The alternative (under the hindsight Scenario 1) of bailing-in some of the bondholders and depositors of Anglo and INBS would have imposed additional disruption to economic activity and capital formation which would have offset a lot of the savings to the State from not paying the creditors.
I conclude that the need for “austerity measures”: the scale of tax increases and expenditure reductions that have proved necessary since, could have been reduced somewhat, but not all that much, by anything done at the end of September 2008. Maintaining perspective As I have remarked recently, the boom and the bust both damaged our economy.