in 2010 – and which were recorded promptly in the general government deficit prepared in the autumn of that year – that was the wake - up call focusing global attention on the fragile fiscal situation and brought forward the need for action urgently. but redressing the emergent deficit in day - to - day spending was actually going to require a much larger adjustment in government revenue and spending ( not least because of the degree to which boom - time tax revenue fell off ). by 2013, the spending and revenue measures that had been adopted totalled almost €30 billion per annum, whereas the total outlay on bank recapitalisation came to a one - off €64 billion, of which at least a third should be recoverable as the banks are sold off again ( figures 2 and 3 shows the relative size of fiscal policy tightening since 2007 and the fiscal cost of bailing out bank creditors ). myth 3 : “ the bailout caused the irish recession. ” there is a danger that some such proposition – preposterous though it would have seemed to any contemporary observer at the time of the bailout – has gained some traction among latecomers to the ireland case. a glance at charts of output or employment confirms that the economy had already pretty much hit bottom by the time of the bailout. at most it could be discussed whether the terms of the bailout and indeed wider euro area policies at the time might have delayed the recovery relative to some other set of policies. the same charts also show that the irish downturn – led by an exceptional construction crunch – was well under way by the time of the notorious bank guarantee ( which was granted just a couple of weeks after the lehman bankruptcy ) ( figures 4 – 7 show the time - line on relevant macro indicators ). the institutions and sovereignty fact 2 : “ the imf agreed to endorse a programme which risked debt unsustainability, justifying this by the need to avoid spillover effects on other countries. ” the irish authorities agreed to the eu - imf programme despite sharing doubts as to its sustainability on the grounds that it represented the best short - term course of action for ireland 1 and left open the possibility of later relief, which in due course came, not least through the reduction in eu interest rates ( from an initial level of 5. 8 per cent per annum ) and lengthening of the loan maturities, and subsequently through the financial arrangements around the liquidation of the failed bank ibrc ( successor to the notorious anglo

patrick honohan : reconciling diverse interests in an international stabilisation programme – some thoughts about the eu - imf programme for ireland, november 2010 remarks by mr patrick honohan, governor of the central bank of ireland, prepared for the session “ politics by other means? eurozone institutions and national sovereignty in the bank bailout negotiations ” at the inet annual conference “ liberte, egalite, fragilite ”, paris, 9 april 2015. * * * the charts can be found at the central bank of ireland ’ s website ( http : / / www. centralbank. ie / press - area / speeches / pages / remarksbygovernorpatrickhonohanfortheinetannualconferenceliberteegalitefragilite. aspx ). introduction the eu - imf programme of financial assistance for ireland, negotiated in november 2010 and involving a three - year disbursement schedule subject to policy conditionality of €67. 5 billion in funds from the imf and european partners – a sum just shy of 50 % of that year ’ s irish gnp – has attracted much comment, some of which is spot on, some mythical. in line with the topic of the session i will address the role of european institutions in the stabilisation programme and the impact on national sovereignty, but i will start by identifying some neglected or disputed truths – and exposing a few myths – about the crisis in ireland that led to the need for the bailout, before turning to the role of the lending institutions. of course the issues are complex and nuanced. much of what is often said about all of this can be regarded as “ partly true ”, and i will mention some of these propositions also. background to the bailout fact 1 : “ it was the unrestrained and reckless and behaviour of the irish banks that destabilised the irish economy and public finances. ” of course there are many ways of allocating blame, but in my view the first line of defence against what has happened must be the directors and managers of the banks. over just a few years, this credit - fuelled bubble created a pattern of over - indebtedness and mispricing ( profits, wages, house prices ) that made ireland ’ s economic performance during the “ great recession ” period among the worst in europe. with greater prudence by management and boards of the lending banks, this bubble could not