Mr. Sebastian Barnes:

Those are very good questions. In the short run, for this year we have had exceptional circumstances under the EU rules. That has been very welcome. It looks as if that will continue next year, which is also appropriate. Where we go to after that is a big question. In principle, the rules will come back into play. Ireland is likely to be in an excessive deficit procedure at that point. It looks as if they will still go into this procedure despite the fact that there are exceptional circumstances.

Exactly how all that will look in one year or two years' time is very hard to tell, both in terms of how the EU might look at its rules and the way it might enforce them, but also in terms of some of the technical issues such as the way it measures the structural balance. It is very hard to know where that will be. The EU looks at issues in GDP terms. For Ireland, that means the rules apply in a slightly different way from other countries. One of the issues we are mindful of is that it may be that the rules are not too loose for Ireland at that point, partly because of this GDP issue and perhaps because of other issues. We do not know whether that will be the case but it is a risk; there is a risk on the other side as well. We believe it is partly helpful for the Government to think through what it wants to achieve.

This should be in compliance with the EU rules. It is difficult to predict exactly what the rules will be but what is done should be the spirit of those rules. That is why the council promoted a principles-based approach to implementing the rules. The debt ratio should be thought about in this context. It is a good target. Particularly in the context where the debt ratio is very high, it is a very good objective. It is also something that moves in a relatively predictable way. As a medium-term target, it is quite good. In light of this, the Government can set intermediate objectives through its budgets. It can show how it plans to get to that level of the debt ratio. It can be a good focal point for policy over the coming years.

There have been a couple of attempts at having a debt target in recent years. They are specified in GDP, which is a weakness, but there was also a lack of commitment to them on the part of the Government. These considerations should really be at the centre of the way the Government discusses the budget if it is to be effective.