Following a comment on yesterdays post i thought i would look a bit deeper into irelands current financial situation:
Ireland uses NPRF to recapitalise banks
IRELAND – The Irish minister for finance has confirmed the recapitalisation of Allied Irish Bank and Bank of Ireland will be funded by the National Pension Reserve Fund.
In a statement, the government said €4bn (US$5.1bn) would come from the NPRF’s current resources while €3bn would be provided by means of a frontloading of the Exchequer contributions for 2009 and 2010.
Irish banking sector mired in borrowing costs
In some respects Ireland is uniquely badly placed to cope with the current financial crisis. It is entering recession with a hole in its public finances as property- related taxes dry up in line with the construction and housing slump.
There is no cash for a fiscal stimulus - ministers are hinting at the need for tax increases and public spending cuts to correct the ballooning budget deficit.
So on top of trying to finance a record fiscal deficit this year, set to be 9.5 per cent of gross domestic product, the government is also having to find funds to recapitalise its banks, which are facing large scale asset writedowns as property developers are unable to sell houses, and the value of collateral collapses.
Here perhaps there is some relief in sight. Ireland can dip into its National Pension Reserve Fund, a sovereign wealth fund established in 2001 as a far-sighted initiative to anticipate the greying of Ireland's population. It was originally set up to part fund the future pensions of retiring public sector workers. The fund was only meant to be drawn down from 2025.
As of December 29 assets under management stood at €16.4bn. Included in this are cash balances of €1.7bn and €3.5bn bonds, which officials say can be turned into cash.
So everythings all right in ireland.... theres plenty of money to fund the financial crisis... the government has just agreed to recapitalise two of the countrys biggest banks to the tune of 4bn from the National Pension Reserve Fund (NPRF).
BUT its only got 1.7bn in cash.... so its selling 2.3bn of bonds. All taken from a pension fund set up to cover the future pension liabilities of public sector workers which was not supposed to be touched until 2025.
I read somewhere that The Last Official Act of Any Government is to Loot the Nation.