Taoiseach dismisses Kelly argument


Taoiseach Brian Cowen said today he does not accept the argument that it would be better for Ireland to default.

Responding to claims made by UCD academic Prof Morgan Kelly that the Government bank bailout will ultimately leave the State insolvent, Mr Cowen said the balance of evidence suggested a more optimistic scenario than that put forward by the professor.

Speaking in an interview with RTÉ radio earlier today, Mr Cowen again said he believed the Government's approach to dealing with the economic crisis was the correct one.

Writing in Saturday’s Irish Times,  Prof Kelly, who originally predicted the crisis, said the open-ended guarantee of banks’ liabilities and the Nama bailout will leave the Republic with “a worse ratio of debt to national income than the one that is sinking Greece” by 2012.

However, this analysis was roundly rejected by the Taoiseach, who said there was evidence to suggest that Ireland was already in a better place than it had been.

"I think it is obviously true that one has to try and deal with some of the narrative that has been allowed to be formed which i think doesn't reflect a comprehensive or balanced commentary of where we are at," said Mr Cowen.

"Really implicit in some of the argumentation is the idea that it would be better for Ireland to default. But we simply don't accept that at all and I think all of the implications from other countries where that happens greatly undermines, not just in terms of financial credibility but also the ability to retain confidence at home," he added.

The Taoiseach said there was objective evidence available which confirmed that the Government was taking the right approach to dealing with the economic crisis. However he conceded that the approach chosen was "a difficult one that imposes its own hardships and difficulties for people."

"It is not just a question of moving into a mild recession we are confronted with a financial and economic crisis as we've seen in our lifetime and to be fair to the irish economy and the public, people are adjusting quickly and flexibly in a way that is impressing the investor community," he said.

Mr Cowen claimed that while there was no room for complacency, there were indicators suggesting that matters were improving and that the country could manage its way out of the current situation.

"We're seeing a turn in terms of stabilisation of unemployment and things picking up on the export side. we're seeing hopefully a bit more confidence in domestic consumer spend (and) people are being perhaps a bit more optimistic in the immediate period ahead than they would have been the last couple of years when there was a sense of people not knowing when the bottom was coming," he said.

"I think it is important that we mustn't bury our heads in the sand or be in denial about the circumstances we have to deal with but by the same token we shouldn't lose faith in our capacity to manage our way through this problem," he added.