bond market can be left for a while to digest its previous meals ; but that does not remove the necessity to stay on the agreed fiscal path : the new lenders – partners though they are – also need to be convinced of ireland ’ s societal capacity for the fiscal adjustment essential to bring the debt dynamics under control. besides, a slower adjustment would add to the stock of debt, and worsen the long - term prospects of the economy. the eu - imf programme adds external credibility to the fiscal programme and should provide assurance that the adjustment is feasible regardless of any differences of opinion on the likely macroeconomic growth rates. i don ’ t have time to elaborate today on the importance of restoring cost competitiveness if ireland is to resume exploiting its traditional potential in international markets and more generally in reducing the risks to jobs. remember that the sustainable job growth of the nineties was predicated on wage restraint delivered by the social partnership process. there has already been a deal of adjustment, especially in the public sector. but it ’ s not easy to see bis central bankers ’ speeches how rapid job growth can be assured if wage costs are not rolled back on a broader basis from their unsustainable run - up in the early 2000s. the process of rolling back the excesses that have marred the great advances made by the irish economy over the past two decades has heightened uncertainty. in order to underpin a vigorous economic recovery, risk must be reduced, not least by ensuring the conventional elements of fiscal discipline and cost competitiveness, but also through an intensified process of clarifying and crystallizing the position of the banks and reducing their exposure. the eu - imf programme funding provides the window of time in which to restore the fundamentals and reduce the risks. let me end on a more philosophical note. if the previous decade had emphasized individual endeavour in a globalized economy, the last couple of years has revealed the degree of interdependence which still exists both in the domestic economy – where the excesses and failures of some have influenced all – and between different national governments – as when fiscal pressures spill over from one country to the rest of the euro area, for example. despite the scale of the official financial support provided by eu partners and the imf, in the end it is evidently going to be for ireland to bear and sort out the consequences of these failures. accordingly the national response must be one that achieves a broad buy - in which requires among other things not only fairness,

now under way. with their due diligence complementing the tail - risk reduction envisaged from pcar2011, it is not unreasonable to suppose that such investors will see sufficient franchise value in the continuing banks to convince them that attractive investment opportunities exist. i look forward to welcoming new owners of ireland ’ s downsized and cleaned - up banks. reducing the risks of an underperforming economy also calls for sustained energy and commitment on a number of other dimensions. i have already alluded to the adjustments that have been needed in the other two fundamental pillars of the recovery, fiscal balance and cost competitiveness. both got badly out of kilter in, or as a result of, the boom years, in ways that i don ’ t need to rehearse today. as a professional deformation, i tend to talk a lot about banking, but i don ’ t want to fall into the trap of having you believe that the fiscal crisis is all about meeting the banks ’ losses. to be sure, the fiscal crisis has been brought on by the bank - driven boom and bust. but i hope it is some comfort to be reminded that only something of the order of one - eighth of the fiscal adjustment over the coming years is attributable to the additional debt servicing costs resulting from the additional borrowing to fill the banking hole ; the remainder is to claw the budget back to where it would have been if the structure of tax and the level of spending had not veered out of what could be sustained during the bank - driven property boom. the current impact of the banking losses on the economy is not so much via the net longterm taxpayer cost, but comes mainly as a result of the accumulation of debt. the jump in debt associated with these losses is of the same order of magnitude as the rest of the borrowing 2009 – 10 ( fig. 4 ). either of these components would have been unproblematic, together they make the markets and the rating agencies nervous. the fiscal adjustment could possibly have been delayed by a year or two had it not been for the banking losses ; now it cannot wait. there have been misgivings about the scale of the fiscal adjustment and the withdrawal of aggregate demand that it will entail. before the eu - imf programme was agreed, it was clear that a less rapid adjustment was infeasible given the rapidly diminishing appetite of the market for additional irish government bonds. now that the programme is in place, the