Bank of Ireland

"We're not alone. If you take the US as your bench­mark, they measure the recession by the month and the average recession lasts 10 months. They're now saying the recession started in December '07, so you're looking at 16 months of recession until April 2009 – similar to the recession of 1981/82 – before bottoming out.

"I don't think you need a big fiscal stimulus. It's not a good idea to deflate the economy. You can't correct a fiscal deficit by increasing taxes – that just dampens economic activity. You do it on the spending side.

"It's not too late to change our approach. In October, when the budget was being framed, the government would have been wary of pushing borrowing too high [because of the European Commission's rules on budget deficits] but now we know the commission is advocating fiscal stimulus. The goalposts have shifted.

"The government brought in the income levy. That will bring in around €1.5 billion net, or around 1% of GDP. You have the option, instead of raising taxes, to borrow more. Fiscal deficits improve with a combination of lower spending and a recovery in economic activity.

"Across the world, countries are opting for big fiscal stimulus. Everyone recognises that activity has slowed very sharply. In our context, one of the policy tools is monetary policy and that's positive for us in '09 [with interest rates coming down]. The second positive is that inflation will come down. But fiscal policy is moving in the opposite direction.

"Possibly one of the main problems with political life is that politicians get the credit when the economy is going well, even though it may be other factors driving it, and then, maybe unfairly, they get blamed when things go wrong. The government can't be blamed for the global recession. I'm not sure, though, that the budget was handled well. I was never convinced about bringing it forward. And I'm not sure deflating the economy is a good idea. Also there were a lot of new taxes raising small amounts. Take the tax on parking, which will raise €30 million. In the context of our tax take of over €40 billion, that is not sensible.

"Is there any good news? The affordability model for housing that we produced showed affordability deteriorated sharply in '06,'07 and '08. But the model for 2009 shows the biggest improvement in affordability I've ever seen. This is because average new mortgages will be lower, as house prices and interest rates fall."