TAOISEACH Brian Cowen maintained yesterday that in spite of its most recent report, the IMF had implied in 2004 that there was no bubble in the Irish housing market and other economic commentators had taken the same view.
Defending his record, Mr Cowen said that while the IMF had warned in October 2004 that there was a possible overheating in the housing market, the organisation had underscored the importance of achieving a soft landing of the housing market.
"Two months later, in budget 2005, I announced a review of tax incentive schemes," Mr Cowen told The Irish Times.
“Due to membership of the euro, we were unable to raise interest rates but, as minister for finance, I moved to gradually remove incentives for the property market.”
Mr Cowen said in the 2006 budget he announced a termination date of July 31st, 2008 for all existing property-related tax incentive schemes with the exception of private hospitals, registered nursing homes and childcare facilities.
“Most importantly, despite a concerted attempt in certain media and on Opposition benches, I refused to get rid of stamp duty, the largest transactions tax on property in the EU.
“If we had heeded those calls to remove stamp duty the brakes would have been off entirely, and we would be in far greater trouble than we are now.”
Earlier, Mr Cowen said the Government would consider extending the role of the National Asset Management Agency (Nama) beyond the purchase of impaired property development loans. Speaking on the News at One on RTÉ radio, he said the Government was looking at a suggestion by the IMF that Nama should examine buying other classes of loans. “That’s an issue they have asked us to consider and it will get due consideration.”
During his time as minister for finance “during the good times”, he thought it was necessary to achieve social goals, including upgrading basic social welfare rates. “I stand over the decisions I made, but I don’t claim to get everything right,” he said.
“We have faced into an economic tsunami the IMF didn’t see coming. No one saw this coming, but we are dealing with it and we are taking whatever steps are necessary, regardless of the short-term political implications.”
On the issue of public sector reform, he said that at a time of major adjustment for the economy, when the private sector had to make very serious adjustments, the public sector had to do likewise. This would be achieved through social partnership.
“We have to get greater outputs for the resources of the hard-pressed taxpayer.”
That would involve flexibility and specific workplace changes at ground level so that public servants could work across organisations and boundaries that had traditionally built up.
Mr Cowen said there were industrial relations procedures in place that needed to be revisited so that they could react far more quickly to service needs.
Green Party leader John Gormley yesterday refused to single out Mr Cowen for responsibility for the over-expansionary fiscal policies in the run-up to the 2007 general election.
Mr Gormley said it was obvious that the economy overheated during that period but argued that it was pointless “crying over spilled milk”. He claimed that all of the parties, with the exception of the Greens, had become engaged in auction politics in the months before the election.
Mr Gormley said the IMF had concluded that Ireland was basically on the right track.
Fine Gael finance spokesman Richard Bruton criticised the Taoiseach’s defence of his record as minister for finance.
Mr Bruton said Mr Cowen as minister had pursued imprudent expansionary policies, including pursuing policies that contributed to an unsustainable property bubble.
“They courted the property sector and have now reaped the whirlwind from that,” he said.