Professor John McHale:

Maybe I can take the first two questions very quickly and let my colleagues answer the others. In terms of a new measure of the economy that would complement GDP, it really is, at least initially, if not for the longer term, for our own use. We need to understand the level of domestic activity in the economy. That said, it is not easy. Both Dr. Conefrey and Mr. Coffey are on the new committee that is working with the CSO to consider alternatives. On the one hand, one can argue that there are now elements within GDP that are not part of Irish economic activity - much of what is known as contract manufacturing, for example, which does not affect Irish employment or Irish incomes. In some senses, it is a contaminant in there that is leading to a distorted measure of domestic activity. The challenge is to come up with measures that do not have those contaminants while not cutting out a bunch of stuff that we are actually interested in. In this report we have come up with a number of alternative measures, but they all cut stuff out that we might be interested in. When one looks at domestic demand, for example, one is cutting out net exports.

When one looks at gross value added, excluding industry, one is getting rid of the stuff that is distorting things but one is also getting rid of all of the rest of industry and one does not want to do that. No matter what measure one looks at, it is a trade off between getting rid of the stuff that is distorting things and maybe getting rid of other stuff that one really does want to measure. These guys face the challenge of using the data as it exists at the moment to try to identify measures that really give one a better sense of the activity that is taking place in the Irish economy.

In respect of the 25%, I also mentioned that our debt to GDP ratio, appropriately measured as we see it, is probably around 100% of GDP. If the crisis had started off with a debt to GDP ratio of 100% of GDP, we would almost certainly have defaulted. Remember we went from 25% of GDP to 120% of GDP and lost access to markets but we avoided default, taking advantage of some outside assistance. If we had gone from 100% of GDP to 220% of GDP, there is no way we would have got through it without defaulting. We would have had a far more serious crisis that we might still be in rather than the recovery mode we are currently in. That gets back to the need over time to get to a safer level so that if some negative event should affect us again, we are in a stronger position to deal with it.