Irish bank bailout hits $99 billionMarch 31, 2011: 1:29 PM ET
Ireland's banking crisis took yet another turn for the worse Thursday.
The government said its latest effort to purge lenders that gorged themselves on inflated property loans during the bubble will set taxpayers back 24 billion euros ($34 billion).
The announcement by finance minister Michael Noonan brings the tab for public support of the country's banks to $99 billion. That's a staggering 40% of annual economic output. A comparable figure in the United States would run above $5 trillion.
That explains Noonan's comment Thursday that the previous government's September 2008 decision to stand behind the teetering Irish banks "will go down in history as the blackest day in Ireland since the Civil War broke out."
Under the plan announced Thursday, two of the loss-soaked banks will be combined and a third will be forced to divest itself of insurance and asset management businesses.
The good news about Thursday's plan is that it won't force the government to go back to its lenders at the European Union and the International Monetary Fund to ask for more money. Ireland took $115 billion in bailout promises from the EU and IMF last year.
But the plan does contain some elements of wishful thinking that could yet again raise the tab if things don't work out, as has happened once or twice.
While Noonan acknowledged that taxpayers will once more be left holding the tab, he stressed that "significant contributions from other sources including from subordinated debt holders, by the sale of assets to generate capital and where possible by seeking private sector investors" would help to defray the cost.
But European leaders have been dodging and weaving around the question of when they should try soaking bondholders to recoup some of taxpayers' losses. Some leading central bankers have been calling for Europe to impose losses on lenders in a bid to share the pain borne so far largely by taxpayers, but policymakers fear doing so will precipitate a bank funding crisis that could unravel the Continent's delicate recovery.
The other top worry in Europe – that a possible debt default in strapped Portugal could undermine the health of banks in Germany, France and Spain – got a little more acute Thursday as Portuguese bond yields surged above 8.5%. The country is without a prime minister following the fall of the government last week, and now the question is whether the European Central Bank can keep the country afloat for two months until elections are held.
In what is becoming all too familiar a refrain, it's the central bankers, for all their flaws, who stand between us and the reckoning.
Also on Fortune.com:
Follow me on Twitter @ColinCBarr.