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Cowen defends handling of economy before recession

Taoiseach Brian Cowen has defended his management of the economy in the years leading up to the property crash but conceded the economic and banking crisis was made worse by internal factors, including mistakes by government, the Irish Times reports.

In a speech at Dublin City University last night Cowen said governments should never again introduce tax breaks which would make a property bubble possible. Property tax incentives in place over the period from the mid-1990s should have been abolished many years prior to his decision to abolish them in December 2005, he said.

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“While government shares responsibility for its role in these mistakes, it is noteworthy that many of the strongest critics of the government were silent on these issues prior to the crisis and indeed were proposing measures such as the radical reduction or abolition of stamp duty which would have made the position much worse.”

The taoiseach said much debate had centered on whether the causes of the crisis in the Irish banking sector were international or self-inflicted. “I know many people will expect me to say that the crisis was exclusively caused by international developments. But that is not my view,” he said.

“We now know grave mistakes were made in the judgment of the capital adequacy of the Irish banks and the assessment of future loan losses. It is, however, important to note that no one in the independent authorities ever advised the Government that the capital adequacy was not sufficient or that higher capital adequacy ratios should be imposed.”

Cowen added that when he was minister for finance he shared in this positive view of the economy’s prospects, which was held by all the main research and international agencies. “But contrary to what some are now trying to suggest, I was concerned about the potential vulnerabilities and risks arising from the rapid escalation in property prices... a recurring theme in risk assessments.”