New government should ask Europe to cut debts or risk default, says academic
THE new government should formally ask the rest of Europe to write off some of our debts or all interest payments, Prof Ray Kinsella told a conference on the future of Ireland's financial services and regulatory structures yesterday.
The academic, who teaches at University College, Dublin, and the Management Institute in Paris, said failure to write off some debt and extend deadlines for the rest of Ireland's borrowings would "precipitate a default that nobody wants".
Despite his stark warning, he said there should be no unilateral attempt to burn bondholders. "That's not an option," he added.
Prof Kinsella was also critical of the growth forecasts used by the Department of Finance and the European Commission. These forecasts, which still see significant growth this year and next, "just don't make sense any more" and are "playing games", he said.
Turning to what he called a hidden problem, the professor said the government should look at youth and long-term unemployment among 25 to 44 year olds and take very specific action to alleviate the problem, he added.
"They are the people raising children, who are not mobile, who are in negative equity and whose lives are falling apart," he said.
Turning to the banks, Prof Kinsella said the banking system won't stabilise until 2020 at the earliest. The ECB/IMF bailout was acting as a "major impediment" to the banking sector's return to health, he added.