primary driver of the current cyclical upswing in ireland. while the central bank is intent on building the resilience of the financial system to cyclical reversals, it is clear that fiscal policy must take the lead role in ensuring that the current strong growth performance does not tip over into an unsustainable overheating phase. in particular, more ambitious fiscal surplus targets for 2019 - 2021 may be advisable in containing cyclical risks. in relation to the latter, i have emphasised that a well - functioning, trusted financial system is essential if ireland is to meet its long - term goals in terms of economic and social development, managing the ageing of the population and supporting the transition to a low - carbon economy. in addition, i have highlighted that improvements in management performance across the private and public sectors ( including the financial system and the central bank itself ) can be an important source of improving living standards. finally, i have urged that public investment plans be evaluated in a long - term context, with short - term capacity limits requiring the matching of increases in public investment with counter - balancing fiscal measures if overheating pressures are to be contained. references aguiar, mark and gita gopinath ( 2007 ), “ emerging market business cycles : the cycle is the trend, ” journal of political economy 115 ( 1 ), 69 - 102. bloom, nicholas, renata lemos, raffaella sadun, daniela scur and john van reenan ( 2014 ), “ the new empirical economics of management, ” journal of the european economic association 12 ( 4 ), 835 - 876. bluedorn, john and daniel leigh ( 2018 ), “ is the cycle the trend? evidence from the views of international forecasters, ” imf working paper no. 18 / 163. central bank of ireland ( 2018 ), behaviour and culture of the irish retail banking sector. central bank of ireland - unrestricted european systemic risk board ( 2016 ), “ too late, too sudden : transition to a low - carbon economy and systemic risk, ” report no. 6 of the advisory scientific committee. government of ireland ( 2018 ), stability programme update 2018, department of finance. hickey, ronan, matija lozej and diarmaid smyth ( 2018 ), “ irish government investment, finance and the public capital stock, ” central bank of ireland quarterly bulletin ( july ). international monetary fund ( 2017 ), ireland : technical assistance

operational crippling of the banks, and the assumption by the government of a large block of banking liabilities. another part is less easy to measure or even to unravel conceptually, namely the sizable consequences of the debt - financed property purchases on spending and wealth accumulation : i hope we will soon be in a position to throw more light on the magnitudes involved. i. causes one should always distinguish between proximate and underlying causes in considering major conjunctural disturbances. ( a ) proximate causes for proximate causes we can easily accept the important commonality and the main distinction between the two episodes. both were caused by the emergence of multi - year overspending : the distinction lying in the fact that the 1980s followed a period of mainly public sector overspending, whereas it was private overspending that teed - up the recent crash. the government over - spending of the late 1970s is generally and rightly traced back to the winning election manifesto of 1977. this heralded a post - austerity splurge, following the sharp fiscal contraction that had corrected emerging imbalances in 1975. the expansive policies of 1977 – 81 set in place pay rates and spending programmes which were politically difficult to dismantle when they proved unaffordable. ( b ) underlying causes but why did these policy errors emerge? here it is useful to recall keynes ’ observation that policymakers are often in thrall to some defunct theoretician. in both the 1970s and the early 2000s, irish governments were misled by bad ideas falsely distilled from simplistic versions of prevailing orthodoxies. thus, in the 1970s it was a bowdlerised deformation of keynesianism that was used to justify a government spending - led growth spurt which was intended to generate self - sustained revenue expansion. the implicit parameterisation of this idea was wildly wrong. 1 see o grada ’ s 2012 whitaker lecture for a vivid table showing how badly the plan for 1977 – 81 missed its unrealistic targets. bis central bankers ’ speeches in the 2000s, in contrast, the government was lulled into complacency by an apparently crass belief in untrammelled financialisation. indeed, ireland ’ s experience in this crisis differs from the experience of several other financialised economies mainly in scale. of course a well - developed financial system is an essential contributor to balanced economic growth. but it was excessive reliance on financialisation that allowed private spending (