BOI sale - Who gets the money?

[Legin]

Hi hope this is the correct forum...

I read today that an investment company (including Wilbur Ross) has purchased a large share of BOI from the Irish Govt (about €1bn).

• What exactly happens this money?
• Does it count towards the €2bn of state assets we're required to sell under the IMF/EU bailout?
• Can we use that money and put it towards job creation / growth?
• Does it count towards a reduction in our debt:GDP or budget deficit?

None of the articles I've read seem to address any of these things or if indeed there is any REAL benefit to the Irish State. Any thoughts/explanations would be appreciated.

 

[Brendan Burgess]

This is my understanding of what happened and the implications.

Bank of Ireland needed extra capital. It looked as if the government was going to have put it in themselves.

As it happens, private investors (and I was one of them) subscribed to the Rights Issue so no new government funding was required.

The government kept a 15% stake in Bank of Ireland.

I am not sure if they sold any actual shares or just didn't subscribe for their rights. But let's say that they sold shares for €1 billion as you suggest.

• What exactly happens this money?

This goes into general Exchequer Funds. It reduces to overall cost of the bailout to the taxpayer.

• Does it count towards the €2bn of state assets we're required to sell under the IMF/EU bailout

No that is a separate issue.

• Can we use that money and put it towards job creation / growth?

I don't think we can put it to job creation. it reduces our overall borrowing from the Troika.

• Does it count towards a reduction in our debt:GDP or budget deficit?

It doesn't reduce the fact that we are taking in far less in tax than we are spending.

However, the money invested in the Irish banks was regarded as public spending and so it increased the budget deficit - especially last year. So to the extent that we are investing less it will reduce the deficit. (Or was it a sale of shares from the National Pension Reserve Fund in which case it would not affect the deficit?)

Which raises an interesting question. If things pick up in a few years and we sell off AIB for €20 billion , will it be accounted for as eliminating our budget deficit that year?

I hope not as it would give the misleading impression that we are living within our means.