Cowen Defends AIB Bailout

The Taoiseach, has defended the Government's €4 billion bailout plan for Anglo Irish Bank during the morning session in the Dail.

Finance Minister Brian Lenihan is currently seeking EU approval for the bailout following Anglo's announcement of €4 billion losses in the six months to March this year.

The bank is also warning that it could have to write off another €3.5 billion in bad loans before the end of the financial year, meaning the taxpayer would have to stump up €7.5 billion in total to save the crippled bank.

Mr Cowen insisted in the Dail this morning that allowing the bank to go out of business would cost the taxpayer a lot more money.

The news comes just as the government was criticised on Tuesday over its plan to introduce the National Treasury Management Agency.

The winner of the 2003 Nobel prize for economics on Tuesday questioned the "bad bank" policy in Ireland, casting doubt on the Government's approach.

In May, the Government announced it was to appoint a state owned body to buy up the "toxic debts" being held by Ireland's banks in a similar move taken by the US.

However, Professor Robert Engle, a professor of finance at New York University's Stern School of Business, said: "I don't think the US one is likely to work so I don't know if Ireland's one is going to work."

Speaking at a conference on international finance at Trinity College Dublin, Professor Engle said there was a lot of concern about how Ireland would deal with the banks' toxic assets and whether the system "is really going to work".

(DW/JM)