Mr. Conor O'Kelly:

I will talk about Greece and the other countries separately because there is a different rationale in each case. In the case of Greece, while its interest rate is low, I do not believe it is one we would want. The main reason its interest rate is low is that €130 billion in borrowings are subject to an interest rate moratorium. Therefore, Greece does not pay any interest at all on the majority of its debt. It will have to pay interest at the end when it repays. At present, in the context of its annual refinancing, it does not pay any interest at all. Its debt-GDP ratio is 170%. Obviously, the debt is official borrowing and debt, and the covenants in respect of all Greece's affairs are set by the troika. The Greek example is probably not one on which we should concentrate.

I have heard people say the interest rate per capitain Greece is lower than in Ireland. It is, but only because its GDP is about the equivalent of ours, even though it has a population twice the size and unfavourable demographics. It also has a very high unemployment rate. It does not have as productive an economy. It is, therefore, difficult to take one statistic in isolation. One could often get the wrong impression. The circumstances in Greece are mainly because it does not pay any interest on the majority of its debt currently.

The examples of Spain and Italy are much more relevant for us. The Chairman is correct to point out that their interest rates are a little lower than ours, on average, despite the fact that one would believe we were a better credit. Actually, the market does rate us as a better credit. Therefore, what is occurring is anomalous. The main reason concerns refinancing, the pace of refinancing and where that comes. As I said in my opening statement, Ireland really only benefited from the extraordinary low-interest-rate environment in 2015. That was the first 12-month period and in it we borrowed €13 billion, which is only about 6.5% of our total stock of debt of €200 billion. It is like moving the average, which is 3.4% on the €200 billion. Movement is only at a rate of 6% so it takes a while. It is like moving the Titanic; it will take a little while to move. The movement in Spain and Italy is a bit faster, for a couple of reasons, one being that they have much more of their financing of their debt in short-term bills and securities of less than one year. Ireland does not do that. Typically, it does not finance in the short area of the market. Why not? One of the main points that concern us, as a borrower - many things concern us - is the question of from whom one is borrowing one's money. The State is no different from any other borrower. It is a question of whom one is borrowing the money from. In our case, we borrow the money from overseas investors. Some 90% of investors in Irish debt come from overseas. We are extraordinarily dependent on international markets. In the cases of Spain and Italy, a huge amount of their borrowing comes from domestic savers, local savers. In Spain, savers have traditionally been bond investors or fixed-income investors, not equity investors. That is where most of the savings go.

Japan is a good example of a state with an extraordinarily high debt–GDP ratio. It is one of the highest in the world, yet people are not concerned about it because it could fund all its debt entirely from domestic savings. Therefore, with regard to the debt–GDP ratio, it matters from whom one is borrowing in terms of the risk profile. The rating agencies would look at a country like Ireland and say it is very dependent on international investors for its borrowing and, therefore, ought not to have too much refinancing risk in the early parts, over the next 12 months, etc.

The reality for Ireland is that we will be a little slower than those other countries to enjoy the benefits of the current low-interest-rate environment. There are significant chimneys, and there are some graphs that show that when the maturities are coming up, €45 billion in debt will mature in the three years from 2018 to 2020. It will be high-coupon debt that we borrowed historically at higher interest rates. That will roll off and then we will get the chance to issue new bonds, hopefully in the low-interest-rate environment. Our prediction, which is obviously difficult to make, is that, based on our current projections and the assumption that the interest-rate environment will be as predicted, the interest bill could head from €7 billion towards €6 billion over the period in question. That would get our average rate down below 3%. Could our average rate go towards 2.5% over time? It is possible but that would be quite extreme. One would be looking for a very favourable interest-rate environment for that to happen in light of the stock of debt we have, €200 billion, which will probably remain unchanged or even increase a little. I hope that offers some explanation as to why our average debt figure does not move quite as quickly as it might. It will move, however, particularly in the big refinancing years of 2018, 2019 and 2020.