Business Irish

Friday 24 March 2017

Recouping bank bailout cash 'a priority' - Ahearne

BANKS

Thomas Molloy

Thomas Molloy

RECOUPING taxpayer money used to bailout the banks should be one of the Government's top priorities, Alan Ahearne, a special adviser to the last government, has said.

"That's got to be a focus," said Dr Ahearne, adding that his own research showed Ireland's bailout of the banks, which cost 40pc of gross domestic product, was the most expensive in history. Bailouts of other western countries have never cost more than 10pc of GDP, he added.

His research shows that some countries have been successful at recouping most of the money paid in bailouts while others have failed.

GDP

Indonesia, which shelled out 37pc of GDP to rescue its banks, recouped almost nothing. Chile, which initially spent 34pc of GDP, ended up paying just 6.5pc because it got most of the money back.

Dr Ahearne told a conference hosted by the Irish Association of Corporate Treasurers Ireland's position would be "somewhat fragile" as debt rose to around 118pc of GDP in 2013.

While the cost of servicing that debt would be 20pc of total government income, it would still be similar to the cost of repaying interest in the 1980s, he said.

Another academic who has an important input into policy, Donal Donovan of the University of Limerick and a member of the Fiscal Advisory Council, told the same conference that the Government should exploit tensions inside Germany between manufacturers dep-endent on exports and those who want to eject countries from the euro.

"I think we will have to push the Germans harder," he said. "The ultimate bill has to be paid by the north," he added in an apparent reference to solvent countries such as Germany, the Netherlands and Finland.

The legal position of the European Financial Stability Facility which was recently created by the European Union was still unclear, he added.

Dr Donovan rejected suggestions that the ECB should buy bonds on the primary markets, saying that central banks shouldn't back governments, only banks. "That's what happens in Zimbabwe," he added.

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