Published: Friday, 11th June, 2010 3:43pm

Taoiseach defends his Government on banking crisis

Brian Cowen has stoutly defended his Government in the wake of two reports on the banking crisis, which contain damning criticism of both the Taoiseach in his former role as finance minister and of the previous Fianna Fáil-led administration.

Accepting that with hindsight he could have done more to dampen the property boom, the Taoiseach, however, insisted that the reports also "strongly vindicate the approach taken by this Government in dealing with the banking crisis"

The Taoiseach argued that the current Government had the capacity and the determination to lead the country out of the current difficulties.

His comments come after Fine Gael tabled a Dáil motion of no confidence in the Taoiseach - a move which was met by a Government motion of confidence.

The motion of no confidence will be debated on Tuesday next.

Mr Kenny decided on the move after reading the reports on the banking crisis, which he says provide compelling evidence that Mr Cowen had been "misleading the public" with regard to his role as minister for finance in the lead-up to the economic and banking crisis.

However, the Tánaiste Mary Coughlan said yesterday afternoon that a motion of confidence in Mr Cowen will be debated in the Dáil on Tuesday following Mr Kenny's motion of no confidence.

Speaking in the Dáil yesterday Deputy Kenny said he put down the motion because he said the two reports laid the blame for the financial collapse at the door of Mr Cowen, who was then finance minister.

Findings by former International Monetary Fund officials Klaus Regling and Max Watson in one of the reports published on Wednesday delivered a major blow to the Taoiseach.

The second report, by Central Bank Governor Patrick Honohan, also blamed reckless banking chiefs and the financial regulator for being afraid to 'spoil the party'.

Mr Cowen said he took full responsibility for his role as former finance minister in the run-up to the crisis and accepted that he didn't take the right actions to prevent it.

But the Taoiseach refused to shoulder all the blame and insisted many mistakes made were based on fundamentally flawed projections from the Central Bank, the International Monetary Fund (IMF) and the OECD.

And in a lengthy statement, he pointed out that the reports had demolished many myths surrounding the banking crisis. They confirmed, he said, the need for an extensive bank guarantee and that the failure of Anglo Irish Bank would have been disastrous for the economy.

The two reports will kick-start an official inquiry into the banking crisis to be set up by the end of the month.

Opposition parties are also expected to call for the terms of reference of the proposed banking inquiry to be widened to include the Government's fiscal policy leading up to the crisis and the bank guarantee scheme of September 2008.

Yesterday Labour party leader Eamon Gilmore said the "irresponsible action" of Fianna Fáil had resulted in "people suffering in a very real way".

He told RTÉ's Morning Ireland the reports made "serious criticism of Government and of Mr Cowen in particular for his handling of the economy in the period leading up to the bank crisis".

"What needs to change first of all is the Government..we need a fresh start in this country."

He said this would be a watershed moment for Fianna Fáil backbenchers who were not in Cabinet at the time covered by the reports, saying they couldn't go in and vote confidence in Mr Cowen and then go back to their constituencies and distance themselves from that decision.

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