The escalating cost of the bank bailout in Ireland has become clearer as the government was forced to go to the bond markets to raise £1.27 billion at significantly higher interest rates than most of its EU neighbours.
Unemployment is nearly 14 per cent, emigration at levels not seen for more than 20 years, and the tax take continues to fall. Despite this, the government says it will have to introduce yet another austerity budget in December slashing a further £3 billion from public spending including schools, hospitals and social welfare payments.
The country is faced with a possible final bill for bailing out and winding down the Anglo-Irish Bank of nearly £60 billion. It has already cost nearly £20 billion and the government has also been forced to bail out other banks for lesser amounts. Anglo-Irish, favoured by property developers close to Ireland’s political elite, recorded the biggest loss in Irish corporate history and one of the biggest in the world.
Ireland successfully raised the funding it needed to finance its public sector into next year – the government said it will continue to go to the markets – but only after offering investors a 6 per cent yield on its bonds. Bailing out the banks has pushed Ireland into a deficit of 25 per cent of GDP – and the cost of paying out on its bonds is 300 to 400 basis points higher than in Germany.
