Tuesday 26 September 2017

Finance officials became 'grumpy' with watchdog

Niall O'Connor and Clodagh Sheehy

SENIOR figures in the Department of Finance grew "upset" and "grumpy" over some of the commentary and recommendations made by The Economic Social and Research Institute (ESRI), the Banking Inquiry was told.

Professor John FitzGerald detailed the fraught relationship that developed between the two parties in the run-up to the devastating financial collapse.

He said that tensions heightened in particular when, in 2008, the ESRI recommended that the government increase corporation tax.

The department became "a bit more grumpy" in the lead up to the bank guarantee when the watchdog "didn't accept their views."

It emerged at yesterday's sitting of the Banking Inquiry that Prof FitzGerald was not consulted by anybody in government circles over the decision to guarantee the banks in late September 2008.

Relations between the ESRI and the department were "frosty" at the time, he added.

Asked what his advice to the Minister would have been on the night in question, he said he would have recommended what he recommended subsequently "that he go and talk to Patrick Honohan", the now Governor of the Central Bank.

"He was the international expert. If he had been consulted there might have been a different outcome," according to Prof FitzGerald.

But he insisted that at no stage in the months prior to the guarantee were he or his colleagues put under political pressure over some of the ESRI's recommendations or economic statements.

Prof FitzGerald said that at times "political comments" were made by officials in the Department of Finance but that these were always ignored.

"Our job is to call it as we see it, without fear or favour," Prof FitzGerald told TDs and senators.

In relation to a piece of economic analysis produced in 2006, Prof FitzGerald said senior people in the department became "upset" at some of the ESRI's findings.

At this particular time, former Taoiseach Brian Cowen was the line minister.

However, Prof FitzGerald told the inquiry that he later attended events with Mr Cowen and that no such sense of upset was communicated by the then Laois / Offaly TD.

He also described an example in 1999 when it emerged that the Department of Finance was "jumping up and down" over a particular ESRI article.

Prof FitzGerald said he was abroad in Warsaw, Poland, when he was contacted and informed of the department's dissatisfaction with the watchdog over the piece.

Prof FitzGerald said he ignored the remarks because they were political. But on his return, he learned that the author of the piece of research had changed the work to meet the suggestions of the department. Prof FitzGerald told the inquiry that the details of the incident were later published in the media.

Irish Independent

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