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Bounceback due to spending - Cowen

Published 08/07/2015

Brian Cowen arrives at Leinster House, Dublin, to give evidence at the banking inquiry
Brian Cowen arrives at Leinster House, Dublin, to give evidence at the banking inquiry

Former premier Brian Cowen has claimed Ireland bounced back from its devastating financial collapse quicker because of his spending spree while in office.

On his second day before a parliamentary inquiry into the crisis, the ex-taoiseach insisted he takes responsibility for his role as leader of the country in the downturn.

But he insisted his policies while in power were "plausible".

His Fianna Fail-led government decisions were stress-tested against threats, but there was a "clear misjudgment of the risks and potential impacts", he told the Oireachtas Banking Inquiry.

Mr Cowen also said his approach was "broadly shared" even by political opponents.

At the time the public was questioning if spending on improved services and other investments was happening fast enough, he told the hearing.

Mr Cowen said if his government had spent less during the boom, the country would not have suffered as severely in the dramatic nosedive from the late 2000s.

But he said that would have also meant fewer jobs and lower growth before the crash, which "would have in turn reduced our ability to come out of recession as quickly as we have".

"One way or the other the impact of the financial crisis has made the serious adjustment in the public finances which could not have been avoided in any event," he said.

After four years as Dublin's finance minister, Mr Cowen reigned as taoiseach from May 2008 to March 2011.

He was responsible for the infamous blanket guarantee for six banks at the height of the financial turmoil in September 2008 - which will cost Irish people 64 billion euro.

He resigned as taoiseach and Fianna Fail leader in 2011.

The same year his party suffered a bruising wipe-out in the general election by voters intent on punishing them for the crash.

Since then, Mr Cowen has taken more than 725,000 euro in pension payouts from the public purse.

Mr Cowen told the inquiry it was very clear that powers were trying to "bounce" Ireland in to a bailout by late 2010.

"I have no doubt that there were elements within the EU institutions who were providing inspired leaks to the media with that agenda in mind," he said.

The ex-taoiseach said speculation went into "overdrive" with the European Central Bank "at all times pushing" Ireland in to an international rescue programme.

He claimed there were no official bailout talks when International Monetary Fund officials first came to Dublin, but that the Government was trying to get the best deal possible before applying.

At the time, senior government ministers Dermot Ahern and Noel Dempsey famously denied there was any basis for suggestions of an imminent rescue package.

Mr Cowen said they were only saying what they were told, and it was technically true as it was only "talks about talks" at that stage.

The former premier said there was no intention to mislead the Irish public.

"There's no benefit in a government misleading its own people," he said.

"We weren't doing that. We were simply trying to get as full a picture as we could before formally applying for a bailout."

Mr Cowen said a broad banking guarantee, agreed in a late-night decision in September 2008, looked like a safer option than nationalising Anglo Irish at the time.

The lender has since been taken over by the State and wound up at huge cost.

The former taoiseach denied that he overruled then finance minister Brian Lenihan, who had favoured immediate nationalisation.

"I did not think nationalisation should be a first course and I said so," he said.

The pair weighed up their options privately in his personal office, and he assured Mr Lenihan that Anglo could be nationalised if necessary some time in the future, he told the inquiry.

The conversation was not "adversarial or confrontational", Mr Cowen said, adding: "It wasn't a question of overruling - the two of us were trying to grapple with a serious problem."

In the event, he said, there was a consensus that Anglo could not be allowed to fail as it would cause a run on other banks and a meltdown of the entire system.

"It was Wall Street 1929 stuff," he said.

He apologised that there was no accurate and full note of the meeting, which, he said, would have been helpful.

Mr Cowen again denied that he spoke about banking during a golfing and dinner meeting at Druids Glen golf club with three serving or former Anglo figures, including chairman Sean FitzPatrick, just two months beforehand.

"As God as my witness, that is the truth," he said.

There was nothing he could do about "conspiracy theories" in relation to the meeting but he only discussed the general economy with the bankers and ex-bankers, he said.

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