Irish Banks May Need More Than Planned 6,000 Job Cuts, IMF Says
Ireland’s three surviving domestic banks may need to cut more than 6,000 jobs already planned as they struggle to return to profit, the International Monetary Fund said.
Allied Irish Banks Plc, Bank of Ireland Plc and Permanent TSB Group Holdings (IPM) Plc, based in Dublin, are lowering staff numbers after a real estate bubble burst in 2008. The lenders are aiming to reduce the 2011 combined job workforce of 30,000 by a fifth, the Washington-based fund said in a report on the nation’s bailout program yesterday.
Current plans “may still be insufficient,” the IMF said, adding costs for the banks are challenging.
Ireland was forced to seek an international rescue in 2010, as its financial system came close to collapse. As the government seeks to exit the bailout program at the end of 2013, it’s pushing European leaders to deliver on pledges to improve the sustainability of its program.
“Given Ireland’s high public and private debt levels and uncertain growth prospects, inadequate or delayed delivery on these commitments pose a significant risk that recently started market access could be curtailed,” the IMF said. That could hinder “an exit from official financing at the end of 2013.”
Ireland plans to raise about 10 billion euros ($13.3 billion) in the market next year as it returns to syndicated bond sales and regular monthly long-term debt auctions, even as the outlook for the economy deteriorates.
Gross domestic product will expand 1.1 percent next year, the IMF said, cutting its forecast from 1.4 percent. Ireland’s debt may peak in 2013, at 122 percent of GDP, it said.
The government is negotiating with the European Central Bank to replace about 30 billion euros of so-called promissory notes used to bail out former Anglo Irish Bank Corp. with long- term government securities.
Craig Beaumont, the IMF mission chief for Ireland, said yesterday he hopes a deal on the notes will be ready before March, when the next payment is due. In a call with reporters, he said talks on the notes are “intensive and on-going.”
European Stability Mechanism “equity may take time to become available, so a bridge is needed to safely reach that point,” the IMF said. Options for “backstops” to succeed the existing program could be explored, it said.
Last month, Ireland’s Finance Minister Michael Noonan said the provision of “dedicated credit lines” would offer comfort to investors as the nation exits its bailout program even if such facilities weren’t called upon.
The yield on the Irish benchmark October 2020 bond fell 4 basis points today to 4.53 percent. It has fallen from 7.13 percent just before European leaders agreed on June 29 to examine the Irish financial sector to improve the sustainability of the nation’s program.
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