Business Opinion/John McManus: One suspects that a certain Andrew Dean of the Organisation for Economic Cooperation and Development is not a happy camper. Dean is the author of the memo to the secretary general of the OECD, Donald Johnston, which had the telephone lines between Dame Street and the Rue André Pascal hopping last week.
In his memo Dean summarised the main conclusions reached by the OECD team that visited Ireland in September. They had met with various Government and non-governmental bodies as part of the research for the upcoming Economic Survey of Ireland which is due out in January.
The following two sentences stand out from the memo which was reported in this paper: "But there is clearly a speculative element and econometric work by the Secretariat suggest [ house] prices are 15 per cent overvalued. Central Bank officials agreed with this assessment, which they found consistent with their own judgement, even though they suggested that any numerical estimate of overvaluation should be presented only with extreme caution to avoid destabilising the market".
The publication of the contents of the memo provoked a somewhat peculiar response from the Bank .
It issued a statement in which it was at pains to point out that it "did not suggest that the OECD study should not be published and the OECD has confirmed this to the Bank". Given that there is no suggestion of this in the memo, it is hard to understand why the Bank felt it necessary to deny it.
It looked like the fairly standard crisis management tactic of denying something that is not alleged in order to avoid the real issue; which in this case is the fact that the Bank would appear not to have demurred from a suggestion that the property market is significantly overvalued and had urged caution about putting the matter into the public domain.
When quizzed about this aspect of the memo, the Bank was somewhat more equivocal. It said that it did not agree with the version of events outlined in the memo and that two of its officials who were at the meeting did not remember urging such restraint.
When the Bank's position was put to the OECD, its response was equally curious. "We stand by what the Central Bank says. We are not going to contradict their version of what happened.
"We accept that the memo must be incorrect," said a spokesperson.
The OECD's position does seem a bit generous given that the Central Bank never said the memo was wrong, just that it did not agree with it and its officials did not remember things the same way.
Exactly what was said at the meeting remains something of a mystery, but it is all a bit embarrassing for Mr Dean.
There seem to be a couple of lessons in all this. The first is that OECD country reports need to be treated with a grain of salt. But we already knew this.
As far back as 2002 there was quite a fuss in Germany when it was revealed that German officials had prevailed on the OECD to tone down their report on Germany.
According to reports at the time a sentence that read: "It is inconceivable the [ German] budget can be balanced in the short term. A stronger, longer-term strategy is required", was replaced by the following: "The federal government has committed itself to a policy of strong budgetary consolidation and is current tied into a consolidation package ..."
The second and perhaps more pertinent issue is what the events of last week say about the real power of the Central Bank. Dame Street still retains the aura of power - not to mention all the trappings - but its ability to control the financial markets is greatly diminished since the advent of monetary union and the ceding of most of its powers to the European Central Bank in Frankfurt.
Its remaining power to influence events rests primarily on its credibility and authority. In theory, when the Central Bank says something is so, then it is so and people will listen and act accordingly.
If, for example, the OECD was to come out in its economic survey and say that property prices were overvalued by 15 per cent, the Central Bank would find it hard not to comment.
And if - as it seems it does - the Bank agreed that property prices were overvalued then the whole market should in theory come juddering to a halt as people take on board its weighty opinion.
Of course if the market did not respond in this fashion to the Central Bank, then Dame Street would be exposed as impotent.
Notwithstanding last week's verbal gymnastics the cat is now well and truly out of the bag in terms of the Bank's views on the property market. However, as of last Friday the property market had not collapsed.
This would seem to suggest that the Bank's opinions on the Irish economy are increasingly seen as irrelevant. Perhaps all the fuss last week was less about avoiding some sort of panic in the market and more about maintaining the semblance of power in Dame Street.
