Cowen rescued banks to 'save economy'
Taoiseach Brian Cowen told the Dail yesterday that the Government's rescue plan for the banking sector was about "trying to save the Irish economy".
Mr Cowen also had to defend the Government's record of handling the banks, as AIB now expects its bad debt charges for 2009 to be €4.3bn.
The setting-up of a new agency to manage the loans of the banks, the National Asset Management Agency (NAMA), was heavily criticised by the Labour Party.
"You are pumping the money that will have to be raised for future generations of taxpayers into the banks now in a blind attempt to get them out of the hole they are in," Labour leader Eamon Gilmore said.
But Mr Cowen said Mr Gilmore's assessment of the Government's motivations behind setting up NAMA was wrong.
Banking
"This is about trying to bail out the Irish economy, it's about trying to save the Irish economy, by having a proper banking system," he said.
Earlier, Finance Minister Brian Lenihan told the Dail that the early signs offered a chance "that an end may be in sight to the deepest and most widespread recession the world has experienced for over a half century".
But, speaking on the Finance Bill, Mr Lenihan also warned that the dawning optimism could easily fizzle out.
"Given the turmoil we have seen in the global financial markets and the dramatic contraction in economic output worldwide, there is natural caution and reticence about forecasts of recovery," he said.
"There is considerable uncertainty about both the sustainability and strength of that recovery."
Mr Lenihan said global economic output was continuing to contract, and was accompanied by falling world trade. The advanced global economies -- which constitute Ireland's major trading partners -- were predicted to contract by 3pc this year, he said. "This in turn will weigh upon our export performance," he said. "The depreciation of sterling is also unhelpful for our exporters."
Nonetheless there were signs that the "marked determination" of Governments and leaders across the world in response to the crisis was beginning to bear fruit, he added.
In the last week, the world's leading central bankers have noted improvements in business and consumer sentiment, he said, while some important indicators in key economies has shown tentative signs of stabilisation.
"When it emerges, the recovery will, in all likelihood, be slower in Europe than in the US. But these tentative signs of stability underscore the importance for this country of continuing to pursue the policy path we have chosen," he said.
Recovery
The Government's austerity drive was necessary "so that the economy will be well placed to benefit from the global recovery", he told TDs.
"Though the challenges are great, we should not forget that our economy has many strengths on which to build a recovery," he said.
Ireland's GNP is projected to contract by 8pc this year. A smaller shock is expected in 2010, but the reduced economy could turn positive by 2011, he said.
Kieran O'Donnell, of Fine Gael, asked when the Government was going to admit it had made a mess of things.
He said it was critical to have a real look at Nama, which he believed would not work, but would in fact bankrupt the taxpayer.
"It will not bring about the flow of credit to small businesses and mortgage-holders which is needed," he said.
- Fionnan Sheahan and Senan Moloney
