Taoiseach blames crisis on 'mad borrowing' and greed

DEREK SCALLY in Davos

THE TAOISEACH has said the problem with Ireland’s economy was that “people went mad borrowing” in a system that spawned greed, went out of control and crashed.

Speaking during a discussion on rebuilding Europe at the World Economic Forum in Davos, Switzerland, Enda Kenny said: “The extent of personal credit, personal wealth created on credit, was done between people and banks – a system that spawned greed to a point where it just went out of control completely with a spectacular crash.”

Fianna Fáil TD Niall Collins said there was a “stark contrast” between the Taoiseach’s comments yesterday and those in his address to the nation last month, “when he told the public that ‘it’s not your fault’ for the crisis”.

“The Taoiseach is clearly taking one approach at home and another abroad. While he’s here, the priority is media management and preserving popularity. When he is abroad, the priority appears to be to avoid putting the blame where it belongs.”

Sinn Féin TD Pádraig Mac Lochlainn said: “This analysis that people in Ireland went drunk with credit, were reckless and they have to now be cleansed by a decade of austerity to clean them of their sins is very worrying.”

When asked about Mr Kenny’s comments last night, Minister for Finance Michael Noonan said: “I didn’t hear his comment. I’m not going to comment on something I didn’t hear.” After a recording of some of Mr Kenny’s comments was played for him, he said: “I’m not going to comment. Ministers don’t go around the place commenting on the Taoiseach’s remarks.”

Mr Kenny later appeared to row back on his earlier comments, saying that the crisis was down to “reckless lending by banks, incompetence by Government and the essence of greed where people borrowed way over and above for development schemes that became a disaster.

“Our people have been the victims of this situation. We are left with the circumstance of cleaning this up and explaining the truth of that scale to our people”.

In Davos, Mr Kenny was optimistic that growing financial market confidence in Ireland was spreading. He said the positive market reaction to Wednesday’s €3.5 billion bond swap was a “small step” towards financial independence after 2013.

But US economist Joseph Stiglitz described ongoing Irish payments to unsecured bondholders as “unconscionable. Why should Irish taxpayers have to give up health and education to make good on a loan from a private bank?” Prof Stiglitz said in an interview with The Irish Times.

Mr Kenny said the Nobel prize -winning economist was a “very important personality, but politicians have to make decisions and commentators comment. We are not heading down the road of looking for debt write-downs or default,” he said.

With Davos this year focused on the eurozone crisis, Mr Kenny said the currency bloc needed agreement urgently on “stronger leadership, clear decisions and adequate firewalls”.

“As important as all of that is, you have to put in signposts for growth and jobs,” he said.

Ahead of Monday’s EU summit, Mr Kenny was hopeful of achieving “political agreement” on the new fiscal compact. He said progress had been made on talks over how to impose EU legal limits on budgetary deficit spending.

Opinion was divided in Davos about Germany’s dismissal of a further bailout fund boost until new budgetary rules are agreed.

“We need an agreed discipline for the future, but the real problem is the immediate crisis, and this will need more resources or even greater flexibility from the ECB,” said Peter Sutherland, chairman of Goldman Sachs International.

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