 Deputy Matthews, ladies and gentlemen, I'm delighted to be here and to have had the opportunity of addressing a conference that is really well-timed, I have to say, well-timed to ensure that the speakers have the greatest possible difficulty in preparing their speeches because everything has changed, it would appear overnight. Anyway, we're asked six relevant questions to address this conference. These concern the fiscal union and the political challenges facing that, budget surveillance and coordination in Europe, can the euro be secured, the balance sheet problems of banks, how Ireland has responded to the crisis and, you know, the prospects going forward for Ireland. And I'm supposed to talk about what Ireland might learn from the crisis. Well, I think what Ireland might learn from the crisis is exactly what everybody else should learn. I don't think there's anything particularly distinctive in our necessary learnings from this crisis apart, different from what, you know, Californians should learn about the housing bubble there or Spaniards should learn from the housing bubble there. The lessons are similar across the board. I'd like to say that I think the underlying cause of the difficulty we face at the moment is not primarily to do with finance. It manifests itself through finance, but its origins are much deeper and unless we address the origins of the problem, I think we are at risk of applying the wrong cure or at least criticizing the wrong people. My sense of it is that we, in the advanced world, in which I include North America, Japan and Western Europe, have constructed a welfare state in the period from, I suppose, the mid-1950s on that was based on that part of the world, the advanced world which includes Japan, having essentially a capacity to dominate the technologically advanced global market. And on the back of that and on the back also of exchange controls and capital controls and so forth, being able to have a secure tax base that was capable of supporting the welfare state that had been created over that period. Now since 1990, in my opinion, two of the essential supports for that system have been removed. First of all, we've moved from a situation where we, the billion people who live in the advanced world who monopolize the world up to around 1990 or perhaps even up to 2000, no longer monopolize it. There's now somewhere in the region of three to four billion people who have access to this same market and who can produce, thanks to containerization, thanks to information technology, thanks to the speed at which ideas can communicate themselves and products can be designed. Today now compete on almost level terms with us, with our sole advantage being that we have intellectual property in some of the things that have made us wealthy, but even that intellectual property will run out. So relatively speaking, we are poorer and therefore our tax base to support the welfare system has contracted. Likewise, globalization with its free movement of goods and people has made it easier for people to avoid tax, either by moving themselves or their money to another lower tax jurisdiction. So essentially the tax base has been contracted because of the loss of our sort of semi-monopoly on the market that we enjoyed up to 1990 because of the entry of China, Brazil, India, Eastern Europe and all these other competitors into the market. And our, but meanwhile, as we age in the West, the demands that are being made on our various entitlement programs are substantially increasing. So you have reduced capacity to raise money and increased demands for money. Now we were able, if you like, to anesthetize ourselves to the underlying pain of this development through the creative expansion of credit in the wake of Greenspan's activities to mitigate the effects of 9-11 and mitigate the so-called dot-com bubble and so forth. And we had very, very, very low interest rates, very, very creative activity by investors and banks to sort of make the elastic stretch longer and further. Now eventually that snapped and the anesthetic didn't just wear off, the anesthetic was removed overnight essentially and the underlying loss of our capacity to live up to the promises that we've been making to ourselves in the developed world has disappeared. So, and that's now manifested itself, first in a banking crisis and now in a sovereign debt crisis. In Europe, because we essentially have a gold standard type currency, in other words you can't inflate your debts away as easily in Europe as you can do in the United States or in Britain, we're feeling the pain first. But the pain is going to be felt just as much in the United States and in Japan as it is being felt in Europe today because ultimately all that their capacity to let the value of their currency or the print money does is prolong the period before the anesthetic fully wears off but it doesn't reduce the pain. What does Ireland need to do to face up to the consequences of this? And I think we need to make sure that we adjust fairly. That means keeping the social solidarity which is one of the great strengths of Ireland. Our economic growth is due and in particular our recovery is due in the last two to three years to the willingness of people to cooperate in businesses of unions, our non-union employees to cooperate with management to make sure that businesses became competitive. And that's because there's an underlying sense that we're all in this together in this country. We've got to preserve that and that means that we've got to ensure that the adjustment that we undertake is fair. Therefore we need to broaden the tax base, we need to make sure the taxes are collected and we shouldn't rule anything out as part of that side of the equation but equally we need to redesign the spending side to ensure that incentives are preserved and the burden falls on everybody but particularly on the backs that are best capable of bearing that burden and that there is relative equity between generations. This is a very complex exercise to achieve and I don't think it will be achieved in any one budget but I think the criteria are more than just financial. The criteria have to be ones that have that holistic approach that the underlying social consensus in Ireland is preserved. What do we need to do to get out of the situation? Well we need to continue to enhance our export capacity and we need to ensure that our nominal GDP grows faster than the interest rate we're paying, simple as that. If our nominal GDP is going faster than the interest rate, well our deaths will gradually reduce. On the other hand if our nominal GDP is going slower than our interest rate, we're in a debt trap which will just get bigger and bigger. So it's quite a simple calculation, not so easy to do. To come now to the six questions that were asked, I'd like to just say something about these. First one about a fiscal union and the banking union. Well at the end of the day a banking union requires a fiscal union because you can have all the amount of deposit guarantee schemes and so forth between the banks and you can put the deposit guarantee schemes together and you can create a resolution fund contributed to by the banks but at the end of the day there needs to be a tax base standing behind all of that and I think we're probably going to need sooner or later to develop. A European tax base that will sort of self-generate revenue so that there's something standing behind this. That doesn't mean that everything has to be centralized. In the United States, states of the United States have taxing power but there's also federal taxation. We just need to have appropriate levels of revenue for the different responsibilities that have to be borne at the different levels of government within the fiscal union. It also requires however a form of democratic legitimation. I had the opportunity of looking at the proposed paper that is now I think being considered at the summit prepared by the four presidents and we don't do things by half. We have four presidents in the European Union at least who have met to give their presidential blessing and not one of them has been elected by the people. These four presidents have come up with the idea that we can have more democratic legitimacy by in some way giving more power to the European Parliament and involving national parliamentarians. Not good enough. Not good enough at all to give Europeans a sense that they have some capacity to influence the direction of Europe or at the very least if they're not satisfied with the people who are running the European Union to get rid of them and replace them with somebody else. Nobody feels when they go to vote in the European Parliament election that they can change the government of Europe. They do have that feeling when they go to vote in a national or local election. They can change the majority in Dublin City Corporation or they can change the majority in the DAW. You don't have that sense at the time of the European election. And until people have that sense that they can put an impulse into the system and that they're all discussing that as much in Romania as we're discussing it in Ireland as this has been discussed in Spain. They were all being asked the same question. You won't have democratic legitimacy for this fiscal union. So I believe that we don't need four presidents. We probably need two at most. But one of them at least should be directly elected by the people. And that is significantly absent from the Van Rompuy proposals. Even though it is party policy for the Christian Democratic Union of Germany, the biggest political party in Europe. Why the Germans were not able to get that into the Van Rompuy proposals? I don't know. But the Germans are right and Van Rompuy is wrong if he thinks that his proposals are sufficient as far as democratic legitimacy is concerned. Secondly, what can we learn from, you know, what about budget and cooperative national budgetary policy? What can that contribute? I think it can contribute a lot because we can learn a lot from one another. If we had comparative information about levels of salary for Taoiseach or levels of salary for consultants or levels of pension for former Taoiseach even, or any of the things you want to mention, welfare rates. If we had information across all 27 countries and if we had information about how things can be achieved less expensively in other countries than they're achieved in this country, we can learn a lot from one another. We should not see this process of multilateral surveillance of budgets as threatening, but rather we should see it as a resource for getting better ideas to give the citizens a better service at a more effective cost. And I think that should be with the goal we should pursue. Thirdly, can the euro be secured? And what's the future of central banking? Well, I think we're going to have a single central bank with whatever it is, 26 branch offices. That's what we've agreed already. Of course, the euro can be secured. The possibility of the euro failing is so awful and its confidence destroying effects would be so massive that the euro will survive. It will survive and it will be stronger. But it's simply a question of getting there and making the decisions. And I think Barbara put it well when she talked about the amount of things that the European Union has done. If you were to compare the legislative output of the European Union since the crisis, with the legislative output of the US Congress since the crisis began with Lehman Brothers falling, our legislative output here in Europe is at least as good, even though we're 27 different countries, doing a lot of the things by unanimity between the 27 countries, whereas they operate on a majority system in two houses, in a single state speaking the same language. And we have, I don't know how many languages we speak in the European Union. So I think we haven't been doing too badly in the European Union as far as making the sort of decisions that need to be made. Forty, can the balance sheet problems of the banks be dealt with? And do we need a banking union? I think it's interesting just to look at the terms in this context of the announcement that was made at whatever it was, five or talk this morning. It does refer to the ESM providing funds for banks, but it says that these would be institution-specific, sector-specific, or economy-wide. That probably means that they won't invest in any old bank. They'll only put money into banks that they're satisfied, they ought to be putting money into. So it's not a blank check for anybody. This is going to be, I'd say, quite a critical process, and it will depend on the sovereign adhering to the conditions that the sovereign has agreed to adhere to for it to happen. It won't happen just like that. There's no manner I believe going to come down from heaven on our banks and just wish away their problems. But I think it is the right step because it is separating the problems of the sovereign from the problems of the banks, and that's something that needs to be done. We also need to get a grip on the problems of banking in Europe. I'm not saying this in official capacity, obviously, but if you compare the United States with the European Union, we have about twice as much banking as they have because they have other ways of raising corporate finance, which we don't have in Europe, because we don't have a single financial market in Europe. Companies can raise money by bonds, issuing their own bonds rather than borrowing from banks. So I think we're probably going to see a contraction in the scale of banking in Europe as a whole, and we're also going to see, by creating a single banking market in Europe, a resolution to the too big to fail problem. Virtually no bank is small enough to be allowed to fail nowadays if it's situated in an individual country of the 27th. But if you create a single market of 500 million people, even the biggest bank, if it's badly managed, may well be one that you could allow to go out of business in an orderly fashion. And that should be the goal, because banking ultimately should be a business, like other businesses in many respects, including the commercial disciplines that failure creates. Because if you have any business that feels that it cannot be ever allowed to fail, that business is liable not to be run as a business ought to be run, and banking is a business. Fifth question, and I recognize Alain Lama-Stour arriving. Welcome, Alain. How has Ireland responded to the crisis? I think Ireland has responded very well. And I think what we have seen, in fact, is that the Irish administrative and governmental system works, that when governments make decisions, and I think the previous government made a lot of important decisions in the last year and a half, and the current government has made equally important decisions in its term of office, when Irish government makes decisions, something actually happens afterwards. It seems that in some other European countries that isn't the case, and that has led to a lot of loss of trust in the politicians making the decisions. So I think our administrative system, perhaps not, our legal system too, and some of the impatience that there is about today's is only a tribute to the fact that our legal system takes care, to be fair, to people, and that's something we should not give up too lightly. But our governmental system, and this is a tribute, I think, to the public service, as well as to the politicians of all parties, does work in this country. We can get ourselves into a colossal mess as we did, but we do have a capacity to get out of it. One of the prospects, this is the last question, the six, which I know you've been thinking about all night, and one of the prospects for Ireland's recovery. I came across interesting statistics here on this topic, which were from the OECD. And the OECD did some analysis of what they think was the growth potential of different European countries in the period from 2016 to 2025. Some of you may be aware of these figures, but I found them quite startling when I read them for the first time. It's said that between 2016 and 2025, Ireland had a growth potential of 2.7% per annum, but Germany had a growth potential of only 1.2% per annum. Because of the different age profile in Germany, the sectors that we are in, which are not particularly cyclical, pharmaceuticals, medical devices, and so forth, by comparison with the motor industry, which is highly cyclical, which is the big German industry. And interestingly enough, Spain has a growth potential in that period according to the OECD of 2.3%, whereas the Netherlands has only got a growth potential of 1.4%, and Italy 1.5%, and Greece 1.5%. And I think that these differences within the European Union about growth potential present a very different picture to the ones that the markets are getting terribly excited about at the present time. Spain, it would appear, has the capacity to recover. Italy has a bigger problem. And as I said, the key issue for success is your nominal GDP growing faster than your interest rate. Well, Germany's GDP is likely to go as I say at 1.2%, which explains why Germany has to be careful. Perhaps a little bit more careful than other countries with higher growth potential. And what I found on this side is the point I'm going to conclude upon. What I have found dispiriting about this whole crisis is the extent to which our thinking is imprisoned in our own national debate. We only think, and if you look at the papers discussing even today, we in this country only think about what's in this for Ireland in terms of getting a reduction in the interest rate on our debt or getting someone else to look after the recapitalization of banks. We don't ask ourselves, what does this mean for Germany? We don't ask ourselves, what does this mean for Greece? Equally, the Greeks don't ask themselves much about the problems of France. And I feel at times the French don't think an awful lot about the problems of Germany. Some of the suggestions that are being made were made by the currently elected president of France, involved the imposition of significant contingent costs in Germany, but no contingent commensurate contribution from France. Which brings me back to the point I made in the middle of my speech. If this project is to work, we've got to start all of us thinking as Europeans. And that's not going to happen overnight. It's not going to happen by having a single European newspaper. It's not going to happen either, I think, even if we all spoke and read the same language. It will happen if we have an election because elections are educational experiences. People learn from the horse race that is an election. And if we had a presidential election and we knew, let's say there was a French candidate standing, perhaps Alain Lamosur would be an ideal candidate for this, was standing and we were wanting to see him elected. We would know and learn in our support for him that he had to get votes in Greece too. He had to get votes in Spain. And in our support of him, we would have to learn and it would become critical to us to get him elected that we actually understood and sympathised with the problems of the other countries in Europe. That's completely absent at the moment. And the European Parliament, which is not really a European Parliament, it's a set of representatives of 27 different countries elected in 27 different national elections who even divide out the jobs within the European Parliament on the basis of national quotas. Something they wouldn't allow anywhere else. But when it comes to deciding who's chairman of whatever committee, it's France's turn or it's Ireland's turn to get this particular job. That approach is not a European approach. We need genuine European thinking and that's why I believe we need a European presidential election not simply because of what the president would do, not simply because of the democratic legitimacy that such an election would confer, but because it would be an educational exercise that would create the sense of mutual identity and mutual understanding without which a political and fiscal union won't work.