Central Bank boss says US is partially to blame for Ireland’s economic crisis

Patrick Honohan waves the flag in London

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Central Bank boss Patrick Honohan

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He continued, “Both Ireland and Britain have experienced the rough and the smooth of this. But the information technology revolution implies that international financial integration is not a question of whether, but of how.”

He noted now the English, Scottish, and Irish banking systems had long been intertwined, reminding his audience that it was the Kerryman Daniel O’Connell -‘the Emancipator’ - who set up the National Bank in London in 1835.

“It was one of the seven great clearing banks, whose English branches later formed part of Royal Bank of Scotland (and now presumably heading to Santander) – with the goal of providing banking services ‘across borders’ into Ireland to compete with the monopoly which had been granted there to the Bank of Ireland.”

Mr Honohan said that for much of the past 200 years, London was the centre of global finance as well as of international economic relations generally. But the system had been “shaken by the evolving crisis from which it will emerge in a reconfigured form”.

“What will the role of London be in the reconfigured system, how will Ireland fare?” he asked. “These are key issues preoccupying you and me respectively, and they are not unrelated.”

Mr Honohan spoke of the need for a banking union in Europe, one for the European Union as a whole, not just the euro area.

Speaking about the upcoming referendum on the fiscal stability treaty, the Central Bank Governor said he did not believe that it would be rejected.

The 'No' campaign are "not all that numerous" he told the audience, saying that most were speaking out against austerity measures instead of engaging in euro-scepticism.

He concluded, “Some have taken the message from the euro crisis that financial integration has gone too far in Europe. My read is different.

“Inasmuch as any country that did not adequately operate sustainable macro and financial policies would suffer greatly from the denouement of policy deficiencies, the euro embodied a strong commitment device. The costs of that policy failure are being felt now.

“But the answer is not to fall back on the more autarchic policies of the 1960s and 1970s, but to try again, try better.

“The markets – gullible as we know they can be – naively assumed that the commitment device would be effective so that they need no longer fear unsustainable policies.

“They know better now, and so do the governments. Next time around will (to this extent) be different: this particular lesson has been learnt.”
 

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