IRELAND LOOKS TO SWEDEN FOR BANKING CRISIS SOLUTIONS - Sweden used to be the bad word in world banking, but that has now changed to Ireland. Sweden went through its own guarantees; privatisations; bank failures, splits and supports. We have had to copy some of the solutions that the Swedes used to get themselves out of their problems.
Daniel Barr is the head of bank support at the Swedish National Debt Office. He is in Co Kerry today at the Cantillon School, a business event that is exploring economic solutions to the crisis.
Mr Barr says that in the mid-80s Sweden had a very loose fiscal policy while there was also excessive mortgage lending and a fixed exchange rate. He said this all led to a property bubble, which eventually burst, and the price of commercial properties slumped by about 30%. He says that some banks were more badly affected than others, but that eventually 6% of Sweden's GDP were put into the banks to fix their problems.
At first the banks were examined case by case before it was realised that it was a full scale crisis and the Swedish government introduced a blanket guarantee for the banks. He said no-one in Sweden - the banks or the government - understood the scale of the problem for at least a year, and the guarantee was in place for six years from its introduction in 1992 until it was abolished in 1996. In order to get things back on track, Mr Barr says that the Swedish kroner was devalued which enabled the country to have an export-led recovery.
Sweden put 6% of its GDP into the banks to sort out the crisis, but Mr Barr says that Ireland needs to put in at least five times more than that. He says that when a banking crisis occurs, it is essential that prompt action is taken to identify the problem, that problem must be fixed and then put behind you even if the measures are very painful. He adds that the global situation at the moment is not really helping the Irish situation.
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MORNING BRIEFS - There is lots of coverage on Anglo Irish Bank abroad this morning. The International Herald Tribune, which caused trouble last week after a report debating the possibility that Anglo Irish Bank could sink the country financially, says on today's front page says that the Irish government, bowing to market fears that its escalating banking losses might cause it to seek a bailout, had decided to split the bank. The newspaper says the decision represents a backtracking of sorts for the government, which has said that it would be more expensive to close Anglo. It continues though, that Ireland is not Greece, as it has a cash cushion of of close to €40 billion in reserves and pension funds.
*** Anglo makes the front page again in The Wall Street Journal. It says the split comes as the country's 'diseased' banking system becomes the latest hot spot in Europe's ongoing economic crisis. It says the Government's move highlights how problems at Irish banks will now be difficult to unwind, threatening the country's economy and the government in the process. It says Anglo turned into the worst egg in Ireland's basket and as problems here persisted its credibility with investors was eroded. The Journal says yesterday's move, which was applauded by Anglo and the EU, soothed some of those fears.
*** The Daily Telegraph refers to the Anglo split as the Government's move which 'hopes to end a disastrous saga that has shattered confidence in Irish finance and left taxpayers with daunting debt'. One analyst quoted in the article says strains had reached a point where 'one or several governments' may soon have to tap the rescue mechanism - meaning money from abroad.
*** The Guardian says the costs of shoring up Anglo Irish with public money has spooked international markets and cast doubt over the Irish government's overall ability to meet its national debt.
*** Financial newswire Bloomberg how as a 12-year-old boy Brian Lenihan learned Latin during the summer to win a place at James Joyce's alma mater Belvedere College. Bloomberg says that over four decades later that 1971 spirit is evident as the finance minister fights to save his country's economy and its banks.
*** The Reuters financial newswire says the plans for Anglo fail to put either a price or an exact timeframe on burying 'the fiscal and economic deadweight'. Uncertainty over the final bill for sorting out its banks' decade-long property binge has re-ignited fears of an Irish debt crisis and investors will have to wait a number of weeks before a price is put on the demise of Anglo, a poster child for reckless lending and scandal.
*** On the currency markets, the euro is trading at $1.2704 cents and 82.1 pence sterling.
