A LEADING economist who predicted the property market crash and the end of the Celtic Tiger boom is now “deeply optimistic about the future of the Irish economy”.

Dr Alan Ahearne, who has taken leave of absence from his lecturing post at Galway University to become special adviser to Minister for Finance Brian Lenihan, said “the Government is on the right track” and described international criticism of Ireland as a “basket-case” as “unhelpful”.

He claims “the economy is regaining competitiveness faster than outside observers believe” and said international critics of Ireland “don’t fully appreciate” how much wages and prices are falling.

Dr Ahearne also praised the “bold and radical action” taken by the Government to establish the National Asset Management Agency (Nama) “to help repair banks’ balance sheets” and allow them to “get on with their everyday business” of lending.

He believes the risk of the guarantee to banks being called in is “negligible” but acknowledged that “developers and bank shareholders will lose billions”.

Dr Ahearne was speaking in Tullamore yesterday where he told delegates at the annual conference of Engineers Ireland that “commercial banks function better than State-owned banks” and that nationalisation is often perceived by the markets “as a sign that a bank has failed completely”.

Some of Dr Ahearne’s peers have called for nationalisation of the banks while, earlier this week, David McWilliams sharply criticised Nama and the bank guarantee for creating public “incomprehension” and “anger”.

Dr Ahearne welcomed the construction industry’s proposal that private pension funds should invest in infrastructure projects. The State, he added, needs to look at “innovative ways” of raising finance for public spending instead of simply borrowing.

Minister for Communications, Energy and Natural Resources Eamon Ryan, who spoke later, said the Government’s handling of the banking crisis was “the right approach” and “the best of a bad lot of options”.