Mr. Fergal O'Brien:

On the right amount of austerity and what the markets think, over the first five months of the year we were in a sweet spot with bond yields but they moved against us a little bit due to various external factors. While the markets are examining how the public finances are being fixed, they are also looking at growth in the economy. We could keep delivering on market expectations on austerity. However, if we disappoint on growth rates, one could give up what one gained for good fiscal housekeeping. We think consumer spending is pent up and it will be unleashed when confidence comes back. While 85% of the fiscal adjustment is behind us and budgets will get easier at some stage, consumers do not believe that. The time horizon is so distant for them, it is not influencing their decisions on consumption. There has to be a tangible benefit and dividend for householders that we have done the hard yards, restructured promissory notes and outperformed in reducing the budget deficit.

Will the bond markets penalise us for lessening austerity? I do not think so excessively. I believe it would be a strategy worth pursuing in what it would give us in growth and jobs. Our current growth forecast for next year is 2.5%. We have a good deal of room for manoeuvre within that in terms of doing less austerity and still reaching a budget deficit target of under 5%.