Thursday 21 November 2019

Honohan 'working to ease burden of overly expansive bank bailouts'

Peter Flanagan and Donal O'Donovan

CENTRAL Bank governor Professor Patrick Honohan said his institution is working to ease the burden of bank bailouts, which he claimed were "overly expansive".

In an address in Dublin last night, Prof Honohan (pictured) said the bank was "currently engaging with external partners to limit and smooth the impact on Irish balance sheets of the indebtedness accumulated as a result of the overly expansive decision to socialise banking losses, to help accelerate recovery of employment on a sustainable basis".

The governor's speech came as he prepares to present a new plan to the European Central Bank on how the bailout of the former Anglo Irish Bank should be structured.

The Government is trying to get a deal on the 'promissory notes' tied to the Anglo deal before a €3.1bn payment goes through next month. The ECB is believed to be opposed such a deal.

Since the crash, the governor said that the bank has imposed a "graduated but intensive and unremitting programme of specific required deliverables" on the banks to "try to ensure that they will deal effectively with the admittedly challenging task of getting ahead of the still-growing mortgage arrears problem, both by getting those who can back on schedule, and modifying loans in the case of those who cannot do so".

The issue of mortgage arrears has worsened almost every month over the last year, with over 12pc of mortgages now in trouble of some description.

The rate is thought to be about double that when it comes to investment properties, or so called 'buy-to-lets'.

Meanwhile, a working paper from the International Monetary Fund has found that the country is "poised to return to its path of strong exports and economic growth and lower imbalances provided that it maintains competitiveness".

The paper, which is published by the IMF but does not necessarily represent its views, looked at how Ireland could grow its economy despite the high level of public indebtedness since the bailout. It emphasised that a pick-up in external demand is critical to Ireland's recovery.

According to the paper, external demand is the "single most important determinant of Ireland's GDP and government revenue". Second, declines in price competitiveness, featured by real effective exchange rate appreciations, restrain exports and economic growth. Finally, the IMF found that exports boost output, which in turn enhances fiscal performance.

Irish Independent

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