Economic and fiscal council recommended

THE establishment of an independent economic council to advise on future financial projections and fiscal policy, has been proposed by two international banking experts.

The pair, Klaus Regling and Max Watson, were authors of one of this week’s two reports into the causes of Ireland’s banking crisis.

They also appeared before the Joint Oireachtas Committee on Finance and Public Service yesterday. Central Bank chief Patrick Honohan is due before the committee next week, to discuss his own report.

Mr Watson told the committee that there was scope both for a strengthening of analysis and fiscal policy at the Department of Finance and for the establishment of an independent economic or fiscal council.

This, he added, could look at financial projections and interaction between financial institutions amongst other things.

He suggested it could be manned by a mixture of Irish and other European academics and financial experts.

However, Mr Watson was quick to point out that the actual financial supervisory structure in Ireland – of the Central Bank and financial regulator as separate entities – during the crisis was less of a contributory factor to the banking problem than the implementation, or lack, of solutions and the lack of intrusiveness into banking practices.

Meanwhile, Mr Regling agreed with Fine Gael’s Terence Flanagan that the lack of a previous financial crisis in Ireland had promoted a sort of false sense of security among Government and private investors.

Mr Regling said it was a relevant point and said legislation may be needed to ensure the present crisis was not repeated.

However, the German banking expert – who has been named as the head of the new European Stability Fund aimed at granting loan payments to struggling EU member states – said Ireland was well-primed for growth and was not on the brink of economic collapse.

“Ireland is not ruined. We’ve had the most serious crisis of the last 70 years and Ireland was affected more than many countries.

“But it still has – per capita – a higher income than the EU average and good prospects for growth. Maybe that growth won’t be as high as was seen before the crisis, but that was arguably excessive and growth will return with the right policy decisions in place.”

Mr Regling added that the establishment of the National Asset Management Agency was an impressive, quick and decisive policy move that backed up his claim that Ireland has the best crisis management policy approach in the eurozone element of the EU.

On the back of that, he dismissed the notion that it had been a mistake of Ireland’s to join the EEC/EU.

While both men agreed that legislation was needed, they avoided the issue when asked if there actually should be a full banking inquiry – which is the course of action likely on the back of the two new reports.

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