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Honohan: We're far from over the crisis

Friday, January 10 12:56:01

The Governor of the Central Bank, Patrick Honohan, today said that Ireland is not out of the woods yet, warning that the financial crisis will have a "lasting unfavourable legacy" on the country.

Speaking a European Commission economics and finance conference in Dublin, Mr Honohan said that Ireland's bailout "delivered what it said on the tin", adding that it provided a "safe harbour" into which Ireland was able to retreat, in order to clarify its ability and determination to deal with the severe financial problems that had so destructively erupted during the global financial crisis in September 2008.

"Those problems had their origin in the property bubble that had already begun to deflate a little earlier, and which had not only generated the huge latent banking losses that have been so much discussed, but also incubated severe fiscal and macroeconomic imbalances."

"The key to the return of market confidence to the extent that now exists has undoubtedly been rigorous adherence to fiscal goals," he added.

However, he warned that the financial crisis will have a "lasting unfavourable legacy" on the country.

"The accumulation of debt, public and private, will continue to weigh on growth prospects in a variety of ways. And many households are being affected by long term unemployment."

While a bounce back in residential property prices and increases in employment figures are evidence the Irish economy is on the mend, it "is nevertheless away from where we need it to be," Mr Honohan said.

He said the financial crisis has seen a substantial increase in the proportion of poor households suffering deprivation in Ireland.

He broadly backed the measures imposed on Ireland by the European Central Bank and the IMF.

"My overall impression is that most of the specific measures urged on the Government by Troika staff as the programme unfolded were sensible or inevitable; few were really bad ideas."