Thursday 23 November 2017

Finance officials told OECD to soften warning on end of boom

Thomas Molloy

Thomas Molloy

DEPARTMENT of Finance officials pressurised a leading economic think-tank to remove warnings about the end of the boom from a 2006 report, one of its authors claimed yesterday.

The Organisation of Economic Co-operation and Development (OECD) dispatched a group of experts to Ireland to draw up a report on the economy and the banks.

But senior Department of Finance officials were opposed to some of the conclusions, committee member Niels Christoffer Thygesen said yesterday.

The committee members held talks with officials but did not meet any politicians -- Brian Cowen was Finance Minister at the time.

Officials were annoyed by the conclusions because they feared they would be seized upon by the media and the opposition parties, who were already predicting that the boom was over.

The economy has suffered the worst contraction in the European Union since the beginning of 2007, while house prices have fallen by 50pc.

"They said to us that the Irish media was as bad as the UK media" when it came to writing about property prices, the Danish professor told the Irish Independent yesterday.

"There was a lot of political sensitivity. We were unintentionally saying what the opposition was saying."

While it is usual for government and OECD officials to disagree over the wording of reports, it is usually possible to come to some sort of agreement following talks, Prof Thygesen said. The OECD routinely discusses a report with the Government before publishing it.

A spokesman for the Taoiseach said yesterday that Mr Cowen had no involvement in the meetings and did not put any pressure on his officials.


A spokeswoman for the department said meetings to discuss OECD reports were confidential but stressed the OECD team approved the final report.

Central banks often back OECD teams when there is a disagreement because they are less sensitive to political pressure. But the Central Bank in Dublin offered the OECD team no support.

The OECD team relented and limited its observations to noting that property prices had already started to fall, he said.

The team was puzzled by the Government's insistence of keeping interest relief for mortgages without any form of property tax but it was told it did not understand the Irish need to own property, the professor added.

The report recommended that such a tax be introduced.

The eventual report included a chapter asking whether house prices had risen too high but concluded the "most likely scenario is that prices will level out or decline slightly".

Other risks were also mentioned, including a sharp fall in prices "either because they are more overvalued than they appear or because a negative shock hits the economy" but the carefully worded report never said that this was likely or that the boom had ended.

Confirmation that department officials tried to prevent the OECD team from publishing its real views on the Irish economy come weeks after Finance Minister Brian Lenihan called in foreign experts to conduct a review of the department's management of the financial crisis.

Canadian civil servant Rob Wright is leading the probe into the department's performance over the past decade.

The review, which will "evaluate the systems, structures and processes used by the department in providing advice to the minister and the Government" will be carried out separately from the commission of inquiry into the banking crisis.

Irish Independent

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