. indeed, as late as november 17, senior ecb officials rebuffed my suggestion that i should publicly declare that the ecb would continue to support the irish banks. bis central bankers ’ speeches the programme structure the programme finally agreed with the troika largely reflected the 4 - year budgetary plan published by the government at the outset of the negotiations. indeed, the target date for reaching the threshold deficit level of 3 per cent of gdp was pushed back in the negotiations to 2015. but would the implied degree of “ fiscal austerity ” be sufficient to bring the public finances back on to a sustainable path? here the remaining question - mark over the banking system was key. 11 the programme included the requirement for a new and much more comprehensive stress test of the banks, capitalization of the banks up to an even higher standard than before, and a programme of rapid deleveraging of the banks. provision was made in the programme ’ s financial envelope for up to €35 billion in cash to be borrowed by the government and injected into the banks if it proved necessary following the stress test. the central bank shared the view of other irish officials that, if €35 billion were really needed for that purpose, debt sustainability of the irish government would be likely unattainable. 12 indeed, the central bank found the financial terms of the programme unsatisfactory especially in regard to the high interest rates and the lack of an insurance mechanism against tail risks in the banks. 13 nevertheless, having set out these concerns, i advised the government in writing that it should proceed on the basis of the programme, given that the alternative of struggling forward without access to market finance would have been more economically damaging. if the programme proved unable to deliver a sustainable debt path ( as seemed possible, even likely 14 ) then it could be renegotiated. the spending and tax adjustments that would have been needed if programme funding was not available would be much more severe. mar a deir an seanfhocal “ ni he la na gaoithe la na scolb. ” better financing conditions help make the programme a success fortunately, there were subsequent considerable improvements in the terms of financing, not least through the reduction in eu interest rates ( from an initial level of about 5. 8 per cent per annum ) and lengthening of the loan maturities, and subsequently through the financial arrangements around the liquidation of ibrc. these improvements, combined with close adherence to the budgetary targets in the following three

this figure will change from time to time as the investments are revalued or realized. any profit of nama, or from the ibrc liquidation will also serve to lower the estimate. 19 it is noteworthy that the net figure is about the same as the aggregate haircut on the nama purchases of property - related loans : had there been no losses on those, the net fiscal cost of the assumption of banking liabilities would have been small. in other words, the main banks had enough precrisis capital ( €28 bn between the top two ) to absorb the actual and prospective losses on residential mortgages. • loan losses of the banks. this is another potential cost figure. banks normally incur only very small loan losses. in this crisis the losses of irish banks and foreign banks operating in ireland greatly exceeded the figure noted under ( a ) insofar as they burned through all of their equity capital ( thereby imposing sizable losses on private shareholders ) and much of their subordinated debt. as i have already mentioned in public several times, the overall figure here is well in excess of €100bn. ( to be sure, the banks had made unsustainable profits in the boom years ). • overall economic cost to ireland of the banking boom and bust. of course ( a ) and ( b ) are only partial views of the overall costs. the boom brought some transitory prosperity even to those not directly involved in construction or property ; the bust threw many out of work and imposed losses on many irish people other than those that came through the losses on bank loans. and of course a sizable part of the economic downturn 2008 – 12 was not home - grown but attributable to the global financial crisis. in order to get an overall cost to ireland of the ireland - specific banking boom and bust we would need to model how the economy might have performed in it is worth noting that this sum is much smaller than the total amount of fiscal belt - tightening that has occurred since the end of the boom. comparing tax and spending policies now with those in 2008, cumulative “ austerity ” savings of about €150 billion have been put in place. this sum continues to grow at close to €30 billion per annum ( cf. the chart in honohan, 2015c ). the large crisis and post - crisis period profits of the central bank ( €8 bn between 2009 and 2014 ) could also be considered an additional offset to the net fiscal costs