Mr. Sebastian Barnes:

IFAC has a statutory obligation to monitor compliance with the domestic equivalents of those rules. What we have done is used some of the leeway we have domestically to implement them in a more sensible way. We have developed our own measure of the output gap and the potential output for Ireland, which is very similar to the one the Department of Finance adopted. That gives us a much better signal about the state of the economy and one that is also much less prone to revision, which is a big problem. The European method is very volatile so every time we look at it, it is like Freddy Kruger's cat because it keeps changing, disappearing or reappearing.

On IFAC, obviously it helps if both the EU and national authorities give the same or similar coherent assessments. We have always had a presumption that it would be sensible if we and the Commission found compliance or non-compliance, and that there should not be big differences. There have been a number of occasions where we thought that the signals coming out of the European methods were so unreliable that we said to the Government it should ignore them because they did not make sense.

The Commission was never very interested in enforcing the fiscal rules against Ireland, I think, because Ireland's performance overall was relatively good. There have been some differences in assessment and some cases in which IFAC has also taken a stricter view than the Commission. The Commission examines many countries, so it tends to focus on those where the biggest problems are. That does not mean there have not been times when things in Ireland have been of genuine concern but the Commission has not really taken it up and we have not hesitated in those cases to point it out. There has always been a slightly dual relationship. One would hope that EU and national levels would be broadly in the same direction but one cannot rule out disagreements either way.