Ireland debates bank-bailouts, awaits EU ruling

DUBLIN — Ireland's government privately debated Wednesday how to proceed with its plans for protecting the nation's struggling banks and in particular whether to keep pouring billions into nationalized Anglo Irish Bank.

Finance Minister Brian Lenihan briefed Cabinet colleagues on the outcome of his meetings in Brussels this week with European Union authorities, who wield the power to approve, revise or reject all Irish bank-bailout efforts. An EU verdict on the future of Anglo is expected later this month.

Increasingly, international investors view Ireland's investment in Anglo as unsustainable and expect EU chiefs to order the bank's gradual closure. The government insists that splitting Anglo into "good" and "bad" banks remains potentially the least costly option.

"A final resolution of the Anglo difficulties will be announced in a matter of weeks," Lenihan said as he entered the Cabinet meeting. "We are satisfied that we can identify what the precise losses are in our most distressed financial institution and we can deal with those losses over time."

Ireland has already put nearly €23 billion ($29 billion) into Anglo since nationalizing the small-business lender in early 2009. At the time the government also bought minority stakes in the country's two biggest banks, Allied Irish and Bank of Ireland, becoming their largest shareholders.

If Ireland receives EU approval to split Anglo in two, this would create a "good" Anglo that receives the institution's remnant of still-performing loans and retail deposit business.

The bad majority of Anglo — representing more than 80 percent of its loan business chiefly to bankrupt property developers and speculators — would die once its toxic debts are written off or transferred to Ireland's national receptacle for dysfunctional property-based projects, the National Asset Management Agency.

The open-ended costs of keeping Anglo alive are fueling worries about Ireland's ability to keep funding its own debt needs. Ireland's deficit is already the highest in Europe in GDP terms because of the Anglo costs, and analysts warn that Anglo could cost taxpayers anywhere from €7 billion to €15 billion more in the next few years.

The rates paid on Irish government bonds have reached a series of record highs in recent weeks versus Europe's German benchmark.