Tuesday 12 December 2017

'Saying nothing' not an option for Prof Honohan

Brendan Keenan

Brendan Keenan

CENTRAL bankers are supposed to abide by the old Ulster advice: 'whatever you say, say nuthin'.

But Professor Patrick Honohan is not a central banker; nor is he a retired Department of Finance official of the kind who usually got the governor's job on Dame Street.

He has said a few controversial things since his appointment earlier this year, but none as politically charged as Thursday's 'Morning Ireland' interview on RTE.

It is unlikely that any politics were intended. Prof Honohan had a different problem. He was off to Frankfurt for the bi-monthly meeting of the ECB Governing Council. The advance party from the EU and the IMF were flying in the same day, and would be calling at the bank. Saying nuthin' did not seem an option.

The problem, of course, was that Taoiseach Brian Cowen and his ministers were trying to do exactly that. But their concerns are different. Rightly or wrongly, they do not want to be seen applying for a bailout. Not yet.


Actually, they have a point. There is no financial reason why the Government cannot produce the four-year plan and introduce the Budget without external assistance. No money is needed until early next year -- and who knows what will have happened by then?

But the politics may have moved beyond that, so Prof Honohan could not avoid being political. His clear statement on the need, and probable size, of a bank rescue, cut across Mr Cowen's plans to kick the can down the road for as long as possible. "Premature," said a clearly irritated Taoiseach.

Yesterday's figures from AIB on the loss of deposits showed one reason why Prof Honohan felt matters had to be clarified. The two big banks have lost €23bn in deposits since the start of the year.

For the governor, the sense that nothing was happening was dangerous. With everyone knowing that a rescue plan was under way, silence could only add to the fear.

But although Prof Honohan told us that a multi-billion fund would be established, and that banks could call on it as needed, all the big questions about the bank rescue, as distinct from the budget rescue, are still to be answered -- in particular whether it will add yet more to the burgeoning national debt and the burden on the taxpayer.

Irish Independent

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