Reports carried out by independent expert witnesses contradicted Brian Cowen’s oft-cited argument that the economic crisis was caused by external factors
THE TAOISEACH used to have a mantra. It wasn’t a particularly persuasive mantra, but it went something like this. “The economic crisis Irish people are suffering was caused by Lehman Brothers collapsing. An external tsunami hit our poor economy and washed away all the good work that Fianna Fáil in office had delivered on. No one saw the crisis coming and the Opposition would have made matters worse anyway.”
Crucially, when challenged on policies that seem to have crippled our economy, he falls back on the “best advice available” defence. Officials are implicated and State agencies or think tanks are implicitly criticised. Commentators or Opposition politicians like me – who warned as far back as 2003 about the reckless direction our economy was heading – were accused of being unpatriotic.
Well this week that tired and self-serving mantra was blown apart. And ironically and damningly for the Taoiseach, it was blown apart by independent expert witnesses commissioned by the Government to review the origins of our crisis.
Patrick Honohan, Klaus Regling and Max Watson were the independent expert witnesses that provided the explosives, but it was Cowen’s catastrophic policy failures as minister for finance that lit the long fuse.
And it is those failures that those expert witnesses identified as being critical to the collapse. Reckless and expansionary budgets, extending property tax reliefs for developers, overdependence on property taxes and the construction sector and a weak and underregulated financial sector.
The reports identify Cowen as the chief architect of the catastrophic failures of policy that led directly to our economic crisis. He was the man at the top of the pile. He was minister for finance through the crucial years of 2004 to 2008. He oversaw the regulatory and financial systems and approved the light-touch model that served us so ill.
The reports don’t pull any punches. Some of the language is devastating. Regling and Watson get to the point on page one. They say this was a “homemade crisis”, that Government policies “added fuel to the fire”, that Cowen’s fiscal policy “heightened vulnerability of the economy” and that “counter cyclical budgets could have moderated the boom”.
Central Bank governor Patrick Honohan didn’t hold back either. He said that “fiscal policy and budgetary measures aimed at boosting the construction sector . . .were significant factors in contributing to the unsustainable structure of spending.”
And, in a comment that means we will never have to hear the “Lehman Brothers” defence again, he said “the weaknesses of Irish banks were not caused by the interruption of the flow of cheap money from abroad”.
Honohan is not just critical of Cowen’s role in causing the crisis, but also critical of the Government’s refusal to force more professional investors in the banks to share in the losses of those banks, particularly Anglo.
This mistake cost the taxpayer dearly. He said: “The inclusion of existing debt in the coverage of the guarantee likely increased the potential share of the total losses borne by the State.”
The Taoiseach’s assertions that the reports fully vindicate his bank’s rescue package are untrue. The Taoiseach appears to be in denial on this issue. In light of this compelling testimony, one fact becomes clear. It is that Cowen and his Fianna Fáil colleagues and Green Party supporters have been misleading the public as to the origins of the crisis and his central role in our economic downfall.
As such they can’t be trusted on the economy and Cowen’s record demands his departure. As Enda Kenny said in the Dáil yesterday when tabling a motion of no confidence in the Taoiseach, if any CEO had two damning reports on his or her performance published, they would have resigned or been forced out the door straight away.
The final insult to the public comes with the publication of the Government’s draft terms of reference for the full inquiry yet to be held. The central role of political and policy failure is excluded from the terms of reference. It’s like having a criminal trial without the number one suspect in attendance.
That is why Fine Gael wants to see three things happen immediately on foot of these reports. Politicians, particularly Cowen, whose stewardship is under scrutiny, must testify and answer questions in an open arena where the public can see them held to account. The terms of reference should be decided in a way that is independent from those whose stewardship is centrally under investigation.
Taxpayers must see a thorough investigation, not only of the build up to this crisis, but of the response which has put Irish people on the hook for €17,000 per family to keep failed institutions like Anglo Irish Bank operating as going concerns.
This is the very least the taxpayer deserves. They are shouldering the burden. They are taking the pay cuts, service cuts and being asked to bail out bad banks like Anglo and Nationwide.
They deserve a government that gets back to the basics with the economy. Back to the agenda Fine Gael was pursuing before, during and after the last election. Stop building an economy by selling houses and let’s return to export-driven growth.
If we learn anything from these reports, it is this: if you build your dreams for the future on a bubble that bubble will burst, along with your dreams. It is time to get back to the basics that worked for us before. They can, and I am sure, will work for us again.
Richard Bruton is Fine Gael spokesman on finance