Tánaiste blames ESRI for failing to predict economic collapse

The Tánaiste, Joan Burton, has blamed the ESRI for issuing forecasts that failed to predict the economic collapse.

Ms Burton said Labour and other opposition parties had relied on those forecasts when producing their election manifestos in 2007.

The Tánaiste is giving evidence at the Banking Inquiry about her role as Labour's finance spokesperson, alongside the party's former leader Pat Rabbitte.

She has told the inquiry that there was no reason to think the ESRI's figures could be so wrong.

She said: "Growth at that point was still expected, you are talking about 2007. As Deputy Rabbitte has said, nobody in 2007 actually anticipated the entire collapse of the entire banking and construction system."

The Tánaiste rejected criticism of the Labour Party's 2007 election manifesto, which followed a pact with Fine Gael.

“We knew there were difficulties ahead and in fact our detailed manifesto sets out in detail how the budgetary policy would be driven by respect for the guidelines in respect of spending from the European Union.”

The lead questioner at this afternoon's hearings, Fianna Fáil's Michael McGrath, has complained that his questions are not being answered.

Mr McGrath has accused the Tánaiste of refusing to answer his questions about the alternatives Labour were putting forward.

Ms Burton said Labour in government would have pursued an end to waste in public and to tax breaks for the wealthy which she claimed drove a bubble of speculation on development land.

Ms Burton and Mr Rabbitte both issued a damning assessment of where the blame lies for the economic crisis.

Mr Rabbitte said the government of the day did not know there was a crisis in the banks and the economy until it was too late.

“It is my view that, whoever or whatever was responsible for the banking crisis, it was not the opposition,” he said.

Mr Rabbitte said the Oireachtas was and remains ill-equipped to scrutinise the banking sector.

Mr Rabbitte said it was ridiculous to suggest the Labour Party - the only party to oppose the bank guarantee - had a ``refined alternative'' to it.

Ms Burton said the government of the day should have acted when Northern Rock went bust in 2007 and the “most exposed” banks should have been allowed to go bust or be nationalised.

She said Labour would not have repaid subordinated debt borrowed by banks from international money markets if it had been in power.

“The guarantee was sprung overnight. We woke up the next morning and it was presented as a fait accompli,” the Tánaiste said

“All bank failures are costly. I do not believe that the level of cost that was incurred would have been incurred. I can’t give you a figure but it would have been significantly (lower).”