Ireland’s economic crisis has lessons for the EU

A cluster of Irish people are involved in bringing lessons learned from Ireland’s economic crisis and applying them across the EU.

Ireland’s EU commissioner Mairead McGuinness has launched a plan to ease the selling of non-performing loans by banks so that they can begin to lend again and fuel economic recovery.

Part of the plan involves proposals for national asset-management agencies to be established by EU states to take on banks’ bad loans if required.

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The agency gave a presentation to the European Commission’s expert group on how to tackle non-performing loans in September. It talked through the set-up of the agency by the Irish government and its task to “cleanse and repair” Irish banks’ balance sheets, making the case for how asset-management companies can speed up the resolution of bad loans by concentrating expertise in one place.

Minister for Finance Paschal Donohoe is an influential figure in the plan as president of the Eurogroup, and will be working with the commission on the goal of a broader banking union in the EU that would introduce more competition into domestic markets.

In the background senior commission officials John Berrigan and Peter Power are in key roles in McGuinness's department of Financial Stability, Financial Services and Capital Markets Union as it works to implement the plan.

Both Donohoe and McGuinness have been explicit that the plan has been informed by their experience of the last crisis out of a conviction that bad loans should not be allowed to become a prolonged drag on the EU’s economic growth by sucking up bank resources and restricting lending.

It comes amid fears that an accumulation of defaults is just around the corner, with an acknowledgement that government supports to sectors and employees are indirectly propping up banks, and this can’t go on forever.