Troika made crisis worse, says former chief of BoI
Soden: Miscalculation over Greek bailout was an error of judgement
Published 20/11/2011 | 05:00
Central Bank board member Mike Soden believes the EU/IMF/ECB Troika has made the global financial crisis worse.
Speaking to the Sunday Independent in a personal capacity, Mr Soden, who is a former Bank of Ireland chief executive, highlighted the troika's miscalculation of Greece's bailout needs as an "error of judgement" that has both contributed to the destabilisation of global markets and diluted investor confidence.
Recalling how Greece had initially sought a bailout amounting to €30bn to tide them over difficulties with the repayment of short-term maturing debt, the former Bank of Ireland boss noted that the troika's detailed examination of their needs had determined a requirement for a bailout of €110bn -- an amount which had since been found to be €110bn short of Greece's actual needs.
Remarking on this, Mr Soden said: "The markets move swiftly, but to believe that an error of judgement by the troika in the context of the financial needs for Greece to extract itself out of their crisis has not contributed to the destabilisation of the global markets and, in turn, the dilution of investor confidence would be wrong."
Commenting on what he believes must be done to restore market confidence, Mr Soden said Europe should now recognise the need for a strong banking system as its "primary objective".
On this, he said: "Perhaps if Europe recognised the need for a strong banking system as its primary objective by preserving the banks' standing there would be far more stability and confidence in the market. As politically unsavoury as this may be, I believe this to be the correct price to pay."
He insisted market confidence would be consigned to the sidelines until those whom he termed the "financial mandarins in Frankfurt and Brussels" determined what they would recommend to their political masters.
"Whatever the cost, it will have to be borne by all the EU members on a proportionate basis if a strong euro and a united Europe is the objective. Slow decision making will be met by swift market reaction that will result in serious unintended consequences that will likely be dismissed by the political elite as inappropriate market nervousness. Yes, the markets do dictate to the politicians -- not the other way around. At best the markets and politicians should be operating in harmony which, at the moment, appears to be a distant goal."
Referring to the path being pursued through the economic crisis by this country, Mr Soden said: "Ireland is cautiously managing its way out of the crisis and has no need to entertain default due to the strong position taken by the Government. The reforms, while austere, are applauded by our partners in Europe and will ensure a place for us at the table as long as it is desired."