A black old week

It's been a terrible week in Ireland on the economic front. We all knew the bank bailout was going to be a disaster, but we didn't know how much of one. The government finally revealed what it thinks is the final estimate for the cost: €45 billion ($62bn or £39bn) (with possibly €5bn more if the property market doesn't recover sufficiently over the next 10 years). That does not include the €40bn the National Assets Management Agency is spending buying property loans off of the banks. I've been posting about it on the other blog I contribute to, with an overview piece here.

The cost of one bank alone - Anglo Irish - will be a minimum of €29.3bn (and possibly €34bn), which the governor of the Central Bank has said we'll never see again. That's a big number and it's difficult to get into perspective. One way is to compare it to the country's tax intake of €33bn. Basically, we're going to spend an entire year's worth of tax bailing out one bank and not receive anything in return. And it's worse because we have to pay interest of €1.7 bn per annum on the money we've borrowed to bail out the bank. Another way is to standardise by the size of the economy. This quote from Bloomberg about Anglo Irish jumped out at me yesterday and put me in a cold sweat:

"Measured against the size of the economy, that’s comparable to a $3 trillion bailout for a single U.S. bank." $3 trillion!

Would U.S. tax payers have sanctioned a $3 trillion bailout of one bank? Would any other country have accepted this as meekly as we have?

€29.3bn for one bank sounds like a massive amount. Put in the context of both the country's tax intake and relative to the size of the economy and you realise how mindboggling and frigthening the bail out is.

A week we'll be paying for in a couple of generations time. God help us ...