SO now we know what caused the banking and economic crisis. Establishing what went wrong, however, is the easy bit. Making sure that it doesn't happen again is going to prove a lot more difficult.
Avoiding another banking meltdown shouldn't be beyond our abilities. Presumably, the main banks will avoid the kind of lunacy they engaged in during the property bubble after been so badly burned.
In case memories prove short, it's vital that the regulatory failures of recent years can never happen again. Much will depend on who is occupying the hot seats in the Central Bank and the Financial Regulator. We're currently blessed with Patrick Honohan and Matthew Elderfield and it's imperative that standard be maintained.
It's much harder to be confident, however, that the cardinal errors made in budgetary/fiscal policy can be avoided in the future. Whereas the current banking crisis was the first, there have been other fiscal cock-ups in the past. We have failed to learn from them.
It was obvious at the time that the spending spree the Fianna Fáil-PD coalition was engaging in – €1bn for benchmarking, €1bn a year increase every year on health, massive increases in pensions and child benefit – was not sustainable. In the run-up to the 2002 general election, the government increased spending by over 20% and double digit percentage annual increases were the norm during its tenure.
That was always going to end in tears, but few shouted stop. On the contrary, most of the complaints were about how the government wasn't spending enough.
When Charlie McCreevy then tried to rein in spending after the 2002 general election, there were howls of outrage and Fianna Fáil plummeted in the polls. Bertie Ahern discovered socialism, packed McCreevy off to Brussels, appointed Brian Cowen in his place and normal service was resumed. Spending went up again, taxes came down further and Fianna Fáil recovered to win a third general election.
That general election campaign was an orgy of spending promises and tax cuts from all the political parties. When Brian Cowen tried to argue that Fianna Fáil should fight the election preaching fiscal rectitude, he was over-ruled by Ahern who felt it wouldn't wash with the electorate.
The authors of the banking reports are indisputably correct to argue that, at a time when the economy was booming, the government should have had a counter cyclical budgetary strategy to take some of the heat from the economy and the property market. But politically, how realistic was that?
Imagine if at the height of the boom, at a time when there was huge budget surpluses of billions, the government had announced that to be fiscally responsible, it was necessary to rein in pay increases to public servants; that social welfare rate increases would be limited to inflation; that the health service would have to make do with modest increases.
Imagine also if the government had announced that in order to broaden the tax base and avoid a bubble in the property sector, it was going to introduce a property tax. What would the public reaction have been? There would have been a near revolution. Let's be clear about this, the government would have signed its own death warrant and handed the next election to the opposition parties who would have condemned the new policy move out of hand.
That is not to excuse the government's failure to act. It was their duty and responsibility to take the tough decisions and they failed to do so. But politics being politics, at a time when it seemed the good times would last forever, they were never going to do that.
And, despite all that has happened, history suggests that as soon as the economic good times return, whichever party is in government is going to face the same pressures.
What is needed therefore is some form of buffer that limits the potential for the government to pander to populism and gives it an excuse or a pretext to rein in spending when required.
The 3% budget deficit limit applied by the EU was supposed to do that but it clearly didn't work – Ireland was constantly running huge surpluses that masked the true picture.
What is required is an independent Fiscal Policy Council, filled with serious economic heavyweights – preferably including those from outside the country – to sit in judgment of budgetary and fiscal policy as currently happens in the likes of Sweden, Austria and Denmark. It would have the authority to recommend surplus or deficit targets, to assess whether the government of the day's spending and taxation plans were sustainable, and to recommend policies that would improve the country's fiscal position.
In short, its job would be to keep the government of the day on the straight and narrow. Like a child who has the 'out' of saying to his friends "I would do that but my parents won't let me", the government could in turn use the fiscal council to justify taking necessary, but unpalatable, decisions.
If there's a lesson we can take from the last decade, it should be that budgetary policy is far too important to be left to the vagaries of politics; of focus groups, of opinion polls and of ard-fheiseannna speeches.
Governments and the electorate need to be saved from themselves.