Jobs and credit crises call for clear policy response
With respect to the flow of credit, the pillar banks and other parts of the economy are badly co-ordinated. Existing bodies like the Credit Review Office do not go far enough. One idea might be to create an emergency credit committee (ECC), a small group of policymakers with one given responsibility for the State’s holdings in the pillars, another with project appraisal experience, as well as co-ordinators in the Department of Finance and the Central Bank. Such a group would require very strong political support.
In simple terms the goal would be, within a limited number of physical locations, to set up a structure where viable SME projects can be brought to the fore, financing needs assessed, and then allocated by the banking pillars. There is also a need for a debate on whether the near-term regulatory burden on the banks needs to be eased somewhat.
The committee structure can be further developed in a number of ways, such as the need to make more management changes in the banks and change the nature and training of loan officers.
It could also prefigure the establishment of “implementation teams” to push through policy initiatives, especially where there needs to be co-ordination across departments and State bodies.
The Irish labour market is an apt example where there is a glaring need for better co-ordination of information on jobseekers, better appraisal of their needs for training and reskilling and improved matching of labour supply with demand.
One reason that new policy initiatives like an ECC and household debt restructuring have not been confronted is that this would further weaken the pillar banks. In the context of the “promise” of the EU to re-examine the banking bailout, extra funding for the banks through the ESM should at the very least be considered.
There are many other important components to the jobs puzzle. One complication is lethargy in the Asian, American and European business cycles. From the point of view of the forthcoming Irish EU presidency there is an urgent need to recapture the “growth agenda” that very briefly made the headlines after the French elections and there should be an aggressive effort to push the need for a stimulus or at very least make the case that co-ordinated austerity constitutes economic self-harm.
Few of the above ideas will generate the kind of immediate jobs announcements that politicians love, but taken together they should help to unblock the critical arteries in our economy, so that it recovers from the property bubble and begins to function normally again.
Michael O’Sullivan is author of Ireland and the Global Question (Cork University Press).