Congressman Neal, Ladies and Gentlemen: I am delighted to be here today for the Ireland – US Council Spring Lunch.
I cannot overstate the importance and value that our Government places on the Ireland US relationship. It is one not only of cold, hard economics, but also of warm, personal friendship. The whole country is looking forward to the arrival of President Obama next month. His decision to visit Ireland at this time is a further sign of the concrete bond that has held our countries so close, over many decades.
The role played by the Ireland US Council in encouraging business between our two countries is of great importance and it is wonderful to see so many business leaders here today. The attendance here today of Congressman Neal is also a welcome sight, especially when the results of his input into peace process in Northern Ireland over the years are visible for all to see.
On Thursday of this week the Chairman of the Federal Reserve, Ben Bernanke, gave the first of what is promised to be regular press conferences by him. During the press conference he made the point that history shows that recessions, which follow a financial crisis, are often deeper and the economies affected by them take longer to recover than from a more normal downturn or recession. I think we all need to reflect on what has happened to our economy in recent years and draw the necessary lessons.
I would like to share with you a few reflections of my own on the economic crisis, which swept through our country. Since the 1980s a type of faith-based economics became the dominant ideology. It was characterised by an almost religious belief in the free market. Like all false faiths; eventually it contained within itself the seeds of its own destruction. They were many advocates and disciples of this creed here in Ireland. Indeed one of the strongest believers went off preaching his views to the Europeans much to their amusement. And what’s more they haven’t forgotten about it.
Capitalism and the free market are human constructs. As we now know to our cost capitalism and the free market are both powerful and dangerous. They are a bit like nuclear reactors. They are energetic, dynamic forces but they need to be contained within a safe and effective system of control and regulation. If they are not they have the capacity to explode and cause immense damage to economies and to the lives of real people.
Before the recent crisis broke there were some prominent economists in the United States and elsewhere and some prominent officials, including Alan Greenspan, who believed in the benefits of "creative destruction". Now that we have seen the fallout; the benefits of "creative destruction" are rather more difficult to see.
Rather than be guided by ideology of the right or of the left I think we should be informed by the virtues of pragmatism and realism. In fact I find the words of Calvin Coolidge, former President of the United States, rather wise in this regard. He advised the following approach to life-
"Persistence and determination are omnipotent. The slogan ‘ press on’ has solved and will always solve the problems of the human race" I like to think that this what the new government is about; finding practical solutions to real problems.
I have also learned that denial, delay and a refusal to face reality is the wrong strategy. In September 2007 the collapse of the British bank, Northern Rock was a red flag warning to Irish banks, the regulators and the Irish government. The collapse of Bear Stearns Bank in the US in March of 2008 and the continuing slide in Irish bank share prices from the beginning of 2008 should have galvanised Irish authorities into action. During the summer of 2008 official Ireland remained paralysed. The situation was allowed to fester and in September the government found itself in a position where it felt obliged to take emergency action in the middle of the night. And a very bitter lesson has been learned from the events of September 29the 2008. No responsible government should ever play a game of bluff with the financial markets. No government should ever give unlimited guarantees, which if called in have the potential to bankrupt the country.
And I have learned from learned from the United States and how they handled their banking crisis. In a banking crisis early, decisive and effective action are required. Chopping and changing policy, not dealing with the mess, creates further instability and makes the problem even bigger. Confidence and trust are crucial for banks. But these attributes are a very fragile flower. In fact trust in banks is a bit like belief in God. Once lost it is hard to recover.
The situation is so serious that there is a real risk that some people might lose hope. There is also the risk that people might be tempted by the escapism of victim hood. Some weeks ago the Dalai Lama visited this country. He made a big impression and had a lot of things to say. He was asked to comment on how Ireland might recover from its present economic difficulties. He replied that "hard work, self-confidence and a positive attitude" are required. I think his response is worth considering.
We cannot magic away our problems. To believe we can do so or hope we can do is only another form of escapism. What is required is a willingness to face the situation head on.
Already the government has been upfront about the banking situation. It published the results of a really tough stress test on the banks. The stress test has been accepted by all commentators at home and abroad as giving a truthful picture of the real situation in the banks. No more denial, no more hiding. Following the stress test the government announced a major restructuring of the Irish banking system into two pillar banks, AIB and Bank of Ireland. These two banks now have a big job to do. They need to engage in a very active way with their customers. They need to win back deposits and restore customer confidence.
People can now be confident their deposits are safe. Slowly but surely confidence and trust will return to the banking system. Deposits will begin to flow back and hopefully we can return to a well functioning banking system.
The government has also moved decisively and effectively to deal with the financial mess at the Quinn Group of companies. It has done so with a view to protecting the businesses and the jobs within the Quinn Group. And let me be frank about the situation. Sean Quinn and his management team showed vision, determination and skill in building up the Quinn Group over a period of thirty years. But the Quinn Group was brought down by reckless gambling on Anglo Irish Bank shares and totally unacceptable management practices.
We made it clear during the election campaign that we would renegotiate the bailout deal. The previous government said it couldn’t be done. They were wrong. We have begun the process of renegotiation. The cut in the minimum wage has been reversed and the troika of negotiators have agreed to a major jobs programme, which will be announced during the coming month. The ongoing negotiation of the bailout package will continue in the months and years ahead. We will continue to fight for a cut in the interest charged and other changes. We will continue to defend our low corporation tax rate. Any change in our corporate tax rate, at a time when Ireland needs stability and certainty, would be utterly self destructive as a country. We will not be bullied or intimidated. We will fight for Ireland’s interests in every international forum. But we will continue the long and slow process of rebuilding Ireland’s international reputation.
On coming into office the government first dealt with the banking crisis and began the renegotiation of the bailout deal. It is now moving on to its promised jobs strategy. We believe that getting people back to work is essential if we are to turn this economy around. We will be producing a major package of measures in this regard within a matter of weeks.
Central to any recovery must be a determination to restore the finances of this country to a sound footing. We have to be honest with ourselves. We are not in a good place. There is an enormous gap between what we spend and what we raise in taxes. There is an urgent and compelling need to bridge the yawning gap between spending and revenue. This why the government is undertaking a comprehensive review of all government spending. This is why we have established a new government department of public expenditure and reform. We must ensure that every euro we spend is spend wisely and to maximum effect. So what I am saying is the following. We are in a difficult situation. It’s not going to be easy. There will be tough decisions and a lot of hard work ahead.
The economic relationship between Ireland and the United States is, and will continue to be, of huge importance in our economic recovery. Ireland is the 13th largest foreign direct investor into the US with investments valued at €32 billion. The US is also the principal market for Irish software (40%) and services companies and is of great importance to the electronics industry in terms of exports and supply of components/services to US firms in Ireland. US economic activity in Ireland is also substantial and in 2010 there were 491 IDA supported US companies operating in Ireland, employing almost 90,000 people. The US is Ireland’s largest source of inward investment with these companies achieving an average rate of return of 21.8% on their investment.
I want to conclude by referring to the unique relationship that exists between the United States and Ireland. For many Irish people America has been a refuge but also a place of hope and a place of dreams. On an occasion like this we enjoy, nurture and celebrate that relationship.
And I would like to acknowledge the contribution made by Congressman Neal to developing and strengthening that special bond. Congressman Neal is a true and steadfast friend. Right now Ireland needs such friends.
And I want to say to you Congressman Neal and to our American friends here today
The ties of history, of family and of friendship that bind our countries and our peoples together will never be broken.