Morgan Kelly's new SME warnings being taken seriously, says minister
Fresh dire economic warnings from the economist who predicted the property bust should be taken "very seriously", Junior Finance Minister Brian Hayes has said.
But he disagreed with Finance Minister Michael Noonan's belief that rising house prices were a good thing.
Last month UCD Economics Professor Morgan Kelly warned a new European Central Bank (ECB) clean-up of Irish banks could force large numbers of small and medium enterprises (SMEs) to close.
Mr Hayes said yesterday of Professor Kelly: "He was one of the few people that got the crash utterly right.
"When Professor Kelly made those remarks the next day the Minister for Finance said that the Central Bank should sit down and meet with Professor Kelly," said Mr Hayes.
Both the Central Bank and Prof Kelly confirmed to the Irish Independent that sit-down talks had taken place about his prediction about a banks' clean-up. But neither party would reveal the detail of their talks.
"We can confirm that Central Bank representatives met with Morgan Kelly but we do not disclose details of private meetings," said a spokeswoman for the bank.
Mr Hayes, speaking at the launch of a new initiative aimed at helping SMEs win public sector tenders, said rising property prices were a good thing.
"I suppose the other argument is that as we begin to see an increase in property prices that also reduces the liability on the part of the business owner who may well have property assets as part of the borrowing and obviously that's good ultimately in terms of that position," stated the minister.
Last week Mr Noonan dismissed talk of a boom but conceded he was "worried" about Dublin's shortage of housing.
Mr Hayes also said that work was being done to rework the bad bank loans of small and medium-sized businesses to avoid the crash that Prof Kelly warned of. "We take very seriously the remarks of Professor Kelly. The Central Bank is keeping a very sharp focus on making sure the pillar banks especially hit their targets in terms of SME lending but more importantly on restructure."
Meanwhile, he says the coming Budget may not have to be as harsh as Minister for Finance Michael Noonan's planned €2.2bn of cuts.
"We don't know where we're going to be next October it's very early in the year. The national accounts are only in for the first quarter and they're looking good we're hitting all our targets on the tax side.
"I think ultimately the minister has some room for manoeuvring and obviously we'll have to wait and see in October," Mr Hayes said.