IMF paints painful scenario with more pain on way for taxpayers

IF IN the mood it is sometimes possible to draw some wry amusement from re-reading comments made about the Irish economy during the height of our illusory boom.

Take this beauty from 2006 as an example: “Reflecting the strength of the economy, the banking system is well capitalised and profitable, and non-performing loans are low … even in an extreme scenario involving a sharp rise in unemployment and a sharp decline in house prices, capital remains adequate in every bank,” what was regarded as a major report at the time said.

This report went on to claim that “recent stress tests indicate that the major lenders have adequate buffers to cover a range of shocks”. Related to this, it said that ‘a contraction of the construction sector to a more sustainable size over the medium term is likely to be smooth.’ And there was more: “even a substantial withdrawal of private-sector deposits would not exhaust the stock of liquid assets at any major lender.” It argued that the “general approach of the Central Bank and Financial Regulator is appropriate for the mature and sophisticated financial market.”