Ireland's bank bailout tries taxpayers

Ireland's most recent extension of its bankbailout,announced Thursday, shows Europe's debt crisis is still dumping more woe on shell-shocked taxpayers.

The Irish government said it was pouring another $16 billion US into shoring up the country's crippled banking system.

Government leaders described the total bill to fix the country's banks about $60 billion as "horrible."

Coupled with the downgrade of Spain's bonds by a third ratings agency, the news from Dublin provided more evidence that Europe has not shed the debt troubles which shook the continent this spring as Greece teetered on the edge of bankruptcy.

The bailout will increase Ireland's budget deficit this year to 32 per cent of the value of its economy, the highest level of indebtedness of any European country since the end of the Second World War.

Finance Minister Brian Lenihan announced Ireland will pump $8.5 billion into Anglo Irish Bank, $4 billion into Allied Irish Banks and $4.6 billion into Irish Nationwide Building Society.

The biggest surprise in the announcement was confirmation that Ireland has conceded it will effectively nationalize Allied Irish Banks, once the country's largest financial institution but now so weakened by loan writeoffs that it cannot borrow on international markets.

'This is a horrible legacy, the figures are numbing.' Eamon Ryan, Irish communications minister

Lenihan estimated the cost of the financial support for the banks amountedto more than $13,000 for every man, woman and child in Ireland.

"This is a horrible legacy, the figures are numbing, and one would really wish we didn't have this legacy from our property bubble and our banking system. But we had it, we have to deal with it," said the government's communications minister, Eamon Ryan.

Irish banks borrowed heavily from foreign lenders and plowed the money into Ireland's overheated property market then papered over the true scale of the wreckage when the global credit crisis broke the real-estate bubble two years ago.

Banks concealed losses

"Some of the banks have spent a considerable period of time trying to conceal the existence of these losses," Lenihan said.

EU monetary commissioner Olli Rehn said he doubted Ireland would need emergency aid from a rescue fund established earlier this year by the European Union and the International Monetary Fund.

The fund had to step in to save Greece from defaulting, but Ireland has already secured sufficient funds through mid-2011 and insists it won't need external aid.

The Irish bailouts represent "a one-off cost measure that will be reflected in this year's deficit figures," Rehn said.

"It is really large but manageable on condition that Ireland can present a convincing multi-annual fiscal strategy covering the years 20112014."