Professor John McHale:

Just to mention another type of risk that is more of the policy side, one thing that certainly supported the fall in borrowing costs has been the European Central Bank's outright monetary transaction, OMT, programme even though it has never actually had to be put into effect. However, the fact it is there seems to have had a very positive effect in bringing down bond yields. Relatively recently, the German Constitutional Court has raised major concerns about that and there also have been statements from the German finance minister noting that since one requires a European Stability Mechanism, ESM, programme in order to qualify for OMT, any ESM programme would require unanimity among all countries. Again, this could raise doubts about whether OMT would be available when needed. Consequently, there always is a risk of setbacks and the sorts of developments that really have helped to underpin the fall in Irish borrowing costs could reverse themselves. However, I wish to stress I do not believe the fall in Irish borrowing costs is just because of these international developments. There has been a positive interaction between our demonstration of our capacity to make the fiscal adjustments, which often makes us eligible for these types of programmes.

Those two matters have interacted positively together which is why we certainly do not want to have back-sliding at the international policy level. Also, if we were to move away from that demonstration that we can make those adjustments, that could have a negative effect as well. We really need both continuing to work together to keep the low bond yields that we have at present.