‘Mismanagement by FF to blame for the crash’ – Enda Kenny tells Banking Inquiry
Taoiseach Enda Kenny laid the blame for the economic crash firmly on the Fianna Fail Green Coalition government today.
Mr Kenny said tighter management of public spending would have moderated economic overheating and left the public finances in a much strong position to protect living standards.
“The lion's share of the damage to the Irish economy was the fault of domestic economic and financial mismanagement”, he said.
The Taoiseach was appearing before the Banking Inquiry to answer questions about his time as leader of the opposition during the economic crash.
He said that by 2007 “an uncompetitive, bloated, over-borrowed and distorted Irish economy had been left at the mercy of subsequent international events”.
This had been “without the safeguards, institutions and mindset needed to survive and prosper as a small open economy inside the euro area.”
He accused the then government of “abandoning the competitive, export-oriented, flexible economic model needed to prosper inside Economic and Monetary Union” which had been bequeathed to it by the previous government.
Mr Kenny criticised the ability of the Minister for Finance to introduce or extend tax breaks for favoured sectors of the economy, particularly the property and construction sectors.
He also attacked the “excessively close relationship between the Central Bank and the Department of Finance at the time” and the corporate funding of political parties.
Mr Kenny said there was “no requirement to conduct and publish cost benefit analyses on tax shelters and major infrastructure projects and to subject all major expenditure programmes to regular review”.
There was an absence of clear enforceable rules for jobs that could be taken up in the private sector by former Ministers, advisers and civil servants, no policing of conflicts of interest.
There was also a lack of transparency and rules regarding the lobbying of public officials by special interests, an absence of effective planning regulation and of a structured institutionalised national risk assessment process.
The Taoiseach told the Inquiry that the dreams of hundreds of thousands of families had turned to a nightmare as “stability was replaced by policy recklessness and regulatory failures”.
“We have learnt the hard way that being part of the euro presents not just opportunities, but huge domestic challenges”, he added.
There was a need for more effective regulation of the financial system, for greater budgetary discipline, for more responsible and transparent politics, and for relentless pursuit of cost reductions, innovation and product and labour market flexibility.
“Having failed these challenges in the first fifteen years of our euro membership, our economic and political institutions are now being renewed and reformed so that the euro can once again become a source of stability, prosperity and hope for the lrish people” he concluded.
Richard Bruton who was Fine Gael lFinance spokesman at the time said vulnerabilities had been “unnecessarily created” which left Ireland extremely exposed.
Warning voices from the IMF, EU, OECD, NCC, “did not get much traction” and “criticism was judged to be ‘taking down the economy’”.
He criticised a planning system which conferred huge benefits on developers, the lack of distance of the Central Bank from the Department of Finance and the weaknesses of the Oireachtas in holding government agencies to account.
Mr Bruton said the growth of property lending on cheap Eurozone money exposed a huge weakness in the wider policy framework for a sustainable single currency.
Producer interests, he added, dominated the Social Partnership model and “these comfortable relationships held back reform that should have been more pro-citizen and pro-consumer.
The hard lesson from the crash, stressed Mr Bruton, was the central importance of strong export oriented sectors supported by a suite of public policies.
Many reforms had been adopted and “better institutions are now in place to protect us from a repeat of such errors, but they do not fully insulate us” he said.
We needed now to ensure “constant vigilance, attention and policy discipline” to avoid “any prospect of a repeat of the mistakes that helped create the crisis that we are now emerging strongly from.”