Once the posterchild of the “Celtic Tiger” economy, the cost of bailing out Anglo left Ireland with the biggest budget deficit in the European Union last year, undermining the government’s austerity drive and raising its borrowing costs.
Anglo Irish chief executive Mike Aynsley’s view that the bank would not need more than the €25bn previously flagged by the government failed to soothe markets already rattled by concerns over Eurozone debt.
“It’s a pretty brave comment by the management,” said one analyst who declined to be named. “As a taxpayer I would be somewhat relieved, and I think it would be a nice support for the bond market, but I'm scratching my head over it.”
The premium investors demand to hold 10-year Irish bonds over German Bunds was hovering close to euro-era highs of 366 basis points yesterday. Irish financial stocks were trading down 1.45 per cent.
In an analysis criticised by Irish officials, ratings agency Standard & Poor’s estimated last week that the final cost of purging Anglo of bad debts accumulated during the property boom could hit €35bn.
Finance minister Brian Lenihan did not put a final figure on Anglo’s bailout but said clarity on the total cost would come when Ireland reaches an agreement with the European Commission on what to do with the lender. “We must bring finality and certainty to that figure and that is part of this exercise we are doing with the European Commission,” he told the national broadcaster.
Dublin signalled on Monday it might wind down Anglo Irish, the worst-performing company in Irish corporate history, after its losses and scandals made it more difficult to push through spending cuts.