Mr. Paul Gallagher:

Firstly, I think the Merrill Lynch report, which you have seen, made it clear to everybody that there was the exposure of the sovereign. So that was well known. Secondly, the Government was in the position ... it had to make a decision on the basis of the information that was available and the advice was "You can't postpone this decision." And, as I say, the Taoiseach repeatedly asked "Is it possible to defer this - not to make a decision?", and was told "No." But it's not just the guarantee. Anything that I've read subsequently ... and, indeed, the whole structures that have now been introduced for bank resolution are to deal with the fact that even those countries that didn't give a guarantee, because they ultimately had to save their banks and put the money in, the whole banking crisis is regarded as a strain on the sovereign.

So, even if you haven't given a guarantee, if you have a banking crisis, the markets know you must solve that because I may be wrong in this and the committee will know better but I'm not aware of any country that allowed, in this period, a systemic bank to fail and, therefore, so far as the markets are concerned, you're behind your banks. If your banks are in trouble - that's what happened in Spain - that impinges on the sovereign and then the cost of borrowing goes up. So unfortunately, you're presented with a difficulty that the banks are in a mess. It has to be addressed and ultimately the cost to the sovereign is unavoidable.