equity, and discounted debt buybacks. still, it is pretty clear that the government will be acquiring additional equity stakes. while i ’ m not yet in a position to put a number on it, i can say that the overall net cost to the state of recapitalisation will be manageable. indeed, the recapitalisation will ensure that the banks are clearly seen as strong, financially self - reliant entities able to fund themselves in the market into the future. by the same token, the overhang of the banking situation on the state ’ s finances will be removed. these transactions are thus a key ingredient in moving both the banking and the budgetary situation forward. as the market digests and acknowledges these new realities, we can expect a further tightening of borrowing spreads. this may all seem a little removed from your immediate preoccupation, which is the job market. but i think you will agree that an overall economic pick - up in ireland offers the best route to improved job prospects here for yourselves, and that pick - up will depend on a speedy resolution of the budgetary and banking problems. those of you who have the ambition and capacity to start on a career of entrepreneurship have an even more direct interest in ensuring that the banks are functioning providers of credit. i think it ’ s fair to say – and what data we have seems to bear this out – that banks in ireland have reacted to their own difficulties and to the downturn by greatly reducing their risk appetite. some of this was a necessary adjustment, but the result has been limited availability of credit for start - up firms and smes. indeed, i have the impression that, during the years of property - based lending, the banks have lost their edge in small business lending. this is something that they need to pay more attention to, not just for the sake of the economy, but for their own business performance in the years ahead when property - based lending will be on a much more limited scale. a number of new initiatives have been floated in this regard. it is important that the banks get going now on improving their techniques for making sound small business loans. at the aggregate level, the pace of economic activity and the trend in unemployment still remain weak. the decline in aggregate income is bottoming out, but ( in the second quarter of 2010 ) at a level perhaps 16 per cent lower than at the peak. ( that ’ s gnp : economic activity, measured by gdp it is about

11 per cent down ). unemployment we think will continue to rise somewhat during 2010, though a reversal of net migration flows will serve to limit this. the current recession has resulted in a significant deterioration in the labour market position of the young in the worst affected countries. in germany, the unemployment rate has hardly moved during the recession, whether at the aggregate level or among the under - 25s. in the usa, which has seen its aggregate unemployment rate double from about 5 to about 10 per cent, youth unemployment went up only slightly faster from 12 to 19 per cent. but in ireland youth unemployment has jumped from less than 10 per cent to over 31 per cent in the past two years – much faster than the aggregate rate which has gone from 4. 7 to 13. 3 per cent. ( spain has had an even worse experience ). this has to be turned around : and that will require determination. some lessons can be learnt from past experience here. this is the fourth major recession i have lived through, though i was only in primary school for the dip of the mid - 1950s which prompted the sea - change in economic policy and gave us the outward - looking globalised society we live in today. globalisation has allowed us to converge in average living standards to the european frontier, but globalisation also does seem to be associated with heightened volatility, and the depth of the current downturn reflects the over - heated expansion that preceded it, which in turn was fuelled by credit sucked - in to ireland all too readily from the globalised financial system. in short, we did not manage our engagement with the global economy in a manner consistent with stable growth. but if globalised economies can fall far, their recovery can also be vigorous. the spectacular recovery of employment and fall in unemployment after the deep recession of the mid - 1980s has rightly been attributed among other things to the wage restraint that characterized the social partnership from 1987 on. wage restraint is all the more important now, when price levels have been falling, with the result that nominal wage rates that might have been viable a couple of years ago, no longer make commercial sense. the problem is even worse because of the unsustainable upward drift in wages that occurred in the mid 2000s. i am sorry to bang on about this, but central banks aim at overall price stability to help ensure that wage and price planning can be carried out in a manner that ensures stable growth. when, as in ireland today, inflation undershoots