 Question, Peter. The role of inflation in solving problems going forward. Historically, there's been a general consensus that 2% has been an ideal number. Would you agree or disagree that there's an argument for a higher rate, which may be five, six, whatever, which would facilitate correction of past errors and dealing with future changes in various countries and to be you as a whole? Thank you. First of all, inflation undoubtedly often adds a helping hand to the resolution of serious economic problems. I don't believe in it, however, I must admit. I think that in the context of the bargain that we have made in Europe and the experience historically in Germany, that part of the deal that we entered into, and indeed part of the mandate of the ECB, is price stability, which is another word for inflation. And I think that we have to recognize that this time we have to get out of this without inflation. I've never really believed in inflation, but I'm not a theoretical economist, and it's a personal view. But I never believed that the constant, for an example, the constant devaluation of the lira over 20 years against the Deutschmark, which retained its strength, did anything for Italian competitiveness except providing short-term panaceas. So I'm afraid that, without wishing to sound too brutal about it, that we have to find another route. This is great. What a relief. Rory O'Donnell here, please. Rory O'Donnell, thank you very much. OK. Rory O'Donnell, National Economic and Social Council, you opened your very interesting final section of your talk on the medium-term requirements for the euro with the pregnant phrase, assuming that the euro gets through its current difficulties. And I'd be very interested in your views on, I mean, in a sense, you mentioned the risk of political accidents. Isn't there a sense that the current difficulties, before we get to that phase of a real stability and growth pact properly, mutually monitored, that the current difficulties might damage the whole project? You're absolutely correct. I mean, we are living through uncharted seas, we're driving through uncharted seas. And one can see accidents potentially happening in a number of different contexts. First of all, we have to have, as I said at the outset, the adoption of the package of the 21st of July across the union. Secondly, we have to have a situation in regard to Greece, which entails, hopefully, an agreement between the Troika and the member states and, on the one hand, Greece and the other as to the steps that they are taking. Otherwise, one is into a game of, I won't call it Russian roulette, but a game of potentially extremely fraught negotiations with one threat following another. And in the past, political accidents have happened when nobody expected them, including in 1914 in a rather more dramatic sense. But that is precisely what can happen if we are not careful. And I suppose what one is saying in the context of Ireland is that what one can foresee is a short period of extreme risk, a longer period, and perhaps quite a long period, of sporadic and serious market volatility caused by the perception of political accidents waiting to happen here or there and requirements in various respects for unanimity and various decisions that will have to be taken, including funding questions and so on. And therefore, it is really a time for exerting the maximum degree of resolution in protecting ourselves. I'm not arguing for a position in Ireland because of some sense of hardline monetarism. Quite the reverse. I'm simply saying that this is a very dangerous time. And it would be foolhardy not to recognize that and to build upon the positive market reaction, which is already evident and which I think is very important to us. Thank you. Philip O'Connell from the ESRI. In your section on Ireland, you made the intriguing suggestion that front-loading could have the effect of increasing employment. So I wonder if you could tease that out a little bit for us in terms of the mechanisms and the time frame. This is why I don't like experts asking questions. I was trying, however, inadequately to make the case that the effect of additional confidence creates the capacity for our banks to function better and for our economy to function better because trust will begin to be provided to Ireland and to its institutions in a way which otherwise wouldn't exist and because it would also have the effect, in terms of confidence, in freeing up resources which we have on this island, which are remaining, metaphorically speaking, under beds at the moment for fear of the future. That's really all that I was trying to say. But I think that there are a lot of examples that can be cited. Take one very recent one, Estonia, where remarkable change has been brought about remarkably quickly because of the clear demonstration of will. Now I think we are demonstrating will at the moment. I think the government is doing that. I'm not being critical of it. I am saying that slightly improving on that demonstration by going further, in some respect, than is expected, can have a very positive effect. We're coming here in the front, and then I'll come back. Peter, Carl Whelan from UCD. So I don't know if that's the next question. So you personally have made an enormous contribution towards the European Union being an area that has free movement of of of. You might just stand up for a second. Sure. Sure. You've made a contribution towards the European Union being an area that has free movement of goods and capital. Do you see as a possibility, if things go badly in Greece, let's say, that capital controls of some sort may need to be part of the armory to address any future crisis? Or is that simply not possible in modern financial markets? That's a bit above my pay grade. My own view is that it probably is impossible. But that's not to say that people won't try. It's not a good example to give, but we've recently seen the Schengen Agreement blown sky high by the introduction of border controls on people within the Schengen Agreement area. And that shows how ultimately febrile you are in the system of this kind, where as we see the demonstration of the nation state, which we've always recognized to be the core element of the community, even those of us who are integrationists, such as myself, that people will try. And I mean, it's inevitable that if you had a roll-out, a contagion effect, I need to go into the effect on national banking systems. Murphy, Peter, in terms of the existing bailout that's pressure coming on the government to sell a number of state assets, many people would argue it's not a great time to do that. The bailout partners want the Irish government to raise more than 2 billion euro. Just ask you for your view on that. Do you think it's actually significant enough money to actually begin to sell state assets in the current environment? And a second question, if I could, there's unsecured, unguaranteed bonds, senior bonds in Anglo and nationwide due to be repaid in the region of 3.5 billion euro over time, which is almost equivalent to the money that we would be raised in the next budget. Do you think they should be paid? What's your view? Well, in regard to the issue of privatization, first of all, if we are required under the bailout plan to take steps, we have to take those steps. That's the bottom line. The amount of money of support, which I've already cited, that we're getting is a demonstration of the requirements and that. I've always had the view that in regard to privatization, that it's not the business of the state to be running commercial entities, and I still hold to that position that they should regulate them. As to the timing of any privatization or partial privatization, obviously the state of the markets at any given time is a relevant issue. That's all I can say. And how the markets will evolve over the next three or four months, six months or a year, whatever time frame we might be talking about for whatever privatization may or may not be considered, is something really which is very difficult to call in advance. But I mean, I certainly don't reside from the position that the timing has to be related to market conditions. It absolutely does. It would be foolhardy to proceed with privatization at a time when you're not getting reasonable value for what you're putting up for sale. Sorry, the second part was, well, in regard to senior bondholders, I don't think that there is a question as to what we can or should do. It's not open for debate. We are funded absolutely on the basis because of the fear inter alia of contagion that we do not dispose of senior bondholders' rights and default on them. I mean, that debate is already taking place in the context of Greece. And the contagion effects are self-evident. So I think that that issue does not arise in terms of the authority to do what you've described. I don't think we have that authority. And I think that that's understandable. Roland? Yes, Peter, an insightful presentation. As usual, I'm not going to ask you a technical question, just a political question. No, it's just in relation to Germany. A great deal of sympathy for our German friends in some ways in the sense that one can see why they could oppose a euro bond without a fiscal union because we'd go back to the situation that led us to the crisis in the first place. You know, we could borrow virtually with impunity, if you like, at low interest rates. So obviously, without serious controls, that isn't going to happen. So really what I really want to put to you, the current situation is like a political accident in slow motion. You know, in a crisis, you always hope someone's in charge. And in Europe at the moment, no one's in charge. And that's what's so frightening about the present situation. So really what I want to ask the question is this. How are we going to break the logjam with Germany? It's clearly in Germany's long-term interests that they retain the euro. They retain the competitiveness that it gives them. Obviously, they do not want to give an unlimited guarantee to the rest of Europe without getting some guarantees in return. So how do we break that logjam? Now in fairness, you've made the point that we should be providing some kind of leadership in that regard, and I agree with you wholeheartedly. But really, without some kind of fiscal union, that's not going to happen. And even Gerhard Schroeder, the German chancellor who led Germany through the stability and growth pact in the first instance, actually called for something similar recently. So in Germany, there is some kind of consensus emerging. But I'm really asked the question, how do we break the logjam with Germany? And I would be most interested in your answer to that question. Thanks very much. Well, I have more than some sympathy for the German political situation. I don't think people here recognize what Germany has gone through in the whole context of the merger of East Germany with West Germany and the enormous price that was paid out of a sense of national obligation to bring together the people of Germany. Absolutely mind-boggling. I mean, people talk about the Marshall Plan. It's not remotely contextually the same as what Germany has already done. And those who read German papers tell me that there has been a constant and understandable recital of differentials between pay rates, et cetera, in this country or in Greece. And Mr. Stark, again, made this point, he was derided for it, but he made the point recently in his interview in the Irish Times. So I have significant understanding, which I think we should show for what Germany has done. I remember, I've got to be interrupted by the chair rightly myself for rambling, but I remember when the doubling of the structural funds took place, I was in the commission at the time. And I remember Jacques Dador coming in at the end of a meeting and threatening that we'd all have to resign if the doubling of the structural funds, which was meant to follow on the single European Act, didn't actually happen. And then I remember him telling me afterwards, we went out, the two of us afterwards, and he told me afterwards that he recalled, going over to, he recalled to me, going over to Chancellor Kohl and saying, you have to do it. And Chancellor Kohl said, well, if I have to do it for Europe, I'll do it for Europe, and he did it for Europe. And it was Germany that has done that time and time again over the decades. So before we get on our high horse about Germany, we should think back about some of the things that they have done. And we can imagine what the political ructions would be here if we were paying the bailout money to Germany or Greece or anywhere else. How are we going to get out of it? I'm not going to say we will muddle through, but I am saying that there is no magic wand in this situation. But what we have, I believe, is the ECB. And the ECB, however difficult it may be for council members in the mandate that it has, under Article III, I think, it's made clear that not merely financial stability, but the well-being of the European Union is part of the criteria under which it operates. And it is providing a backstop. In a way, I won't say, because I won't say that it could be taken as synthetic Euro bonds because that would be inaccurate too, but one could make the argument that it is doing a great deal at the moment. And secondly, I think that one can also see that there are various other things that can be done to enhance the functioning of the FSF and so on. And there are a whole range of different measures, including the biting on bullets in the peripheral countries, all of which have to be orchestrated and come together. And this will work. And I believe the Euro will be sustained. I believe the Euro is not going to collapse, but I am just expressing the view that we have to be part of that push. The question is actually the newly arrived German ambassador Dr. Erichhard Stuhlke. Thank you. Thank you. I forgot you were here. I was just going to say that to underline the stress, Peter is not on the payroll of the German government. Nor are we known to employ Scorptman sex as PR agents for the German government. But of course, the answer couldn't have been more convincing except that I may probably want to add that it wasn't just the unification process that we had to settle, but also we were in our own deep crisis in the first half of the last decade and we launched a very painful reform process. Actually, I worked for someone at the chancellor. We probably lost this job because of what he had to do in terms of what we called at that point the Agenda 2010. And we are now reaping the benefits of this rather painful reform process. So we have firsthand experience of what it takes to get through a crisis. But now we came out stronger than we went into the crisis and not least because of our own reform process, not just because the markets were telling us because but there was a determination resolve in my country, we can't go on like this. We have to do something and then we did do something and this is why a German economy is as strong as it is today. That was the comment. The question, first of all, I did notice the subtlety in the title of the talk. It says the current crisis in Europe rather than of Europe. And I'm very grateful to Peter to this because we are not, I don't think this is a crisis of Europe yet, but it can become a crisis of Europe. And that really is what is at stake. At stake is the European project as such. It's not just the eurozone, the eurozone turbulence, but the European project is at stake. And I think what is necessary to have a more convincing, to develop a more convincing narrative among ourselves of what this is, the European project, what it does to us and what actually we would miss if it were to fail. My two questions are the following. First question is, wouldn't you agree that part of the problem that we are facing now is the unfinished business of the financial crash? I.e., there are still out there institutions too big to fail. And part of the contagion risk is because there are still financial institutions too big to fail. And this makes it all the more difficult to address our present problems in the eurozone. The second common question is, you talked about competitiveness and rightly so. At the end of the talk, though, you focused on fiscal discipline. For us, it's a dual challenge. It's fiscal discipline and, going back to my earlier comment, regaining, maintaining competitiveness, not just in Europe, but in the global market. Because today, the benchmark is not Europe. The benchmark is China. Well, clearly the answer to both your questions is yes. I mean, what Germany did in terms of recalibrating its competitiveness environment with the agreement and support of the social partners in a real way rather than a face-saving way was vital to where Germany is today. It reduced its costs. I seriously believe that we have to learn and provide a mechanism for comparison between ourselves and others in terms of cost right across the board. We don't know, after time, that we're paying far too much for X or too Y. We don't know. But that has to be done, I think. Sorry. Yep. That's not to ask you a nasty question that you might like to hear. I think I just want to go a little bit beyond, let's say, the current crisis. And let's all get through that and get on from that. And let's say we roll the clock forward about 10 years. What do you think the impact of having gone through this process of crisis within Europe will have ungovernance and the balance of power within Europe? Do you think it will fundamentally change that? And will it, linking back to the last question, will it mean that Europe looks at the financial markets in a rather different way to, let's say, the way it might have looked at them five years ago before all this got underway? Well, in a way, it seems to me that this is a once-off opportunity for us at a domestic level to get a number of things right. This is easy for me to say. It's very difficult for politicians to deliver. It really is a moment of truth for whether our system can adapt to the changes that are necessary to bring us back into a competitive state of competitiveness, which is provided for not merely by the adjustments in wages, some of which we've had, but by a recognition, by vested interests, that we have to have a competitive system in the professions, as well as in the companies and the trade unions. And the vested interests around the country have to be faced down by government. That's the only way that this can happen. With regard to whether this is going to have an effect on the European integration system, I think it is going to have an effect on European integration. And it's not because I'm a fervent integrationist, I say it, but simply because, as I said in my speech, it's the only way that the system survives, that we start cooperating with each other in a way which goes a little bit beyond the rhetoric that is announced after European councils. We have to have structures, and we have to use the institutions properly, including the ECB. We bring them to Trinity College. First, I'd like to say to you, Peter, how refreshing it was to hear you highlight all the positive benefits flowing from the euro. I mean, if one is to listen to the discourse both locally and across the water and in a broader global sense, one would imagine that the euro is this huge albatross that's dragging us all down when, in fact, as you've highlighted from the point of view of consumers, from the point of view of companies, and so on, the euro has been immensely beneficial. And likewise, with the ambassador emphasizing that the narrative around the European project has somehow got tainted. And we need to, as it were, rescue the narrative and reframe the narrative so that the benefits that flow from the euro and the main sense of the euro, the benefits that have flown from the euro project thus far and the potential benefits are out there in front. In a sense, I think the narrative has been hijacked. And I don't know what or who can contribute to a restoring of the narrative, but I think it's tremendously important. My question then is, you mentioned how this is not just a crisis in Europe, but it is a global crisis. And so I'm wondering, is there a role for others outside the European sphere in resolving the crisis or in addressing the crisis? For example, at the moment Russia seems to be on the point of rescuing bailing out Cyprus. There's been a lot of talk of China contributing to, in some way, to the euro situation. What's your view on that? I think that the answer is, and Obama said it in the last week, we have to solve our own problems. I mean, if one can hypothetically imagine a minister for finance from one of the countries in the periphery visiting Beijing and asking Beijing to buy the bonds of that company, country, one could imagine the reply, why don't you ask Germany or the Netherlands or somebody else, why do you come here? This is our problem. It's our issue. We have to solve it. And in a micro level, we have to solve or contribute significantly to solving our own domestic problem as well. So I don't think that there is a panacea other than for motives of subsequent profit, which there may well be in buying bonds at inflated levels, which are in fact going to be repaid rather than reflecting the risk which you're getting the enormous interest rate for. OK? Paul Gillespie from the Institute. You've spoken about the distinction between constitutional and legal responses to the crisis. You spoke about incrementalism as a method, a typical method of development. And you've spoken about market credibility as a big factor not only for Ireland, but for the system as a whole. And looking at that system as a whole, I wonder, do you think that it needs to go beyond that incrementalism to look at two or three pretty radical steps, that is towards euro bonds, that is collectivizing risk, and towards a system of orderly default within the euro zone, precisely to satisfy the issue of market credibility, even if it raises from the Irish and more general point of view the issue of a further treaty change. Or is it too soon to talk about that, and perhaps too soon in the sense of the timescale that you outlined between short term, medium term? But a lot of the market and political response now, and including the global political response, seems to be concluding that such steps are necessary to restore credibility. I wonder what your view is. Well, I think that with regard to your question, it depends on precisely the issue that you're talking about. With regard to euro bonds, I think that there is a move which is gradually moving towards euro bonds as a solution. I haven't a clear answer as to the effect of the constitutional court judgment on the issue of euro bonds, but I think it has implications for having just read the account and the accounts of it, rather than having heard any legal opinion as to what it requires in future. So what I'm really saying is that anything that involves constitutional change in terms of referenda is something that politically, the European Council, I think will be reluctant to embrace precisely because we made such a horrific error in our decision on the Lisbon Treaty the first time, which has raised, perhaps you can say, others would have done the same had they had the chance of voting on it. But yeah, they did, they did, they did, but only in a way. I think our first debate was pathetic in terms of the way that we covered the issues. And when they were covered properly the second time round, it was passed relatively easily because there was a great momentum and people who were prepared to debate it fully and so on. But I think that the danger of all of these issues is to deal with it generically, Paul, is very difficult. You have to look at what precisely the proposal is and where the political soft part is. And all I can say is that in this country, what we have to ensure is that our debate is based on logic, not on populism. Alan Duke's a member of the Institute. I don't like to sound a non-necessarily contentious note at the end, but I think there are some things we should remember. I agree with Peter's analysis and with his prescription in so far as that goes. I would have to point out in parenthesis that although clearly Germany has paid a huge role in bringing us as far as we've gone, it is an existential fact in any mutual endeavor that the strongest have to do most of the heavy lifting. It is also a matter of history that while the rest of us clearly and enthusiastically supported German reunification, it also cost us quite a bit over a period of years because Germany was borrowing so much from the markets that we all paid a little bit more for it. So don't let's beat ourselves up too much about that. A scenario that I see is the following. It will become clear quite soon that the Greek situation is unsustainable. A second time around, extension of maturities and another half-hearted attempt at private sector involvement will not work just as it hasn't really worked up to now. And we will be faced with a much harder outcome from the Greek situation. If we are to avoid contagion from that, we need to build ways to prevent that contagion happening. We are prevented from doing that because the debate in the European Union up to now has been taken over by the heads of state and government of the two largest member states who have now virtually taken on the role of the European institutions and the European Council. And each is almost entirely driven by short-term electoral considerations. How do we get out of that bound? Well, I don't agree with the number of premises in what you said. I mean, you're quite right on your first point about Germany. Germany has been a big, big winner. It's a driving economy, but I think it's been driven significantly by competitiveness improvements as well as the opportunities afforded by the internal market and so on. But so have we. I mean, I don't think you can blame Germany for being in a more efficient situation than we are and taking on some of the vested interests that had to be taken on, including the lander in significant respects, driven by decisions by the European Commission and the Court of Justice. It should be said. With regard to the Greek situation, everybody must accept that the Greek situation is extremely grave. I'm not going to make a prophecy about when and how a final denouement in one way or another will take place. I don't think it's helpful just to make a speculative remark about that. Obviously, time is important from a whole range of situations, including the issue of how to respond if that event were to happen in terms of the domestic banking systems and the effects of the domestic banking systems and in some of the major states, because there may be exposure. There is exposure, as we know. And we've seen the effects in recent days in some of the share prices. So I think time is an important factor in this. It may appear to be muddling through, but we're gradually getting to a situation where, for an example, if the EFSF has a capacity, either through some form of insurance or other forms of borrowing, in effect becoming a bank-like facility itself, you could see the total amount available greatly increasing. There are a number of avenues that can be explored, but they're going to have to take time. So I don't think that there's any way that we can have a dramatic gesture that somehow will deal with things, as to Germany seeming to be leading with France and meetings in coastal towns of France and so on taking place. It's an interesting criticism, because the criticism I hear most is, why isn't Germany leading? I mean, you're saying Germany and France are trying to take the leadership. Most people are saying, we're not getting anything like enough leadership from Germany. And I must say, I'm in the second camp. Michael McDool, would you agree with me, Peter, that it's remarkable looking back to the single currency, that the architecture of the European Central Bank was so light and so inadequate? And would you agree with me that, while you say that taxation harmonization is not part of fiscal union as you see it, that really we have got to the point where the central banking function, which was so awful in this country, is one where the member states really should pool sovereignty and bring about serious integration, that there is one central bank, one EFSF-type institution, which has simply local offices in the various member states. And in that context, do you think that the resistance to that would come from the peripherals or from Allen's to Boug Bear's? The Bundesbank certainly wouldn't like to be seen as relegated to a subsidiary role. I agree. But I mean, I would say to you, this, Michael, that it seems to me that the power given to the ECB, whether intended or not, because of the framing of the statutes which govern it, is in fact proving so wide as to enable it to be a lender of last resort, which is exactly what it is doing, which is no different from what the Fed would be doing in these circumstances. So I think we have, in fact, reached a stage with the ECB, whether by design or otherwise, that it is the failsafe mechanism that is holding everything together. And in fact, it is the perception, potentially, of the power of the ECB that may help us to resolve the situation because it must be having a very serious effect on markets, because market players must be thinking, well, where is this all going? Because we may intend to blow up the euro and have a SARS moment in terms of sterling and so on. But the reality is, it seems to me, that they must also be saying, well, wait every second. We've got the FSF, which people say can be quadrupled, perhaps, by some mechanism to make it a 2 trillion pot. We've got the ECB, who seem to be buying up bombs everywhere when they can't be sold on markets. What are we doing? How can we rely on this whole system imploding? And I think they may be concluding that they can't. So maybe the uncertainty that you suggest was there from the beginning, whether it was intended or not, is working to the advantage of sanity in markets today. OK? Thank you. Thank you.