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Ahearne dismisses IMF claims on bank rescue cost

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Dr Alan Ahearne,
economic adviser to the
Finance Minister,
addressing the Engineers
Ireland annual
conference at the
Tullamore Court Hotel, in
Offaly.

Dr Alan Ahearne, economic adviser to the Finance Minister, addressing the Engineers Ireland annual conference at the Tullamore Court Hotel, in Offaly.

Dr Alan Ahearne, economic adviser to the Finance Minister, addressing the Engineers Ireland annual conference at the Tullamore Court Hotel, in Offaly.

THE Government's leading financial adviser, Dr Alan Ahearne, yesterday dismissed as a "technical exercise" suggestions that Ireland will have to pay more than any other country to stabilise its banking system.

The International Monetary Fund said in an unpublished draft report which appeared on the fund's web site on Tuesday that the potential cost of shoring up the bank system would be €24bn and cost more than anywhere else.

The official report published the same day did not contain the figures.

"What made the numbers look rather large is that the way they did that takes into account that Ireland has a guarantee on the banks liabilities," said Department of Finance advisor Dr Ahearne.

"Of course, all the efforts that are being made, are being made to make sure that guarantee is not called in. In fact, I think the chances of it being called in are negligible."

Dr Ahearne warned there are "downsides" to bank nationalisation and that it could send a bad message to markets.

"Nationalisation has lots of downsides for a banking system like Ireland which relies on international funds," he said. "Nationalisation is often viewed from wholesale markets as a sign that the banking systems have completely failed. That's a message the Government would not want to give out."

Old fashioned

The adviser said this month's emergency Budget did not contain "old-fashioned" stimulus as seen in the US where President Obama's administration is running a huge deficit in order to stimulate the economy.

"That sort of stimulus wouldn't work well anyway in a small, open economy, and, of course, the budget position is such that it just doesn't allow it," Dr Ahearne said at the 30th annual Engineers Ireland conference in Tullamore, in Co Offaly.

He said if the US and the global economy improves next year and Ireland continues to get its public finances in order, then Ireland would be in a position to make a "strong recovery".

The former Federal Reserve economist and academic began advising the Government last month.

Ireland is regaining its competitiveness "very quickly" because of rapidly falling wages, he said.

"Of course, those declines are painful but they will price a lot of people back into the labour market and, therefore,they are setting the foundations for the recovery."

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