Former Central Bank governor Patrick Honohan says the net cost of the 2008 banking crisis to the Government and Irish people was €37 billion.
The cost to Irish shareholders was €29 billion, to foreign shareholders it was €28 billion and it cost subordinated debt holders €14 billion, Prof Honohan said at an event in NUI Galway (NUIG) on Friday.
Prof Honohan also warned that loss of tax revenues from US multinationals could cause the State’s next recession.
He was speaking at a conference on how Ireland has changed since the 2008 financial crisis, chaired by NUIG president Ciarán Ó hOgartaigh.
Asked about his famous Frankfurt phone call to RTÉ Radio One's Morning Ireland on November 18th, 2010, in which he said the State was likely to ask the EU and International Monetary Fund to rescue the banks, Prof Honohan said he didn't think about the impact this would have on late finance minister Brian Lenihan's position within Fianna Fáil.
Mr Lenihan’s position was “none of my business”, he said, but he recalled he had previously made some “pointed criticism” at an Oireachtas committee and was later taken to task by a senior civil servant.
His phone call got “more attention that I had expected” , he said, but had a positive outcome in conveying a message that the Republic was being “handled by professionals”.
Next crisis imminent
Former Tory MP Angela Knight told the event she believed the next crisis was very imminent.
Banks may be “safer”, but the “system is not”, Ms Knight, former British Bankers’ Association chief executive and current chair of Britain’s Office of Tax Simplification, said.
“The minute I hear extraordinary phraseology from government...watch out for ‘Goldilocks time’,”she said.
She said she believed that globalisation and the fact that a number of countries had taken similar measures to avoid a repeat of the 2008 financial crash meant that any “mistake” would have a domino effect.
China’s tentacles are also “far wider”, she said, and any “foul up” in its economy would have far broader impact, while she also believed measures taken after 2008 had resulted in the “people and the political class” moving further apart, with much greater political instability.
On Brexit, she said she believed the final deal would involve a Canadian-style free-trade agreement with the EU with a “special twist for Ireland”.
Short-term approach
Former Economic and Social Research Institute director Frances Ruane warned of the hazards of an increasingly “short-term approach” , and cited as an example the “drift” back to restoring public sector pay without reflection on the impact of such increases.
Playwright and author Colin Murphy delivered a five-act presentation on the cultural impact of the 2008 crisis, and identified the risks of groupthink in a boardroom culture. Murphy concluded with a list of words that should trigger “groupthink antennae”, ranging from “populist”, “neoliberal”, “vulture fund” and “Russian interference” to “fake news”, “backstop”, “snowflake” and “squeezed middle”.
