Professor Philip Lane:

There are different levels. There is one which is abstract but core to the fiscal compact, that is a question of whether GDP is at potential. For most of what is called a structural balance it is a question of where in the GDP cycle we are. There is also the concept of the financial cycle, when credit is growing quickly and construction activity is very high. That is so visible and obvious in the Irish data it is not a small issue of whether Ireland can grow at 3% or 4%. When capital gains tax, stamp duty and so on grow at such a rapid rate under no circumstances could one say those revenues will be there every year forever. If they will not be there every year forever one could say these are windfall revenues. One saves a windfall for the rainy day, one does not ramp up current spending or make tax cuts to get rid of it. In the scale of the revenue boom we had at that time it would have been possible to come up with fairly simple decision criteria that would have allocated a fair chunk of revenue to a rainy day fund.