Thursday 17 August 2017

We'll all be stress-tested to the limit

With the ECB tightening monetary policy, a 'tax and spend' strategy may push the economy to breaking point, writes Marc Coleman

As far as the media is concerned, stress testing is over and done with. The full horrifying worst-case facts are known. Basta. Finito. The bad news is that as far as you and I are concerned, stress testing has only just begun.

Last Thursday it was the central banks testing the banks. Notional stuff, this was an exercise full of hedged bets and what-ifs. Not next week's stress testing of mortgage holders by the European Central Bank. At 12.30pm next Thursday, Jean-Claude Trichet will approach the podium in the ECB's main conference room in Frankfurt to announce the first increase in the bank's "main refinancing facility" since July 2008. It will also mark the beginning of the second tightening cycle -- ie, series of continued upward rises -- in interest rates in the ECB's 13-year history. And it is a very unlucky 13.

Compared to the notional worst-case scenario of €24bn being sucked out of the wallets of taxpayers to give to banks, a very real scenario of €10bn will be sucked out of the wallets of borrowers around Ireland between now and 2013.

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