An inquiry into the collapse of the Irish banking system will illuminate a dark period of the country’s past, the head of the investigation has said.
The Irish government guaranteed the nation’s ailing banks in 2008, a decision which eventually led to a €64bn rescue of the financial system and an international bailout of the state.
A parliamentary committee in Dublin is looking at banking, regulation and crisis management by Irish authorities, before publishing a final report in November.
Committee chairman Ciaran Lynch said: “It is an opportunity to shine a light on a dark and painful recent time in our past, an opportunity to piece together the events of that time, an opportunity to learn from the mistakes that were made and an opportunity to ensure that those mistakes are not repeated.”
Peter Nyberg, a former IMF economist and Finnish government banking official, was questioned by a group of 11 legislators on his 2011 government-commissioned report into the crisis.
He said the Irish Government had taken the safe option in deciding to bail out the ailing banks following a property price bubble.
“When decision-makers are faced with that situation, what one tends to do is take the safe decision even though afterwards it might not seem so wise, and that is what I think the Government did.”
He said he understood but did not necessarily condone the move.
“It is a culmination of a lot of mistakes that were made before but the mistakes were not made on that night, the mistakes were made several years before and not only by the Government but really by everyone else.”
The Irish property bubble was not a unique phenomenon and could be compared to developments in Spain and Scandinavia, said Mr Nyberg. Despite this, it was “home grown”.
He said the blame for the handling of the crisis was more widespread than just the Government, which had to assure the markets that the banks were solid enough to lend to.
Mr Nyberg added there was an underlying assumption before the collapse that the financial institutions were stable and efficient.
He said there were doubters.
“People are smart but it is very difficult. People doubted in the beginning but once your doubts have proven unfounded year after year you might change your mind.”
He pointed out that a lot of people were enjoying “concrete” benefits during the bubble – the Government was reinvesting boosted tax takes in higher public sector wages, better social security and “onerous” costs for public sector services.
He said hundreds of individual decisions had to be examined, by people who felt they did not do anything wrong but which made the crisis possible.