Mr. Colm McCarthy:

Professor Barry would not accuse me of that.

Deputy Rabbitte raised a few issues about the original design of the eurozone. Banking union is critical. The critical flaw in the original design of the eurozone was the absence of banking union and that remains. Some people are writing about banking union in the past tense as if it was done and dusted. Until there is a Europe-wide system of bank resolution, probably some system of insurance for bank liabilities and a non-discretionary universally available lender of last resort function for the central bank, then we do not have a meaningful banking union and we do not have those things.

It is extraordinary that people can talk about banking union in the past tense as if it had already been achieved. We witnessed in recent weeks that the gunboat that was sent down the Aegean was not one that floats. It was the closure of the banks by the European Central Bank which decided not to act as a lender of last resort to the Greek banking system. That was the design flaw that really mattered.

A definition of a monetary union should be one in which the address of the headquarters of the bank does not matter and has no consequences for the solvency of that bank. I will give an example. In the United States, Delaware specialises in company secretarial business. Many people there do company registrations and all that. People think there are tax deals in Delaware that are better. That is not really true. However, many US corporations are headquartered in Delaware, including many banks. I believe that Lehman Brothers was headquartered in Delaware. Somebody noted that if Delaware had been a member of the eurozone rather than of the United States of America, when all these banks went bust the Governor of Delaware would have been asked to bail them out using the tax revenue of Delaware to do so. However, he was not asked to do so because the United States is a monetary union, there is no question about it.

The United States also has a no-bailout clause, which has applied to several cities in the US. Detroit went bust recently. The people who bought Detroit bonds are getting 50 cents on the dollar. That is after the substantial fiscal transfers built into the US system, so the US has a banking union and Europe still does not. That remains the big design flaw. It is the resolution of bust banks that is critical in all this.

Banks go bust in the United States every week. Every Friday officials from the Federal Reserve arrive to a bank and fire all the management, and the bank opens on Monday with the Federal Deposit Insurance Corporation taking care of the depositors. That is not how it worked in Greece because we do not really have a monetary union, just a common currency area.

The Deputy also asked the important question of what might have been done last weekend. What might have been done last weekend could have been done in 2010, namely to show the Greek political system some, even distant, sight of the winning post. One has to show the horse that there are just two furlongs to go and one might get there. That is why debt has to be written down. It is also why we need to avoid frontloading the austerity too much. It is not possible to wave a magic wand and say that there is no need to balance the budget ever. That is silly. However, one must be very careful about the phasing and timing of the fiscal consolidation measures, something that the IMF, in fairness to it, was always careful about in the programme here, as I am sure the Deputy is aware. However, sadly those things were not done and I am fearful that we will end up with another botched deal for Greece.