Ireland’s bailout tab for ailing banks rises

$60 billion total ‘horrible,’ Dublin says

— Europe’s debt crisis dumped more woe on Ireland’s shellshocked taxpayers Thursday, as the government announced it must divert $16 billion more to a crippled banking system.

Coupled with the downgrade of Spain’s bonds by a third ratings agency, the news from Dublin provided more evidence that Europe has not shed the debt troubles, which shook the continent this spring as Greece teetered on the edge of bankruptcy.

Irish government leaders described the total bill to fix their banks, about $60 billion, as “horrible.” The bailout will swell Ireland’sdeficit this year to 32 percent of economic output, the biggest in post-World War II Europe.

Yet markets seemed to find solace in the view that Ireland at least had come clean about the worst of its troubles. Irish government bonds rose, while losses were limited on European stock markets, and European Union officials expressed confidence in what Ireland had done.

Finance Minister Brian Lenihan announced that Ireland will pump $6.4 billion into Anglo Irish Bank, $3 billion into Allied Irish Bank and $2.7 billion into Irish Nationwide Building Society.

He said, based on IrishCentral Bank conclusions published Thursday, the government expects to spend a total of $60 billion in resurrecting five banks - equivalent to $10,000 for every person in Ireland. Of the five, only Bank of Ireland will require no new state aid.

“This is a horrible legacy, the figures are numbing, and one would really wish we didn’t have this legacy from our property bubble and our banking system. But we had it,we have to deal with it,” said the government’s communications minister, Eamon Ryan.

Irish banks borrowed heavily from foreign lenders and plowed the money into Ireland’s overheated property market - then papered over the true scale of the wreckage when the global credit crisis broke the real-estate bubble two years ago.

“Some of the banks have spent a considerable period of time trying to conceal the existence of these losses,” Lenihan said.

Meanwhile, Moody’s Investor Services cut Spain’s publicdebt rating, an expected move that nonetheless provided a further sign that Europe will be slow to emerge from its debt crisis.

The EU welcomed Ireland’s harsh assessment as designed to consume as much bitter medicine as possible now. Lenihan said the government was determined to return to 3 percent deficit spending - the European Union’s much-violated limit - by 2014 and would publish a four-year plan in November that will mean even harsher spending cuts for his recession-hit country.

Business, Pages 21 on 10/01/2010

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