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Dublin. It is the world’s biggest banking black hole — and it is in Ireland, one of Europe’s most troubled economies.

The debt disaster at Anglo Irish Bank means that Ireland is tasked with carrying out the continent’s most ambitious bank-bailout program at a time of surging deficits and welfare lines.

The unrelenting tide of red ink has analysts and Dubliners alike asking: How on earth will Ireland keep paying its bills?

“Every man, woman and child walking down that street out there has been put in a deep, dark hole by the bankers. We’ve all been given a bill we can’t pay for a hundred years,” said John Doyle, a car mechanic.

At the center of the crisis is Anglo, a specialist lender that bet all its chips on a runaway property market during Ireland’s boundlessly optimistic Celtic Tiger boom of 1994-2007.

Ever since the global credit crisis plunged the economy into reverse two years ago, unemployment has tripled to 13.8 percent, private construction activity has collapsed, tax collections have shriveled and the national deficit has swelled to the largest in percentage terms in Europe.

“You wonder if Ireland is going down the same route as Greece. The country is hemorrhaging money at an alarming rate,” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin.

The government of Prime Minister Brian Cowen has won plaudits internationally for its swift intervention since 2008 to prevent bank failures and fight the deficit with severe cuts in ordinary people’s incomes.

Cowen, the European Union and International Monetary Fund agree that Ireland must keep cutting spending by at least 3 billion euro ($3.8 billion) next year — but the ballooning cost of saving Anglo keeps undercutting that effort.

So far, the government has thrown 35 billion euro into Irish-owned banks, about two-thirds of that into Anglo alone, in hopes of preventing the chaos that followed the US collapse of Lehman Brothers.

In doing so, it offered a Europe-unique blanket guarantee to pay back international holders of all Irish bank-issued bonds, rather than let Anglo fail and let its investors swallow the losses.

But many, even within Cowen’s own coalition government, now criticize that guarantee as recklessly generous, and question whether Ireland would be better off making Anglo investors bear at least some of the losses.

The government initially hoped to limit its support for Anglo to 3.5 billion euro, but nationalized the bank outright after uncovering massive loan malpractice.

Taxpayer support has reached nearly 23 billion euro — and, after initially billing this bailout as an investment, the government now concedes the money will not be coming back.

International investors guided by ratings agency Standard & Poor’s think the ultimate Anglo bill to Irish taxpayers will reach 35 billion euro, equivalent to 20 percent of the Irish economy, if the government stays the blanket-guarantee course.

While the government’s publicly favored option is to split Anglo into two — a “bad” bank that would handle the taxpayer-funded dumping of failed loans, and a solvent bank that receives the profitable 20 percent of its loan book — Cowen now is hedging his bets and using European Union supervision as possible cover.

Analysts expect the European Commission in Brussels to offer at least partial support to the government’s plan to split Anglo in two, but could demand that European bondholders in Anglo take their lumps rather than accept Ireland’s get-out-of-jail-free card.

“Brussels probably will back Ireland’s plan for a good bank-bad bank split of Anglo. But you can’t dismiss the chance they’ll say enough’s enough, the numbers are that bad,” McQuaid said.

As it is, the uncertain cost of propping up Anglo has already made investors deem Ireland an increased investment risk for borrowers.

Last week S&P lowered Ireland’s credit rating again, citing its bank bailout program.

The taxpaying public, which has glumly swallowed two years of income cuts and tax hikes as part of deficit-fighting measures expected to continue through 2013, sounds fed up with the cost of saving Anglo and doubts the ability of their own government to cope.

“Hopefully the IMF and EU will run this island for the foreseeable future,” a correspondent for the The Irish Times said.

Doyle, the Dublin mechanic said: “All of those Anglo fat cats should be in jail. They’re keeping their mansions, their tax shelters, their Mercedes while the nation goes to the wall. It makes you sick thinking about it.”

 

Associated Press