##tailed wrenching economic, financial and social change. and the path has not been smooth. indeed, about one - and - ahalf years ago the economy was close to cardiac arrest. the patient required life support – kept alive with the substantial assistance from international lenders, as well as the continued levels of extraordinary support from the eurosystem. but progress since then has been good : the programme is on track. so far, ireland has delivered. i am confident it can be a “ success story ”. nonetheless, substantial challenges remain. ambitious structural and financial reforms are still needed : to put unemployment on a downward trajectory ; to ensure that government finances are put on a sustainable path ; and to secure a banking sector that can stand on its own feet again and support the irish economy. bis central bankers ’ speeches and that last item – financial sector repair – is absolutely crucial. the support from the eurosystem in the form of monetary policy and emergency liquidity loans to irish banks has been extraordinary by any measure. with these considerations in mind, i would like today to start by considering, first, the origins of the crisis. i will then discuss some macro - fiscal aspects of the adjustment process. however, i want to spend the majority of my remarks discussing, thirdly, financial sector issues and the role of the ecb. i would like to present a clear view on how the ecb has supported ireland through the adjustment process, working as a true partner to help this country resolve its problems. 1. the origins of the crisis a somewhat colloquial, description is that when the bubble burst, the economy was lacking competitiveness, that it was unfit and overweight. is that really a fair description of the irish economy around 2007? it is perhaps a little harsh – it clearly misses some of the important strengths that still underpin the irish economy and which will be crucial components of the recovery in the years to come. yet we can see many elements of the irish situation in the years 2007 and 2008 in that description. lacking competitiveness : clearly, wages and prices had risen much too fast since the start of monetary union. from 2000 until 2008 wages ( compensation per employee ) in ireland increased on average by nearly 6 % per year, more than twice the rate seen in the euro area. this eroded ireland ’ s competitive position. unit labour costs had risen by 50 % between 1998 and 2008 while they had risen by only 19 % in the euro area during the same time

its treaty mandate, and this is above all to secure price stability in the euro area as a whole, which consists of 17 countries. and there are clear limits to what the central bank is entitled or even able to do. it is impossible for the ecb to provide guarantees or assurances concerning future funding amounts or interest rates over the medium term. certain tasks should and can in europe only be dealt with by the member states, and not by the ecb or the central bank of ireland. our common objective therefore must be to reduce over time the reliance of irish banks on central bank funding and in particular on the emergency liquidity assistance. the irish government has the capacity to further consolidate and implement the necessary reforms, so that there will be no lingering doubts about the sustainability of government debt. i am thus confident that ireland will continue to fully implement the necessary adjustment and reforms, and that on this basis, member states will continue to show solidarity towards ireland. i understand that minister noonan has said that champagne corks will be popped on the night the troika leaves dublin. as long as ireland continues to implement fully its programme and preserves its credibility as a state that honours all its obligations, i think that day will come in the not too long future, at the end of this programme in 2013. and what will the ecb be doing on the day the troika returns home? well, we won ’ t perhaps be engaging in similarly wild celebrations – we are central bankers, after all. but i suspect that i, and my fellow board members, may raise a quiet toast to the achievement of a country in so admirably fighting its way back to solvency and stability. i wish you continued success in meeting that goal and we stand ready to work with you in achieving this goal. bis central bankers ’ speeches