People ‘continue to pay heavy price’ for FF mistakes, Tánaiste tells banking inquiry

Tánaiste Joan Burton has insisted Fianna Fáil-led governments were to blame for the economic crash. Ms Burton told the Oireachtas banking inquiry that the crisis was not caused by some external force. It was “entirely home-made, caused by bad government policies”.

She said: “I want to nail the lie of the last Fianna Fáil-led government that we were all responsible for the national bailout crisis. This is absolutely untrue. The Irish people were victims of the crisis and continue to pay a heavy price. Those responsible were the Fianna Fáil-led government, the boards of the banks, the Central Bank and the financial regulator.”

Ms Burton said that viewing the crisis as a banking crisis which led to an economic collapse was wrong.

“The correct order is the following: a series of catastrophic economic policy decisions by the Fianna Fáil-Progressive Democrat government created a huge distortion in . . . the Irish economy, destroyed our competitiveness and . . . inflated the biggest property bubble in any advanced country in modern times.

“The bursting of this bubble and the associated collapse of the domestic economy led to the banking crisis. . . I warned time and again against the property-based tax breaks fuelling this bubble.”

Ms Burton said the decision in September 2008 by the Fianna Fáil-Green Party government to guarantee the banks was “disastrous . . . This was the most damaging and expensive decision in terms of the costs of dealing with the crisis.”

Labour opposed the bank guarantee because it believed it was the wrong choice, she said. The government should have acted when Northern Rock in the UK went bust in 2007 and the "most exposed" banks should have been allowed to go bust or be nationalised.

“All bank failures are costly. I do not believe that the level of cost that was incurred would have been incurred,” she said.

Former Labour leader Pat Rabbitte, who also appeared, insisted nobody foresaw the "world changing" on September 29th, 2008, when the guarantee was agreed.

He said his party had no alternative ready because all information was kept under wraps. “The thing was sprung on us, shock and awe. It was the most extraordinary story in my lifetime that I woke up to that morning. So no, we didn’t have a refined alternative. We had to be there and then react to the proposals being brought forward.”

Mr Rabbitte said he was concerned about the rise in property prices but never linked it to the risks in banking. He said no credible report had raised the possibility that the institutions might fail.

Mr Rabbitte said a small number of individuals in the financial sector had more influence with government than the Dáil had in the run-up to the crisis.