Lenihan adviser defends approach to banking crisis
THE GOVERNMENT approach to the banking crisis “is the best, as other approaches would be more expensive and do a lot more damage to the economy and hurt the standard of living of citizens a lot more”, a key Government adviser has said.
Dr Alan Ahearne, economic adviser to Minister for Finance Brian Lenihan, was speaking at the weekend at the inaugural Tourism Policy Workshop in Dromoland Castle, Co Clare.
Dr Ahearne said that the Government “moved very decisively by forcing the banks to face up to the problems”.
“The alternative approach was to take the Japanese route where you allow the banks to work out their problems over a long, long period of time.
“We saw it didn’t work in Japan. The banks never solved their problems and in trying to deal with their problems, they crushed the economy.
“The Government learned that lesson, hasn’t gone down that route, forced the banks and the boards to face up to the reality of what happened.
“When you crystallise all those losses, you see very, very big numbers and in the March 30th statement from Minister Lenihan, you saw those big numbers and they were shocking.
“They told a legacy of what happened. It is better to face up to those decisively; that allows the financials of your economy to be repaired and allows you to grow faster. They have got it right.”
He went on: “There is understandable public anger, particularly at the big losses at Anglo Irish and Irish Nationwide.”
Dr Ahearne said that the Government has chosen “the least worst option” in dealing with the banks. He said: “There is no easy way to do it. I think the Government has gone the right route.”
“We had a very big boom. The bigger the boom, the bigger the bust and the more expensive it is and this is expensive.”
Dr Ahearne outlined his opposition to suggestions that the Government-owned Anglo Irish Bank should be wound down immediately.
“To wind it down immediately would require to pay back immediately all the funders, the liabilities. The numbers are around 70 billion worth of depositors and other guaranteed funders of that bank. The State doesn’t have €70 billion in cash. It really can’t be done.”
Dr Ahearne said that “the only way out of this deep recession is through an export-driven growth”.