Saturday 7 December 2019

Now we know why Honohan gets big bucks

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Patrick Honohan,Governor of the Central Bank, arriving for the Oireachtas Committee on Finance meeting at Leinster House yesterday. Picture: Tom Burke
Patrick Honohan,Governor of the Central Bank, arriving for the Oireachtas Committee on Finance meeting at Leinster House yesterday. Picture: Tom Burke

Thomas Molloy

THIS is why they pay Central Bank governors the big bucks. Poor Patrick Honohan has that awful dilemma: two masters who want completely different outcomes.

His pay master, Michael Noonan, clearly wants the property party to continue indefinitely. The European Central Bank, to which Mr Honohan has sworn an oath to consider the big picture, wants the opposite: a responsible housing policy that would choke off the bubble in Dublin and cut the nascent recovery elsewhere before it really takes off.

Prof Honohan made it fairly clear to TDs and senators yesterday afternoon that he is inclined to keep the Troika happy rather than the minister. Still, we don't yet know exactly how he will do that because he has also admitted that the Central Bank was far too ambitious in its plan to reform the mortgage system by the start of January.

That should come as no surprise; the Central Bank operates at a glacial speed at the best of times and slows down further when treading on political toes.

That's a shame because the sooner Prof Honohan acts, the better. There is no point in allowing the market to keep rising if you plan to deflate it within months. Like the man holding onto a balloon as it floats higher, the best time to let go has passed. The second best time is now. There are some good reasons to question whether the Central Bank is pursuing the right approach but there are no good reasons to delay; what the housing market needs is certainty. No sensible decisions can be made until Prof Honohan tells us exactly what he has in store. The sooner the better.

Irish Independent

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