Taoiseach Enda Kenny has told the Oireachtas banking inquiry that Fianna Fáil-led governments caused the "lion's share of the damage" to the Irish economy.
The Taoiseach appeared before the inquiry today to outline Fine Gael's response to the crisis and strongly criticised the policies pursued by the Fianna Fáil-led government from 2002 to 2007.
He laid the blame squarely with homegrown mistakes much to the discomfort of some members of the committee.
He said that by 2007 an uncompetitive, bloated, over-borrowed and distorted Irish economy had been left at the mercy of subsequent international events, without the safeguards, institutions and mindset needed to survive and prosper as a small open economy inside the euro area.
Sinn Féin's Pearse Doherty said Fine Gael's 2007 election promises on cutting income tax would have further eroded the tax base.
Mr Kenny said they were based on the growth projections of the Department of Finance and the ESRI.
He said his party had never supported increases when they would impact on jobs and opportunities.
Mr Doherty said he was none the wiser on the answer to his question.
Fianna Fáil fought back with Michael McGrath accusing Fine Gael of voting against budgets because they wanted higher spending.
Mr Kenny said Fine Gael opposed the changes to financial regulation, the loss of competitiveness and public sector pay deals and the party voted against budgets but there was a lack of opportunity to properly scrutinise the process.
He said that for hundreds of thousands of lrish families, however, their dreams turned into a nightmare, as boom turned to bust and stability was replaced by policy recklessness and regulatory failures
The Taoiseach said the average annual growth in public spending, at just under 10% per year, was roughly twice the underlying potential growth rate of the economy.
The disastrous impact on the underlying health of the public finances was camouflaged by the temporary and unsustainable surge in transaction tax receipts from the credit fuelled construction and property bubbles, he said.
Mr Kenny said when Fine Gael left government in 1997, the economy's rapid growth was underpinned by sound public finances, strong productivity, employment growth and a vibrant export-oriented industrial base and unemployment had dropped below 9%.
The ability of the Oireachtas to hold Government to account on the economy during this period was hampered by the bypassing of elected representatives as a result of the dominance of social partnership as the forum for influencing, behind closed doors, government choices in all key policy areas, he said.
Mr Kenny gave evidence and answered questions on his time as leader of Fine Gael between 2002 and 2007.
Minister for Jobs, Enterprise and Innovation Richard Bruton told the inquiry that Fine Gael was consistently against the bad policy decisions made on the economy when in opposition.
Spending was way out of line and Fine Gael warned the then government consistently about an over-reliance on the construction sector as well as warning about the dangers of inflation.
The property boom "papered over" the vulnerabilities building up in the economy, he said.
Minister for Jobs, Enterprise & Innovation Richard Bruton's opening statement to banking inquiry https://t.co/t72855wY4E
— RTÉ News (@rtenews) July 23, 2015
However, many will argue that today's session was aimed at fireproofing the investigation from claims that its real focus is targeting Fianna Fáil's role in the crash.
Mr Doherty asked Mr Kenny if Fine Gael was pursuing policies that would erode the tax base. He cited the party's 2007 election manifesto, which promised to cut income taxes for all and maintain capital gains tax at then levels.
Mr Kenny said their tax policies were consistent with growth forecasts of 4% and the projections from the Department of Finance and ESRI. He also said Fine Gael and Labour put together a joint platform at that time.
Mr Kenny was asked about a call in November 2008 to then Anglo CFO Matt Moran. He said this was requested by Mr Moran's brother, a native of Castlebar. This took place after the guarantee and before recapitalisation.
He said he would never discuss banking business with bankers and rejected assertions in a newspaper that he had done so.
He visited all the banks around that time including Anglo to discuss the state of the economy. He was told by Anglo that it had an outstanding model and would emerge stronger.
He said appointing Central Bank governors from the Central Bank was a serious mistake, which the Government had changed.
Fine Gael's Eoghan Murphy asked why Fine Gael had supported the bank guarantee when Labour had voted against it.
Mr Kenny said they accepted that a functioning banking system was the lifeblood of the community.
He said when they took over in 2011, they were told Ireland was very close to the precipice and the situation could have been like that of Greece recently.
Mr Doherty asked the Taoiseach if it was true that it was Fine Gael's intention to increase expenditure by €17bn from 2007 to 2012.
Mr Kenny tried to avoid giving a direct response stating: "I made this point before. What we pointed out here in our analysis of the economy is that we had a gross wastage of money, you had systems that were neither scrutinised nor analysed."
He did, however, state that the party's projections were "based on ESRI and the Department of Finance, but we knew that you could not achieve them unless the economy was sorted out".
Mr Doherty reiterated "but you still planned to increase spending by €17 billion? Fine Gael was advocating a spend of twice what growth was - do you accept that is what you were planning?"
The Taoiseach replied " I accept the programme for the manifesto. But I have already said to you. Fine Gael philosophy was about cutting costs and running business more efficiently.
"We had proposed a new network telecoms so that people could do their business in any part of the country and serious powers for regulators to reduce costs."
He added that the party had a very different projection to the Fianna Fáil model.
"The Fine Gael model was vastly different from what Fianna Fáil was proposing. Your comment that it was the same as Fianna Fáil is not right. We had pointed out the dangers. and that was not anyway in what the government of the day was at," he said.
Fine Gael TD Kieran O'Donnell posed the question to Mr Kenny of what he may have done differently if he had been appointed leader of the country in 2007?
"We would have implemented the propositions Fine Gael had put forward. The warning signs were signalled by Fine Gael from 2002 to 2007 but people made their choice in 2007.
"Despite the fact that people knew about cracks in the Irish economy they made their choice and gave the government of the day the majority.
"Clearly we have learned lessons since then. If Fine Gael had been elected in 2007 we would have tried to rectify the problems", he said.
Mr O'Donnell also asked Mr Bruton what different approach would a Fine Gael government would have taken in terms of putting a bank guarantee in place.
Mr Bruton replied: "Going back to 2002 we were critical of the regulatory system in place. That was sadly proven right.
"So we were right to call for a detailed review. When it came back through subsequent years, we raised that issue that there hadn't been proper stress test model.
"Obviously when the bank guarantee started, we were at a point where you feared a run on the banks, you needed to protect depositors but we raised all the right questions, like the separation of good and bad banks.
"We also held the view that there should not be more recapitalisation of Anglo and it should be wound down in an orderly fashion at a time when we were being told it should be kept open.
"I think based on the information made to us, they were sensible policy decisions to take up.
"I think we have a very credible record in how we handled this. No one has perfect foresight. This was an appalling disaster that no one predicted in its scale. But the scrutiny we applied was the right one," he said.
With the final question put to the Taoiseach about what assurance could be given to the public regarding measures that have been brought in to ensure the banking crisis will not happen again, it was interrupted by Labour TD Ciaran Lynch who stated that was for Minister for Finance Michael Noonan to address, when he comes before the committee.
