credit to the real economy during the crisis, and the repeated calls by the governing council for banks to reinforce their balance sheets so as to be better able to fulfil their responsibility in this regard. the economic environment in the near term the world economy is finally emerging from the most severe recession in recent history. global output declined by 0. 8 % in 2009, while trade volumes shrank by more than 12 %. 3 economic activity in both the euro area and the united kingdom, malta ’ s largest trading eurostat statistics in focus 31 / 2008. financial times “ the cogs are clogged ”, 16 february 2010. imf update of world economic outlook, january 2010. partners, declined by 4. 1 % and 4. 9 %, respectively. this contraction had inevitable consequences for labour markets, with unemployment increasing to levels not seen in decades. the combination of lower tax revenues and higher outlays arising from the operation of automatic stabilizers and fiscal stimulus programmes took their toll on public finances, with deficits in a number of countries rising close to, or even exceeding, double digit levels. the growth rate of these economies over the coming years will be constrained by the inevitable fiscal consolidation required to bring deficit and debt ratios back to sustainable levels. these recessionary headwinds inevitably took their toll on malta ’ s open economy. the impact, however, proved less severe than might have been expected. the economy came out of the recession in the fourth quarter of 2009, after contracting for three consecutive quarters. on a seasonally adjusted basis, the peak - to - trough drop in gdp was around 3. 0 %, compared to 4. 7 % in the euro area. the relative resilience of the maltese economy is attributable to four factors. first, membership of the euro area has enhanced its capacity to withstand external shocks. second, the impact of the financial crisis was mitigated by the strength of the domestic banking system, underscored by the absence of toxic assets in bank balance sheets, prudent lending policies and a funding structure based primarily on retail deposits. the third factor was the strategy of temporary government assistance targeted to those non - financial corporations ( nfcs ) that were in difficulty, mostly in the manufacturing and tourism sectors, along with the implementation of some infrastructure projects. besides limiting the number of potential job losses, this approach proved to be more appropriate in the domestic context than an across - the - board increase in spending whose impact would have

patrick honohan : ireland ’ s eu - imf programme – delivering what it says on the tin address by mr patrick honohan, governor of the central bank of ireland to the european commission dg - ecfin conference, dublin, 10 january 2014. * * * accompanying charts can be found at the end of the speech. introduction the eu - imf programme of financial support for ireland, negotiated in november 2010 and with the final tranches of lending being completed about now, delivered what it said on the tin. amid turbulent market conditions, it provided a safe harbour into which ireland was able to retreat, in order to clarify its ability and determination to deal with the severe financial problems that had so destructively erupted during the global financial crisis in september 2008. those problems had their origin in the property bubble that had already begun to deflate a little earlier, and which had not only generated the huge latent banking losses that have been so much discussed, but also incubated severe fiscal and macroeconomic imbalances. the key to the return of market confidence to the extent that now exists has undoubtedly been rigorous adherence to fiscal goals. over the three years, a continuation of the momentum of fiscal adjustments already initiated in 2008 has brought the public finances back within striking distance of eu norms. the debt - to - gdp ratio has reached a peak and is on target to fall in the coming year. economic growth, albeit modest, has returned on a broad front ; both full time and part - time employment have been growing for many months now. residential property prices in the capital have bounced back a little from their lows of two years ago, and have on average been broadly stable in the rest of the country also for some months. later i will speak a bit about how far the economy is nevertheless away from where we need it to be. but it cannot be denied that, reflecting both policy and general economic conditions, market confidence in irish creditworthiness is higher than at any time since well before the greek crisis developments of may 2010. it was not always obvious that this restoration of market confidence was going to work out. the imf staff appraisal of the initial programme proposal in december 2010 emphasised that the risks were high. and, after the programme began, the euro area slipped into a second dip recession which had its effect in slowing the irish recovery. the cumulative change in gdp, consumption and employment over the three years may have been as much as 2 percentage points lower than