I understand the strong desire of the authorities to minimise the costs associated with the banking sector rescue, including costs incurred to date, and those still to come. Let me make some comments in this area. When the programme for Ireland was designed, the costs of the banking sector measures already in place, including the promissory notes, were fully factored in. The annual cash repayments of promissory notes is thus financed by programme resources. That programme is on track. Any deviation from that programme should be considered very carefully indeed. The perceptions that have built-up around Ireland’s successes in the programme should not be jeopardised. It has been hard-won and it is worth fighting for. Therefore, the ECB remains of the opinion that Ireland should honour its commitments stemming from the promissory notes, as foreseen. This in our view is the best way to regain sustainable market access. I frequently hear in the Irish debate the sense that the debt resulting from the bank rescue is not Ireland’s debt. I can understand this sentiment and how many people feel about this situation. But what must be understood, is that in the run-up to the crisis, insufficient domestic policies (banking supervision and economic policies) played a major role in excessive credit growth and risk management failures in the Irish banking sector, the bubble in the housing market and the loss of competitiveness. The ECB has no supervisory responsibilities, despite claims to contrary.
Such coverage is the norm for exports towards countries with appreciable risk and in transactions which, frequently, have the sovereign guarantee of the importing country. CESCE also provides underwriting on the State’s behalf for the political risks associated with exports (the main such risk being default by the sovereign or by the institutions backed by the sovereign), except in operations at less than two years in EU and OECD countries, where it is considered that there is a sufficiently developed private underwriting market; it also extends guarantees and bonds for participating in international tender procedures and projects. From 1998 to 2007 there was a strong expansion in international banking activity in financing for Spanish companies’ international activity. Banks took on a relevant role in the financing of trade flows to emerging countries and in the opening-up of new markets. Against the backdrop of this boom, the use of instruments offered by export credit agencies for exports became less necessary and less frequent. The international financial crisis The financial instability as from mid-2007 and the outbreak of the crisis in autumn 2008 radically altered this financial landscape, giving way to an across-the-board decline in financing by international banks. The contraction in credit had a particularly severe effect on international trade, which fell by between 20% and 30% in the main economies. The central banks responded to this situation through coordinated action that stabilised bank financing conditions.