For Ireland, membership of the European Union has over the past 38 years provided great opportunities. It opened up new markets to us, made us a more attractive location for international investment, and gave us the chance to create a new set of relationships with our European neighbours, including Germany. Also, great benefits were provided for our people to travel, work and live throughout Europe.
However, let me state clearly that in Ireland’s case, policy mistakes over a prolonged period of time did culminate in a loss of financial market access, and this is a source of considerable regret to all Irish citizens. The biggest of these mistakes was to put too much trust in the property sector as a driver of economic wellbeing. This reliance on property and construction had its roots in Ireland’s history and we tended to forget that sustainable success for an economy of our size requires that our national output can find markets in an increasingly global economic environment. We won’t forget this again.
Today, what I believe is generally accepted is that the Irish people – families, entrepreneurs, public servants, everyone - have responded in a determined and transparent manner to the challenges which have faced us. What’s more, I believe that it is becoming increasingly clear that the policies that we in Ireland have put in place are now bearing fruit; this is perhaps most evident from the improvement in market sentiment towards Ireland in recent months. So, in this sense, the case of Ireland demonstrates that countries experiencing financial market access difficulties need to address their own structural problems if they wish to eventually stand on their own two feet.
Exports are leading a recovery…
Turning firstly to the macro-economic situation, the latest figures show that GDP increased by 1.6 per cent in the second quarter of this year. This follows a relatively robust expansion in the first quarter – so the Irish economy is growing once again.
The external sector is leading the recovery, with exports of goods and services now well in excess of pre-crisis levels.
Moving onto the public finances, where our deficit target for this year is on track, as reconfirmed by the EU-IMF-ECB Troika during their visit to Dublin. There is clear evidence that real progress is being made in terms of putting our public finances on a more sustainable path.
For next year, the agreed target is for a further reduction in the deficit to no more than 8.6 per cent of GDP and we are committed to implementing the necessary level of consolidation to ensure that this is achieved.
There are also clear signs of progress in resolving the problems in the banking sector.
In a nutshell, we are trying to create a leaner, more resilient banking system centered around two domestic pillar banks whose primary focus is supporting economic recovery in Ireland.
In terms of resilience, a €24 billion recapitalisation of the banking sector took place in July of this year. And with this additional capital, Irish banks are now very well capitalised and capable of withstanding very distressed scenarios.
At the same time, the programme of asset deleveraging is underway, with significant progress expected to be made this year, notwithstanding the difficult environment in international financial markets.
Overall, we are fixing our banking system despite the colossal scale of its problems in proportion to our economy as a whole. Our experience has shown that at a European level, it is important to deliver a very credible approach to the markets. We have tested our banks to extreme scenarios and capitalised them accordingly.
Our programme is on track…
I think it’s fair to say that Ireland has built up significant credibility by now, both economically and politically. In addition, the cost of external financial assistance is also moving in the right direction.
All of these developments are having a positive impact, both directly – through lowering the cost of external financial assistance – and indirectly – by helping reassure markets that Ireland remains on a sustainable path. We acknowledge the support and collegiality of our European partners in this regard.
We fully recognise, however, that we are not out of the woods yet. I will not deny that challenging times continue to lie ahead for Ireland as they do for Europe. We know that there are further sacrifices that will need to be made in the coming years. We have, however, shown a capacity to deal with our problems and a determination to overcome them. Overcome them we will, in doing so playing our part in the re-emergence of a Europe that is a strong, competitive player on the global economic stage.