Mr. Carlos Martínez Mongay:

There are several questions here as I see it. One concerns the way in which we calculate the output graph and potential output. This is based on a commonly agreed methodology. There is a technical group within the EFC which is chaired by Mr. McCarthy, an Irish official. We apply the same methodology to all of the countries in order to have an analysis of the cyclical positions which is comparable across all countries. We use the production method and we have a way to calculate the multifactoral productivity and capital stock. This is very complex, technically speaking but at the same time, the methodology is very transparent. All countries can see exactly how the calculations are made. This is the way we measure the cyclical position of the different countries. In the case of Ireland in particular the calculations were made on the basis of the budgetary plans one year ago. At that time, we did not know about the revision that took place concerning 2015 and the various adjustments that had to be made. Last year we saw the output gap closing very quickly. This year we still have very high output gaps. In some cases, the output gaps are positive. In the case of Ireland, the output gap will start to close in 2018 or later.

This methodology also allows us to calculate the structural balances, that is, the parts of developments in the balance which are not due to the cyclical evolutions, that is, due to the fact that if one grows faster, one has more taxes, less unemployment and therefore, less expenditure. These cyclical fluctuations or impacts on the budget are netted out from our calculations of the structural balance which are made on the basis, in turn, of our calculations of the output gap and potential GDP.

This is one indicator that we use in order to determine to what extent the fiscal stance in the country is appropriate, taking into account the debt levels and the distance towards the medium-term objective, MTO. We have used another indicator which is the expenditure benchmark. This is related to the ten year average of potential growth. We never use these two indicators in a totally mechanical way. We make what we call a nominal assessment in order to understand better the underlying factors concerning the changes in the structural balance and the structural expenditure. That is, the expenditures net of discretionary tax changes. We never use this in an automatic or mechanical way. We always look at all of these factors. We examine the cyclical position of the economy, the distance with respect to what we have defined as the MTO which ensures that there is enough room in front of cyclical fluctuations. We also look at expenditures net of expenditure finance through EU funds and net of cyclical expenditures, for instance, of unemployment and net of interest payments and discretionary changes in tax revenues and how these have evolved compared to potential growth - not potential growth for one year but over a number of years.

Finally, this is why our assessments may change although we have to take into account that the benchmarks are frozen either in 2015 or 2016. We even reduce the possibility of more cyclical or annual fluctuations. I do not think that it is a question of saying that we have this indicator and then we change completely. We have a rather stable analysis.