THE TAOISEACH questioned the media interpretation of the warning by the International Monetary Fund (IMF) on the Irish economy during sharp exchanges with the Labour leader.
The IMF estimated that the cost of stabilising the Irish banks would be the equivalent of about €24 billion, the highest government bailout as a proportion of economic output.
Brian Cowen told the Dáil that the figures quoted in the newspapers, suggesting potential loss rates on foot of support to the banking industry in Ireland, did not appear in the IMF’s final global financial stability report.
“I understand there was a figure in an earlier draft which the IMF, in the end, did not use,” he added.
“These figures should not be relied on as a measure of likely cost for Ireland or any other country . . . though from the point of view of the IMF they may well be of use in calculating financial strains on a global level.”
He said that the particular figures appeared to be based on “more or less mechanical application of various modelling tools with a heavy reliance on technical assumptions”.
He said that they did not represent the outcome of a specific examination of Irish banks’ assets such as being carried out on behalf of the financial regulator by PricewaterhouseCoopers.
Mr Cowen added: “The principal reason the IMF approach gives a relatively high figure for Ireland is that our bank guarantee arrangement is broader-ranging than in other countries and our financial sector is larger relative to the economy.
“Obviously, we are open at all times to discussion with international institutions about technical assumptions they apply to the Irish case.
“But in the current case, we are far from convinced that there is a significant new or additional informational value in the figures presented from a national point of view.
“I understand from media reports that, following contacts with the UK authorities, figures relating to the UK in the final report have also been amended.”
Referring to remarks made by “eminent economists”, Mr Cowen said the Government was very much of the view that it stood ready to assist financial institutions of systemic importance.
“The question of impaired assets, and how you deal with assets in this situation, will be in line with the EU guidelines in these matters,” he added.
Eamon Gilmore accused the Taoiseach of giving an answer which was “a mixture of clutching of straws and denial”. Irrespective of how the Taoiseach might spin the issue, the IMF had used the same methodology in looking at the banking situation across of the countries in the developed world.
“They have come to the conclusion that the Irish bailout is going to be the most expensive on the taxpayers of the respective countries . . . Clutching at straws, saying that this figure is out or that figure is out, or was in an earlier draft, is neither here nor there.”
Mr Cowen said that the Government was not playing any game.
“We are in the serious business of trying to maintain financial stability in the State against the background where there are far stronger economies than ours having to contend with the same mammoth task,” he added.
Accusing Mr Gilmore of using “populist phrases like bailouts”, Mr Cowen said the Government was interested in trying to protect the maximum number of jobs in the economy.
Unless there was a functioning banking system, it was not possible to do that, he added.
“The position of the Labour Party was to reject the whole question of State guarantee . . . which would have brought about the implosion of the banking system,” said Mr Cowen.
