Dr. Tom McDonnell:

Yes, it could happen again. It is not necessarily the case that we will be shut out of the markets again but it is absolutely the case that there will be future recessions. Recessions tend to happen every decade or so and smaller recessions can happen more often than that. We do not want to be in a situation when the economy is running hot that there is a balanced budget because that means there will be a very significant deficit when things go wrong, and things can turn against us. In the case of Ireland our budgetary position is actually one of the most benign in the euro area. That has partially to do with the excess corporation tax windfall receipts, which could reverse and is the first thing that could go wrong. If two or three of these very large multinationals decide to move intellectual property assets to other countries, that could have a significant impact upon our budget. That is the point of not spending it and sequestering it away because we are worried that it might run out. That is the first big risk.

The second big risk is that there will be a global economic recession that perhaps emanates from China, the United States or something in the euro area. That is always a risk. In that situation we want to be in a position where we have not been pursuing procyclical policies or not running deficits during the good times so that we are in a position that we can naturally use wer automatic stabilisers, which reduce tax receipts and provide more welfare payments without endangering our ability to borrow on the markets. Of course, even having a savings fund that can be tapped into gives we a certain degree of protection against that. The rainy day fund helps in that regard by allowing us to provide immediate supports without immediately having to tap the market.

It is always a concern but I do not see Ireland being particularly at risk no more than other European countries in terms of climate change and so forth. However, because we are such a globalised economy and maybe coming into a cycle of deglobalisation, that has particular implications for the Irish economy, which we know to be a very volatile and small open economy. It is something we need to be cognisant of and watch on a year-on-year basis. This is also the reason we should do multi-annual budgeting and look out into the future to see what the budgets look like once we pay for inflation costs, public sector pay, welfare and so forth.