How Krugman got it wrong on Irish economy
US-Ireland Council responds to New York Times column
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Finally, Mr. Krugman does not take the great opportunity he had to contrast the Irish Government’s interesting and imaginative policy response to the banking crisis with the U.S. policies that have been announced. The problem real estate loans of Ireland’s banks will be ring-fenced in a sort of asset lockbox and will be managed back to health in time. Thus, these problem legacy assets will no longer taint the balance sheets of the banks. More importantly, Ireland’s taxpayers will reap the rewards of the upside when asset values recover – something never mentioned in his piece.
The recapitalization of Ireland’s banks has been undertaken in a timely and prudent manner. The Government’s liquidity injection to the banking system came in the form of preference share capital in the two largest banks. Importantly, ownership of the vast majority of Ireland’s banking system remains in the hands of private shareholders.
Even after these capital injections have been made with Government funds, Ireland's total national debt (even allowing for the increase in debt levels recently) is today less than the total corporate debt of AT&T, Inc. - the slimmed-down regional Bell!
The great thing about a democracy is that opinion journalists are free to be depres singly negative if they choose to be. The current international financial and economic crisis provides a grand platform for the pessimists to strut their stuff. A little look on the bright side now and again might do a power of good for Dr. Krugman’s dismal outlook.
