Irish taxpayers to pick up bill for bank disaster

Irish workers were last night bracing themselves for painful tax hikes after reckless bankers left a 40 billion euro (£34bn) hole in the public purse.

Taoiseach Brian Cowen gave his strongest indication that extra levies would be included in December's widely-feared slash-and-burn Budget.

With the final bill for Anglo Irish Bank reaching up to 34 billion euro (29bn), the Government is preparing to chop "significantly" more than 3 billion euro (2.6bn) from public services, such as health, education and social welfare.

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And in a stark warning to taxpayers, Mr Cowen said the draconian cuts alone would not be enough to plug the massive gap in the State finances.

"Obviously there will have to be revenue raising as a contribution to closing that gap – it cannot all be done on the expenditure side," he said.

In a further signal of the severity of the crisis, Mr Cowen signalled the very sovereignty of the country was at stake.

The Central Bank has estimated Anglo Irish Bank will saddle taxpayers with debts of 29.3 billion euro (25.2bn) or up 34.3 billion euro (29.5bn) in a worst case scenario.

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Mr Lenihan defended his policy not to let investors, known as senior bond holders who gamble on debt securities, take a hit for the bank going bust.

"We're not telling the bank manager that we are going to default prior to asking for money," he said.

The Opposition and opponents of the Government's banking policy dubbed the series of announcements Black Thursday.

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