The economist branded Doctor Doom by the media has warned that the worst is yet to come for Ireland’s ailing economy.
UCD professor Morgan Kelly predicted even more hardship for the Irish tax-payer as he accused the government of massaging the truth.
Kelly says the property market has yet to hit rock bottom, the bank bail-out will cost more than anticipated and government debt could rise to as much as $360 billion.
The Irish government has already invested some $90billion into the banks but Kelly predicts that could rise to as much as $140billion on the back of the property market’s failure to recover.
“We are very far from the bottom of the real-estate market, it is going a decade for it to recover,” warned Kelly as he pointed out that Irish property prices may decline as much as 80%.
“While prices had fallen by 50 per cent, almost no transactions were taking place at that price and with unsold properties starting to accumulate, we are very far from the bottom of the market.”
Kelly also warned of the implications of America’s latest problems for the Irish economy but doesn’t believe the EU will allow the Euro to collapse.
Speaking at a summer school in Kilkenny, he added: “If the US goes under, that hits us very, very badly.”
Addressing the current plight of the Euro, Professor Kelly said: “The Eurozone is too complex to collapse, the logistics of undoing the Eurozone especially for us.
“We’ve got €160bn in European deposits in our banks, what happens to those if the Eurozone disappears? It’s a nightmare. But I think mostly what will keep it going is that it is in Germany’s benefit.
“I think at some stage what we are going to see are very large ECB loans to Ireland and Greece, and bigger ones to Spain and Italy.
“But assume that we get through the European crisis and suppose they lend us €100bn for 50 years at one per cent interest. That would be the end of the problem for us, and we would be able to go and borrow again from the international markets.
“Even if we get through that, we still have very big problems in Ireland.
“The whole banking and government crises have taken attention away from very deep and pretty much intractable problems of the Irish economy.”
In conclusion, Kelly urged the Irish government to improve the education system in a bid to keep track with the outside world.
He stated: “We have dumbed down our education system. Unfortunately, the rest of the world hasn’t. We’ve given up, the rest of the world hasn’t.”