Image via WikipediaFears mounted today that the proposed €90bn (£76bn) bailout of Irelandmay not be enough to convince investors that its banks will be safe, as the woes facing the debt-laden country continued to reverberate around Europe.
Amid suggestions that Ireland was considering creating a second "bad bank" in a further attempt to stabilise its crippled financial sector, the country's borrowing costs remained at painfully high levels above 9%.
Portugal, regarded by observers as likely to be next in line for help from the International Monetary Fund and the European Union, also remained under pressure with borrowing costs of 7%, as did Spain, whose borrowing costs reached another record.
The interest rate on Spain's 10-year bonds rose to 5.2%, a the highest since it joined the euro and close to the 5.5% rate that Europe's emergency fund offers to countries unable to raise money on the markets. "We need somebody to catch the falling market and stabilise it," said Philip Brown, managing director of capital markets at Citigroup.
A radical overhaul of Ireland's banks will take place once the country's fragile coalition government agrees the terms of the bailout with the IMF and EU. While Anglo Irish Bank is already nationalised, Allied Irish Banks (AIB) is also expected to fall into state hands with Bank of Ireland (BoI), currently regarded the strongest of the three, also likely to succumb to majority state ownership.
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