Fine Gael has said “hysterical” attacks by Minister for Finance Brian Lenihan on the party’s deputy leader are a sign that the “Nama gamble” is beginning to fall apart.
Economist and Fine Gael TD George Lee said Fianna Fáil attempts “to bully, threaten and intimidate people” into supporting the National Asset Management Agency (Nama) as if it is the only option available to solve the banking crisis would not “fool the people”.
Separately, Labour Party leader Eamon Gilmore called for a temporary nationalisation of the main banks as an alternative to Nama.
Mr Lee said his own party and its deputy leader Richard Bruton had been “proven correct on their repeated warnings on the economy over many years, despite Fianna Fáil attacks and criticisms, and we are right again on the Nama gamble”.
Mr Lenihan yesterday said Fine Gael was pursuing a policy on Nama and the banks that could have catastrophic consequences for both the banks and the State. He described the Fine Gael “good bank” policy as “a mirage” and said it was extraordinary the main Opposition party had advanced such a proposal.
It also emerged that Mr Lenihan had written to Fine Gael leader Enda Kenny in relation to a radio interview with Mr Bruton last weekend.
In the letter, Mr Lenihan said either Mr Kenny or Mr Bruton “should correct a very serious mistake” made in that interview in his assertion that the EU had instructed Anglo Irish Bank to stop paying interest to senior debt holders.
“This, which I presume was simply a mistake, is completely false and would be a breach of the State Bank Guarantee that Fine Gael supported in the national interest,” Mr Lenihan said in the letter.
In a statement today, Mr Lee said Fianna Fáil’s attacks on Mr Bruton would be “laughable” if it wasn’t such a serious issue. He said that, amongst other issues, Mr Bruton had “exposed the irresponsibility of the Government's public sector pay benchmarking without real public sector reform, when it was not popular to do so”.
He added: “Richard Bruton exposed the danger of pumping up public spending on the back of temporary windfall taxes from an overheating property sector.”
Mr Bruton had also "exposed the steady erosion of the competitiveness of the Irish economy, camouflaged only by the debt-driven property bubble being pumped up by [Taoiseach] Brian Cowen's economic policies”.
“Richard Bruton and Fine Gael have been right on all these issues on the economy when Fianna Fáil were accusing us of being unpatriotic to point out their failings. Now that Richard is exposing the huge ‘double or quits’ gamble on bankers and developers that Fianna Fáil is proposing to take with the Irish economy they are trying something similar again.
Mr Lee said Nama had been guided by the “panic” induced by last year’s bank crises, by “baseless projections of a sharp rebound in land and property prices, and a distorted and narrow Fianna Fáil definition of the national interest”.
“Almost every independent expert in the land shares Fine Gael’s opposition to the way the Government is going about solving this crisis. Yet Fianna Fáil is asking us to trust them on this one.”
“But this is the party whose leader repeatedly assured young Irish families back in 2005 and 2006 that house prices then were based on ‘strong economic fundamentals’.
“We now know that at that time he was receiving exactly the opposite advice from the world's foremost experts on house prices and banking stability at the IMF.”
The Labour Party leader called for the temporary nationalisation of the main banks as an alternative to the setting up of Nama.
Speaking on RTÉ's News at One, Mr Gilmore said a mechanism should be established to write down the bad debts, before returning the banks to the market when they are restored to good order. He said such a move was a necessity to get the banks lending to businesses again.
Separately, economic adviser to the Government Alan Ahearne said today that nationalisation of the main banks would be “an absolute disaster”.
Speaking on Newstalk radio, he said it would be possible to nationalise AIB and Bank of Ireland by issuing ‘dead-of-night’ Bills, in the same way Anglo Irish Bank was nationalised. But this would not be as “costless” as some commentators believed, he said.
“With almost certainty, it would be a very bad outcome. And quite probably, it would be catastrophic. It would not be cheap, by the way – you have to pay off shareholders.”
Asked what the outcome would be without the establishment of Nama, Mr Ahearne said: “If Nama doesn’t happen, my honest opinion is that we’ll ‘do a Japan on it’.
“You ask what happens to the shareholders, what happens to the citizens of the country? It will be terrible. We all have a terrible future unless we can sort out the balance sheets of the banks.”
Mr Ahearne said he agreed the taxpayer had to be protected.
“So you do the best analysis that you can. That gives you what you expect to happen. Of course, the outcome might not be exactly what you expect, so what you have to do is build in safety mechanisms so that if things don’t turn out exactly as you think they do, the taxpayer is covered.”