Irish authorities won provisional approval from European Union regulators on Wednesday (31 March) to provide emergency recapitalisation worth up to €10.44 billion to the Anglo Irish Bank, which has been at the heart of financial turmoil in Ireland.
Anglo Irish Bank has become a target of public ire since the outbreak of the financial crisis, with Socialist MEP Joe Higgins planning to lead a protest to the bank's headquarters in Dublin today (1 April).
The bank's cavalier approach to lending and unorthodox accounting practices sparked a major banking crisis in Ireland in 2008, forcing the state to take on billions of euros' worth of debt.
Two former officials from Anglo Irish Bank were arrested last month and may face prosecution after a lengthy investigation by detectives from the fraud squad.
Irish Finance Minister Brian Lenihan yesterday published a comprehensive plan to clean up the balance sheets of Irish banks and will now demand more stringent capital requirements (EURACTIV 31/03/10).
Critics say Ireland's troubles emanated from the close relationship between banks, property developers and politicians, ultimately spawning a huge property bubble which burst during the financial crisis. This left banks with loans secured against property which has fallen dramatically in value.
The financial sector overhaul has seen a new financial watchdog appointed from overseas and a respected university professor installed as governor of the Irish central bank.
Irish bonds have performed well since an austere budget in December, but opposition politicians claim the government is lumbering future generations with billions of euros of debt through the new 'bad bank' scheme.
The European Commission has also temporarily approved €2.7 billion for the Irish Nationwide Building Society (INBS), saying the aid was necessary to guarantee Ireland's financial stability. Both measures have been given the green light for a six-month period.
The competition watchdog said it had at the same time launched an in-depth investigation into the total aid received by Anglo Irish Bank and its accompanying restructuring plan.
"There is no doubt that both Anglo Irish Bank and INBS need a significant recapitalisation to meet their obligations," EU Competition Commissioner Joaquin Almunia said in a statement.
"However, INBS needs to establish a viable restructuring plan and Anglo Irish Bank has to restructure profoundly in a way that effectively tackles the weaknesses of the past business model and ensures a sustainable future without continued state support," Almunia said.