Professor Philip Lane:

No. It goes back to ELA and euro system liquidity and so on. One view of liquidity is that where a bank has a one-week problem, liquidity has to be provided for a week, but when a central banking system has made many long-term property loans, essentially a liquidity crisis could last for years. If one tries to get the banks to sell off those loans quickly, there will be a big decline in asset prices and, therefore, it would be self-defeating, turning a big problem into a massive problem. When there is a property-based banking crisis, liquidity needs to be extended for years, which is what has happened, and NAMA has been part of that. NAMA has the NAMA bonds, has provided liquidity to the system and has been gradually selling its portfolio. Ireland has been able to make a case that liquidity support is a years-long issue, not a months-long issue. It must be remembered that in the bailout discussions in November 2010, some of the troika were essentially arguing for a pretty quick disposal of assets by the banks, and over the next few months the Irish authorities were able to convince them that this would be self-defeating. My point there was that dealing with the liquidity problem, as it turned out, was going to be a process that took years. Liquidity was needed for years and years. It was not something that would take just a few months.