High stakes

Irish Finance Minister Brian Lenihan opens debate in parliament this Wednesday on the potentially 90-billion-euro plan ($132 billion) to restore faith in Ireland's financial system.

The plan calls for the creation of the National Asset Management Agency (NAMA), which will function as a "bad bank."

Economists forecast the agency to cost around 60 billion euros, which would amount to around a third of the the country's Gross Domestic Product.

NAMA's job will be to take poor performing assets tied up with the US housing crash off banks' balance sheets, freeing them up to revive the flow of credit in the economy.

The state-backed agency is supposed to buy these assets, valued at around 90 billion euros, at a discount rate from the banks.

However, critics fear the agency will pay too much and saddle tax payers with years of debt, not least because the government is under pressure to avoid insisting on a big discount.

The greater the discount, the more likely the state will be forced to extend its stake in two of Ireland's main banks to help them cover the face-value loss of their assets.

A Reuters survey of economists' expectations estimated that the government was likely to offer a discount of around 27.5 percent.

The government already holds around a quarter of the Bank of Ireland and Allied Irish Banks (AIB), and such a discount could see the government effectively take over both banks.

nw/Reuters/AP
Editor: Trinity Hartman