Mr. Brian Cowen:

Good morning, Chairman, and good morning members of the committee. I welcome the opportunity to address today's session and to assist the inquiry where I can in its deliberations. As requested by the inquiry, I have submitted two separate written statements relating to what you describe as themes and lines of inquiry which the committee wishes to discuss with me. The first written statement covers my tenure as Minister for Finance from September 2004 until May 2008 and the second relates to my time as Taoiseach from May 2008 to March 2011. I understand that at today's proceedings we are discussing my period as Minister for Finance. Next week, I am to return to deal with my time as Taoiseach. These are the arrangements that you have asked me to comply with and I am happy to do so. If I may, Chairman, as this is my first appearance before the committee, I wish to make a few introductory remarks?

I want to say, first of all, to the Irish people, that the Government I led dealt with the financial crisis to the very best of its ability. I know the crisis brought with it difficulties and problems of all kinds to many people throughout the country and as Head of the Government I accept full and complete responsibility for my role in and our response to that crisis. I am sorry that the policies we felt necessary to put in place in responding to the financial crisis brought with it hardship and distress to many people. The human cost of dealing with this crisis, which we sought to mitigate as best we could, was the most difficult aspect of the decisions we had to make. What we did was about restoring financial stability to the country. We must learn from this difficult experience and ensure that it doesn't happen again.

This exercise, however, is not just about expressing regret or sorrow but to indicate that I will be approaching all questions in as an objective and non-defensive a manner as possible. To do otherwise would not serve the interests of this inquiry or future generations. I hope also to dispel some of the assertions which have been pushed sometimes for personal or party political reasons. I think the best contribution I can make before this inquiry is to give you and the public an insight into what our thinking was at the time and what were the factors we had to consider in making decisions. We did not have the benefit of hindsight. While there is ... there was an international context to our difficulties, there is no doubt that there were failures on the domestic front also. I hope that my engagement with you here will help people to understand the nature of the problems we faced - there's never as much room to manoeuvre in the crisis as some would have one believe.

The Government I led has had these matters examined by commissioning and publishing two reports - Regling and Watson, and Honohan. We also set up a statutory commission of investigation, chaired by Mr. Peter Nyberg. He produced another valuable and substantive contribution in the examination of the banking crisis. The Oireachtas banking inquiry is another important exercise in accountability. I have always intimated, since the inquiry was first mooted, that of course I will co-operate with you as you undertake your work here.

In relation to the actions I took, I want to make it clear from the beginning that nothing I have to say here should be interpreted by anyone in any way as an attempt by me to pass the buck to anyone else. Mr. Nyberg makes a very prescient comment in his report with which I fully concur and subscribe to when he says:

People in a position to make decisions are and must be ultimately responsible for them regardless of what advice or suggestions they have received. The higher and more influential their position the greater their responsibility.

It is a reality of life today that a country's economy cannot operate without a functioning banking system. The Government's responsibility was to try and save the economy. In doing that, we also had to have a banking system. I agree with Professor Honohan when he says in his report that the primary responsibility for this crisis rests with the banks themselves. It's important to recognise that, in the pre-crisis period, there was what turned out to be reckless lending by individual banks, made worse by a bonus culture incentivising short-term gains. I also accept that the Irish and European regulatory systems failed completely to recognise the extent of the risks that could materialise and to stop the over-dependence of Irish banks on overseas wholesale funding. In terms of the bank guarantee, I believe it was the most decisive step that the Government could take on that night to deal with the problem. It was clear that we were on our own. We had one shot at it. If we did not get it right, Ireland, we were told, would be set back 25 years. We had to go with the best information available to us at the time.

So, Chairman, taxpayers' money has been put into Bank of Ireland, AIB, Irish Life and Permanent and EBS building society, which will, I believe, be recovered over time. The vast majority of losses in Anglo and Irish Nationwide, totalling some €34 billion, will not be recovered. Had they collapsed, the cost to the State and the economy would have been catastrophic because of the consequent impact on the whole banking and economic system. When the scale of the losses were identified, we were in favour of imposing losses on senior bondholders. We were left in no doubt that burning bondholders would have meant no EU-IMF programme; it was one or the other. We assessed that there was a far greater financial and economic benefit to the country entering the programme at the time than to burn remaining bondholders. Nationalising Anglo Irish Bank would not have been a simple solution. There were serious risks attached to that approach too. It is now becoming increasingly clear to people that there are, or were, no cost-free or risk-free solutions. The decisions made were finely balanced and there were legitimate pros and cons with all the limited options available. No option looked good; it was a case of taking the least worst option available. I can say that the Government that I led strove tirelessly to do its duty in the most difficult of circumstances.

Our primary motivation at all times was to try to protect livelihoods as best we could and to steer a course that would progressively close the gap between what Government was spending and what it was taking in in taxes. This was made doubly difficult by the fact that the economy was contracting for a period and unemployment was rising. Added to this central task was the need to stabilise the financial system in the country when there was an unprecedented turbulence in the markets after what was described as a "once in a century event".

Chairman, I will now speak to the issues you have asked me to address as Minister for Finance. On macroeconomic policy, the budgets that I presented were built on what appeared to be conservative economic projections, targeting very modest deficits and an ongoing decline in the national debt burden. At the time, many of those assumptions proved to be overly conservative with the actual fiscal outturn being better than that projected on budget day in a number of instances. Those outcomes were targeted at the same time that the Government was putting aside 1% of our national income every year for investment in the National Pensions Reserve Fund. These were responsible fiscal targets at the time, which appropriately balanced the resources at hand and the demands for better services and infrastructure. As Minister, public investment was a major priority.

This country had suffered from decades of under-investment in our physical and social infrastructure, and I was determined to use the resources at my disposal to put that right. Our rate of public investment, at around 5% of GNP, was approximately twice the European average. This was a correct level of public investment in my view, as we sought to close the infrastructure deficit, to underpin competitiveness, and to improve the lives of all citizens, young and old. I also took the opportunity presented by our economic growth to transform the funding of services for the disabled, to support child care, particularly in the early years, to improve the lives of our elderly citizens and to make the tax system fairer.

While the rate of growth in public expenditure was, with the benefit of hindsight, high, I do not recall any other public representative ever arguing in the Dáil or Seanad that I was providing too much for the old age pension, for welfare payments, for child care supports or improved services. In fact, there were demands for greater spending coming from every interest in the State, much of which could not be met.

I do regret that current spending growth was not lower during my time as Minister for Finance. However, even a slower, more modest rate of growth in spending on health and education and welfare, would not have eliminated the need for the painful fiscal adjustments we saw from 2008 on. That adjustment was driven by the global financial crisis and the collapse in economic activity, a collapse which was more pronounced in our country because of the level of construction activity taking place in Ireland at the time. When I was Minister for Finance I shared the positive view of our prospects which was held by all the main research and international agencies. But contrary to what some are now trying to suggest, I was concerned about the potential vulnerabilities and risks arising from the rapid escalation in property prices which was a recurring theme in risk assessments.

It has since been alleged that no action was taken by our Government to deal with those risks. This seems to be based on a view in some quarters, it seems to me, that I was in some way beholden to property market interests, and that is simply not true. The facts are that prior to any signs of an emerging international crisis, there were four important actions taken to attempt to minimise the potential vulnerabilities in the banking sector related to the dependence on highly valued property. The four actions were: the decision in December 2005 to abolish a wide range of property-based tax incentives; secondly, the refusal by the Government to abolish or dramatically reduce stamp duty; thirdly, the decision of the Financial Regulator in early 2007 to increase the capital requirements on banks for speculative property lending from 100% to 150%; and fourthly, the decision by Government to continue to allocate 1% of GNP every year into the National Pensions Reserve Fund. These key actions taken prior to the crisis were significant and reduced the risks and vulnerabilities of the Irish economy, without which the crisis in the Irish economy would have been far worse.

In order to refute the suggestion that no action was taken to minimise vulnerabilities, it is worth considering the significance at the time of each of the four main actions cited above. It is important to reflect that some of the opposition to these actions which, if heeded, would have left Ireland in a more detrimental position. Regarding the abolition of property-based tax incentives, those who suggest we did nothing to curb that property spiral ignore the fact that in presenting my 2006 budget, I announced the most radical abolition of property-based tax incentives taken by any Minister for Finance. I did this because I was concerned that these incentives were contributing to an over-valuation of property, with resultant vulnerabilities. This decision did not gain favour with many interested parties in the property market. It also represented a decisive policy shift, because over a long period, successive Governments since 1985 had added more new property incentives rather than engage in wholesale abolition of existing incentives. I took these and other measures to reduce the vulnerabilities of the Irish economy to the escalation in property prices, to secure a greater return for the Exchequer, to enhance equity, and to do so in a way that reflected the fact that there were over 250,000 jobs in the sector at the time.

Transitional arrangements were put in place for projects that were, at that stage, up and running or being completed, and no new projects were eligible under any of these schemes from the date I announced their abolition, December 2006. A further protection before any future proposal of this type could be brought forward was the provision by me in the Finance Bill that a cost-benefit analysis showing the economic benefit that would accrue from any such introduction would have to be shown, first of all, and that there would be an automatic three-year review after it became law.

If such a provision had been in place when this type of tax relief was first introduced in 1985 by the then Government, the achievement of the economic objectives for which the schemes were initially devised could have been apparent much sooner. But in any event, in hindsight, these schemes could have been terminated much earlier. In late 2006 and up to the general election in 2007, I was also the subject of sustained criticism for my decision as Minister for Finance to resist widespread demands to abolish or dramatically reduce stamp duty on property. At that time, I accepted that the levels of stamp duty in Ireland were among the highest in the world and that this meant real consequences for people buying houses. While I agree that some adjustments were appropriate, I realise that the high levels of stamp duty were a brake on the escalation of property prices and acted as a disincentive to greater property speculation. I felt that calls for the abolition or serious reduction of stamp duty were simply irresponsible in the context of rapid property price growth and I therefore strongly resisted such demands. There is no doubt abolishing or reducing stamp duty at that time would have been politically popular. But it would also have increased the vulnerabilities of the banking system and the Irish economy to overvalued property and I therefore refused to go down that route. It's hardly surprising today that the cheerleaders for the abolition of stamp duty, or its radical reduction, are now silent on what would have been the impact on property prices or the resultant impact on the scale of the banking crisis had I heeded their calls.

The decision of the Financial Regulator at the start of 2007 to increase the capital requirements on banks for speculative property lending to 150% from 100% was a decision which I strongly supported. I accepted that this brought the capital requirements on Irish banks for speculative property lending to one of the highest in the developed countries but I believed that it was totally appropriate given the vulnerabilities of Irish banks to property prices. This was taken at a time when international agencies and others were still benign on the prospects for Irish banks. We now know that given what happened since, this action again should have been taken at the start of the period of lending growth by banks but it was a significant initiative.

The final action taken to reduce vulnerabilities was to allocate 1% of GNP every year into the national pension fund. This was despite calls from the political Opposition from time to time to use that fund for more expenditure in Ireland. This would have increased further the Government spend in the economy. The tax revenues from the economic growth were used to engage in unprecedented capital investment to provide key infrastructure such as roads, public transport projects, the Luas, the tunnel, schools, third-level research facilities, energy, communications and health. And this infrastructure has greatly increased our productive capacity and will be essential in returning the economy to a sustainable growth rate as global conditions improve.

The economy was operating at or close to its potential over the period when I was Minister. During this time the economy was enjoying conditions of full employment with an unemployment rate at 4.5%. With full employment the labour market got much tighter, which reflected in further price and wage pressures and inevitably a loss in cost competitiveness. Large public investment in infrastructure to deal with development bottlenecks arising as a result of the economy being at full tilt could not totally compensate for that fact, certainly within the same period. In my view, this investment was necessary and appropriate to continue to expand the productive capacity of a growing economy. While headline indicators suggested that fiscal policy was on an appropriate track over the period, more attention could have been paid to the underlying fiscal position and stance which was pro-cyclical. However, it must be acknowledged that few independent observers of the policy-making process, either domestic or external, highlighted that as a major concern. There was a failure to adopt policy to reflect the realities of membership of the euro. With monetary policy conditions set with regard to euro area conditions as a whole and the exchange rate no longer available as a macroeconomic adjustment tool, fiscal and other policies, for example incomes policy, needed to play a greater role in macroeconomic stabilisation and adjustment. However, such conditions do not appear to have received adequate attention over the period to 2006.

Opposition parties criticised Government during growth years for spending too little. Their new revised criticism, to fit changed times and circumstances, is that during these years we actually spent too much.

Yet the facts are we recorded budget surpluses in ten of the 11 budgets up to when I left office as finance Minister. We used the period of sustained economic growth to more than halve the general Government debt as a percentage of GDP from 64% to 25% in the ten-year period to 2008. If the assets of the National Pensions Reserve Fund are taken into account, the net debt position at the time I finished being Minister was about 14% of GDP. This undoubtedly slowed the Irish economy from the rate which would have applied if an additional percent of GNP each year was allocated for more spend at the time. This subsequently gave the Government vital head room to borrow to help us through the crisis when large deficits had to be funded, even after serious annual adjustments were made to start closing the gap that had then emerged between spending and revenues.

On prudential policy, the role of the Department of Finance was to promote financial stability by developing financial services legislation where required which was implemented by the Central Bank and the Financial Regulator. The former was charged with formulating macro-prudential policy, whereas the regulator was managing individual financial institutions through micro-prudential policy. The entire regulatory system was under the guidance of the Central Bank and the Financial Regulator, which was established on the continuing principle of being independent of the Department of Finance. All of the quarterly reports prepared by the Central Bank were independent, the financial stability reports were drawn up by the Central Bank in consultation with the Financial Regulator. Briefings were provided to me as Minister based on these findings. I had and was given no reason to doubt the economic and financial stability projections contained in these. By 2000 ... by summer 2007, the Central Bank's report noted that growth in credit had started to abate, as had house prices. This was viewed as being evidence of an incremental steadying of the market. Throughout 2007 and up to the summer of 2008, third party domestic and international economic and independent reports suggested a slight slow-down in economic activity. The analysis from the Central Bank was that there would be what is termed a soft landing regarding the property market, which is usually, to be definitive about it, it is about stagnating price and gradual reduction over a period of years after that.

I agree with the conclusions of the Regling and Watson report which stated that banking practices, governance failings and financial supervision "seriously exacerbated Ireland's credit and property boom" which left the economy vulnerable to a deep crisis and depleted its fiscal and banking buffers when the crisis struck. I believe that had there been more robust independent work and scenario planning undertaken by both the Central Bank and the Financial Regulator regarding the banking system, this would have informed the silently evolving risk scenario and enabled the Central Bank, the Financial Regulator and the Department of Finance to develop timely strategic interventions, policies and strategies. There was a lack of analysis by both the Central Bank and Financial Regulator in challenging the over-concentration of risk in property and the emphasis seemed to have been more on the residential housing market than on the commercial property sector and that was a mistake. There was clearly a culture of deference in operation between the Financial Regulator and the financial institutions it was regulating.

I agree with the findings of the Nyberg report which asserts that the policy apparatus was complacent. As Minister, I should have been more doubting, more questioning by challenging the broad consensus of opinion that had developed on these matters. There were vulnerabilities built up within the banks, property prices were over-valued and there had been a gradual loss of competitiveness in the Irish economy. I believe that if the unprecedented global financial collapse had not happened, there would have been a softer landing for the Irish economy but the over-valuation of properties and related vulnerabilities within banks put Ireland in a weaker position when we had to face the global crisis. I accept that ongoing actions would have been required to address these vulnerabilities, even in the absence of the global crisis.

The views on the prospects for the Irish economy in 2007 from the OECD, from the European Union, from the International Monetary Fund, from Moody's, from the ESRI and many other commentators were conclusively positive. The advice at the time was that the balance of evidence suggested that the banks had sufficient capital to absorb the likely losses but that there were vulnerabilities and risks. With hindsight, this proved to be fundamentally wrong. However, those were the views expressed at the time. We know now that grave mistakes were made in the judgment of the capital adequacy of the Irish banks and the assessment of future loan losses.

It is, however, important to note that no one in the independent authorities ever advised the Government that the capital adequacy was not sufficient or that higher capital adequacy ratios should be imposed. These lessons have now been fully taken on board and policies implemented to ensure that a banking crisis like that can never happen again in Ireland. While Government shares responsibility for its roles in these mistakes, it is noteworthy that many of the strongest critics of the Government were silent on these issues prior to the crisis and indeed were proposing measures such as a radical reduction or abolition of stamp duty which would have made the position much worse.

On the adequacy of the assessment and communications of both solvency and liquidity risks in the banking institutions and the banking sector, I state that when we joined the euro Irish banks got access to a new source of wholesale funding at low rates of interest and with no exchange risk. Integrating the Irish financial system within the euro area was always viewed as a positive development. The more integration that took place, including financial integration, the better it was deemed to be for us. The question of access to this liquidity being cut off completely was never seen as a realistic prospect in any foreseeable circumstance. When problems with liquidity arose, being part of the euro system and having access to ECB policy responses was again seen as a strength for Ireland.

Regarding solvency of the banks, the message from the authorities was that the banking system was adequately capitalised given their level of profitability, and that they appeared in good financial health. While concerns were expressed when overall financial stability was being assessed, there was no suggestion that downside risks would transform into such a critical situation for Ireland. The external surveillance mechanisms, including the OECD, IMF and European Union, together with the ESRI, were forecasting a continuation of strong economic growth in Ireland compared to our EU counterparts. Credit rating agencies looked favourably on Irish banks. During my time as Minister, there was no consensus that we were heading for what ultimately happened.

As is noted in appendix 6 of the Wright report, the international reports on the Irish economy undertaken by the European Commission, the IMF and the OECD from 1999 to 2007 in fact commended the performance of the Irish economy, while domestic reports up to mid-2008 also talked down any idea of a hard landing for the Irish economy or the Irish property market. None of these reports made any reference whatsoever to a systemic banking crisis or a possible banking collapse.

I was not aware of contrarian views within the Department of Finance which differed in substance from the Department's overall assessment. Regarding external contrarian views, the most notable was a research paper by Professor Morgan Kelly of UCD which was published by the ESRI when it launched the ESRI summer quarterly economic commentary review of the Irish economy in July 2007. In an interview on publication of the review, the ESRI economist Dr. Alan Barrett made it clear that the ESRI did not share Professor Kelly's prognosis that house prices in Ireland over the following eight years would drop between 40% and 60% in value. Whilst the ESRI thought that house prices were overvalued by 15% to 20%, it did not believe there was going to be a sharp fall in house prices. It was forecasting a house price decrease of 3% for 2007, with it stabilising the following year. The ESRI view was that economic growth would be 4.9% in 2007, moderating to 3.7% in 2008, a growth rate which they said was consistent with a degree of stability in house prices in 2008. The mainstream view remained amongst most commentators that house price increases had been underpinned by many factors, including a strong economy, increases in employment and earnings, reductions in taxation and lower interest rates resulting from participation in monetary union. Professor Kelly's more pessimistic view proved to be more accurate, as we now know, although in his paper he said the main macro-economic effect of this as being ... he saw it as being higher unemployment due to reduced house building activity as prices fell over the period in question. He states in the paper that he remained of the view that Irish banks were well capitalised at the time.

Regarding the effectiveness of the Oireachtas, throughout my period as Minister for Finance the critique from the political Opposition was that we were not addressing economic issues quickly enough. There were constant demands for more spending. Practically all economic Private Members' motions which allowed the Opposition to debate issues of their choice in the Dáil involved demands for more public spending in the areas of health, education, transport, etc. On other occasions the Opposition was calling for more money to be returned to taxpayers.

They were predicting continued economic growth and were proposing looser fiscal policies than the Government during the 2007 general election campaign. Very few parliamentary questions were put down on banking issues generally, let alone suggestions that the banking system and the economy were facing ruin. There were parliamentary questions on subprime lending, which was a very small part of the overall Irish mortgage market. The capital adequacy or otherwise of banks was not, to my knowledge, ever raised as a priority issue.

I was in favour of improving opportunities for better Dáil oversight of the annual budgetary process as Minister for Finance. I introduced new arrangements whereby, from January 2006, I met with the Committee on Finance and the Public Service to discuss the economic and fiscal background to the 2006 and two subsequent budgets. From 2007, individual Ministers would publish an annual statement on the outputs and objectives of their Departments and from 2008, the actual outturns. These statements were then presented to the relevant Oireachtas committee along with the Department's annual Estimates. After these individual examinations the Oireachtas Committee on Finance and the Public Service would co-ordinate the preparation of a report to the Dáil on the outcome of these deliberations. I instituted those changes to meet the desire on all sides of the House for better debate, better scrutiny and better results from the raising of tax and spending of public money in the State.

During my time at the Department of Finance, there was a recognition that keeping tax levels lower generated economic growth which, in turn, produced tax revenues to fund public expenditure. Despite the obvious international risks, the outlook was broadly positive and the budgetary strategy allowed for significant policy initiatives. The Department was advising that spending growth should not exceed growth in revenues. There was room for substantial sustained infrastructure investment consistent with projected levels of economic growth but at the same time, keeping the burden of taxation and debt at reasonable levels. The Department was expressing caution regarding the economy and the need to keep the budget balanced at a level which could cope with any slowdown in growth that may occur over the period ahead at that time. Department views with ministerial sign-off were submitted to Cabinet in the annual June memo on budget strategy, but after Cabinet discussion and subsequent bilateral discussions on the departmental Estimates, spending and tax relief outlined in the December budgets were above that advocated in June.

Key drivers for public policy, when asked about that ... obviously, programmes for Government and the social partnership processes, which included spending and tax expenditure commitments, were drivers of Government policy. The enlargement of the EU in 2004 led to significantly increased net immigration to Ireland in the following years. At the same time, our own population was also increasing and, indeed, emigrants coming back home again. This required expansion of day-to-day public services and capital investment needs in housing, education and transport, for example, among many others. All this left us more vulnerable than would otherwise be the case to deal with the current economic challenges. However, there was a limited amount of formal analysis and advice on fiscal risks outside of the June memo for Cabinet.

Regarding the interaction with the Central Bank and the Financial Regulator, the Central Bank was responsible for overall financial stability assessment, the Financial Regulator was responsible for day-to-day supervision of the lending institutions. I was aware that when financial stability reports were being compiled, that the Central Bank and the Financial Regulator interacted on that exercise. The Central Bank issued quarterly bulletins and financial stability reports to the Department of Finance. The Governor of the Central Bank would update me, usually around the time of quarterly bulletins being issued, and before budget time, he would also formally issue a pre-budget letter setting out the overall stance of the Central Bank on the economic and budgetary situation. There was contact between the Financial Regulator and the Department of Finance at official level, as one would expect. During my tenure as Minister, I met with the chairman of the Financial Regulator on three occasions to discuss IFSRA business at the time. I would have expected that any concerns would initially be escalated through the existing channels of the Central Bank and Financial Regulator through the Secretary General of the Department. Any briefings I received from the Governor of the Central Bank and through the financial stability reports were overall conclusively positive.

There was no evidence from any of the reports already completed on the banking crisis that the Financial Regulator did not have adequate powers to deal with the emerging situation, if it had been analysed and identified at the time. The principles-based approach to regulation, which operated in Ireland and in many countries throughout the world as an orthodoxy, was deferential in its report here in Ireland towards financial institutions. Processes were checked but outcomes and risks that the banks' behaviour was causing were not identified and corrected.

Both the Central Bank and the Financial Regulator had significant resources in terms of dealing with supervision and regulation of lending institutions. The Department of Finance primarily saw its role as preparing any legislation that the Central Bank and Financial Regulator might seek. It did not see its role as one of second-guessing the work and assessments of the Central Bank and the regulator, which were independent, separate and had specific statutory responsibility within this area. It cannot be said that the supervisory practice was effective since the analysis concentrated on liquidity being the problem, without adequately preparing for a situation where the whole financial system was at risk. The change which saw the banks accessing increased amounts of wholesale funding did not prompt a review by the authorities as to what wider effects a property downturn would have on the capital adequacy of the banks and there was insufficient first-hand evidence available about the deterioration in the banks' risk management policies. Worst-case scenarios were not worked out because of the general regulatory approach which relied too heavily on trusting the governance mechanisms within the banks themselves.

There was no indication of any significant financial or banking problems on the horizon before 2007 when the US subprime mortgage crisis impacted the global banking system. This had the effect of dramatically reducing liquidity within and between banks throughout the eurozone area. While there was a settled view that Irish banks had not acquired any of these toxic assets, Irish financial institutions were not immune from the impact of interbank lending and the closing off of traditional liquidity channels. The domestic standing group was established in 2007 when I was Minister for Finance and sought to enhance cooperation between the Central Bank, Financial Regulator and the Department of Finance in light of the emerging financial situation across Europe. The group was monitoring and continuing to analyse the liquidity issue which was impacting banks right up until the crisis in September 2008. There was a view across the board that Ireland's banks were well capitalised and this view was shared with me as Minister for Finance throughout this period. As Minister for Finance, I attended monthly Eurogroup and ECOFIN meetings which discussed economic policy, taxation and the regulation of financial services across all EU member states. During the period 2004 to 2007, Ireland comfortably met the revised Stability and Growth Pact targets of having an annual debt-GDP ratio of less than 60% and an annual deficit of under 3% of GDP. During late 2007 and early 2008 the work of domestic standing group remained focused on liquidity and contingency planning, including the impact of ELA on the confidence of an institution following the Northern Rock scenario in the UK.

During this time, the European Central Bank was provided supplementary liquidity via long-term refinancing operations to the eurozone financial system where markets previously provided same without any problem. The memo of understanding which was agreed with other EU states on the issue of banking was operated by the domestic standing group at a national level. It must be stressed that national or institutional responsibilities did not change under this memorandum. With the enormity of the financial crisis which emerged across Europe in September 2008, each member state became focused on national stabilisation measures. As a country, Ireland was on her own. DSG officials worked on all issues arising. During my time as Minister for Finance, the work intensified and a liquidity group was established in early 2008 to obtain and disseminate information on liquidity developments from the main credit institutions and to identify any potential problems. At no point during my time as Minister was it thought by the authorities that any of the banks were facing imminent solvency risks or that there was a fundamental threat to the entire financial system in Ireland.

The expert advice received during this time included the OECD, European Commission and IMF, who were, in overall terms, positively disposed toward Ireland's economic and financial situation. The relationship of the Department of Finance with the banking sector and the property sector was primarily through their federations - the Irish Banking Federation and the Construction Industry Federation. Individual banks dealt with the Department through contact with the relevant officials. My own interaction with banks was seldom and infrequent. Every year the Minister for Finance would receive many pre-budget submissions in writing from economic and social actors, including the IBF and the CIF. The main groups would be met every year by the Minister for Finance at meetings attended by officials where oral presentations would amplify the written submissions put forward. The incumbent Minister for Finance would always be, from time to time, a guest speaker at IBF or CIF functions or an awards ceremony or whatever. As Minister for Finance, I regarded my relationship with these two sectors as being appropriate. Their access to the Department was in no way different from how other organisations of economic importance were dealt with. Thank you, Chairman, and I am here to answer any questions you have.