The Government has set out its stall in terms of its banking programme, indicating that over time the €29.4 billion used to bail out AIB, Bank of Ireland and Permanent TSB may be recouped. Investment bankers have been appointed to advise on the future of AIB, where the State may start to sell its stake later this year. The future of AIB is now central to recouping the cash cost to the exchequer of rescuing the surviving banks.
There is a need for perspective here, on both sides of the debate. It is welcome that we have got to a point where the cash paid to rescue Bank of Ireland has been recouped and where AIB is a saleable proposition. A few years ago this looked unlikely, but the return of economic growth and the restructuring of the banks has changed the picture. The flipside of the debate is that it is likely to take some years to sell AIB and success in doing so remains crucially reliant on economic growth and stability. We must also recognise that cash returned at some future date will never entirely compensate for what was spent, nor can it undo the horrendous wider damage done by the banking collapse. For a heavily-indebted State, however, the opportunity to take in cash and pay down borrowings in the years ahead would be welcome.
We have come a long way since the European Union summit in June 2012 which appeared to offer some commitment to Ireland to help with its banking bill. The restructuring of the bailout payments for Anglo and Irish Nationwide and some changes in the payment terms for EU loans have been agreed in the meantime. But there has been no fundamental move to lower the debt burden taken on by the State because of bailing out the banks.
If eventually we recoup of cash cost of the bailout of the surviving banks the enormous €35 billion bill for rescuing Anglo and Irish Nationwide will remain, along with the wider economic and financial costs of the banking crisis. The case for relief for Ireland remains, but the mechanism for delivering it is unclear – and there appears no wider political willingness to meet the June 2012 commitments, which have also been rowed back on in the design of the single banking market.
For Ireland, the battle to get some kind of financial payback for the bank bailout will be framed by political developments across Europe, with elections due this year in Greece, Spain and Portugal and Europe languishing in low growth. There remains a case to address the high debt levels burdening a number of European economies, but no indication that the bigger, creditor member states are in any mood to do so.
In the meantime, the sale of the State’s holding in the suriving banks is a question of timing, but with strong investment sentiment towards Ireland, it seems sensible to push ahead.