Professor Philip Lane:

This runs across much of the debate. Why is it that ten or 12 years later, these risks are deemed to be so high? One element is that time needs to pass in order for Ireland to demonstrate it will maintain the stability to avoid the boom-bust cycle we saw previously. We think it will not be like it was previously. There are many policies now to avoid what we saw in 2006-07, but in terms of the legacy of history, that is there.

The second element is what is called loss given default - if a bank has a default, how much can it recover? Banks consider the ability to repossess homes and so on. A perfectly legitimate choice has been made here to allow considerable forbearance and avoidance of repossession, but an external bank looking at Ireland would identify the difficulty to recover collateral in this situation as a clear factor.