Membership of the euro did not lead to Ireland’s economic crash, according to Central Bank governor Patrick Honohan, though it did add some fuel to the fire in the preceding years.
In a speech at the Institute for New Economic Thinking’s annual conference in Paris, Mr Honohan said the euro gave Ireland low interest rates while also removing the exchange risk on cross-border borrowing by Irish banks.
However he pointed out that other countries outside of the currency union, such as Iceland and Latvia, suffered similar banking crises to Ireland.
There was also nothing within the euro's rules that stopped regulators and Governments from moderating the kind of boom Ireland experienced, he said.
Mr Honohan said it was the case that unrestrained and reckless behaviour by Irish banks destabilised the Irish economy and that they were first in line for taking the blame.
However he also accepted that lax supervision played a part, saying that the rapid expansion of lending in Ireland should have rung alarm bells within the relevant regulatory authorities.
But he rejected the claim that no banker had been punished for what had happened, saying that some have already been found guilty of a criminal offence while other cases were already being progressed.
Mr Honohan also called for Irish law to be strengthened in order to take reckless risk-taking by financial firms into account, as has been done in Britain.
As part of his speech the Central Bank governor went through a number of claims about the Irish financial crisis, pointing out what he considered to be a number of partial truths and myths.
Mr Honohan dismissed the notion that the bank guarantee was what led to the need for fiscal austerity, as there was already a need for a drastic cut in the Government’s day-to-day spending.
He also said that the eventual bailout was not the cause of Ireland’s economic collapse, as data from the time shows that the country was already heading for a recession before the deal was agreed.
Mr Honohan said it was not the case that Ireland would have benefitted more from an IMF-only bailout as this would have been to the detriment of the European Union’s central principles.
And he described as a myth the suggestion that other European countries leveraged the situation to force Ireland into changing its policies in a way that would damage the country’s economy.