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Lars Christensen is Chief Analyst and Head of Cross Asset Strategy and Emerging Markets Research in Danske Markets Screengrab via YouTube

VIDEO: 'Austerity has not failed in Ireland but the ECB must do more'

The chief analyst at Danske Bank, which owns National Irish Bank, tells that the European Central Bank must consider quantitative easing to encourage more growth in Ireland and the eurozone.

ONE OF THE few people who predicted the Icelandic financial and economic crisis has insisted that austerity is working in Ireland but criticised the European Central Bank for not doing more to address the lack of growth in the eurozone.

Lars Christensen, the chief market analyst at Danske Bank – which owns National Irish Bank – told that the government’s implementation of fiscal austerity is necessary to balance the books but called for more quantitative easing in the eurozone.

“The ECB needs to deliver in terms of providing some stability in the outlook for GDP and for growth. Rather than debating whether austerity is right or wrong, we should be debating that we need to have more monetary easing,” Christensen said.

“So we should continue down the road of austerity if that means balancing the budgets over the long run. But that would be tremendously much easier if we had growth in the economy.”

Christensen said that ECB’s decision to effectively create over €500 billion in cash and lend it to some 800 banks last February in what is called a long-term refinancing operation (LTRO) had eased the crisis in the eurozone “but we’re still very close to the edge”.


He called for a more coherent strategy from the ECB because “the markets lose track of where the ECB is”.

“I think fundamentally Europe needs much more quantitative easing but I also think it should be done within a very, very clear rule framework and it should not be about bailing out countries or bailing out banks but ensuring that the European economies do not go into deflationary downward spirals,” he said.

This week, Christensen gave a presentation to clients of National Irish Bank at Dublin’s Convention Centre. He was the co-author of the Geyser crisis paper in 2006 which forecasted the Icelandic financial crisis.

Drawing comparisons with the situation in Irish banks, Christensen said that the sheer size of government’s bailout in September 2008 coupled with a lack of a co-ordinated response across Europe contributed to Ireland’s problems.

“We had a competition to guarantee the most and that had some very unfortunate ramifications for the banking sector across Europe that clearly escalated the crisis. So I think that is clearly the greatest mistake,” he said.


Christensen also said that personal insolvency legislation was important in Ireland but that there was a need to do it right rather than “in a panic”.

He added: “If you have households or if you have companies that are insolvent it should be acknowledged. If that means that there will be losses to the banks, well, then that’s just too bad.”

Watch the full interview with Lars Christensen in which he talks more about Ireland’s financial crisis, the Fiscal Compact referendum and whether or not the country will need a second bailout:

Deja vu: ECB gives banks new money – and banks save it in the ECB

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