Dr. Kieran McQuinn:

That is a very good question. Our colleagues have a research programme that explicitly looks at the general issue of access to finance among SMEs. This was a research programme that was there prior to the pandemic but it is obviously a key question it is addressing given the pandemic and the strains it will place. Clearly, the Irish banking sector needs more competition, not less. That is clear and evident from even our discussion about the interest rate a while back. If we look at the kind of credit conditions in the Irish market, especially focusing on the interest rate, it is clear that interest rates are higher on average in the Irish market, whether it relates to SMEs or mortgage holders, than they are for comparable households and firms across the euro area. This makes it more difficult for those firms to operate in the Irish market than if they were operating in other jurisdictions. That is going to be a key issue.

In terms of policy interventions, we discussed the need to look at targeted measures addressing the debt situation of many SMEs that come out of the current situation. It is a difficult issue because we must try to establish what firms we think are valid and viable and have a successful path in the economy going forward and those we simply feel are not likely to succeed and are not worth providing huge financial assistance to. It is a difficult question and issue. There are bound to be a lot of firms among SMEs that are struggling and will struggle when we get into the post-Covid situation. They will be carrying high levels of debt because of Covid. These are firms that would have been perfectly viable and valid otherwise. This is where policy measures need to be targeted to assist those firms to progress into the future.

Looking at it from the aggregate, the macro perspective, we would be fairly confident that most sectors of the economy that have been closed will recover quite strongly over the short to medium term. Our growth forecasts would reflect that not only in terms of our expectations of things like consumption and investment but also in terms of our future path of unemployment. I will not say we are optimistic but we are quite positive about how we see the economy opening up in the next six, nine or 12 months and we believe it will grow quite strongly in that period. Where the policy intervention needs to come is targeting those SMEs that are carrying high levels of debt mainly as a function of the pandemic but, ultimately, are very viable enterprises in terms of their prospects going forward.