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€6bn bailout will solve our homes crisis, says Kelly

THE economist who predicted Ireland's property crash has proposed a €6bn bailout for struggling homeowners.

UCD Professor Morgan Kelly said that an investment of this figure would be sufficient to assist desperate mortgage holders.

The system would be similar to a NAMA for householders in debt trouble -- just as some developers will benefit from some level of debt forgiveness on a case-by-case basis, so should ordinary Irish people.

Prof Kelly told the Irish Society of New Economics that "spending €5bn to €6bn on mortgage forgiveness, mortgage principle reduction and allowing those hopelessly indebted to walk away from mortgages, would probably solve most of the problem" for mortgage holders.

"We are talking sums in the region of €5bn to €6bn which would be necessary to spend on mortgage forgiveness, which by our standards are not very large," he said.

"This sum to sort out tens of thousands of people with big problems does not seem enormous."

The figure would be minuscule compared with the billions shelled out by State 'bad bank' NAMA -- during 2010, the agency paid €30.2bn for 11,500 loans belonging to 850 debtors.

Prof Kelly described his keynote address as "good news" on a day when billions was wiped off the value of global stocks and shares -- ultimately causing pain for pension-holders.

There are mounting fears of an impending double-dip recession as rumours circulate over European debt problems and figures reporting sluggish US economic growth.

European investors are lining up for another vast decimation in the value of stocks and shares today after overnight falls continued in Asian stocks.

Dublin's ISEQ dropped more than 4pc as Frankfurt's DAX was hit hardest yesterday, closing down almost 6pc, while the CAC in Paris fell 5.5pc and London's FTSE lost 4.5pc.

But Prof Kelly said that there is a way out of the stagnant mortgage economy and overall spending here -- and urged the Government to consider looking at this "very useful social programme".

"The good news is that if you leave investment mortgages out [of total mortgages owed], which are largely the banks' problem, and look at mortgages people have on their own houses, there are about €55bn of these out there," he said.

"A lot of people can't repay these mortgages and this is causing people terrible agony," he said.

The analyst also predicted that there will be further falls in house prices beyond what has already taken place.

Prof Kelly, who has been praised for forecasting the property crash, has also been named Dr Doom for his more recent analysis of the recession.