Friday 18 October 2019

Dire warnings ignored by Government

PEOPLE WHO bought homes at the height of the building boom will remember all to clearly how Brian Cowen, as Minister for Finance, offered the reassurance that there was no danger of the property market collapsing. Instead there would be a 'soft landing'; people had no reason to be concerned, the massive investment they made in their homes was safe. The message seemed to be that we could all continue living the high life and the good times would roll on indefinitely.

We now know that was a false promise. The 80,000 or so people who can't pay their mortgages know to their cost that Brian Cowen was talking utter rubbish, as does the entire taxpaying population of the country who are forced to pay off the debts of the banks that recklessly funded and fuelled the boom.

One of Fianna Fáil's lame excuses after the crash was that no one could have seen it coming. Most people see that line for the patent rubbish that it is, but new revelations of how dire warnings were ignored at the height of the boom bring the issue into sharp focus.

The Sunday Independent reported last weekend how a mid ranking official at the Department of Finance repeatedly warned that the property bubble was unsustainable and a collapse would have huge implications for the banking sector and the economy as a whole. However, the warnings issuing from Marie Mackle in 2005-2006 on the basis of reports from bodies such as the Central Bank, the ESRI, OECD and the IMF were dismissed and written out of public statements by senior officials and politicians, including Brian Cowen.

For example, in 2006 – two years before the crash - Ms Mackle wrote: ' The current size of the construction sector is not sustainable and it will fall over time. The economy and public finances remain exposed to the construction sector. Any significant downsizing could have a substantial adverse effect on both.' She was instructed to change this statement and say instead that there ' was a broad consensus among commentators that the most likely outcome for the propery market is a soft landing'. This version subsequenty found its way into a speech made by then Finance Minister Brian Cowen at a major gathering of property developers, real estate agents and others.

The speech was widely reported in the media and hesitant house buyers were reassured that it was safe to spend on massively over-priced houses. This was recklessness in the extreme and it came about in a climate where anybody who raised concerns about the government's economic direction was dismissed as a naysayer and accused of ' talking down the economy'.

It is critical that the lesson is learnt if we are to protect against future disasters. Yet, it seems even now that Ms. Mackle has struggled to have her concerns heard by the Nyberg Commission examining the reason for Ireland's banking collapse. This does not bode well for the promises of transparency and a new beginning that were issued by our new government. The plain people of Ireland who are paying for the crash deserve to know how it happened and this government has a responsibility to deliver answers.

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