Emmet Oliver: 'We wouldn't be lending if we thought the Irish situation was unsustainable'
Ajai Chopra, deputy director of the International Monetary Fund's European Department, in the gardens of the Merrion Hotel in Dublin yesterday
Related Articles
THROUGH a doorway, up a stairs, down a very long corridor and inside a swipe-operated door you will find the IMF team that bailed out the first western European economy in three decades.
Surrounded by bottles of water, piles of Irish newspapers and banks of laptops, members of the IMF mission to Ireland are preparing to catch flights back to Washington after working for almost two weeks here.
At the top of a large table, tapping away at his own laptop, is economist Ajai Chopra, dubbed 'the Chopper' since he arrived in Ireland on November 18 and overnight became the most recognisable face in the country.
While trained as an economist, Chopra could easily have been a diplomat, such is the ease with which he sidesteps unpalatable numbers.
Chopra's genial personality clashes with the prevailing mood of all permanent residents of this country.
But he is having none of it and believes not only can Ireland rebound, it can also afford to take on just one more dollop of debt in a last push to stabilise the banking system.
He thinks the key is to get a real sense of the problem in the banks. While there have been plenty of stress tests of the banks already, they didn't wash with the markets and Chopra says the answer is to commission a stress test to beat all stress tests. If the test discovers a new frightening black hole, then its best to simply fill it with fresh capital, he says. The money is now available.
While the Government has forced the banks to engage in a precise level of lending, Chopra is not as keen on this idea.
"I don't think it is viable to just say they need to lend regardless, indiscriminately. That is not going to be good for the economy either,'' he says.
Chopra steers the conversation away from questions about whether he is personally confident the banks are admitting to all their bad loans. Instead he says the markets weren't happy and that was the crucial point.
"Let me put it this way, there is no question that there is a lack of confidence in the capital adequacy of some of the banks,'' he adds.
"One way to address it is to actually go in there and do an assessment of expected losses more thoroughly. Where there is a confidence problem, that doesn't necessarily mean there is an actual problem. You have to address it from both sides. It could be a perception problem -- one needs to find a way to dispel that perception."
The IMF chief says the banks must look forward, not back.
Today's secure borrowers can easily become tomorrow's bad debts. But he refuses to give any sense of concern over what skeletons might yet emerge from banking cupboards.
"It would be completely unrealistic to expect in two weeks over here one would be able to look at a complex banking system, a very large banking system, and come up with a scientific number that tells you, this is it," he says.
If anything is going to go wrong, it could be mortgages, Chopra admits (he also mentions SMEs).
"The mortgage loan pool is large and has to be monitored closely. There are lots of different types of mortgages, for example, tracker mortgages. Over time interest rates will begin to go up, and one needs to be sure that with these tracker mortgages people will be able to afford the higher interest rates.''
Clearly Chopra has been through some stamina-sapping negotiations, but he is tight-lipped about the subject of senior bondholders.
"Yes, the subject did surface for discussion, the pros and cons of these approaches are discussed and then a decision is made,'' he says.
He was not going to discuss whether the Government lost that crucial debate after the ECB vetoed the idea of including senior bondholders in the bank rescue.
Chopra is more interested in talking about the future and Ireland's debt levels. Are they affordable? Yes says Chopra. "We would not be lending into a situation if we thought it was unsustainable," he adds. Only time will tell whether his faith in Ireland's ability to pay is misplaced or well-grounded.
Irish Independent
