Kelly - Irish society must 'toughen up'
UCD economics professor Morgan Kelly has said that Ireland has become insolvent, and cannot hope to repay the money it has been loaned as part of the EU/IMF bailout. By Bernard O'Rourke.
Presenting the Hubert Butler Lecture as part of the Kilkenny Arts Festival (listen at the link below), Kelly warned that government and Central Bank estimates of the repayments needed are too optimistic. The current government estimate is that by 2015 Ireland will owe about €200 billion. Kelly challenged this figure, saying that the total losses of the banks will be “around €90-100 billion,” as opposed to the estimate of €60 billion made by the Central Bank, which means that Ireland “will have a debt of around €240-250billion by 2015”.
“There is no way that we can repay that,” he said.
He continued: "Ireland has “basically ceased to exist as a sovereign entity. We are basically an EU protectorate.”
Kelly highlighted the substantial loans given to property developers by the banks during the 2000s as the main reason why the banks failed. It was not only Anglo Irish Bank which was at fault, he said, but also AIB and Bank of Ireland who had “foolishly followed” the policy of providing larger and larger loans to developers.
In particular it was "the senior management of the Irish banks” that were responsible for this excessive and dangerous lending, “in particular AIB and Bank of Ireland. At any stage they could have gone along to the government and said that ‘Anglo were out of control, you need to stop them.’ Instead they imitated Anglo, and even tried to poach developers form Anglo.”
Kelly was critical of both the Honohan report and the Nyburg report, neither of which lay the blame on any particular individual, and which both held that this was just a "social mania in Irish society" and that "everybody got carried away". “That’s not true,” said Kelly “it was the senior management of Irish banks, most of who are still in their jobs.”
He was further critical of the government for not taking into account the massive losses faced by Bank of Ireland and AIB.
Kelly also noted what he felt is set to become a major problem for Irish banks in the future – the issue of mortgage repayments. According to Kelly this will be the cause of major losses for Irish banks, which will make the government guarantee even more unsustainable and ultimately result in the total losses of the banks being “around €90-100 billion”.
“There are tens of thousands of people out there who took out loans that they can’t afford. Eventually we will get a system where some people get their mortgages reduced and others are allowed to just walk away from their house and not be pursued for the outstanding balance.” This means that the banks are banks are “facing big, big losses, and that means losses for all of us, and as a result by 2015 Ireland “will end up with a national debt of easily €240 billion.”
The only solution to Ireland’s continuing difficulties, said Kelly, is to aggressively kick start its economy the way it did in the 1990s, and the only way to do this is to “have a better educated workforce than everyone else”. Unfortunately “we are at the bottom of international mathematic achievement among more affluent economies. And this is not a statistical blip, I can see it in kids coming into universities. We have dumbed down our education system, and the rest of the world hasn’t.”
Kelly said that Ireland as a society must “toughen up”.
“In order to be a decent society we have to be better educated, we have to be completely intolerant of corruption, we have to be fighting all the time to stay one step ahead."
Listen to the full lecture below.