Mr. John McCarthy:

Our real exposure arises from nominal income growth. If there is a shock to what is going on in the economy, we do not have much exposure to an interest rate shock. That is because between 80% and 90% of the debt, taking into account interest rate hedging, is at fixed rates. The National Treasury Management Agency, NTMA, has been able to lock in money at very low rates. It is something we identify and the Minister has spoken about it on numerous occasions. He mentioned a figure, as the Deputy said, of about €40,000 for every man, woman and child in the State. What is positive, if we can take anything positive from this, is that because of the NTMA debt management operations, the average interest rate on the debt is down to 2.7%. The debt maturity profile has been pushed out quite a bit. The weighted average maturity is about 11 or 12 years. The norm in the Euro area is about six or seven years.

Debt is manageable but I stress it has to be managed. What does that mean? It means not adding any more debt. It means continuing to keep the interest rate down. Even when the interest rate cycle turns, we need to keep our spread vis-à-vis the bund to an absolute minimum. I do not want to stray into policy here but we have published this report. It also means we need structural reforms to improve the growth potential of the economy so that the denominator - GDP, GNI* or whatever - can do some of the heavy lifting as well.

When we talk about the €206 billion, the NTMA has accumulated about €25 billion or €30 billion in liquid cash assets to meet various amortisation humps that will arise over the next couple of years. Therefore, for our net debt, about ten percentage points of GDP have to be taken off to get the underlying position. All debt management offices across Europe will hold debt because it is not possible to go to the market with nothing in one's back pocket. However, we have quite an amount of cash. That is a mitigating factor.