Financial Schools Reviews

() - The cost of fixing Ireland’s banks would come to nearly EUR 25 billion, Finance Minister Brian Lenihan said on Friday.

“This is the amount that will be added to our national debt to prevent a collapse of the banking system,” Lenihan said at the launch of the Annual Reports of the National Treasury Management Agency, the National Pensions Reserve Fund, the National Development Finance Agency and the Carbon Fund. “The cost, albeit unacceptable, is manageable,” he said, echoing the view of the country’s central bank chief Patrick Honohan.

“It is of no comfort that at 16 per cent of GDP, the cost to the taxpayer is no larger than the average cost of banking crises around the world over the past few decades,” the minister said. That said, Lenihan pointed out that the cost to the taxpayer is “a once off cost”.

On the other hand, he said, “The cost of running the State is a long term, strategic issue that will bear on generations to come and it is an issue that deserves serious analysis and debate in which we must all engage.” The minister noted that the government will borrow EUR 18.5 billion this year.

“That is the ongoing borrowing figure that we need to reduce and that is what our focus should be now,” he added. The government is targeting savings of EUR 3 billion and achieving this involves “difficult choices”, Lenihan said.

The minister expressed confidence that the Irish government will be in a position to recoup some of its outlays. He noted that the government has already achieved a notable return on its investment in Bank of Ireland. As part of its EUR 3.5 billion investment in the bank in February 2009, the State received warrants over shares in the bank. Lenihan said these warrants have realized a profit of nearly EUR500 million for taxpayers. In addition, taxpayers currently own about 36% of the bank.

Moreover, the National Asset Management Agency will also recover some losses for the taxpayer. Under a more optimistic scenario presented in the NAMA Business Plan, a profit of nearly EUR 4 billion is expected.

“In dealing with our banking crisis, the government’s overriding objective has been to minimize the exposure of the taxpayer and to recoup as much as possible for the State from this sorry saga,” Lenihan said. “Our focus now both domestically and at European level is on learning the lessons of this crisis and ensuring we never make the same mistakes again.”

He added that the Irish government will continue to implement its budgetary strategy to reduce the country’s deficit and contain the cost of debt. “We need to ensure that the public finances are restored to full health,” he stressed.

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