Irish pass bad bank rescue plan

The property slump left banks will billions of euros of bad loans

The Irish parliament has approved legislation to establish a "bad" bank to absorb problem loans in the country's troubled banking sector.

The National Asset Management Agency (NAMA) will have 54bn euros ($80bn; £49bn) to buy bad loans from banks.

The government has already pumped billions of euros into banks and nationalised Anglo Irish Bank to try to stabilise the sector.

The country's economy has been one of the most hard-hit by the downturn.

The 54bn euros will be used to buy toxic loans made by banks with a book value of 77bn euros, mainly in the property market.

About a quarter of those loans relate to property and other assets in Great Britain and Northern Ireland.

The rescue plan is the biggest in the country's history.

"The Irish economy is suffering from a very sharp liquidity crisis, which NAMA is designed to counteract," said Kevin McConnell at Bloxham Securities.

But the plans were fiercely debated in the Irish Dail, with the opposition party Fine Gael particularly critical.

"NAMA is fundamentally flawed, will do nothing to get credit flowing to small business and it will do nothing to support the retention or creation of jobs," it argued.

The UK government has proposed a similar "bad" bank to handle toxic loans at Northern Rock bank.