Irish crash could have collapsed euro, bailout chief tells inquiry
Ireland's economic crash could have collapsed the euro, Europe's bailout chief has said.
Klaus Regling, who co-wrote a report on Dublin's banking crisis, blamed home-grown decisions for throwing fuel on the fire of the country's financial meltdown.
A "soft landing" could have been possible if the right action was taken by those in power at the time.
"Fiscal policy could have been counter-cyclical, instead it was pro-cyclical, supervisory action that could have been taken was not taken," he told a parliamentary inquiry into the crisis.
The German economist, who heads up the European Stability Mechanism, said blame for the crash can be spread widely and needed to be seen against the culture of the time.
Leaving banks and financial markets to virtually regulate themselves was fashionable while central bankers and regulators ignored alarm bells and the warnings from a minority that a crash was imminent.
"The bottom line was nobody seemed to be in charge," he said.
However, while a number of global and European elements played their part, Irish authorities could have taken action to moderate the boom and been much more firm with the banks, he told the hearing.
A "soft landing was possible" but instead Dublin's policies put "fuel on the fire", he said.
Mr Regling was cross-examined by TDs and Senators as part of the Oireachtas (parliament) Banking Inquiry into the lead-up to the crash, which is expected to publish its findings later this year.
The crisis in the Republic at the time could have led to a collapse in the euro, he said. "The founding fathers of the common currency could not foresee the worst economic crisis in 80 years, or the need for emergency funding to countries locked out of the international money markets."