Mr. Sebastian Barnes:

The Deputy makes very good points. The council has included a risk matrix in its fiscal assessment report. From memory, we gave a high relative likelihood for the type of scenario the Deputy outlines. We definitely agree on the substance. Putting on my OECD hat very briefly, this is the fifth year in a row in which the global growth rate has slowed.

Organisations such as the OECD and the IMF consistently revise down their forecasts for global growth which is a big source of concern for us. The centre of this is a collapse in world trade. World trade growth has been very slow since the crisis - slower than past relationships would suggest - and that situation has got worse during the course of the last year. That is a great source of concern. Times where trade growth has been this weak have typically been associated with recession or recession like conditions in the global economy. We are very concerned about that. The mechanisms the Deputy referred to through which this might happen are very familiar to people in Ireland and include, in essence, the accumulation of debt in China and other emerging economies. We are about to go through an interesting couple of days. The ECB met today and the Fed meets next week. That may well be the trigger of some of these things, but it may not and there may be other triggers. There is definitely good reason to be concerned. Partly because it is so concentrated on very specific activities, Ireland can prosper even though things around it are not so good, but we should not be too complacent about that. If there were a big global economic crisis, particularly one that went through into financial markets, it would clearly have very big consequences for everyone. Everyone would be affected to some degree.

In terms of the forecasts by the Department of Finance, and this covers all OECD forecasts, we have a central scenario that assumes these things will not happen within the forecast period. It is very hard to predict when a crisis is going to happen and exactly what the triggers would be. The Department of Finance refers to a downside risk in its forecast material and that is surely the right thing to do. I have not looked at the budget documents closely enough to say whether the Department has got the balance right but it is right that it has set out that there is a downside risk. What this points to is not really a forecasting issue, but is rather a policy one. One of the reasons we are arguing for caution, particularly on the 2015 decision, is that we have had a whole series of positive shocks for Ireland, which has been very helpful, but there is no guarantee that they will carry on being positive. If one looks back at the typical scale of forecast shocks, one can quite easily see things that make life look a lot more difficult and less rosy than it does.