CANADIAN FINANCE minister Jim Flaherty has defended Irish government policies, saying credit ratings agencies needed to realise that countries like Ireland have taken bold steps to fix their public finances and financial systems.
He was speaking after ratings agency Standard Poor’s downgraded Ireland and warned of a further ratings cut. Mr Flaherty said he was “not a big fan” of ratings agencies and that their views should not be taken too seriously.
He took their opinions “with a large grain of salt”, he said, because they “quite rightly” have been burdened with some responsibility for the crisis.
“Quite frankly, some of the work done by ratings agencies did not assist and contributed to what became a serious global crisis so they are part of the story,” he told The Irish Times in an interview on a three-day trip to Ireland.
“It is not as if they can stand on high and look down and start now being critical of others who are trying to sort their way out of the crisis that they contributed to.”
Following meetings with Irish officials over recent days, he realised “even more intensely than I did before being here” the seriousness of the crisis and “what a mountain there is to climb to restore confidence and stability”.
“It is certainly important that agencies and commentators realise that it takes time for government policies to take hold and to have positive effects,” he said. “We didn’t get into this crisis overnight and we won’t get out of it overnight.” Earlier, Mr Flaherty praised Ireland, saying it had led Europe “in taking the necessary, courageous decisions towards fiscal consolidation”.
Mr Flaherty said he hoped that the G20 countries would agree on new bank capital rules at their meeting in Seoul in November, but agreed that countries such as Ireland may need time to meet them.
“Some countries need more time to get to the appropriate capital standards and leverage standards, and that is the subject of continuing discussions,” he said.
Mr Flaherty cited “strong, effective supervision” by Canada’s banking regulator as one reason why the country’s banks fared better than most during the crisis.
Effective supervision and enforcement would allow Ireland’s new regulator supervise domestic banks robustly without damaging the country’s standing as an international financial centre, he said.
“That requires a regulator who is well resourced and who is independent of the financial institutions and takes their duties very diligently and seriously,” he said.
Mr Flaherty welcomed international expansion by Canadian banks subject to maintaining their capital and leverage standards, as required by Canada’s regulator.
The struggling US economy, which accounts for 75 per cent of Canada’s exports, and the weakness in US consumer demand was a major concern, said Mr Flaherty.
He expects Canada’s economy to grow by 3 per cent this year, anticipating moderate growth into 2011.
