Sign in. It’s quick, free and it’s up to you.
An account is an optional way to support the work we do. Find out more.
Updated 12.32pm
RESEARCHERS FROM IRELAND’S top economic think-tank made a “bad mistake” when they failed to predict the banking crisis, one of its chief academics has said.
But the Economic and Social Research Institute (ESRI) did make repeated warnings to the Central Bank and other officials about the risk of the growing property bubble – and their cautioning was ignored.
ESRI professor John FitzGerald said between 2001 and 2007 the organisation called for policies to be introduced to “defuse the situation” of rapidly-rising house prices and reckless bank lending.
If the advice on fiscal policy had been followed, Ireland would probably have escaped much of the damage that was suffered over the recent crisis,” he said.
FitzGerald was appearing this morning before the Oireachtas banking inquiry, where he said he was speaking only for himself – not the ESRI.
He admitted the influential think-tank’s 2008 review had failed to recognise the “impending financial collapse” in the banking sector which plunged the country into recession.
“We were conscious of the fact there was a problem out there but we made a call that Ireland would probably escape it and we were totally wrong,” he said.
The ESRI is one of the government’s key economic advisory bodies and claims independence, although it receives a big share of its funding direct from various departments.
Property industry ‘like a tumour’
FitzGerald said 2003 had been a “turning point” in Ireland’s economic growth when it “moved into a new and dangerous phase” as local banks started to borrow heavily overseas to fund booming demand for home loans.
The point of no return came in 2006 when regulators probably had their last chance to stop the rapid ramp-up of debts, he said.
The build-up of the bubble could have been prevented by appropriate fiscal policy or by appropriate prudential action by the Central Bank and the regulator, or both. Either one of these policy instruments, if appropriately deployed, could probably, on its own, have prevented disaster. Both together would have prevented disaster.”
FitzGerald said the construction sector had a that stage become “like a tumour which grew and grew and squeezed the rest of the economy”, drawing resources from important export industries.
“That killed off a significant number of firms and jobs … jobs that didn’t seem important at the time – no-one noticed the jobs were going, there were no headlines – but we really need those jobs today,” he said.
About that bank guarantee…
Last week US professor William Black said Ireland’s regulators also “did an enormous disservice to the nation” when they declared the banks solvent before the infamous bank guarantee.
He described that decision to offer a blanket assurance for all the banks’ debts as “the most destructive own goal in history”.
FitzGerald said the ESRI wasn’t consulted over the bank-guarantee decision and relations between the think-tank and government officials had grown “frosty” before that time.
He said he had contacted the Central Bank in 2006 and 2007 with his worries to no avail, while he also pointed the finger at the Finance Department for paying more attention to politics than good policy.
There was a cultural change in finance I think in the last decade – they became more concerned about the politics of things and less interested in the technical detail,” he said.
To embed this post, copy the code below on your site
Kenny has a nice EU commissioner role awaiting him in Brussels, which is his 30 pieces of silver for not burning the bondholders but burdened the Irish taxpayers with debt.
@Permo Dermo: that wasn’t him. Blame that lying bast@rd Brian Cowan for that
@jason bourne: Actually jason it was Enda “its not our debt” that put us on the rack,
@Permo Dermo:
Please. The people who burdened the Irish taxpayers with debt were the public sector unions, who’s refusal to give an inch on their bloated pay and pensions during the recession led to a €20 billion annual deficit, every year. The bank bailout was small change compared to that.
@Fred Jensen: €20 > €64?? oh ya I forgot you’re probably using leprechaun economics.
@Fred Jensen: You are some moron aren’t you if you believe that. Aside from the incontrovertible fact that every public sector employee took a fairly hefty pay cut, one which is only now beginning to be only slightly undone, and had a public sector only pension levy applied, how could anyone forget that it was the failure of private sector organisations – banks and property developers among others – that caused the recession and economic collapse. Don’t be so daft
@Fred Jensen: Fred would you ever cop on to yourself.
Why wasn’t tosser listed.
Well this gombeen ever exit the stage.he sold out his own people in favour of the EU,has to be the most embarrassing leader ever
The sheer arrogance of the man, did the same when it came to announcing the date of the last General Election, flip-flopping around for months, unwilling to inform the Irish people when they would be allowed to cast their vote, forgetting that he is nothing more than a PUBLIC SERVANT. Should be in jail for treason.
Surely Seannachi-in-chief. I know a homeless fella on a bench in merrion square with a pint in each hand who will second him for the role, as soon as he’s finished phoning everyone to tell them how much extra water is in his taps thanks to fine gael.
He wasn’t good enough to be taoiseach never mind any of the other jobs. The fact that the EU people see him as a soft touch to advance their own objectives (hence all the EU praise) will rule him out for all of those jobs. I can’t remember one important decision he’s made in the 6 years he’s been taoiseach, except that announcement for the immigrant vote referendum a few months back which will mean nothing to most of us.
@Adrian: The Aqueduct?
“Recently, there has been speculation that Kenny should be kept on as Brexit minister.”
Why would we want “its not our debt” any were near important discussions…..
40 years as a TD, stayed under the radar for 30 odd years collecting his wages and then spent the past few years keeping his masters in Brussels happy to make sure he gets a plum job in Europe. He’s done very well for “himself” and will be looked after while phase two austerity continues to be implemented under stealth taxes and lack of investment in public services. That’s his legacy and as long as the Irish people continue to FF/FG, many more entitled TD’s will enrich themselves on the back of the gullible Irish voter.
While he collects his Taoiseach’s massive pension pot and then the 100k lump sum and the 30k a year teachers pension, he can think about it.
Prison cell
@Jonathan Yeo: so it’s a crime to save a country from economic ruins?
@Negan: lol
@Negan: what planet are you on, I’d like to visit for a few hours.
What about absolute waster?
Quentin Tarantino is looking for a new gimp for Pulp Fiction 2
Would his incompetence be put up with anywhere else.
@William Clay: Only in the EU…..
He could get a job working for Dinny?
Like Cowan did.
Who would have him the circus wouldn’t take him!!
@vinnie Monaghan. Cos he already holds that job title.
He should be booted out of politics.
Why doesn’t he volunteer and dosomething worthwhile ? Why a job with a big salary and yet another pension?
A bog in his beloved mayo,,bury him in it
@Shane O Malley: Shane with a name like O Malley at u sure u wouldn’t like to be buried with him.
@Shane O Malley: Yes he should go back to mayo & cut turf, at least he would be doing something constructive & not costing the taxpayer more money
Backbencher?
@Dylan McKane: backstabber you mean surely
Go back teaching-ar u. Joking-he couldn’t teach a donkey.He will b over in the canaries rubbing the sun cream onto Finnullas back.
Enda wants the private lick arse job to Merkel.
have your say