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Kelly takes up invite from Central Bank

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Warning: Morgan Kelly. Photo: Gerry Mooney

Warning: Morgan Kelly. Photo: Gerry Mooney

Warning: Morgan Kelly. Photo: Gerry Mooney

ECONOMIST Morgan Kelly has taken up an invitation to discuss his views with the Central Bank on the threat facing small businesses.

It follows a warning from the UCD lecturer that a large number of small firms would go out of business as a result of this year's stress tests.

In a lecture to the Economics Society in UCD, the professor said the SME (small and medium enterprises) sector, which provided most of the employment in the economy, was still struggling with debts from the property boom which it was unable to repay.

The economics professor inspired intense debate after he warned that the European Central Bank was planning a "clean-up" of Irish banks which would see large numbers of SMEs go under.

Contact

It has now emerged that senior officials from the Central Bank moved quickly to contact Prof Kelly, following remarks from the Finance Minister Michael Noonan last Monday night, in which he acknowledged that the economist's views had to be taken seriously because of his track record in predicting the country's house price crash.

"He was correct before when nobody else was and I think if the Central Bank was to make contact and access some of the data that is underpinning his speech, that would be helpful," Mr Noonan said.

Central Bank Governor Patrick Honohan meanwhile has insisted that there is no mechanism whereby the ECB bank stress tests could increase pressure on SMEs.

He said that Irish banks had been working through the SME loans on their books in a very systematic way for the past three or four years.

"As with the mortgages, it has been very slow, but it has been going on and the banks are dealing with the loans," Mr Honohan said.

Agriculture Minister Simon Coveney has rejected Professor Kelly's views on the dangers faced by the SME sector. "I think he's wrong, but he's entitled to his opinion," said Mr Coveney.

The stress test process is aimed at uncovering any hidden risks or losses in the banks by the end of October.

FDILLON@HERALD.IE


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