Why no one really listens to the Central Bank
WITH Finance Minister Michael Noonan preparing once again to shrug off Dame Street's economic recommendations, it is time to ask ourselves what we expect from the Central Bank and even whether we really need it.
Does anybody even listen to the Central Bank these days?
Not our Government, which will ease the planned austerity in this month's Budget despite the bank's call for the exact opposite.
Not our high street banks, which are running rings around the Central Bank. Not our credit unions, which have rejected the Central Bank's efforts to reach a comprehensive solution on personal debt.
Not the European Central Bank, which has consistently made decisions that favour the eurozone's larger countries. Not the markets, which dance to their own tune whatever is said.
It is perhaps too much to expect the central bank of a small country to sway the deliberations of the European Central Bank's governing council but it is hardly asking too much for the Central Bank to influence debate back home.
In many countries, a central bank governor's pronouncements invariably lead to much soul-searching. It is a big deal for governments or lenders to defy the Central Bank.
Here, custom dictates that almost everything the Central Bank says is ignored completely by our political class. To some degree the Central Bank resembles the Seanad and is also a prisoner of history and a political system that insists on centralising all power on the Cabinet.
The 1943 law which established the modern-day Central Bank created a frail creature. It has always been feeble relative to its peers elsewhere in the western world and only enjoyed real power over interest rates for little more than 20 years.
It would tax the patience of any reader to detail here the dozens of organisations that cheated the State under the Central Bank's nose over the past decade or the endless regulatory failures that proceeded and followed the bailout, so let's just ponder one failure: the Central Bank's inability to reform itself.
Last month, the Central Bank admitted that more than 40pc of staff at the Central Bank were contracted to work less than 35 hours a week. Staff representatives are now locked in furious negotiations as the Government tries to implement the Haddington Road agreement and force staff there to work a pathetic 37 hours a week.
The extraordinary thing is that staff right across the bank, from the governor downwards, are better paid than counterparts elsewhere in Europe or in Ireland.
Around 570 staff earn more than €65,000, while in 2012 it was reported that 114 senior officials were earning more than €100,000, and four staff – including governor Patrick Honohan – earn more than €200,000. This is more than the $199,700 salary of US Federal Reserve chairman Ben Bernanke's.
Hypocrisy is a nasty word but it is difficult to think of a better description of the bank's insistence on more austerity for you and me at a time when many cosseted staff are working so few hours for generous salaries.
With a record that includes everything from repeatedly turning a blind eye to tax evasion to faulty economic forecasts that failed completely to capture what actually happened in the economy over the past 20 years, it is unsurprising that the rest of the establishment feels so free to ignore the bank these days.
With a weak opposition, discredited banks largely under state control and a Fiscal Advisory Council still struggling to find a voice, we desperately need authoritative and thoughtful institutions that can shape the debate. Like the Seanad, the Central Bank risks obsolescence unless there is reform and an attempt to practise what it preaches.