Professor Philip Lane:

It is always important for us as central banks and for other parts of the financial system but also for governments to take on this risk-based approach. This morning, in the bulletin, we gave an optimistic view of Ireland this year and that is our expectation but we could be wrong on the upside or on the downside. The collective view in Europe, and Mario Draghi also spoke about this yesterday, is lots of the dynamics within the euro area look okay at the moment - not fantastic but okay. However, there are big concerns about whether the adjustment in China from exporting to domestic activity will go smoothly. One manages risk by asking what happens if one is wrong. For us, it is to say to the banks, "You need to have enough capital so if you are wrong and you are taking losses, it is not disastrous". No matter who is in the next Government - and this is in the spirit of the fiscal treaty - we must not only forecast the spending and tax levels for next year but also, "What if I am wrong". This approach says a system is needed under which public debt comes down. It has come down a good amount in the past couple of years and it will come down more but the idea that public debt should be left at approximately 100% of GDP is too risky. I agree it is hard to explain to people that we could cut taxes this year but we want to get the public debt down because it is in the background in comparison to taxing and spending. It will be an ongoing challenge to get the public debt down because, as the Deputy said, while policies relating to pensions, social welfare and so on are important, there is a public investment issue regarding how a good amount of such investment is funded on top of everything else. Members are about to go into election mode but I hope the next Government takes seriously the need to reconcile not just a genuine public spending need, but also the importance of getting back to a safe level of public debt, which is no easy task.

I fully agree with the Deputy that though the Central Bank is independent, that does not mean it is unaccountable. Accountability through Oireachtas committees and other dimensions is important. I would welcome a more rigorous exchange between the Oireachtas and the Central Bank.