Leading experts predict economic growth
Ireland is not financially ruined and can look forward to economic growth again in the coming years, international experts said today.
Klaus Regling and Max Watson, who authored one of two reports into the banking crisis, said if the Government can make the right decisions there were good prospects for the country.
The former International Monetary Fund officials also praised Ireland’s reaction to the crisis as the best out of all eurozone states.
But they insisted there was a serious hole in the expertise of the Department of Finance, pointing to budgetary mistakes that worsened the crisis “because they were in charge”.
Mr Regling, speaking to an Oireachtas committee about the report, dismissed suggestions from some economic commentators that Ireland was “ruined”.
“Ireland is not ruined, that is my firm view,” he said.
Despite suffering the most serious crash in its history, Ireland still had a higher income per head than the EU average and with the right Government policies could look forward to good growth again, he said.
However, growth would not be as strong as before the economic crash, according to the expert.
Mr Watson said it was also a mistake to entirely dismiss the economic model that sparked Ireland’s boom as an illusion.
“There’s a slight tendency to throw the baby out with the bath water and say Ireland’s big boom was all a bad model,” he said.
“The truth is that up to 2001 or so Ireland had a very good growth model.”
The former deputy director at the IMF said there were negative elements to the Irish economic model, such as an overdependence on foreign direct investment.
But he added there was “little doubt” it can generate new jobs, particularly in new knowledge-based industries.
“I think when you look at economies in the euro area, Ireland is one of the ones where people should feel confident that there is an ability to regenerate the economy,” he said.
Once the crash of the property bubble – which grew in the final phase of the boom – is digested, then people can look forward again to genuinely rising living standards, Mr Watson said.
Highlighting shortcomings in the Department of Finance, the leading economist said it was understaffed and needed to be strengthened, particularly in terms of independent economic expertise.
Mr Watson suggested a fiscal or economic council made up of outside experts be set up to advise the department and the finance minister.
Asked if the department had ignored or overridden sound advice in the lead up the crash, he said: “We came to the conclusion there was not a lot of good advice.”
Separately, Labour leader Eamon Gilmore today insisted Central Bank governor Patrick Honohan’s report vindicated his party’s reasons for opposing the bank guarantee scheme – despite the report backing the need for a guarantee.
“He said an extensive guarantee was needed,” Mr Gilmore said.
“He did not say that the blanket guarantee, which he referred to elsewhere, is what was needed and he specifically identified the coverage of subordinated debt, which we objected to at the time.”
