Banks must be left fail and bondholders take hit

Passing the referendum on the fiscal treaty has put the Government in a position that is at once both easy and difficult.

The position is easy in that the parameters of fiscal policy are set out for the next number of years. The position is hard in that the implementation of these policies is going to result in wrenching adjustments to all aspects of Irish life. There are two different kinds of adjustments to be made.

Firstly, we are still running a primary deficit — ie government income is less than the sum of spending minus interest payments.