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ECB needs more attitude, warns Dukes


European Central Bank President Mario Draghi

European Central Bank President Mario Draghi

European Central Bank President Mario Draghi

THE European Central Bank (ECB) needs a marked change of attitude and energy, former finance minister Alan Dukes has said.

The former Fine Gael TD accused Mario Draghi, the head of the Frankfurt-based Central Bank, of making "obscure, opaque statements" about the ECB's intentions to stimulate the eurozone economy and steer it away from deflation.

The ECB last week cut interest rates to record lows, launched a series of measures to pump money into the sluggish eurozone economy and pledged to do more if needed to fight off the risk of Japan-style deflation.

But the bank stopped short of fully-fledged quantitative easing – printing money to buy assets – although Mr Draghi said more action would come if necessary.

Mr Dukes told an IIEA-European Commission seminar in Dublin that small incremental steps were pointless.

"If the history of the last seven years shows us anything at all, it is that small measures that go in the right direction are pretty much a waste of time," Mr Dukes said.

"If you're going to make a change, make a lot of change very quickly."

Mr Dukes was speaking at the 'Looking to the Future: Recommendations for the Irish Economy' seminar, which was also addressed by Department of Finance chief economist John McCarthy and University College Cork economics lecturer Seamus Coffey.

The former Fine Gael leader also criticised aspects of the Ireland-specific recommendations from the European Commission, claiming some were disingenuous. But he said on the whole, the recommendations were "well focused".

However, he said that monetary policy appears nowhere in the European Semester and claimed this meant that Europe still believes the crisis in the eurozone is a fiscal crisis.

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"That, in my view, is to everybody's detriment. For as long as this continues to be the case, the European Semester will be an elegant, internally consistent, suitably rigorous and effective recipe for stagnation," he said.

Separately, Mr Dukes also said that capital writedowns for bad home loans was inevitable.

He said sorting out the mortgage arrears problem – either through repossessions, buy-to-let, split mortgages, or debt writedown – was going to be costly but needed to be tackled.

"If they're going to take a hit, which they are, they should take it rapidly, so that we'll get rid of most of the problems as quickly as we can and finally get to the point were the fundamentals of the economy are beginning to work," he said.

Earlier, Mr McCarthy said the country's debt ratio had peaked and was now falling. But he said the recovery in investment had been driven by multinationals.

He said most, but not all, of the country specific recommendations for Ireland were appropriate.

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