Professor Patrick Honohan:

I will make two points on that. First, as we said, it might be €40 billion that was taken over. The other losses to the Exchequer - the revenue losses and the other costs - were much larger than that so even if they had found a way, on 29 September, of saying, "€40 billion - magic it away to zero" they would still have all those other losses of tax revenue. The collapse of the property bubble created costs to the State which were much larger. That does not mean the €40 billion was not important. It was.

Second, the hindsight scenario I outlined was that they would have decided they were not going to pay for this, that it was too big and certainly not worth €35 billion or €40 billion. That would have had its costs as well because we know how disruptive it is to proceed to a liquidation and eventually to a bail in of depositors and bondholders, as we have seen in Cyprus. We know it is disruptive. It should have been done in that hindsight scenario but there would have been additional costs to society. We might have got the €40 billion down to €30 billion when one thing or another is taken together, or perhaps more - I do not know - but the other costs would have made the austerity that was needed almost as severe. That is the big shocker, when one realises that there were other tax revenue losses and other expenditure burdens.