Professor John McHale:

As the Deputy says, getting the deficit down is central to putting us on a more stable path over time. At this stage, being realistic, having part of the banking-related debt written off is highly unlikely. It will not be a source of significant debt relief. On the other hand, the State has significant banking-related assets on the balance sheet which are estimated to be worth €18.5 billion. If we look at Allied Irish Banks alone, the estimate is that these assets are worth €15.4 billion, less than the €20.7 billion put in but still a significant sum. Selling these assets is a way to get the debt down, but I would not exaggerate the benefit of it from an overall balance sheet perspective because these are assets on the balance sheet. One can sell assets to reduce liabilities if the goal is to bring the debt down because there are risks associated with having high levels of sovereign debt. Even if one has assets on the other side of the balance sheet, however, it can be hard to liquidate them quickly in a crisis. As such, it can make sense from a risk management perspective to deleverage in the sense of bringing down the debt by selling assets. On other ways to bring down the debt-to-GDP ratio, faster growth certainly will bring it down, as will a larger budget surplus or a smaller deficit. The possibility of selling assets, as I have outlined, is another possibility.