However, there is still a weak link in the capital rules – as the euro-area crisis has clearly shown. The need to bail out systemically important banks with taxpayers’ money puts pressure on government budgets. That was one of the focal points of the first part of my speech here today, and I mentioned Ireland as a striking example.
Over the past year it has grown by close to 3½ per cent, inflation has been low and stable at around 2 per cent, employment has grown quite strongly and we are getting closer to full employment (Graph 1). Business conditions are positive and government finances have improved and are in reasonable shape.