Once upon a time, it was “Would you buy a used car from this man?” referring to Richard Milhous Nixon. Now it is prescient to enquire, would you buy a used prediction from a Fianna Fail government?

Europe rejects Cabinet growth forecast

By Ann Cahill, Brian O’Mahony and Juno McEnroe
Tuesday, November 30, 2010
THE Government’s battered credibility suffered a fresh blow last night after the European Commission flatly contradicted its projections for economic growth next year.
It came as Central Bank governor Patrick Honohan signalled the end for Anglo Irish Bank, saying its toxic brand name would disappear within “weeks” as a first step.

A revised plan to wind down Anglo more quickly than originally anticipated will then be submitted to the EU by the end of January.

Under the plan, deposits in Anglo will be protected but will be moved elsewhere, while the loans on the bank’s books will be gradually wound down over several years.

The Anglo move is part of a wider restructuring that will see the size of Irish banks shrink as demanded under the EU/IMF bailout.

Prof Honohan played down a suggestion by Labour TD Pat Rabbitte that a further black hole could yet emerge in the banks because of problems with complex financial instruments known as derivatives.

“There has been no indication in our discussions over the past couple of weeks that there is a hole that we haven’t discovered,” said Prof Honohan, adding that the EU and IMF teams had pored over the banks’ books.

While that will be welcome news for the Government, it suffered another blow to its credibility when its economic projections were called into question by the European Commission.

In its four-year plan, published just last week, the Government forecast GDP growth of 1.75% for 2011.

But the commission, in its assessment published yesterday, said growth would increase by just 0.9% — roughly half of what the Government is predicting. They also cut the Government’s projections for 2012 from 3.2% to 1.9%.

The commission said the Government’s figures were “not realistic” because people would not spend as much as the Government anticipated and would instead continue to save.

As a result the budget deficit will be considerably higher than the Government’s projections in the National Recovery Plan and debt will reach 114% of GDP by 2012 while the Government said it would peak at 102%.

It is because of this and other factors that Ireland is being given a further year — from 2014 to 2015 — to reduce the deficit to 3% of GDP.

However, Economics Commissioner Olli Rehn said the fundamentals of the Irish economy remained sound and the situation would improve markedly in 2012, with a predicted growth level of 1.9% that would outstrip the EU average.

His comments came as Labour leader Eamon Gilmore played down suggestions by his party’s finance spokeswoman, Joan Burton, that Ireland was “banjaxed”.

Asked by RTÉ if he believed that to be the case, Mr Gilmore replied: “No, the country has a great future, but the (bailout) deal was a banjaxed deal.”

Meanwhile, the ongoing effects of the mortgage crisis were witnessed again in the High Court.

A single mother, who had fallen ill after being attacked at work and thus struggled to pay her mortgage, had her home repossessed by a sub-prime lender.

Judge Elizabeth Dunne said that despite the borrower’s genuine efforts to satisfy the lender, the woman had not been able to keep up with repayments.

This story appeared in the printed version of the Irish Examiner Tuesday, November 30, 2010