Dublin will close Anglo to keep Eire in the black

 
City A.M. Reporter
Ireland is still mulling whether to keep parts of Anglo Irish Bank open but stands ready to wind it down if that helps keep the country solvent, finance minister Brian Lenihan said yesterday.

Earlier, the Irish Independent newspaper reported Lenihan would ask the European Commission to allow a closure of the troubled lender over a 10-year period and analysts say that scenario is looking increasingly likely.

Science and technology junior minister Conor Lenihan said on Saturday the bank would be “decommissioned”, the latest signal that the government, conscious of its wafer-thin parliamentary majority, is set to cave in to growing pressure.

Anglo Irish has submitted a plan to Brussels, favouring the option of carving out a small functioning bank via a “good bank/bad bank” split and Lenihan yesterday said this proposal was still on the table.

“We have to evaluate that case,” Brian Lenihan said. “If what is best for the taxpayer and for the country – in terms of the risks to the country’s solvency – if the best option is a workout [wind-down] over an extended period of time, then so be it,” Lenihan told public radio RTE before flying to Brussels. The escalating cost of rescuing Anglo Irish is a major threat to Ireland’s creditworthiness, with analysts seeing it as the next potential Eurozone trouble spot after Greece despite much-vaunted efforts to cut public spending. Lenihan said however the costs would be manageable.

“I was a bit concerned to see yesterday that a lot of public opinion believe that Anglo Irish Bank will bankrupt the country,” he said referring to a survey published at the weekend. “That’s simply not the case.”

Lenihan also said he had completed treatment for cancer, stabilising the disease and allowing him to stay in his job in the run up to the next budget which he said would be presented on 7 December.

At around 352 basis points (bps), the premium investors demand to hold 10-year Irish debt rather than benchmark German Bunds remains only about 20 bps below last week’s record highs, showing investors are still nervous.