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Austerity was wrong option for Ireland, says former IMF chief

A former International Monetary Fund (IMF) chief has admitted that austerity alone as a way of solving Ireland's economic crisis was a mistake and is counter-productive.

Ashoka Mody, former IMF chief of mission to Ireland, also said that bondholders should have been burned, while a sovereign default would also have been manageable.

But Taoiseach Enda Kenny responded tersely, saying: "Hindsight is a wonderful thing."

Mr Mody's comments come as eurozone finance ministers are in Dublin for an informal meeting this weekend, where it is understood longer repayment terms for our bailout loans will be discussed. In an interview with RTE's 'Morning Ireland', Mr Mody said there were three options for Ireland – make bondholders pay some of the cost, extreme concessional official funding or, lastly, austerity.

"The decision then was the entire reliance would be on austerity and clearly the experience, if experience was needed, has demonstrated that reliance on austerity is counter-productive," he said.

The Taoiseach later said he had heard the interview, but that "in every situation in life, hindsight is a wonderful thing".

Mr Mody added that burning bondholders, which could have saved billions of euro, was not considered because of a mindset that felt it would cause uncertainty.

Irish Independent