debt was under control, private debt was not. returning to figure 5 shows the rapid expansion in net foreign debt of the irish banks. recalling what i have said about the banks ’ earlier behaviour, the speed and scale of this accumulation was altogether new. the irish banks were moving into unfamiliar deep waters, where they would soon get into difficulties and drown. growth in the new millennium relied increasingly heavily on bank - financed property - related revenues to support – directly or indirectly – employment, profits, dividends, wage and salary income levels, and tax revenue. the rapid reversal in the trend of public debt after 2007 has been quite explosive. it reflects both the injection by the government of funds into the failed private banking system, as well as the emergence of a huge deficit on the rest of the government ’ s accounts, shorn as they now are of the boom - time tax revenues. 8 once again, it seems that the irish economy has shown a propensity for rapid changes of fortune. it is not to understate the severity of the debt challenge, public and private, currently facing the irish economy to recognise this propensity, and to believe that it reflects in part a flexibility which will clearly be a very helpful ingredient in the recovery. 9 had it not been for the official funding from eu and imf sources, the budgetary cutbacks would have had to be much more severe, and economic wellbeing would have been much more badly affected. indeed, the collapse in incomes and the rise in unemployment in the crisis largely predates the arrival of the troika. unemployment at the end of the programme was lower than at the beginning. but now the legacy of debt, public and private ( only some of which can be attributed to the famous bank guarantee ) presents major challenges for government and for over - indebted households, firms and their bankers. for the government, there has been the challenge of dealing with indebtedness. of course the early decision to socialise the risks of bank losses has turned out to be much more of an unnecessarily open - ended gamble than it can have seemed at the time to the decision - makers, blindsided as they were to the lack of well - quantified underpinning of the advice they were being given. from that point on, as more and more information emerged 2002 ; and perotti, 2012 ). we therefore have not included this episode in our case studies because it does not seem repeatable

being re - appreciated, leading to some reappraisal of the relationship model for sme lending. community - based lenders can be key actors in this dimension. 13 and innovations in such areas as crowd - funding could also come to complement other forms of non - bank finance which are sure to grow in importance as banks repair their balance sheets and respond to regulatory demands. not every financial innovation makes sense ; finance attracts many crackpot schemes and is a happy hunting ground for populism. but it is clear that there are several different proven models of organising finance that are equally good in delivering growth outcomes, 14 and which can have different impacts in other dimensions. income inequality returning to the question of income inequality, i would argue that ireland is not exceptional in this dimension either. as far as the income share of the top 1 per cent is concerned, the last quarter of the 20th century saw ireland ’ s figure growing midway between that of a group of “ anglo saxon ” countries and a group of “ continental ” countries ( alvaredo, atkinson, picketty and saez, 2013 ). indeed, in ireland, despite the substantial loss of national income in the bust, policy has gone some way towards limiting the rise in poverty in the downturn ( callan et al., 2013 ). this surely reflects a broad political consensus in ireland ; indeed some will argue that more should have been done. actually the data suggest that the later years of the boom did allow relative poverty to decline in ireland, at a time when the opposite was happening in many countries ( figure 8 ). and the corresponding data for 2010 and 2011 suggest that any reversal in this improvement has been small and mainly concentrated among young adults ( the data for 2012 are not yet available ). a similar story is shown by the gini coefficient, another indicator of inequality. of course, holding inequality or relative poverty constant at a in line with standard international practice, the recorded profits of the banks contributed to measured gdp, whereas their loan losses have been treated as a capital item, and have not been subtracted from the gdp of any year. this is why i regard strengthening of the credit union movement both financially and institutionally – a task which has been conferred on the credit union restructuring board ( rebo ) as worthy of the substantial financial resources that have been earmarked for it. for instance the choice between relying mainly on stock markets or on universal banks for the financing of firms. bis central bankers ’ speeches time of falling