Cantillon

Inside the world of business

Unresolved questions

DRAWING A line under the future and, more importantly, the costs of dealing with Anglo Irish Bank is a vital step towards winning back the confidence of international lenders.

Yesterday's announcement appeared to please the market if Irish bond yields are any measure, although the unseen hand of the ECB may have had something to do with the rally that followed the Government statement.

Nevertheless, the decision, which appears to have the support of the European Commission, has answered some questions. But the issue that appears to be troubling the market most remains unresolved. Namely: how much money is the Government pouring down the Anglo black hole, and can it afford it? From this perspective, all that was new in yesterday's announcement is that the nature of the two holes into which the money will be poured has changed. The cost to the State will not be clear until the end of the month when the Central Bank sets out the capital requirements for the two new banks.

The Government would dearly like to be able to claim that the new plan will actually reduce the burden on the taxpayer. But it is hard to see how it can without completely undermining the new management of Anglo Irish Bank and its chairman Alan Dukes.

Anglo's management has been adamant that their preferred solution – a good bank/bad bank split – was the lowest cost option. Either they have now been shown to be wrong – in which case their credibility is very badly damaged – or else they are right, but have been overruled in the interest of expediency.

If the change in sentiment towards Ireland in recent months has resulted in a decision that will cost the taxpayer more, then the blame must fall in good measure on the Government and its failure to deliver in a timely fashion on the strategy it laid out in the spring.

Never a dull moment at Elan

LIFE IS never dull at Ireland's largest indigenous drugmaker Elan. Relations in the boardroom are frosty. The scale of the schism became clear this week as the company successfully sought a High Court injunction to stop two directors – Jack Schuler and Vaughn Bryson – carrying out an investigation into corporate governance at the company parallel to an existing inquiry due to report next week.

The High Court was told Schuler and Bryson – who both joined the board only last year after a high-profile campaign of agitation by Schuler for change – had acted ultra vires in retaining lawyers in the company's name without authorisation in a way that could undermine the existing investigation into allegations made earlier by the two directors.

However, Schuler could have his own, bigger issues to contend with. Elan's affidavit reveals that the company has referred "issues" relating to Schuler to the US stock market regulator. A separate paragraph refers to an inquiry by Elan's legal team into Schuler's share dealings. In most companies, such turmoil would damage the stock price. Not at Elan. Its shares advanced this week.

A step in the wrong direction

A COMMON European approach to corporation tax has reared its head at the worst possible time for Government. Chances are we will be leaning on our euro-zone partners as never before between now and September 20th when Brian Lenihan is due to meet taxation commissioner Algirdas Semeta.

On the agenda once again will be tax co-ordination and in particular introducing the common consolidated corporate tax base. While a common tax base is not the same thing as a common tax rate, it is seen by the Government as a firm step in that direction.

For that reason we have opposed it despite the enthusiastic support of the larger states including France and Germany. Doing so again will prove problematic if the more portentous economic omens prove correct.

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Today

The Central Statistics Office will release the Consumer Price Index for August this morning while at lunchtime Aer Lingus chief executive will address the Leinster Society of Chartered Accountants