Central Bank forecast - Writedown on debt is needed

There’s no light at the end of Ireland’s dark economic tunnel judging by yesterday’s gloomy forecast from the Central Bank that the domestic economy will remain in deep recession this year.

Based on an increasingly bleak outlook for the global economy, this alarming prediction is a major blow to Ireland’s job creation prospects and a setback for homegrown and multinational companies that rely on exports.

It also puts the spotlight on Enda Kenny amid growing confusion over whether Ireland asked the EU for a bank debt writedown in recent EU negotiations.

The need for clarity on this point, a question first raised by journalist Vincent Browne, is all the more pressing given the conflicting views on the issue between Mr Kenny and Lucinda Creighton, the European affairs minister.

Ms Creighton has said on television that a writedown was sought. However, in the course of the Dáil debate on the Government’s controversial decision to pay €1.25bn to unsecured bondholders of former Anglo Irish Bank, the Taoiseach insisted: “We are not going to have the name ‘defaulter’ written across our foreheads. We will pay our way. We’ve never looked for a debt writedown.”

So what’s going on? If what the Taoiseach said is true, then what of Ms Creighton’s assertion? If a writedown was not sought, why is the Government blaming the troika and the ECB for not getting one? And if, as Mr Kenny categorically states, no writedown was requested, the question is why not?

That the Taoiseach is inclined to rewrite economic history was seen at the world economic forum in Davos where he blamed the Irish people for the country’s woes. However, he omitted to recall saying in a state of the nation address that the people were not to blame.

At Davos, he also omitted to refer to the lack of state regulation, greedy bankers and avaricious developers who were largely responsible for causing the economic Ireland’s debacle, leaving taxpayers to repay borrowings of €64bn to bail out the banks.

Meanwhile, according to the Central Bank prediction, Ireland’s GDP, which includes multinationals, will grow by 0.5% this year and not the 1.8% previously envisaged. This major revision of earlier projections is based on falling demand for exports and weakening domestic demand. It is a worrying outlook.

Despite the political achievement of EU leaders in reaching agreement on a fiscal treaty, a deal which may yet be put to a referendum here, economists have warned the world could be plunged into even deeper recession if the eurozone crisis intensifies.

With no end in sight to Ireland’s travails, the economic crisis looks set to run and run. With the public clamouring for relief, Mr Kenny and his Government should get their act together and prepare the strongest possible case for a debt writedown. This was promised both by Fine Gael and Labour in their pre-election campaigns. It is time they delivered on it.