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Kelly's warning is ominous – so will Enda and Co listen?

MORGAN Kelly is the Loch Ness Monster of Irish economics. The UCD professor does not pop his head up often, but every public appearance causes a huge amount of fuss.

Now he has delivered one of his most ominous warnings yet – and his superb track record at predicting disasters should force the government to take him very seriously indeed.

The gist of his argument, made during a Q&A with students last week and available to view online, is chilling.


He points out that despite all the back-slapping in government over our recovering economy, many small and medium-sized companies are still dependent on ECB credit.

If the head honchos in Frankfurt decide that Irish banks need to "clean up" their loan books, then that credit might disappear – and all those SMEs would be wiped out in one fell swoop, with possible foreclosures on mortgages to boot.

This is not the message that Enda Kenny is trying to spin right now – to put it mildly.

At the European People's Party congress in Dublin last week, leaders from all over Europe lavished the Taoiseach with praise that made Brian O'Driscoll's send-off look half-hearted by comparison.

The Dail descended into an orgy of self-congratulation, while even Bono sounded like he was thinking of running for Fine Gael or Labour in the upcoming elections.

Morgan Kelly obviously sees things very differently. In his analysis, the government deserves little or no thanks for the apparent economic upturn.

The plaudits really belong to ECB president 'Super' Mario Draghi, who saved the euro by cutting interest rates to the bone and lending vast amounts of money to Irish banks.

Kelly's main point is that what the ECB can give, they can take away. A series of 'stress tests' on our banks are to begin around October and will determine whether those distressed loans need to be recalled.

In the professor's typically colourful language, "The ECB has basically kept pumping that sweet, sweet credit into our veins" – and we are in no shape to go cold turkey just yet.

An economic collapse such as the one that struck Ireland usually takes ten years to work itself through, so we would be naive to think that the storm is over after just six.

In fact, Kelly's bottom line is even more frightening – "We haven't had the real crisis yet."

If Kelly was just any old academic, he could be dismissed as an attention-seeking prophet of doom. In fact, the UCD man has been on the money since 2006, when he declared that the Irish property market was heading for an almighty crash .

Bertie Ahern was so outraged that he wondered why the nay-sayers did not go off and commit suicide – within a few years it was painfully obvious which of the two men had got it right.

Kelly caused more uproar in May 2010 when he wrote, "It is no longer a question of whether Ireland will go bust, but when."


Once again, a Fianna Fail Taoiseach (this time Brian Cowen) insisted that this was scaremongering. Once again, the Professor was fully vindicated and the Troika had assumed control of our economy by Christmas.

Of course, Kelly is not infallible. Even he is not claiming that an Irish SME wipe-out is inevitable, only pointing out that we are still hugely reliant on the kindness of strangers.

However, by now the lesson must be obvious – when Professor Kelly cries 'Wolf!', the Irish government would be well advised to have its pitchforks at the ready.

Nobody has become rich by betting against Morgan Kelly. Does Enda Kenny really think he can be the first?