Sunday 11 December 2016

Celeb McWilliams hits back at FitzGerald's 'cheap shot' jibe

Published 03/04/2011 | 05:00

FORMER Fine Gael leader Garret FitzGerald, in a manner reminiscent of Fianna Fail, has rounded on "celebrity economists" who, he says, are "seeking publicity" by claiming that Ireland's problems are so great that default is inevitable.

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Dr FitzGerald's intervention comes as the Government attempts to deny what many observers believe to be obvious -- that Fine Gael and Labour have reneged on an election promise to burn the bondholders.

Yesterday David McWilliams, regarded as the most high-profile "celebrity economist", accused Dr FitzGerald of a "cheap shot" and said that such criticism was "exactly the same" as some economists had encountered at the height of the property boom.

In a column in the Irish Times yesterday, Dr FitzGerald said the conservatism of assumptions which underpin stress tests on the bank "ought to command the respect" of the financial markets.

It remained to be seen, he said, to what extent the study actually commanded such respect, before he went on to cite three factors which could work against this.

The third factor, he said, was "the damage done to our financial reputation by some of our more vocal domestic commentators".

Dr FitzGerald said: "Part of our problem has been, and regrettably still is, the fact that 'the markets' lack the capacity to assess adequately the financial situation of smaller states like Ireland. It is only in relation to larger sovereign borrowers that these firms employ specialists with detailed knowledge of the economy of a particular state.

"For smaller states like Ireland they depend on second-hand information. This includes often ill-informed media reports, which in our case have involved reports of some of the 'celebrity economists' who have been seeking publicity by claiming that our problems are so great that we will eventually have to default.

"Some have indeed proposed that we should take that course now despite the impact this could have on our only current source of future borrowing -- the EU-IMF bailout.

"The damage to our standing abroad by such irresponsible statements has been incalculable. It is difficult enough for our own people to distinguish between serious economic commentators in Ireland and irresponsible voices -- it is impossible for foreign observers of our finances to do so," he wrote.

Yesterday Mr McWilliams, an advocate of default, told the Sunday Independent that he was reluctant to get into a "row" with Dr FitzGerald: "I have too much respect for Garret," he said.

However, he said the criticism by Dr FitzGerald was "exactly the same" as the criticism levelled at economists such as himself when they warned in 2002 and 2003 that a "monumental crash" that would "impoverish a generation" was on the way.

Mr McWilliams added: "I am reminded of what Johnny Giles says when his football analysis is criticised: 'Show me your medals'."

He said: "With respect to cheap shots like that, the old RAF adage applies, that 'you only take the flak when you are over the target'. There are two types of economists in Ireland -- economists with foresight and economists with hindsight. If having foresight makes me a celebrity economist then so be it."

The assertion that Dr FitzGerald's view is reminiscent of the criticism which Fianna Fail directed towards some economists in the boom years has a parallel in the new Government's decision to adopt a banking policy broadly similar to the Fianna Fail-led Government.

Finance Minister Michael Noonan and other ministers have contrived to reject claims that the Government has reneged on promises made during the election to impose burden sharing on senior bondholders of loss-making banks.

In the wake of Thursday's major recapitalisation announcement, Mr Noonan and other ministers have denied any U-turn on the issue. "We have not broken our word," Mr Noonan said, stating that all election promises were predicated on agreement being reached at European level.

He said that since the banking crises had emerged, Fine Gael had been in favour of burden sharing. "We want burden sharing but we would not do it unilaterally. We would only do it with the agreement of Frankfurt and we did not get it," he said.

"The ECB in Frankfurt has held out solidly that senior bondholders will not be touched. It's a majority view in Frankfurt. There are governors in Frankfurt who do not hold that view." He said the ECB had been "very good to Ireland", providing almost €200bn in liquidity.

Meanwhile, Expenditure and Reform Minister Brendan Howlin also denied the suggestion that the announcement represented a U-turn for Labour.

He said the Coalition had chosen the best way out of a "ruinous situation". He said that the advantages of burning bondholders would have been outweighed by disadvantages.

Transport Minister Leo Varadkar denied that the announcement contradicted a statement he made in February that "not another cent" would go to the banks unless junior and senior bondholders shared the losses.

He said there was an element of burden-sharing, because about €5bn of the €24bn came from losses imposed on junior subordinated bondholders.

"We would have liked to impose losses on senior bondholders but Europe has ruled it out. We are certainly ruling it out for AIB and Bank of Ireland, because Ireland will never get back to normal if we do impose losses on senior bondholders at these two institutions," he said.

Sunday Independent

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