Dr FitzGerald: Fine Gael may be overplaying its hand

FORMER Fine Gael taoiseach Garret FitzGerald made a stunning intervention in the Nama debate yesterday, warning that a Dáil rejection of either the government's banking or budgetary proposals "could throw our state into the hands of the IMF [International Monetary Fund]".

FitzGerald said that there could safely be a change of government after the budget and the Nama legislation if the Dáil or the electorate so decided. "But in my view it would not be helpful for that to happen within the crucial three months ahead."

In an implicit criticism of his own party, FitzGerald said that "the present populist anti-Nama mood … could all too easily lead to the opposition overplaying its hand and there are signs of that happening".

Writing in his Irish Times column, the highly respected former taoiseach said he was moved to comment on Nama by his "concern about maintaining our recently improved credibility in international financial markets".

He said he was "concerned" the government might fail to get through the Oireachtas by early December either or both of its budgetary proposals and measures to deal with the banking crisis. "This could undermine our capacity to borrow the huge sums we need to keep going."

FitzGerald said the opposition parties should be the first to recognise that it would not be helpful to have a change of government "within the crucial three months ahead", adding: "No worse fate could befall an opposition than to precipitate themselves into government by defeating measures, the rejection of which could throw our state into the hands of the IMF."

Speaking to the Sunday Tribune yesterday, FitzGerald said he did not know if Nama was the best option but to abandon it now could "destabilise things".

In his piece yesterday, FitzGerald also commented on last week's letter by 46 economists critical of Nama , noting "the significant absence of the names of some highly qualified members of that profession".

He also said the economists had failed to distinguish between subordinated and senior debt when calling for bondholders to also take a hit under Nama. FitzGerald warned that "an attempt to resile from our commitment in respect of [senior debt] could prejudice our capacity to continue to borrow from international markets. Who would want to lend any more to us if we repudiated the senior bonds of our banks?"

He added that "a similar apparent failure" to make this distinction was "a worrying feature" of last weekend's Fine Gael statements on Nama, although he said this "confusion was clarified" by Richard Bruton and called on the economists to do likewise.

FitzGerald did not spare the government from criticism, saying it had "destroyed our competitiveness through an irresponsible promotion of public spending", as well as aggravating the housing bubble. It might have been better if there had been a change in government when the economic crisis first emerged as a new government "might have been better able to mobilise support for the very tough measures needed" but this had not happened.

Finance minsiter Brian Lenihan said yesterday he agreed with Dr FitzGerald's thesis that the next 100 days were "very important for the future well being of the country".

A Fine Gael spokesman said his party fully agreed responsible government was required. "That is why Fine Gael backed the bank guarantee scheme last September; why it published an alternative banking solution in April which the government has refused to engage on; and why it continues to highlight the genuine concerns we have about the Nama gamble."