Bailout a positive move, says economist

A BAILOUT for Ireland would be a positive move for the country, economist Jim Power said yesterday. Speaking at the launch of Friends First’s quarterly economic outlook, the insurance company’s economist said he fully supports the bailout.

“I am more optimistic about Ireland today as any stage over the last couple of years” he said.

Mr Power said he did not support the option of a mortgage debt write-off which he estimates may cost €10 billion.

Arguing that the State could not afford it at present, he said troubled mortgage loans could be kept on banks’ balance sheets as non-performing assets, without accruing interest. Those loans could then be revisited in five years time, when a write-off could be considered.

According to the Friends First Quarterly Economic Outlook, Ireland’s housing and mortgage market will remain weak in 2011, with house prices likely to fall by 4 per cent next year, in addition to the 10 per cent fall forecast for this year. House completions are likely to be around 13,000 this year, but will fall to 9,000 next year.

Among the options to be considered in the budget are a property tax, the introduction of water charges, an increase of 2 per cent in the standard rate of tax and a cut in public sectors. Mr Power also advocates a cut in social welfare. “Almost all workers in the economy have already experienced wage cuts and tax increases, with more to come. Social welfare recipients cannot remain immune to these forces, particularly given the size of the social welfare bill.”

A tax on child benefit and a reduction in rates for third and subsequent children, should also be considered he said.