As news of the Moody's down-grade starts to settle, there is a growing real-isation in Gover-nment that solving the deficit problem is only half the story when it comes to prompting some kind of recovery here.
Exchequer returns may start to turn up, lethargic German Chancellor Angela Merkel may finally lead a solution to the European debt fiasco and the banks may finally fill their coffers with adequate amounts of capital.
But as a senior government official implied to me last week, it's all about the deposits, stupid. He was referring to the collapse in deposits in Irish banks since late last year. This collapse, now since slightly arrested, has been nothing short of extraordinary. In fact, it is arguably the biggest ever flight of capital from Ireland.
In December 2008 the Irish banks were sitting on deposits (excluding inter-bank) of €255bn, but after Ajai Chopra and Olli Rehn arrived in Dub-lin in November 2010 this figu-re had collapsed to a sobering €168m -- a plunge of 36pc.
But the flight of money is bigger and scarier than that. The Irish banks started the financial crisis with funding of €521bn (including retail depo-sits, corporate deposits, repos, bonds, inter-bank and Central Mank support), but by earlier this year the funding total was heading below €400bn.
Clearly the deposit outflows are being replaced in many cases by the ECB/Irish Central Bank, with the rest accounted for by plain old deleveraging. But either way, the only way for Ireland and its banks to reduce ECB dependence is not only to start issuing bonds again, but also attracting deposits back into the system.
With a sovereign junk rating this is going to be a huge hurdle to overcome, even with Irish banks offering savers decent yields. Clearly government guarantees for both retail savers and corporate depositors are not sufficiently attractive to change minds.
What is important now is keeping the lifeblood of the system that is there -- retail deposits. In that area the Government could have some input. All Michael Noonan has to do is switch on his PC and see the kind of rumours about Irish banks that are populating certain websites. There the talk is all about final implosion of the system and loose chatter about Enda Kenny sequestering people's savings -- overnight.
The Government will have to counter this pessimism and alarm if it is to hold on to the largest source of remaining funding for the Irish banks. Its recent decision to levy pension assets probably did little to calm frayed nerves.
While everyone wants to see the NTMA eventually go back to test the bond market in 2012, sucking money back into the bank system is probably a more urgent priority.