I could not have put it better myself Pat.

The Irish Times – Monday, May 9, 2011

Minister criticises economist’s ‘prescription’


MINISTER for Communications Pat Rabbitte has criticised the “prescription” from economist Morgan Kelly for Ireland’s recovery.

Mr Rabbitte said it would be “very, very devastating for some number of years if it were to be followed by a Government”.

Mr Kelly, professor of economics at UCD argued in an article in The Irish Times that Ireland faced bankruptcy if it did not walk away from the EU-IMF deal.

Speaking on RTÉ radio’s This Week programme yesterday, the Minister said he agreed with Mr Kelly’s analysis of how Ireland got into its current difficulties.

“The piece is a powerful horror polemic,” he said.

“I don’t dispute most of the analysis but I do dispute the prescription.” He said he understood people’s “fascination” with Prof Kelly’s analysis but they needed to look at the “prescription”.

The “implications of Morgan Kelly’s prescription which is that we bring the public finances into kilter as quickly as possible” would mean cutting €17 billion or €18 billion in one budget.

This would result in “serious cuts in pay, in pensions, increases in taxes, cuts in the public capital programme”.

There were already critics in the Dáil he said who “throw around default like confetti”. Some “think we can land oil on Dalkey head and that will solve all the problems”.

But when they are asked “what are we going to do to pay social benefit and run the social services of the State in the immediate wake of that decision some are very backward at coming forward”.

Prof Kelly believes Ireland’s debt will be close to €250 billion by 2014.

Mr Rabbitte said “nobody is denying the gravity of the position this Government inherited or that it goes back to the ridiculously broad manner in which the bank guarantee was drawn”.

Rejecting the call to abandon the bailout he said that “even if Ireland had a zero deficit, there would still be a necessity for Ireland to borrow because of rollover of debt”.

Mr Rabbitte said the nation would continue to negotiate for a better agreement and a reduced interest rate on its EU-IMF €85 billion package.

The decision to reduce the interest rate had not yet been made but he was hopeful it would be agreed next week. The interest rate is on the agenda of next week’s meeting of EU finance ministers, at which the Portuguese bailout is to be debated.

“The Irish Government has been constantly involved in talks on the interest rate issue and hopefully, hopefully it might be brought to an end at the Ecofin meeting,” Mr Rabbitte said.

The Minister said the rates, averaging 5.8 per cent, are “punitive”.

He said the whole point of the type of agreement Ireland made with its international partners “is that the country affected can get access to normal debt markets again within the timeframe prescribed”.

Mr Rabbitte also expressed the opinion that the debt should be rescheduled.

And he said that “we must get the interest rate down without quid pro quo”.

Stressing that “this is a euro-zone problem, not just an Irish problem”, he said the situations in Ireland, Greece and Portugal were different.

Mr Rabbitte referred to the EU deal on any future bailouts which comes into effect in 2013 and will be “an entirely different bailout mechanism”.

He said “the foolish thing about that is there is now an immediate and present danger affecting three member states . . . If a system is deemed necessary from 2013 onwards, why can it not be accessed immediately?”