Professor John McHale:

The fewer margins there are to adjust, the more difficult it will be. The more margins there are to adjust, so that one can spread the adjustment out and be more targeted in minimising the damage, the less damaging the adjustments will be.

With regard to the statement from the three European finance Ministers, I can give a personal rather than a council view, because this is not something we have had an opportunity to discuss at length. I was never optimistic that the taking of direct stakes in Irish banks by the European Stability Mechanism, ESM, was going to yield large benefits. Part of that was the result of scepticism: if the ESM did take stakes in the Irish banks, which was a big "if", it was unlikely to pay that much more than the market value of the banks. It could pay somewhat more. The banks might be more valuable in the hands of the ESM, as a different owner, than in the hands of the State, although that could be argued, but the gain was likely to be relatively small.

To the extent that the EMS funds were used to pay down gross debt, they could reduce Ireland's gross debt. However, one of the things we emphasise on the council - which will be the focus of a forthcoming paper from the council and will be emphasised in our next report - is the importance of looking at the broader State balance sheet and not just at gross debt. When one sells assets one reduces one's assets. One may be able to reduce one's liabilities as well, but it is the net effect and how the financial standing of the State is changed that really matters. The statement from the three finance Ministers makes it less likely that much progress will be made there, at least in the near term. I do not think much was likely to come from the arrangement in any event so I am not sure the statement contains any new bad news to be worried about. The reaction in bond yields was minor; they ticked up a little as a result of the announcement. I have not had a chance to check them today.

In fact, the action is likely to be elsewhere. My sense of the issue, which is not as exciting as the alternative, is that a restructuring of the promissory note and emergency lending assistance, ELA, type of arrangements, might do more to reduce the real burden of the debt. It is difficult to explain to the public why those benefits are accruing, but the outcome in terms of the current discounted value of the debt could be quite significant.