Aid for Irish banks approved
Anglo Irish and INBS to be given billions of euros as Commission launches investigation into support.
The European Commission yesterday gave the Irish government permission to provide billions of euros in aid to two banks, in order “to preserve financial stability in Ireland”. It also announced an investigation into all state support provided to the larger of the banks, Anglo Irish.
Joaquín Almunia, the European comissioner for competition, said there was “no doubt” that Anglo Irish and Irish Nationwide Building Society (INBS) needed “significant recapitalisation” to survive. The Irish government is injecting €2.7 billion into INBS and €10.44bn into Anglo Irish.
In both cases, approval for the ‘emergency aid’ applies until June. They were told to submit restructuring plans, by the end of May in Anglo Irish’s case and by 22 June in INBS’s.
Almunia singled out Anglo Irish for particular attention, saying that it “has to restructure profoundly in a way that effectively tackles the weaknesses of the past business model and ensures a sustainable future without continued state support”.
Most of the latest €10.44bn in aid to Anglo Irish – €8.3bn – is meant to cover costs incurred last year and through to the end of March. The remaining €2.1bn is contingency funding.
Investigation into state aid
At the same time, Almunia announced that the Commission is opening an in-depth investigation into all state aid provided to Anglo Irish. This is the second tranche of state aid to Anglo Irish that the Commission has approved: last year it allowed the Irish government to inject €4bn into the bank.
The Commission probe will focus on whether the bail-out aid given to the bank by the Irish government so far gives it a competitive edge over rivals.
If the aid is found to have violated EU rules, Anglo Irish could be forced to return the money to the state.
The continuing difficulties that Anglo Irish faces were highlighted a day before the announcement of the investigation, when Brian Lenihan, Ireland’s finance minister, said that, to stay afloat, Anglo Irish may need another €10bn on top of the €14.4bn in aid that the Commission has approved.
Lehihan and Alan Dukes, the chairman-designate of Anglo Irish, have both said the sums needed are small compared to the cost of shutting down the bank entirely.
A Commission spokesman said the Irish authorities have yet to contact EU regulators with any request for clearance for the additional €10bn in aid proposed on Tuesday (30 March).
Anglo Irish lost €12.7bn in 2009.
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