Mr. Marco Buti:

Let me try to address them. First, what changed between 2001 and 2002? The main element that changed was that the ICT bubble struck the global economy.

So there was a very rapid downturn in the global and European economies. In the case of Ireland, much of the healthy growth which occurred during the Celtic tiger period was based on ICT and high-innovation products and this was the reason for its wealth. There was a collapse in growth between 2001 and 2002. The kind of criticism that was directed towards the budget prior to the unexpected collapse in the ICT economy seemed less appropriate ex post factobecause the economy had, in a sense, collapsed on its own. That is why in 2002 we did not repeat the criticism we offered in 2001.

The second point is that unlike the position now, the degree of generality relating to the recommendations was quite high during the period in question. We basically said that countervailing measures should be taken. However, we did not stipulate which measures should be taken. The issue of subsidiarity is important and our recommendations remained at quite a high level of generality. The issue on which we place a great deal of emphasis now, namely, the quality and composition of public finances, on both the spending and revenue sides, were not the focus of attention at that time to which I refer. We did not, therefore, go into the kind of specifics to which the Deputy referred.

On the Deputy's final point, estimating the structural surplus is particularly difficult. We know it is an unobservable variable. In retrospect, Ireland's budgetary position at the time was less solid than we believed. This was the case for two reasons. First, at the beginning of the last decade we were, like many others, anticipating the growth of the Irish economy to remain high during the following few years. The potential rate of growth was, therefore, considered to be very high. Second, at the time there was what economists refer to as very high tax elasticity. The budget was improving as a result of high tax revenue but, essentially, this was linked to the property and housing market. In retrospect, with more normal elasticity and a sustainable growth rate that was not artificially fuelled by activity in the property market, things would have been different. However, budgetary conditions at the time were less healthy than we thought.