Kelly ‘should talk to bank’

Finance Minister Michael Noonan has called on UCD economics professor, Morgan Kelly, to contact the Central Bank over his claims that SME debt could sink the economy.

Over the weekend Mr Kelly warned that if the ECB insists on the banks cleaning up the outstanding loans of SMEs a lot of them will disappear bringing their jobs with them.

Mr Noonan said he welcomed Professor Kelly’s intervention. He said the UCD economics professor has been right in the past and had to be taken seriously. He urged Mr Kelly to contact the Central Bank.

However, Mr Noonan said Bank of Ireland had restructured 90% of its SME loans while AIB had restructured 65% of its.

“The Central Bank have expressed that they are satisfied with the progress being made, so I still would like to examine Morgan Kelly’s views in details.

“Maybe the Central Bank who have the primary responsibility here would contact him… and access some of the data that is underpinning his speech,” he said.

Professor Kelly said the primary problem with SME loans was that they borrowed to buy property and were surviving because of bank forbearance. Unlike bigger businesses that could be sold on, the main asset of most SMEs was the owner. There is a total of €58bn in SME debt with €32bn of this related to property loans.

Prof Kelly said that the SMEs provided most of the employment in the economy, and wiping them out in a bank clean-up would mean wiping out a big chunk of the Irish economy. The property loans needed to be assessed relative to the size and employment of the SME.

Mr Noonan was in Brussels for a meeting of eurogroup finance ministers on agreeing outstanding issues of the Single Resolution Fund. These include the issue of mutualisation and the ability of the fund to borrow on markets and whether the guarantees to support this should be at national or EU level.

The issue of how burden sharing will work in the first few years before full mutualisation will be discussed, with compromises on the table such as allowing mutualisation to occur after a specific number of years of contribution.