Mr. Sebastian Barnes:

It is possible to think about the two issues separately. Ireland raises an exceptionally high share of its revenue through corporation tax and is a significant location for foreign direct investment, FDI. How sustainable that is from an economic or political point of view is a big question. It is at the heart of our concerns about over-reliance on those tax heads. The Franco-German proposal on issuing bonds together in Europe is extremely significant and it is very important for Ireland. In the short run, the impact may not be enormous. Interest rates are so low and the ECB is being very active in the bond market. It adds an additional channel of financing but, as Dr. Casey said, it is not clear how much Ireland will get out of it in the short run. It is important but it is not hugely significant. What I think is important is the commitment that lies behind it. In 2008, we saw what happens when there are doubts about euro area countries standing behind each other in a position of crisis. When the Irish Fiscal Advisory Council was set up, the bond spread was 14 percentage points on Irish Government debt. That is one of the reasons we had austerity. This was massively expensive and small countries like Ireland, particularly those without their own monetary policy, are always going to be vulnerable to these changes in behaviour, to use a term we have used this morning. That commitment at European level is extremely important. Some countries in the euro area are still struggling with high levels of public debt where the debt dynamics are much less favourable than they are in Ireland.

These are real issues. Given the state the world is in, that commitment is important, but what is really significant for is providing a backstop for the Irish public finances and giving confidence to markets. In that context, Ireland has much to gain from this.