Irish economy afloat because of euro, says Sutherland

PETER SUTHERLAND, the Irish chairman of energy giant BP, the world’s fourth-largest company, says that Ireland’s economy has remained afloat solely because of the country’s membership of the euro.

Speaking to The Irish Times at the Davos economic forum in Switzerland, Mr Sutherland said that if Ireland was not in the single European currency, the Irish economy would be “in a state of destruction”.

He described as “absolutely appropriate” the comparison between Ireland and Iceland, a non-euro state whose economy has collapsed, made by European Commission president Jose Manuel Barroso during a discussion on the European economy in Davos.

“He was quite right to make it,” Mr Sutherland said. “There is no point trying to pretend now what our condition is. That condition is deeply, deeply worrying, so it behoves everybody to recognise this and to react accordingly.”

His comments came as the outlook for Ireland’s debt rating was downgraded to negative from stable and Irish State debt became the riskiest in Europe, surpassing that of Greece, based on credit default swaps, a proxy measure of a country’s ability to repay borrowings.

Credit rating agency Moody’s said the change in outlook on Ireland’s debt rating reflected its view that “the current economic crisis is likely to significantly affect Ireland’s economic strength and government financial strength for the years to come”.

Speaking in Davos, in response to the negative view on Irish sovereign debt and the state of exchequer finances, Taoiseach Brian Cowen said the Government was “determined to address these issues, starting in 2009, and the first process is one of stabilisation of the public finances”.

Mr Sutherland said that the reaction of the international markets to Irish Government debt was “unfortunately extremely serious” and “a very serious warning”.

“The international markets are not idiots and they have clearly and unambiguously signalled where they place us in a league table of possible default,” he said.

“We have been hit as everybody knows by a series of catastrophic events. The credit crisis, combined with the property bubble, has made us particularly vulnerable.

“I believe it is absolutely necessary to take dramatic steps in reducing the indebtedness of the State.”

Mr Sutherland said that Ireland was “definitely living way beyond our means in terms of the current realities of the global economy. The painful consequences of this are a national challenge which is unprecedented, although sometimes the tenor of the debate at home suggests that many view this as just another blip in an economic trajectory,” he said.

“This is not a blip. This is deadly serious because all of the major economies in the world are suffering and, when Ireland is in a position of even greater vulnerability than them, one can immediately see the consequences.”

Mr Sutherland, who will retire as BP chairman in June after 12 years in the job, said Ireland “as a small society, should be sufficiently cohesive to be able to react effectively”.

“The political parties as a whole have an obligation to not merely lead but also to recognise that this goes beyond the traditional issues of domestic politics,” he said.

Mr Sutherland said the Irish banks needed to be dealt with “urgently” and that it was “absolutely necessary” for the country’s credibility that the Lisbon Treaty be voted through.

“It is ludicrous to find ourselves in these incredibly turbulent seas in a state of suspended animation with regard to the one issue on which the whole of Europe is watching. We should get our act together and quickly pass it.”