A leading academic has warned that the financial sector has the capacity to strangle economies despite the fact that it produces nothing.

Professor Tony Fahey made his remarks at a conference in Dublin, which also heard criticism of European Central Bank president Mario Draghi for saying austerity measures will involve dismantling the welfare state.

Prof Fahey is Head of Social Policy at the School of Applied Social Science in UCD.

He told a Conference in Croke Park on the welfare state that after the Second World War, crushing national debts and austerity - much heavier than what we are experiencing today - failed to block European countries from growing their economies and welfare provision.

For example, France reduced its debt by permitting inflation to surge into the early 1950s and lowering its interest rates.

Uniquely, the United States also helped West Germany to write off half of its debt and to negotiate easy repayment terms on the remainder.

He criticized the EU for ruling out those approaches and said it is extraordinary that banks still have such an influence over economic decision-making, adding that when they acted responsibly they were productive but that now they produce nothing as they shunt money between one another.

Fr Seán Healy, Director of Social Justice Ireland - which is hosting the conference - criticised unelected bureaucrats like Mr Draghi for saying austerity will involve dismantling the welfare state.

Meanwhile, Anna Coote from London's New Economics Foundation, called for a phased introduction of shorter working hours for the better paid.

She said the Dutch have already done this with new entrants to the labour market adding that such a reform creates jobs, alleviates stress and illness among employees and increased productivity.