The Central Bank Governor has said that while the state of the economy leaves a lot to be desired, he believes it is moving in the right direction.

Professor Patrick Honohan was speaking at the Oireachtas Joint Committee on Finance, Public Expenditure and Reform today.

He said that overall employment and incomes would have fallen much further were it not for a strong performance by the export sector.

He said Central Bank forecasters now believe that employment may start to grow again this year.

On mortgages, the Central Bank boss said that progress towards restructuring unserviceable mortgage debt is unsatisfactory.

He said that giving too much relief would cost the taxpayer too much, but giving too little relief will hold back economic recovery.

Professor Honohan said the Central Bank will continue to intensively monitor banks until such time as it believes a properly working system for dealing with mortgage debt is in place.

On the new European bank supervision mechanism, Professor Honohan told the finance committee that much of the supervisory work will be delegated to national supervisors under the new European bank regulation plans.

On the IBRC promissory note, he said there is considerable goodwill from all interlocutors in this matter, but it has not been easy to find a solution.

Taking into account the statutory and market situation of the ECB, this will entail a novel solution, he said.

"We have worked at a set of solutions that do not take other decision makers out of their comfort zones. What we have designed from our side is beneficial to the euro zone as a whole", he stated.

The Governor went on to say that the ECB would not give any "grant" as part of the solution to the promissory note.

It would instead revolve around a term extension or interest rate changes only.

Professor Honohan said a solution was being designed that would not "leak into other situations".