Dr. Donal Donovan:

My own view is that we were entitled to and should have got some burning of bondholders in November 2010 and March 2011. I will put it like this: we had a strong case for it. We did not get that because of opposition from the European Central Bank, which feared systemic consequences, and more importantly from the United States, the intervention of which is described vividly by the former Secretary of the Treasury, Mr. Geithner, in a page of his book.

That being said, and this is quite important, the magnitude of the failure to get something done on the senior unguaranteed bondholders has been exaggerated, in my view. There was approximately €20 billion of those out there. Perhaps €18 billion is the figure. I have seen reports that have estimated that one third of that was owned by Irish institutions - credit unions, pension funds and investment funds, etc. If one is talking about the net savings that might have accrued to Irish taxpayers, one has to take that out because the burning of these people would have been the burning of Irish people. Maybe €10 billion or €11 billion would have been left at that point. If we had decided to apply a 50% burning rate, on the basis that it was half our fault and half the bondholders' fault, we would have saved approximately €6 billion.

One could get to that number in a different way. If I recall correctly, Governor Honohan did so in his testimony. We could have decided not to burn any bonds held by Bank of Ireland or AIB because they were still in the market, their reputation was important and they were hoping to go back into the market at some stage. We could have decided to leave them untouched while burning 100% of Anglo Irish Bank and Irish Nationwide Building Society bonds that were eligible for burning. It so happens that this produces approximately the same figure - approximately €6 billion - that was mentioned by Governor Honohan, if I am recalling what he said correctly. I stress I am in no sense suggesting that €6 billion is not an important number. Of course it is very important, but we have to remember that it is not €64 billion or €270 billion. The amount of money that could or arguably should have been saved is €6 billion. My personal view is that to hang the whole cost to the taxpayer of the banking crisis on this particular non-event - the veto, if one would like to call it that - is to exaggerate its importance in the greater order of things.