Mr. Seamus Coffey:

This is very much my own opinion on it and I will take off my fiscal council hat.

Clearly, when we joined up to the euro in 1999, we ceded the ability to set our own domestic interest rates and became part of a common currency area - an incomplete common currency area - which has continued to evolve. Whether the ability to set domestic interest rates would have made a significant difference in Ireland is very hard to know. We do not know what those rates would have been or whether they would have been appropriate.

In a sense, we had a form of independent monetary policy leading up to 1999. It was not absolute - once we got independence, one of the first things we did was tie any new Irish currency to sterling. Essentially, the Irish pound was the regional version of the sterling which used UK interest rates. For 20 years, we had our own independent monetary policy which was not without its ups and downs. We can look at interest rates, which were at 14% or 15% in the early 1980s and again, in the 1990s. When a small currency like Ireland was trying to be pegged against a larger currency like the Deutsche Mark, this came under speculative attack. To try to maintain the value of our Central Bank at the time, we increased those interest rates and saw more interest rates rise to 14% and 15%.

There are arguments in both directions. One is the flexibility it gives you; you can set your own rates. As we noted in our opening statement, the ECB is currently in a cycle of reducing and cutting interest rates, which might be appropriate for economies like Germany that are struggling and are currently somewhat anaemic when it comes to growth, however, this is not necessarily appropriate for Ireland which is strongly growing and has very low rates of unemployment.