Anglo Irish is set for fresh state bailout

City A.M. Reporter
Anglo Irish Bank won temporary clearance from the EU yesterday for a fresh bailout of up to €10bn (£8.3bn) from the Irish government, more than expected and putting further pressure on Ireland’s bulging budget deficit.

Ireland’s finance ministry said underlying budget trends remained in line with its targets but it acknowledged that an aid package given to Anglo Irish in March would probably increase the government deficit and so could the latest bailout.

The bank was nationalised last year after it was hit by deposit and loan scandals and a property market crash. The Irish government injected €4bn in emergency capital into the bank last year and another €10.3bn this year.

The EU’s approval yesterday of a further €8.58bn payment to cover the bank’s capital needs this year was higher than €8bn earmarked earlier.

The EU said the amount could increase to €10.05bn depending on the price Anglo Irish gets for loans sold to the National Asset Management Agency (NAMA), Ireland’s “bad bank” scheme.

The €4bn bank bailout in 2009 pushed Ireland’s deficit up to 14 per cent of gross domestic product last year, the biggest in Europe and far above an EU ceiling of three per cent. Analysts say the latest injection could push the budget shortfall above 20 per cent this year.

Ireland’s finance ministry said yesterday that €8.3bn of capital given to Anglo Irish in March would “in all probability” be added to budget deficit calculations. It said the accounting of a further €2bn given in May and the €8.6bn approved yesterday was still being examined.

“The underlying deficit is expected to be in the order of 11.5 per cent of GDP in 2010, in
line with the budget day target of stabilising the underlying deficit,” the finance ministry said in an e-mailed note, adding that its annual bond issuance plans were also unaffected by the latest bailout.