Mr. Colm McCarthy:

One should not forget a lot of public expenditure in the United States is through state and municipal budgets. The amount transferred through the federal budget in the United States is less than is typically transferred in this part of the world. If we had separate statistics for the various counties of Ireland, we would discover Dublin has a very large budget surplus and that most of the rural counties, especially in the west, have large deficits. Technically, it is feasible to have a durable monetary union including geographical regions with very different levels of economic development. Whether it is politically a good idea is another story. There are examples in history. The Soviet Union was an example, as was the rouble zone. They can have high or low levels of transfers. The technical problem with the design of the eurozone is that it is not a banking union.

Let me give the Deputy another graphic example. The state of California nearly went bust three or four years ago. It ended up paying people with bits of paper, IOUs, because the budget deficit of the state was enormous. However, nobody started withdrawing bank deposits from bank branches in California because there was no link between the solvency of banks in the state and the public finances of the state. In other words, the United States is a monetary union with full banking union. What we have seen in Greece, again in the past few weeks, has illuminated some of the original design flaws in the eurozone. People started hefting money out of Greek banks for fear of redenomination risk and what had happened in Cyprus where bank accounts had been frozen. What is now happening in Greece is extraordinary. People cannot pay bills to Greek people across the road. It is not that they cannot transfer the money out of the country into dollars or to Switzerland, for example. A businessman in Athens who owes money to a firm in Thessaloníki cannot pay that firm even if he has the cash. All of the newspapers have been on about pensioners trying to withdraw €50 per day from the ATM. The SME sector is typically cash positive in the banking system, contrary to what one would expect based on reading the newspapers. The transactions balances are immobilised. That does not suggest a monetary union. It cannot happen in the United States; there would be no chance of it happening.