Dukes says its time for us to show our iron in Europe

Former finance minister Alan Dukes didn't pull his punches yesterday when it came to discussing Europe with members of the Association of Chartered Certified Accountants.

More than 70 gathered for the breakfast talk at Dublin’s Westbury Hotel.

The event was ably compered by Con Power, the ex-director of economic policy at the Confederation of Irish Industries (now IBEC). It was hosted by Anne Keogh, the president of the ACCA who is now CFO at the Well Water Company.

Earlier in her career Keogh worked alongside Sarah Newman and Andrew Collins in NeedaHotel.com.

According to Dukes, the temptation as the Irish economy recovers is to spend, but he said increasing wages should be resisted: instead, the State should try to invest wisely.

Ireland’s economic success, he said, gives comfort to two “prevailing but misguided tendencies in economic orthodoxy.

It seems to show that a country can, indeed, ‘cut its way out of a crisis’, and that the theory of ‘contractionary expansion’ holds water at least in the euro zone.”

From this point of view, the better Ireland does, the more difficult it will be to get agreement in the euro zone to make the decisions required to move the euro zone away from recession, and stop it from being "prolonged unnecessarily".

Ireland, he said, appears to support the view that a country can “borrow its way out of a crisis”.

Again, Dukes begs to differ, saying it’s not as simple as that. About 3.5 per cent of GDP goes on debt servicing, he noted.

This is a big drag in a country where income levels have fallen and the State is under pressure to spend more.

“It must now be impressed on euro zone leaders that they have tried the usual political prevarication, and its principal result has been to delay recovery and make people’s lives more difficult than they need to be.”

“If you’ve got Enda Kenny’s number, you need to ring him and tell him to get his skates on and talk to Merkel and that bunch about the political and economic reality,” Dukes said.

In the broader euro zone, Dukes said it was time for a “new direction and impetus” in the approach to economic and financial sector problems. Seven years down the road, it was time for “collective action”.

The euro zone’s economic performance is pallid, he said, and its economy is “exposed to a high level of risk from external economic trends”. The cost of the collapse has led to “huge economic and social costs”.

One of the central faults in EU policy, he said, was that the fiscal element of how to deal with the crisis was looked at on a country-by-country basis rather than as a bigger picture, as in the US.

The EU Treaty on Stability, Coordination and Growth was, he said, a “useless adornment” and will prove to be utterly ineffective if there are any big shocks to the system in the future.

“When compared to what happened in the euro zone, both the US and the UK cases show clearly the benefits of rapid, concerted and sizeable action. Tardy and timid action in the euro zone has lengthened the period of recession,” Dukes concluded.

“The result is, and will continue to be, that economic and social damage are both greater and longer-lasting than they need to be. There will clearly be political damage, the extent to which we cannot even guess at.”

Clearly, Dukes has lost little of his iron since leaving politics.