Irish Government nationalises bank as financial crisis deepens

Public concerned about worsening state of Ireland's finances as Government steps in to rescue the country's three largest banks.

Public concerned about worsening state of Ireland's finances as Government steps in to rescue the country's three largest banks.

The Irish Government has taken full ownership of troubled Anglo Irish Bank to prevent the collapse of the nation's third biggest lender.

Nationalisation was announced on 15 January 2009, one month after the Government had already injected €1.5bn of capital for a 75% stake in the bank, as public confidence in the bank dropped even further following the discovery of false accounts and hidden loans worth more than €87mn made by Anglo Irish Bank top executives.

Irish Finance Minister Brian Lenihan justified the nationalisation saying that "The funding position of the bank has weakened and unacceptable practices that took place within it have caused serious reputational damage to the bank at a time when overall market sentiment towards it was negative."

A statement released by the republic's department of finance said: "Anglo Irish Bank is a major financial institution whose viability is of systemic importance to Ireland. Anglo has a balance sheet of some €100bn with a substantial deposit base which the State is determined to safeguard."

The Anglo Irish Bank scandal has lead to a number of resignations within the Irish financial sector and an ongoing fraud investigation about the controversial operations made by the top executives of the bank, which also resigned from their jobs.

Further gloom for the Irish banking sector was announced on 11 February 2009 as the Irish Government had to step in with a €7 billion rescue package for Bank of Ireland (BoI) and Allied Irish Bank (AIB), the nation's two largest banks.

The two banks, which received bailouts of €3.5bn each, were suffering heavily from the collapse of Ireland's property market and the precarious wholesale market funding.

Adding insult to injury, a criminal gang robbed €7 million from the Bank of Ireland's headquarters in Dublin shortly after on 27 February 2009, in the biggest bank robbery in the history of the Republic of Ireland.

Following the Irish Government's rescue of the nation's three largest banks, international ratings agency Standard & Poor downgraded Ireland's sovereign credit rating to 'AA+' from the previous top-ranked 'AAA'.

Although the 'AA+' rating is applied to countries which repay their borrowings, Standard & Poor put Ireland on a "negative" outlook pointing out that further downgrades are possible.

Finance Minister Brian Lenihan said Ireland had been badly hit by the global recession as "We are a small open economy with a huge exposure to international economic trends. Our confidence, our finances, our exports and our banks have been dented."

New figures released by the Central Statistics Office (CSO) revealed that the number of people claiming jobseeker's allowance rose in March 2009 to a record 372,800, the highest level in almost 13 years.

Taoiseach Brian Cowen admitted that unemployment could go well over 400,000 before Christmas and announced that his Government was working on an emergency budget to restore order to the nation's public finances.

The current financial crisis has eroded public confidence in the Fianna Fáil and Green Party coalition Government. According to polls published by the main Irish newspapers, public support for Fianna Fáil has dropped to record lows behind Fine Gael and the Labour party.

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