Mr. Sebastian Barnes:

I will answer briefly Deputy Arthur Spring’s questions about the situation in Europe. It is not an issue we have discussed explicitly at great length, but it obviously provides the context for all our discussions. The Deputy articulated very well some of the challenges being faced in Europe. In some ways, this country has an advantage because it is at the sharp end of the euro crisis and naturally people in this country understand it better than, for example, people in Germany who are experiencing something very different and facing a very different set of issues.

What has happened in Europe in recent months has been significant, in that three things that have fallen into place are important. The first is that the ESM has finally been approved and the detail is being worked out. I understand it will become operational within a few weeks. Second, the European Central Bank has launched an outright monetary transactions plan programme, which is a significant step forward and clarifies its role in the crisis. Third, we have the Commissions’s proposals banking union and a political commitment to do something about it, although exactly what remains unclear. These three things, taken together, potentially are very powerful and change the game somewhat in Europe, in particular by breaking the sovereign-banking sector link that people in this country understand very well. However, they are significant, as what they all do is put the ball firmly in the politicians’ court, in respect of countries such as Spain and Italy and also countries such as Germany that would have to approve some of these programmes, implicitly or explicitly. Unfortunately, there are still lots of risks. We have the instruments, but there is a deep question about whether they will be used and how the politics of it will work. I hope that answers some of the Deputy’s questions.

The other point the Deputy made which is very important was on growth. Achieving stability is a necessary condition, but it is not sufficient for growth. Once stability is achieved because politicians do what they need to do in the right countries, there will have to be more thought given to the need for growth. If it works, potentially, it will create more fiscal space. If one compares the United States to the euro area, objectively it is in a much worse fiscal position but because it has a large federal government debt and a single central bank and is in a different position from that of European countries. There may be more to do on the monetary policy side.

A point that is worth emphasising is that many of the growth problems in Europe are structural. That may be less so in Ireland. It is a credit issue. In some ways, one has an economy that is flexible and dynamic, but if one looks at a country such as Italy, it is in trouble, but it did not have the kind of boom period that we had in this country or Spain. The Italian economy has not grown for ten years and its market share has been showing a downward trend. That is not a demand management problem, rather it is a structural problem. What Europe needs is ambitious reforms to deal with the structural problems. Fortunately, in Spain and Italy things have moved on quite a lot relative to the experience of the past decade, but in all countries there is a huge need to make the European economy competitive again on a global scale. I do not think the measures have been put in place will do that.