Mr. Colm McCarthy:

Very few have been taken back since, but I agree that some have been taken back. However, instead of being put on the dole, many were included in the pensions system. Therefore, the Greek pensions system provides for a lot of the income distribution which in other European countries is provided for by routine social expenditure. These cross-national comparisons of public expenditure ratios are very treacherous, unless one knows the details of what each country does.

On the broader question, one must be clear on what was the objective in Ireland when the so-called bailout began at the end of 2010. The Government was two years into a fiscal consolidation programme at the time. That programme started in July 2008 before the bank bust. The then Government made a series of expenditure reductions in the middle of the year. There was an emergency budget in October 2008, another budget in the spring of 2009, followed by another in the autumn of that year. During all this time the Government was able to borrow. We were not driven out of the bond markets because our initial public debt was very low. We also had a bunch of international equities held in the National Pensions Reserve Fund which was not a pension fund but rather a kind of hedge fund. It included short bonds and long equities, which sounds like a hedge fund to me. When push came to shove, these assets could be flogged, which we did and the markets knew that we could flog them. The full extent of the losses in the banking system was not realised. It came to be realised a little more through 2010. Therefore, the objective position on the public finances was completely different.

The Greeks were bust in March or April 2010 the Greek public finances were shot, whereas ours were not. When we eventually had to have a programme, it was in the context of another run on the banks here. People will remember the famous radio interview given by the Governor of the Central Bank, which, it was believed, impelled the Government into a rescue package. He was conscious that there was a run on the banks and that it would accelerate and he believed there was nothing else he could have done. However, the circumstances were completely different. As Professor Barry outlined, the negative impact, the deflationary impact of the tax increases and expenditure cuts on aggregate demand here, was much less than in Greece because of the openness of the economy and the broader export base. We were also lucky that our big trading partners were Britain and the United States which were not doing great, but they were doing less badly than many continental European countries. Therefore, we had a little luck, which is not to say our programme had been perfectly designed or executed. The IMF will also stress that the Irish programme was owned by the Irish authorities, that the Irish authorities had embarked on a medium-term programme which involved austerity and cuts in spending and increases in taxes. However, they embarked on it and had authored it. The programme in Greece was imposed and there was little or no ownership of it there.

The IMF is very big on the question of ownership; if there has to be a difficult macroeconomic adjustment, one must show people the exit and persuade them that it will only last for a few years, that everything necessary will be done, including haircuts for creditors, that the people will have a reasonable chance of getting out inside three years and that those concerned can design the programme. Both rules were broken in Greece.