THE International Monetary Fund will be asked to run the Irish economy unless there is a major change in Government policy, according to the Professor of Banking and Finance at the Michael Smurfit Graduate School of Business Ray Kinsella.
Mr Kinsella told the Irish Examiner that control over our own national destiny – over the rebuilding of our economy – is slipping out of our hands.
“On present trends and in the absence of a transformational change policy, the IMF will be called upon to intervene with its own particular brand of orthodoxy. We should no longer be surprised at this clear and imminent possibility: the IMF is now an integral part of the EU’s adjustment and financing system. It is no longer the case of speculating over whether Ireland will be impacted by a sovereign debt crisis; it is already a promise.
“The issue is not one of outright default; it’s one of the crisis of credibility in relation to the management of policy. This crisis is reflected, in particular, in the interest rate that Ireland now pays on its sovereign borrowing compared with Germany and, also, in the cost of insuring against sovereign default,” he said.
Prof Kinsella said that not for the first time, Ireland is at a crossroads.
“We can continue – at least for a short time – as we are. The Government had indicated that the forthcoming budget will take another €3-4billion out of the economy. This is utterly wrong. We now have had four such budgets and all of them against the background of businesses and families that were already deleveraging and adapting: the last thing they needed was such a budgetary strategy unsupported by any supply-side policy to rebuild the economy,” he said.
Prof Kinsella points out that our economy is smaller, our national deficit is higher, our public finances are even more strained – and the rebuilding of the economy has not yet begun.
“This particular road is not a long one – it is leading straight down a cul de sac to IMF intervention,” he said.
The UCD academic said we need to think differently and to think in terms of transformational terms.
“We need to demonstrate to the EU and the IMF, to the financial markets and above all to ourselves, that we have the resources (renewable energy and our people) as well as the maturity to retain control of our own destiny. We will need to talk common sense and reality to other EU leaders. That will take courage and credibility,” he told the Irish Examiner.
He said the single most devastating measure of policy failures was the fact that unemployment is now headed for 500,000.
“We simply cannot ‘cut’ our way out of this recession. We can only commence the process of fundamentally rebuilding our economy. This will take time and, above everything else, we need to tell this straight to the EU.
“We do not need strategies from the state – we need businesses to do what they do best, with the state supporting them and not suffocating them. This will help to rebuild the contract of trust with the people, rebuilding our credibility as a modern economy in which they are prepared to invest more than ever in our education system and in our health and in our R&D, because that is what rebuilding requires,” he argued.
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