Patrick Honohan: Cost of bust ‘well over €100bn and growing’

We should be used to them by now, but the figures relating to the Irish banking and economic crash still have the power to shock.

At the Oireachtas Banking Inquiry, Central Bank of Ireland governor Patrick Honohan said the overall net cost to the economy of the banking bust was "well in excess of €100 billion and still growing".

What might the State have saved if an alternative to the blanket bank guarantee had been chosen?

“All in all, a possible net economic saving in the area of €2 billion to €10 billion could be imagined, but surely no more than that,” he said.

By September 2008, more than 90 per cent of the costs of the boom and bust had “become unavoidable”.

Deposits outflow

Mr Honohan’s decision to go on a national radio show on November 18th, 2010, to announce that the State would be holding talks on entering an EU-IMF bailout programme was partly driven by the fact that there had been an outflow of €900 million of retail deposits from Irish banks on the previous day.

The EU-IMF bailout included a provision of €35 billion for the recapitalisation of the banks.

In the event, aggressive stress tests in March 2011 resulted in less than half this figure being required.

The liquidation of Irish Bank Resolution Corporation in February 2013 left the Central Bank in possession of a €25 billion promissory note, €3.5 billion of Government bonds and almost €14 billion of National Asset Management Agency bonds.

And if you compare tax and spending policies now with 2008, cumulative “austerity” savings of €150 billion have been put in place. This sum grows at close to €30 billion a year, according to Mr Honohan’s calculations.