Paul Gogarty (Dublin Mid West, Green Party)
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Question 198: To ask the Minister for Finance his views on the recent Central Bank warning that despite the interest rate rises the demand for credit here remains strong and that Ireland's private sector credit to GDP ratio is now the highest in the euro zone area. [4079/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The relatively high level of private sector debt must be seen in the context of a sharp decline in public sector indebtedness in recent years. Moreover, a large part of the increase in private sector indebtedness reflects the accumulation of housing assets on the part of households.

However, as I have pointed out before, both borrowers and lenders need to be aware that interest rates are still low by historical standards. Moreover, a shock to the economy which affected employment and earnings growth could affect the ability of borrowers to service their debt. As Ireland is a small and very open economy, and hence vulnerable to changes in the global environment, this highlights the need to retain and indeed improve our international cost competitiveness.

I fully support the vigilance of the Central Bank and the Financial Regulator on the issue of private sector credit and in reminding borrowers and lenders of the need for responsible behaviour. The Government, for its part, will continue to contribute to economic and financial stability by pursuing a prudent fiscal policy.