cillian
October 1st, 2008, 04:38 PM
You think $700 billion bailout for a country of 300 million is bad? It works out at approx €2,400 per capita and at least it is a fraction of your GDP!
Now try $575 billion in guarantees in a country with a population of only 4 million! That is $143,750 per capita and double the country's GDP.
Ireland guaranteed all bank deposits on Tuesday in a bid to improve the industry's access to international funds frozen by the global credit crunch.
The pledge, which covers up to 400 billion euros ($575 billion) of liabilities -- more than twice the country's annual gross domestic product -- and includes retail, commercial and interbank deposits, takes effect immediately and expires in September 2010.
The scheme, which also covers certain bonds and other debt instruments, will be provided at a charge to the banks, whose level is still to be determined.
Ireland, hit by the double whammy of the global credit crunch and a domestic property slump, last week became the first euro zone economy to slide into recession this year, abruptly ending more than a decade of its 'Celtic Tiger' boom.
"What we're doing here is guaranteeing the lifeblood of the banking system, the system of lending and borrowing that is essential to successful operation of any banking system," Finance Minister Brian Lenihan said.
"Were liquidity to dry up in the Irish banking system in the weeks ahead the inevitable result would be economic catastrophe for this country." He said the guarantee needed to be enshrined in legislation and might not apply were a foreign bank to take over an Irish bank.
Shares in the country's banks have been some of Europe's hardest hit. On Monday, they suffered their biggest losses in more than two decades although Tuesday's announcement helped to reverse much of those falls.
Shares in Anglo Irish Bank were 59 percent higher by 1331 GMT at 3.6 euros. Allied Irish Banks traded 13.8 percent higher, with Irish Life and Permanent up 23.5 percent and Bank of Ireland 19.9 percent stronger.
That helped the Irish market climb more than 6 percent on a day when world stocks fell to near three-year lows as turmoil following the rejection of a $700 billion U.S. bank rescue package swept from Wall Street to Asia and Europe.
"This should make it easier for Irish banks to obtain funding," said ING credit strategist Maureen Schuller, adding it was a solution other countries should consider.
Exposed to Property
The Irish Finance Ministry said its scheme could cover up to 400 billion euros in liabilities.
That is more than twice Ireland's gross domestic product of about 190 billion euros and a national debt of around 45 billion, Davy stockbrokers analyst Scott Rankin said.
"With the U.S. bailout voted down last night and Dexia also getting a 7 billion euros capital infusion, the Irish government has moved to take out its own bazooka," Rankin said in a note.
The Irish scheme applies to Allied Irish Bank, Bank of Ireland , Anglo Irish Bank , Irish Life and Permanent , including permanent tsb bank, Irish Nationwide Building Society and the Educational Building Society (EBS), the government said.
Ireland had previously guaranteed bank deposits up to 20,000 euros, which it raised to 100,000 euros 10 days ago. The scheme introduced on Tuesday sets no limit to the funds guaranteed.
Brokerage NCB said Irish banks' access to wholesale markets had been hit by fears about the quality of their loan books, which are heavily exposed to falling property markets in the UK and Ireland.
"At the moment, these balance sheet fears are all about perception rather than reality," NCB said.
"The government and the (financial) regulator could not wait for perception to become reality and needed to act with urgency." Last month Ireland brought forward the date of its 2009 budget in a surprise move that highlighted the deteriorating state of its public finances.
Other countries have moved to reassure savers their money is safe as banks from the US to the UK are rescued.
France told savers on Tuesday their money was safe in the banking system after a public injection of cash to save Belgian-French financial services group Dexia.
Dexia will receive a capital boost of 6.4 billion euros ($9.18 billion) from Belgium, France, Luxembourg and other key shareholders to rescue it.
Spanish Economy Minister Pedro Solbes said Spain had a strong system to guarantee bank deposits.
http://www.cnbc.com/id/26940092
Now try $575 billion in guarantees in a country with a population of only 4 million! That is $143,750 per capita and double the country's GDP.
Ireland guaranteed all bank deposits on Tuesday in a bid to improve the industry's access to international funds frozen by the global credit crunch.
The pledge, which covers up to 400 billion euros ($575 billion) of liabilities -- more than twice the country's annual gross domestic product -- and includes retail, commercial and interbank deposits, takes effect immediately and expires in September 2010.
The scheme, which also covers certain bonds and other debt instruments, will be provided at a charge to the banks, whose level is still to be determined.
Ireland, hit by the double whammy of the global credit crunch and a domestic property slump, last week became the first euro zone economy to slide into recession this year, abruptly ending more than a decade of its 'Celtic Tiger' boom.
"What we're doing here is guaranteeing the lifeblood of the banking system, the system of lending and borrowing that is essential to successful operation of any banking system," Finance Minister Brian Lenihan said.
"Were liquidity to dry up in the Irish banking system in the weeks ahead the inevitable result would be economic catastrophe for this country." He said the guarantee needed to be enshrined in legislation and might not apply were a foreign bank to take over an Irish bank.
Shares in the country's banks have been some of Europe's hardest hit. On Monday, they suffered their biggest losses in more than two decades although Tuesday's announcement helped to reverse much of those falls.
Shares in Anglo Irish Bank were 59 percent higher by 1331 GMT at 3.6 euros. Allied Irish Banks traded 13.8 percent higher, with Irish Life and Permanent up 23.5 percent and Bank of Ireland 19.9 percent stronger.
That helped the Irish market climb more than 6 percent on a day when world stocks fell to near three-year lows as turmoil following the rejection of a $700 billion U.S. bank rescue package swept from Wall Street to Asia and Europe.
"This should make it easier for Irish banks to obtain funding," said ING credit strategist Maureen Schuller, adding it was a solution other countries should consider.
Exposed to Property
The Irish Finance Ministry said its scheme could cover up to 400 billion euros in liabilities.
That is more than twice Ireland's gross domestic product of about 190 billion euros and a national debt of around 45 billion, Davy stockbrokers analyst Scott Rankin said.
"With the U.S. bailout voted down last night and Dexia also getting a 7 billion euros capital infusion, the Irish government has moved to take out its own bazooka," Rankin said in a note.
The Irish scheme applies to Allied Irish Bank, Bank of Ireland , Anglo Irish Bank , Irish Life and Permanent , including permanent tsb bank, Irish Nationwide Building Society and the Educational Building Society (EBS), the government said.
Ireland had previously guaranteed bank deposits up to 20,000 euros, which it raised to 100,000 euros 10 days ago. The scheme introduced on Tuesday sets no limit to the funds guaranteed.
Brokerage NCB said Irish banks' access to wholesale markets had been hit by fears about the quality of their loan books, which are heavily exposed to falling property markets in the UK and Ireland.
"At the moment, these balance sheet fears are all about perception rather than reality," NCB said.
"The government and the (financial) regulator could not wait for perception to become reality and needed to act with urgency." Last month Ireland brought forward the date of its 2009 budget in a surprise move that highlighted the deteriorating state of its public finances.
Other countries have moved to reassure savers their money is safe as banks from the US to the UK are rescued.
France told savers on Tuesday their money was safe in the banking system after a public injection of cash to save Belgian-French financial services group Dexia.
Dexia will receive a capital boost of 6.4 billion euros ($9.18 billion) from Belgium, France, Luxembourg and other key shareholders to rescue it.
Spanish Economy Minister Pedro Solbes said Spain had a strong system to guarantee bank deposits.
http://www.cnbc.com/id/26940092