Irish government bails out banks

The property slump left many buildings unfinished

The Irish Republic's so-called "bad bank" will pay out 54bn euros for 77bn euros worth of toxic loans made by the country's leading banks.

The rescue package announced by Finance Minister Brian Lenihan is the biggest in the country's history.

Mr Lenihan also said that the market value of the properties underpinned by the loan is approximately 47bn euros.

Six percent, or 4.62bn euros, of the total loans made by the banks are for developments based in Northern Ireland.

Mr Lenihan said that of the 77bn euros lent out, 24bn euros came from AIB, 28bn euros from Anglo Irish, 16bn euros from Bank of Ireland, 1bn euros from EBS and 8bn euros from Irish Nationwide.

The minister told the Dail there was a risk of paralysis "if nothing was done now to free up credit".

Mr Lenihan said the Irish people were understandably angry about the state of the banks and appalled by the details of the reprehensible behaviour of some in the financial system and in the property sector.

"There is now unfortunately a breakdown of trust in the entire system," he said.

But the public also knows economic recovery cannot come without fixing the banking system, which should be extremely grateful for the taxpayers' help, he claimed.

"So we must all now overcome our understandable anger and get on with the business of reform," he added.

HOW NAMA WILL WORK The agency will take on responsibility for 77bn euros of property and development loans from Irish banks The plan involves the government buying property loans at a discount, then managing them in such a way that the Irish taxpayer will at least break even on the deal over about 10 years In return the banks are expected to start lending again with the money the government has paid them for the loans It will take on both 'good, or performing loans' and 'bad, or non-performing loans'

The minister said that the banks should be grateful to the citizens of Ireland for the protections the measures will bring.

Mr Lenihan said Nama would ensure that credit would flow to viable businesses and would force banks to take losses on the riskiest loans.

He said he would consult with leaders of the opposition before making appointments to the board of Nama.

The bill has potentially huge consequences for property prices north and south of the border.

Northern Ireland property

Critics of the scheme have called it "a bail out" for bankers and builders with taxpayers picking up the bill for generations.

Fine Gael, Labour and Sinn Fein are all opposed to the scheme.

Fine Gael finance spokesman Richard Bruton said the 54bn euros figure represented 34,000 euros for every family in the country.

He said the taxpayer was being asked to pay for the assets at a time when cuts were happening across the public service.

Concern had been expressed that millions of pounds worth of property in Northern Ireland bought with loans from banks in the Republic could be sold off quickly, causing commercial property prices to plummet.

However, Northern Ireland Finance Minister Sammy Wilson told BBC News Online that Mr Lenihan had assured him there would be "no firesale" of southern-backed property in Northern Ireland.