Any discussion of the Irish economy usually involves property. Let's begin our conversation there. In the years of the Celtic Tiger people counted the cranes on the Dublin skyline to assess the strength of our economic boom. What did you think?

"Well there was a thriving economy and employment was thriving, and everything that was being built was being sold, and after 2004 we had all the immigrants coming into the country and they were taking up the accommodation that was there. We were saying 'well there are people who are there prepared to buy the land, build on it, and there are people prepared to take up what's built, then what's the problem?'

"Of course, what I didn't know at the time and what I don't think anyone in government knew at the time was the extent to which all that was being built using borrowed money. It has to be said our overall fiscal policy was considered in Ireland and more importantly in the EU, and particularly the IMF and the OECD to be exemplary.

"My feeling was that somewhere along the line we had to get to a situation where we would have saturated it [construction], and that the natural laws of supply and demand would kick in and prices would start to drop. So prices did start to drop in 2006 and I was happy with that. That of course was going to push up unemployment but we believed we were on the road to a soft landing and would come back from building 80,000 houses to a more appropriate level."

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Did you ever wake up any morning during the boom, pinch yourself and say 'this is too good to be true, or this is a bloody miracle'?

"Well it was a miracle, a miracle on all fronts for many years. We did think things would slow up. You have to remember Ireland had the smallest per capita housing stock in Europe. Even in 2005 and 2006, the population was growing and incomes were expanding. There were strong fundamental factors; the housing demand, access to funding for housing from the EMU and low interest rates."

Did you ever draw the link between those low interest rates courtesy of the ECB and people taking out mortgages to buy their homes? Did you ever call your finance minister Brian Cowen in and say 'Brian, people are going to be in trouble if interest rates go up'?

"Interest rates never really went up. They even came down during the crisis."

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Were you ever worried that interest rates might go up?

"We did worry that interest rates would go up, and that some people might be caught with a mortgage issue. Of course, we didn't think the entire thing would be hit. No analysis was ever presented to us that that might happen.

"Of course, I know now there were mistakes. Brian Cowen, when he was in finance, was very anxious to get rid of all of the tax concessions we gave. It was a mistake by us to keep so many of the tax breaks going. We should have stopped them earlier.

"The reason we did it was, and I accept that it was wrong, was that there was a huge amount of Irish wealth - it might have transpired later it was Irish borrowed wealth - being invested outside the country. So it seemed more sensible to keep all these guys who were buying stuff in London and Paris in Ireland. I accept that was wrong and that we should have said, 'so be it'."

The tax concessions you referred to left us with ghost estates when the crash came.

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"It was only with the census of 2006 that we found out there was a whole lot of vacant houses in the country. Then we realised we had to stop all these tax incentives and we had a review carried out into that. We cut all the tax breaks that there were around the country.

"One of the reasons they were in place was a lot of people were saying 'you gave all these incentives for Dublin, but if you check your banking figures you'll find there's hundreds of millions sitting in bank accounts around the country which could generate economic activity if the same incentives are given'."

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Many people believe Fianna Fail was too close to developers and that they were able to bend your ear in the Galway Tent.

"Well, the Galway Tent, in so far as it was, was a bit of sporting fun. We had CEOs of technology companies and pharmaceutical companies, CEOs of all kinds of companies and we had builders and property developers big and small who were generating a huge amount of jobs for the country there. The only sector from the Galway Tent who went totally bust and lost their family homes were the builders who were meant to be so close to us. If you go through the top 10 of the developers who were supposed to be so close to Fianna Fail, I think around eight of them are now bust, and I think seven of them lost their family homes."

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I'd like to ask you about the banks now. You were Taoiseach for three terms. Shouldn't you have known what was going on in the banks and known about the issues in relation to regulation within the Financial Regulator and the Central Bank? Shouldn't you have been aware the banks were lending too much money to property developers and indeed to ordinary people to buy houses?

"I wasn't responsible for the Central Bank or the Financial Regulator. They're independent under the 1941 Act. I wasn't privy to what was going on in the boardrooms of the banks. There were plenty of very important people there. No bank director ever came to me to say there were any problems.

"If I had been able to foresee a 1929-type crash, that the banks were committing Hari-Kari, I would have built up a bigger surplus and put aside more money for the rainy day. Should I have? Yes. But I didn't see or think for a minute a 1929 crash was coming or that the banks were so exposed.

"It was quite reasonable of me to think that if there was a slowdown, we could handle it, but it was not known to me the vulnerabilities of the banks and the crisis that was going to emerge in them. It wasn't in the 2008 report of the Central Bank either."

So you were shocked at what emerged in relation to the banks when the crash came?

"There's no shock that there was an over-concentration on property. But it took us a long time to find out that a lot of the people who had gotten loans had actually gotten several houses. I believed in supply and demand. If people wanted houses, you weren't going to [tell them they couldn't have them]. It was years later that I found out some people I knew myself had gotten nine or 10 mortgages. It absolutely shocked me. That was not being put to us by the Central Bank. In fact, even at the very end, in 2007 and 2008, the Central Bank and the Department of Finance were saying this was a liquidity problem, they said our banks did not involve themselves in sub-prime lending."

Some would say your management of the economy had more to do with your determination to secure power and hold on to it than your wish to serve the greater good. What drove you in terms of your management of the economy?

"When I was the minister for finance in the 1990s, the debt to GDP ratio was 120pc. For the Maastricht criteria, we had to get it down to 60pc. I was always conscious if we had a low debt, if there was a rainy day we would have more money. When the surpluses were very big, McCreevy and myself started putting money into the pension reserve fund so that after 2025 we would have money for pensions and welfare after that period.

"With a small debt and with the pension money, there didn't seem to be any need to be saving anymore at the time. So even if there was a downturn, we looked to be in a strong position. I was looking where we should be putting additional resources. Our idea was to lower the tax rates, put the money into people's pockets and you would get back your VAT as the money went around and generated employment. It was good for the economy and good for growth. That was our theory and it worked for most of the years that we were there.

"The people who needed the money were the pensioners. Think back to 1997. People in their 70s who had worked from the 1940s to the 1980s, all through the hard times. We set a target that every year we'd bring the pension up and get it to €200. That helped the pensioners.

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"I was responsible for getting the medical card for the over 70s. I believed that at that age if you only had your State pension, a medical card would be good for you. In my experience people in their 70s don't abuse the medical card and I didn't accept the argument that Michael Smurfit or Tony O'Reilly would stop their Mercs to use their medical cards at the chemist. That was a nonsense.

"For young families, we did two things. We brought in a payment to assist young families with child-minding because it was costing them a fortune and then for people in the community who were in training, we brought in community [child-minding] places to assist them.

"We put enormous money into health. We employed an extra 30,000 in health. Now I know the cynics try to say it was 30,000 people doing nothing, but let's be frank; they were doctors, nurses, paramedics and ancillary staff in the hospitals. It wasn't made up of administrators and it brought down the waiting lists. We put huge money into capital expenditure in hospitals and education and we employed additional teachers to bring down the pupil- teacher ratios.

"So this is where the money was going. Now people say 'you had the money and you blew it', but the same people were roaring at me, day in and day out in the Dail and in the media, to put more money into education and everything else. I was being told we were awash with money and to spend it. We didn't blow the money."

Your critics would say you bought the electorate. What do you say?

"We had money, and far from it being a case of anyone saying: 'Thanks Bertie, you've given us enough money'. They were saying: 'Bertie, you have a lot of money. Give us more'.

"In the Dail, it was endless. They had stopped asking me questions about the economy, stopped asking me about taxation, stopped asking me about Exchequer borrowing and how little was being paid to service the debt, because all those things were near to perfect. What they did was they took individual health cases around the country about 'Mary' and 'Joe', and said 'now look at their case'. The daily pressure was for more and more money.

"And when we came to the 2007 election, all the political parties, including Fianna Fail, were saying the economy is going to grow by 4.5pc for the next number of years, and we want to spend more. We made a mistake based on those figures and for that we're responsible, but I'm afraid the rest of the world made the same mistake.

"Hundreds of thousands of people have been very badly affected by the combination of the banking crisis, the construction crisis and the world recession. There's been €28bn taken out of the system so obviously people have suffered horrendously. I regret anything we did which contributed to that. I'm sorry our policies helped to fuel the bubble. I'm even sorrier for what happened when the bubble burst."

Some economists have said when the dot com bubble burst in the year 2000, the Irish fuelled their own boom by selling houses to each other.

"I think we have to remember all the good industries we brought in to the country. Even Klaus Regling and Max Watson in their report on the causes behind our banking crisis acknowledged that all the policies we instituted in the 1980s and the 1990s, many of which I oversaw, enabled a huge increase in inward investment and brought in good companies. Unlike many other countries around Europe, we didn't see huge factories closing here when the crunch came. The big pharmaceutical and medical companies and all the ICT firms didn't close here. We sure had a banking crisis and a property crash, but a lot of the companies that were here, stayed here.

"The Celtic Tiger happened because of the policies we introduced. In the mid 1980s, we had a public debt GDP ratio of 110pc. We were paying out almost 10pc of GDP per year in interest payments and tax rates had been raised to massive levels.

"We had only a million people working at the end of the 1980s. By 2007 we had almost 2.1 million people working. We had really strong improvements in productivity and growth averaging 6.3pc. I felt very pleased when I was in government in my last full year, the debt to GDP ratio was 24pc and the interest we paid as a percentage of GDP was 1pc. The amount of interest as a percentage of all the taxes we were paying was only 2.8pc and we had €22bn in the pension reserve fund. Even back when I was leader of the opposition the debt to GDP ratio was 79pc, the interest to GDP was over 5pc and the interest as a percentage of all the taxes was almost 14pc.

"So whatever the criticisms of some of these people who say 'well, you should have stopped'. Stopped what? We didn't stop exporting. We didn't stop Google. Why do we have Google and Cisco and all of these companies here? Even if there hadn't been a global economic crisis, we still would have a problem with property; I'm not denying that. But I think the exceptional economic growth allowed us to achieve what was the envy of politicians around the world. There were very few criticising it. We were on a catch-up period. The mistake we made? We didn't identify the point when the catch-up period ended."

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Fianna Fail got a wake- up call in the local and European elections in 2004 from Sinn Fein. Didn't you dispatch Charlie McCreevy to Europe after that because his plans for the economy weren't going to sit with your ambition to win the next general election?

"Charlie McCreevy came out to me in St Luke's the previous year and he asked me about the European Commissioner's job coming up the next year [2004]. He wanted to put in his spake and he asked me would I give him first offer on the job. He said he was keen to go for it. I said I would [give him first refusal] that night, and I honoured it.

"When I offered him the job, he said 'will I, won't I' as any guy will do. But Charlie got the job because he had been a very good minister for finance and had been there a very long time and had worked hard. He asked for the job and I gave him the job."

When did the problems with our economy begin, do you think?

"It's hard to put a date on it but the competitiveness had certainly been lost for three or four years by 2007, and the wage rates were too high by that stage. The construction sector had become too big. Investment in residential property went to 13pc of our national output in 2006. That's about double what it should have been. The share of employment in construction was too high too. But the OECD didn't pick it up at the time, and from reading their reports, which I used to do, I didn't pick it up. In hindsight, the OECD said we had been the most 'overheated' of all the advanced economies. I accept that, but it would have been helpful if their [earlier] reports had been saying it."

What do you have to say on what is now considered to be the disastrous shift from stable sources of tax revenue to cyclical taxes such as stamp duty, which took place under the governments you led?

"There was a steady growth in the cyclical taxes over two decades which created a false sense of security. It did leave the budget seriously exposed to a downturn which we never thought was going to happen.

"We had offered income tax cuts to achieve wage restraint. That seemed to be the right thing to do. Nobody ever told me it was the wrong thing to do. I was commended for it, particularly when things were booming. We tried to keep wages low and keep taxes low so when Joe or Mary got their wages, they had more money and they spent more money, creating more employment and keeping the economy going. Everyone in Europe thought that was a great idea. But it narrowed the tax base and made it more difficult when the economy suffered.

"Had the tax structure been less skewed towards stamp duty and other taxes, the fall in revenue in 2008 would have been much lower. But few enough saw that. All the parties put forward manifestos in 2007 which were based on growth forecasts of 4.5pc. All the parties were talking about reducing stamp duty. If I were to look back and if I were to do it all over again, I'd say a big mistake by the political system and by me was that we didn't introduce a property tax in 1993."

When the UCD economist Morgan Kelly warned of the house price bubble in 2007, you wondered why people on the sidelines 'cribbing and moaning' didn't commit suicide.

"I wasn't talking about Morgan Kelly. There just seemed to be an appetite to talk the country down and my attitude was we shouldn't do that. I said off the script that people like that should commit suicide. I apologised. I should not have used that term. In so far as I was giving a defence that it was a good thing to keep building, I was wrong."

Would you not have sought out Morgan Kelly to discuss his analysis?

"I wish I had. I wish I had run into him at a match somewhere. Unfortunately, I'd never heard of the man. Everybody says now 'did you not listen to Morgan Kelly?' I think I was gone before I heard of the man. I never actually heard of him. I attended all those business dinners and most of the guys I used to meet used to ask me to put more money into their pet projects, usually a university. They wanted more buildings and more professorial positions. That's usually what I heard from the universities. They used to come into me in delegations looking for more money. But I do acknowledge Morgan Kelly got it more right than others."

The cynics would say you stepped down as Taoiseach in May 2008, knowing full well the economy was about to hit the rocks.

"People have said that to me many times. It had nothing to do with it. I had been in politics at the Cabinet table for 21 years at that stage, and whether people believe it or not, I would have relished being there for those few difficult years. They would have been the last few years of my political life anyway, as I had said I wasn't going to run [for office] again. I would have relished the challenge of being at the Cabinet during that period.

One of the hardest things for me in my life was not being there and having to watch this stuff unfold in Ireland and around Europe and the world on television.

It wasn't just in Ireland. It was everywhere."

What was your reaction to the then Government's decision to guarantee the liabilities of the Irish banks in the early hours of September 30, 2008?

"I assume my colleagues did it because we were heading fast to bank default and there was going to be a run on the banks."

What did you make of the bailout negotiated by the late finance minister Brian Lenihan with the Troika in 2010?

"The fact that the plan worked out by my colleagues with the Troika has been implemented really, in fairness, by this Government to the letter is why we're coming out of this thing [recession] fairly fast. I do credit the present Government that for 2015 we're looking at a budget deficit of probably 2.5pc. That is a considerable achievement."

You were always considered to be a skilled negotiator and a consensus man. Do you think those skills were needed when the crunch came in 2008 and 2010 for Brian Cowen and Brian Lenihan?

"Well, I had the experience. I had been through the currency crisis. It's a distant memory to people but it was horrendous. The pressure I was under from autumn of 1992 to the summer of 1993 with the currency crisis was probably the toughest, watching the financial markets open and close, watching people trying to destabilise our currency. I'd breathe a sigh of relief when it came to Friday and the markets would close in every part of the world. One of the biggest hits we had came from Tokyo and it was IR£75m. It was a rough period.

"In fairness, some of the economists at the time wrote that the handling of that, which I don't take all the credit for, was exceptional. We had our little team of Maurice Doyle and Maurice O'Connell, who was later a governor of the Bank of Ireland, Sean Cromien, who was the secretary general of the Department of Finance and Michael Somers, who was head of the NTMA; we were meeting daily. And I think that's the living proof, that experience I had would have been hugely beneficial because I wouldn't have been fazed. I also had the contacts. I knew Jean-Claude Trichet very well from when he was in the French finance ministry. I knew them all extraordinarily well because I had been there years, not alone because of the Irish presidency of the European Union [in 2004]. So I knew my way around all these things while Brian Cowen was only in the door. So that's the pity about that period.

"And anyone who would know me would know I would thrive in those situations. I think I was involved in half a dozen programmes for national recovery. I negotiated, I think, them all and I implemented one that had been negotiated by the John Bruton government. I'd been through the Northern talks, I'd negotiated the European Constitution with 27 countries and because I'd been in the presidency in the lead-in to the enlargement of the EU, I was very close to all the prime ministers, so I'm afraid with my departure an incredible amount of knowledge also departed.

"That knowledge and those contacts would have been useful to my colleagues, and that's sad for me."

So you believe your relationships with key people in Europe could have made a difference?

"Of course. I mean what's everybody saying now, six, seven years later? Now they're saying it came down to Trichet's letter. Everyone's saying it ended with Trichet's letter. You can't have it both ways. It was either Trichet's letter or it wasn't.

"But would that have changed the hard landing to a soft landing or the situation we didn't know about in Anglo? Of course it wouldn't, because those things were already there, but there are ways of working through things and dealing with the pressure and managing it. There were horrendous pressures on Brian Cowen and Brian Lenihan during that period."

Would you have been able to deal with the 'firearm stuck in your ear' as one commentator described the implied threat to Bran Lenihan in Trichet's letter?

"The reality in life is when you're around a long time, maybe the mistakes you make the first time, when you do them about the sixth time [you don't do it again]. When you're doing it the first time, it's not so easy. But that's what's called, in inverted commas, experience. It doesn't change facts, but it does count for a lot. Every book I ever read said it does."

Your daughter, Cecilia, gave an interview recently in which she said she could understand and deal with the criticisms of you when you were active in politics, but that it is now harder to take.

"In 2008 after I had gone, I had no difficulty with the public, but when you get endless arguments and articles and commentators jumping at you on everything, it does turn public opinion, there's no doubt about that. It does make people hostile, but by and large it's just from certain sectors. When you're out of politics, you don't have a platform to deal with criticisms. I tried in the early years in very long interviews for programmes, but what happens is they take a four-hour interview and use 10 clips of a half a minute put against experts, many of whom I don't know. That proved a useless exercise and I gave it up after a year or two."

Sunday Independent