Leadership

Lenihan agrees with IMF assessment of Irish economy

25.06.2009
The Minister for Finance, Brian Lenihan TD, has said he shares the broad assessment of the International Monetary Fund (IMF) on the troubles that have befallen the Irish economy, and acknowledged that it had been “overheated” by the Government.

Speaking on RTE’s Morning Ireland programme, the Minister insisted, however, that in its annual staff report on Ireland, the IMF had not singled out the Taoiseach, and former Minister for Finance, Brian Cowen TD, for particular criticism.

The Minister said that Ireland’s governments, to the extent which they had contributed to the economic crisis, must bear some responsibility for it. However, he stopped short of apologising for the Government’s role in creating structural dangers in the Irish economy which made it vulnerable.

He criticised Opposition parties for not putting forward policies to under-heat the economy or reduce pressures on it during the earlier part of this century when it was undergoing massive growth.

The Minister also insisted that the IMF made the point in its report that the Government is taking the right steps to get the economy back on track.

“The key issue is what we do here and now, what we do to get out of this trouble, and the clear message from this report is that all of the steps the Government is taking, in relation to NAMA, taxation and expenditure, are the right decisions,” he said.

In its report, the IMF also pointed out that the Government has moved with resolve to counter the severe economic and financial shocks Ireland is facing, and commended the scale and speed of its response, the Minister said.

He said that he had the honour of meeting with the IMF delegation during their visit to Ireland, and that it was the toughest interview he had faced since becoming a minister.

The IMF published its annual staff report on Ireland late yesterday evening. Its assessment of the Irish economy was bleak. Following years as a “star performer”, Ireland is in now the midst of an unprecedented economic correction as severe as the worst economic distresses faced following the Second World War, it said.

It forecast the Irish economy would shrink the most of all advanced economies with a contraction of 13.5pc from 2008 through to 2010, and that unemployment would climb to 15.5pc next year.

The Washington-based institution was clear in its report about when and how the rot started to set in on the Irish economy: “Since the start of the decade, and especially from 2005 to 2007, easy credit fostered a property bubble, bank exposures to property lending soared while reliance on wholesale funding intensified, wages rose rapidly, and international competitiveness was compromised,” the report read.

The IMF described how “dazzling growth and buoyant public revenues prompted tax reductions and expansion of public expenditures that have proved unsustainable”.