Update: The Irish government has announced plans to split Anglo Irish Bank in two. Full details here >
We may only be a few hours away from an Irish government statement on Anglo Irish Bank that could decide the future of its position in the company.
It may not longer be worth it for Ireland to backstop the troubled bank as costs rise and impair the state’s ability to escape economic recession.
But the story didn’t start with Anglo Irish Bank. Ireland has gone through a housing bubble and credit boom, which resulted in a state bailout and now a bank that may be too big to bail for the tiny Irish state.
Ireland's property boom was at the heart of the Celtic Tiger phenomenon, and when it bust it brought much of the previous decade's economic growth with it, including several of the country's biggest banks.
Anglo Irish Bank has become the most expensive of Ireland's bailouts, with estimated costs rising to €25 billion, though that price could go higher, in a 10 to 20 year wind-down scenario.
The upfront costs of winding up Anglo Irish Bank right now are €70 billion.
It looks like Ireland's leadership may be on the brink of settling on a 10-year wind up plan with the ECB, however, in which the bank would be divided between a good and bad half.
Anglo Irish Bank's CDS has skyrocketed in the past few days, as investors have become concerned that Ireland may back down from its obligations. But Ireland's sovereign CDS has surged too, which may indicate that many are concerned that state might step in to support the bank with even more cash.
Anglo Irish Bank has even had to sell its extensive art collection.
Ireland's position in the bailout may be the result of the EU's position that no bank in the region be allowed to fail. If that's the case, some are calling for the ECB to step in and bailout the bank themselves, as Ireland may not have the money to progress.
But if Ireland has to continue to spend, it may need to make even more cuts to its already austere economy.
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