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“The failure of a bank of that scale would render the nation insolvent”. This is what Brian Lenihan, Ireland’s finance minister, told broadcaster RTE on September 30th, explaining the fresh funds that the government will devote to bailing out Anglo Irish Bank, the country’s most troubled lender. At its peak, Anglo’s balance sheet grew to half the size of Ireland’s annual economic output, making it a prime example of a “too big to fail” institution.  

In addition to the €22.9bn (US$31.3bn) already injected into Anglo, the central bank now estimates that the lender will need an additional €6.4bn, bringing its total bailout to €29.3bn. Along with Anglo, Ireland’s other banks were subjected to new assessments of their balance sheet strength, with largely similar results.

The implications of Ireland’s ballooning bailout bill are daunting. Mr Lenihan said that the budget deficit this year will soar to an eye-watering 32%. As a share of GDP, the direct fiscal cost of Ireland’s bank bailout will make it one of the largest on record.

Read more at Financial Services Briefing: “More bad news” (September 30th)