FRIDAY INTERVIEW:Ibec director general and accomplished juggler Danny McCoy has been accused of being high on aspiration in his projections for the economy. His counter argument is simple – of course, the recovery is all about confidence

IF IBEC DIRECTOR general Danny McCoy had played a role in the 1970s BBC television comedy Dad’s Army, it probably would have been as Corporal Jones, who became famous for his “don’t panic, don’t panic” catchphrase.

Jones’s cry was a response to the ever-present threat of a Nazi invasion in wartime Britain. McCoy’s call relates to the State’s battle to prevent our mushrooming national debt – and the austerity measures that flow from that – from choking a recovery in the Irish economy.

While the rest of us fret about the future, the self-confessed anorak economist is sanguine about our current economic woes and remarkably upbeat about our prospects for recovery.

McCoy doesn’t do doom and gloom. He’s more a glass half-full merchant type of chap.

“I’m three-quarters full and we own the glass compared to some of the pessimists out there who say it’s half empty and we don’t own the glass.”

On a damp and dreary morning at the Aviva Stadium last week, McCoy outlined to a gathering of about 170 people his vision for “driving Ireland’s recovery”.

It involves achieving average annual growth of 3 to 4 per cent in the economy by 2020, increasing employment levels to two million and boosting the contribution of the indigenous export sector from 15 per cent to 25 per cent.

Sounds great, but how do we get to that point in the face of yet more austerity budgets and crippling interest payments on our dizzying €123 billion national debt?

This is where it gets a bit fuzzy. Ibec’s document is long on ambition but short on specific detail as to how we meet these targets. McCoy told the audience last week that they were not forecasts.

In essence, McCoy says the recovery will be driven by our export sector, which, in turn, will stimulate domestic demand.

Exports grew by just under 5 per cent last year to a record level of €171 billion. Growth of about 3 per cent is forecast for this year. But domestic demand remains constrained. Retail sales are sluggish, telecoms companies are all paring back, CIE has reduced or cut various transport services, and pubs continue to close right across the State.

Even the GAA is having to slash ticket prices to put bums on seats. Breakfast roll man is long dead, killed by the collapse of the economy rather than a diet of artery-clogging bacon and sausages.

Against this gloomy backdrop, can the export sector really be expected to drive our recovery?

“Oh they will,” says McCoy with an air of confidence in his pleasant corner office on the third-floor of Confederation House on Lower Baggot Street. “What they do is that they drive on the growth. Domestic demand then follows. That’s why these documents, which you say are high on aspiration, are important.

“People have to have a confidence to believe that there is actually a dynamic in the economy.”

He’s right of course, yet the everyday reality of life in Ireland is quite glum and no amount of aspirational documents from the private sector will change that. McCoy was preaching to the converted in the Aviva.

The Tuam native counters that there are other reasons to be cheerful.

“There’s also been huge job creation in this economy since 2009. We’ve seen net destruction [in employment] because of the focus on everything that was happening in going down. It’s remarkable that the Irish unemployment rate [14.3 per cent], high and all as it is, isn’t higher. Look at Spain [24 per cent].

“The other piece is that emigration hasn’t been the escape valve. From the latest census, we now know that 50,000 people came back to Ireland . The population is still growing.”

McCoy says “confidence” will stimulate domestic demand, which is fine except that this is in short supply in Ireland at present, especially in working-class areas. How will it improve under yet more austerity and the need to rein in a €13 billion budget deficit?

“Sure but you’re looking at household disposable incomes of about €93 billion per annum. If we can get back into a growth phase, those kind of sums aren’t insurmountable at all, given the age dynamics of the population.

“It’s going to be incredibly painful . . . but we don’t have a choice about this. We have to grow our way around it.”

McCoy also believes that the debate about burning bondholders is something of a waste of time.

“You can spend and awful lot of your time looking for debt forgiveness at the top of the line. Thankfully, the people who drive the bottom of the line are up and about their business and trying to find new markets. That’s ultimately how you’re going to get out of your debt problem.”

In some respects, McCoy is on the same page as Sinn Féin, Joe Higgins and Richard Boyd-Barrett, a motley crew of left wingers who argue for stimulus rather than austerity.

“Yeah, we have the same aspiration. I don’t doubt their bona fides but they’re obsessed on the top of the line, looking for the debt forgiveness piece. That’s not going to come in my view. It would make our life a lot easier but at what price? More fundamentally, we should get out and about actually driving growth in the economy and taking action trying to get people back to work.

“Debt forgiveness, in and of itself, is not going to get a single person back to work. Activity is going to get people back into work.”

Is his view on debt forgiveness framed by his meetings with the Troika?

“It’s my observation of looking at the incentive for the European Central Bank. We made these commitments. We talk about moral hazard at individual level, but there’s moral hazard at European level as well. There are much bigger countries that might be looking for some of the same solutions.

“The consequences for us of them getting this kind of debt forgiveness would be enormous and it goes to the heart of the new fiscal treaty rules.

“These rules are about ensuring that no other member of the [euro] club can bring the same level of distress that we’ve just gone through. So it’s in our best interests that everybody is playing by the rules.”

Not surprisingly, McCoy will be banging the drum for a “yes” vote in the Fiscal Treaty referendum debate.

“The tragedy of the past couple of years is that Europe has got distracted while the world economy has been booming. We’ve shot ourselves in the foot by causing uncertainty about our currency instead of dealing with it quickly,” he says.

McCoy joined Ibec as director of policy in 2005, having been a senior economist with the ESRI. He took over the managerial reins in 2009, when the Celtic Tiger party was over.

Three years on and he is still trying to redefine its role in Irish society after more than two decades as a central player in social partnership – a discourse with government, trade unions and the voluntary sector that shaped our spectacular boom and bust.

Is social partnership dead?

“Yes, with a capital ‘S’ and a capital ‘P’, it’s dead,” he says.

“And it’s not coming back anytime soon. But societies have to have a social partnership of some form – in dispute resolution and so on. It might just not be one mediated through a centralised wage-bargaining model.”

Was social partnership part of the problem that has led us to this pass?

“I think it certainly became part of the problem. I don’t think anybody who was involved in it could not acknowledge it had a role to play in the loss of competitiveness.”

This begs the question as to why Ibec, as the employer’s representative, didn’t do something about it sooner. McCoy calmly rebuts.

“We did. Right throughout the 2000s, we were pushing the competitiveness agenda. But the market was clearing at rates that were much higher than the centralised wage bargaining. The other thing that needs to be recognised was that the wage rises were voluntary. The only place they weren’t voluntary was in the public sector.”

McCoy set himself two priorities on taking over the top job at Ibec. “One was to get Lisbon II [treaty] through and the other was to get out of social partnership in the “smoothest way possible”.

Should Ibec have pulled the plug sooner than it did?

“Perhaps, but one of the things that people forget is that when the last deal was signed, inflation was 6.5 per cent. It was a commodity bubble.”

He also rejects the suggestion by some that Ibec was in the pockets of the banks, which effectively bought its silence during the bubble years.

“Nonsense,” he says. “It’s factually incorrect. In the order of 2.5 per cent of Ibec subs came from that quarter. That’s been pretty much consistent. That’s financial services more widely; Ibec represents the IFSC companies and so on as well.”

Is he embarrassed about the shabby behaviour of his bank members during the boom and the reckless lending that has resulted in the Irish exchequer having to bail them out?

“Personally, no, but I am frustrated by the fact that the checks and balances weren’t there and that the crisis that came proved to be such a hard landing.

“But I don’t believe the business model broke in Ireland. The vast bulk of businesses were going about their work, being productive, capturing market share and they got caught up in the noise around it.”

How did McCoy, as a respected economist, not spot the bubble?

“Looking back, it was certainly reckless [lending] but it wasn’t observed at the time how reckless it was. What we all failed to spot was how Irish banks were using international wholesale markets to finance their activities.”

McCoy is also of the view that the banks are lending to businesses right now.

“The difficulty is that they are not lending enough. What we want is lending to create new stuff rather than lending to service previous debts. Thats really the veil of ignorance we have.”

Sticking with the banks, many wonder why Gary McGann, a non-executive director of Anglo Irish Bank at the time of its crash in late 2008, and Fergus Murphy, the head of EBS, a failed building society that received a €2.5 billion bailout from the State and has been folded into AIB, are both on the board of Ibec.

How is this credible, given the role the banks have played in creating our economic mess?

McGann has been an Ibec board member since 2006. He resigned from the Anglo board in January 2008 when it was nationalised. This led to him resigning as chairman of the Dublin Airport Authority the following month.

Yet he remains on the board of Ibec.

“Ibec is about corporate membership, and those CEOs are CEOs of corporations who are members of Ibec. In both of those cases, I have the utmost respect for both of those individuals.

“These are people who are capable of bringing broad swathes of experience and acumen, and that’s the reason they were on these boards to start with.”

“Let’s not scapegoat individuals who are creating wealth and creating value in a society and bringing their expertise from the international stage.”

Taxpayers might beg to differ.

Name:Danny McCoy

Job:Director general, Ibec

Family:Married with four children

Lives:Templeogue

Hobbies:Avid reader of modern British history and "a little jogging".

Something we might expect:"I enjoy economics and current affairs."

Something that might surprise:He's an accomplished juggler.