Irish aid 'pre-empts UK banking worries'

19 November 2010

An expert has claimed that the British government's decision to provide billions of pounds in bilateral aid to bail out the stricken Irish financial system was mainly motivated by worries relating to its impact on UK banks.

In a note to clients, GFC Economics analyst Graham Turner pointed out that British firms - particularly state-owned Lloyds and the Royal Bank of Scotland - would be at particular risk if Ireland's banks were to fail, the Guardian has reported.

"The bilateral aid for Ireland is absolutely an attempt to pre-empt further difficulties for UK banks," he wrote. "The UK had more than any other country to lose from an outright default of Irish bank and sovereign debt."

Monument Securities economist Stephen Lewis added that the latest banking crisis in Ireland has "undermined confidence" in this year's EU stress tests, which were intended to assess companies' ability to survive a second slump.

Ireland's deputy prime minister Mary Coughlan stated that the country will not raise its rate of corporation tax as a condition of the impending European loan.

By Asim Shah

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