Mr. Seamus Coffey:

The EU has looked at broadening the macro-economic indicators that it looks at and there has been a remarkable improvement in Ireland's private sector balance sheet in the last decade. Household debt, as has been said, has come down significantly. It was some €200 billion in 2008 and it is about €135 billion now. It has been remarkable that the Irish economy has performed so strongly with such high levels of debt repayment. It is something that shows up in our improved current account position. Households are now spending less than they are earning, in aggregate terms, and are reducing that debt by about €5 billion a year. That money is going into the banking system and it is not coming back out. That is a withdrawal from the Irish economy and, even with that money going to repay debt, the performance of the economy has been very strong.

Returning to the points we made in response to Deputy Cowen, we do not see the same level of risks in the broader economy, including the private sector, as we can now see for 2006 and 2007. This is all viewed in retrospect and it is easy to look back now and see where the problems were. Looking at similar metrics, however, we do not see problems to the same extent. It is possible, looking at the private sector, that it is potentially an upside risk for the economy that this deleveraging and repayment of debt will stop. We are talking about mortgages taken out in 2003, 2004 and 2005, some 14 to 16 years ago. Significant inroads have been made in those mortgages and if that debt repayment stops that money will then become available to be spent in the economy. With an economy at 4.8% unemployment, do we have the capacity to absorb that additional spending? There is, then, a potential upside risk to the forecast, but we do take the broader economy and the private sector into account when we are looking at things. Going back, again, to what we said to Deputy Cowen, we see the key risks in the public finances. The public sector has not reduced its debt. It is still close to €200 billion and is potentially becoming reliant on corporation tax because it is running close to a balanced position, even with this surge in revenues. It is correct to highlight the private sector, but there have been significant improvements in that area.