“As the 29th of September deadline for the disastrous blanket bank guarantee draws ever closer, it is now becoming absolutely clear that the government has no effective exit strategy and that its plan is to rollover the guarantee and to extend a very large portion of the guarantee for a period of up to 5 years.

“When the guarantee was first concocted on 30th September 2008, we were told that it would only last two years and that it would be the cheapest bank rescue in the world. It now looks likely that upwards of €210bn will remain guaranteed for up to five years longer, until 2015, subject to EU state aid approval.

“Taxpayers were this week handed the latest in a string of invoices arising from Fianna Fáil’s disastrous decision to provide a blanket bank guarantee back in September 2008. A further €2bn was pumped into the dead-bank-walking that is Anglo, bringing the total to €14.3bn so far for this zombie bank alone, with at least another €8bn on the way.

“On the day that the NAMA legislation was introduced into the Dáil last September, the government published proposals for a guarantee extension, the Eligible Liabilities Guarantee. Fianna Fáil railroaded this through the Dáil, without allowing for extended debate, on 3rd December 2009 and the Minister for Finance signed off on it on December 9th.

“This gave the government the option to rollover debts which expired under the original guarantee as they matured. This new debt could be issued with a 5 year guarantee at any point up to 29th September 2010.

“The Minister for Finance admitted in reply to my parliamentary question on 1st June 2010 that he “would expect further amounts of the eligible liabilities currently covered under CIFS to rollover into ELG as they mature”. He also confirmed that “as of the end March, liabilities guaranteed under the Covered Institutions (Financial Support) Scheme (CIFS) amounted to €130 billion while liabilities under the Eligible Liabilities Guarantee Scheme (ELG) amounted to €139 billion.

“In reply to another parliamentary question, on 2nd June 2010, he confirmed that liabilities of €188bn guaranteed under these schemes is set to mature before the end of September deadline. Of this, €74.2bn is accounted for by lending from other banks (€16.4bn), senior bonds (€57.8bn) and subordinated bonds (€866m).

“This week, the EU Commission granted provisional state aid approval for the continuation of the ELG scheme until the end of June, pending a full and formal approval process to extend the scheme until 29th September.

“Leaked reports suggest that the government intends to extend even this date to the end of 2010, which would allow them to guarantee tens of billions more, but this will require new or amending legislation.

“The Labour Party stood alone in the Dail in October 2008 in opposing the blanket nature of the bank guarantee. The wisdom of our position has been vindicated by events since then. The inclusion of Anglo in the guarantee is the principal reason why the taxpayer is being required to pump what seems like endless thousands of millions of Euros into the financial black hole of Anglo Irish.
Taxpayers should remember who placed this financial millstone around their necks when they get the opportunity to vote in the next general election.”