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Irish government claims banks will honour their obligations

The Irish government has today confirmed that it fully expects Irish banks to honour their obligations because a failure to do so would seriously jeopardise the government's ability to raise finance in the future. There is no doubt that concern regarding the Irish banking situation continues to grow and with Anglo Irish Bank's senior debt downgraded by three notches today it is easy to see why some investors are running scared.

It is believed that the Irish authorities have already earmarked 20% of the country's GDP (around €33 billion) to the troubled banking sector as concerns grow about the level of funding which will be required to stabilise the situation. The problem is that the Irish government cannot afford for any bank in the country to default and therefore is literally being held over a barrel by the financial community.

Nobody yet has the confidence to say that ultimately the final figure to bailout the financial sector will be XYZ therefore we are seeing an array of different forecasts and expectations, many of which creep into the doomsday scenario. This is a situation which will continue until investor confidence improves in the Irish banking sector and investors are prepared to invest their money.

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