This Bill is one of extreme urgency and our party will do everything possible to facilitate its speedy passage through the House. The proposal which it is designed to support—that the ACC will borrow a substantial amount of money in other EMS currencies abroad and lend it to Irish farmers because the money is not available in our own currency—is very urgent, a matter of days. Because of the credit squeeze, money from domestic sources is not available through normal channels to the farming community. If this Bill were delayed for a week, or two weeks, damage would be done because money was not available. Indeed, I am sorry that the Government did not bring this Bill in even sooner than they have done. In the last week farmers have been in difficulty in stocking their farms and have been unable to buy cattle at marts simply because they have not the money. Because of this, the farmers wishing to sell cattle had to sell at a very serious loss, which very few could afford to bear.
Small farmers in the west without silage, or sufficient fodder to feed their cattle over the winter, have to sell; and because the people who should be buying their cattle from them have not sufficient money, they have to sell at a very great loss. The effects of this are twofold. Firstly, they and their families will be a great deal worse off than they would otherwise be; and, secondly, they would be far less inclined to engage in building up cattle numbers in the future. Indeed, our land at present is carrying as few cattle as it could possibly carry. We are seriously understocked. Our land could carry, with ease, twice as many cattle; in fact, we are carrying fewer cattle than was the case when we entered the EEC.
This is an alarming but true fact which people do not seem to realise. The effect of the credit squeeze and, in particular, the serious slump in cattle prices will be to make farmers even more reluctant to stock up in the future. The present trend in downward numbers will be maintained and even accelerated because of the crisis of confidence that is taking place this year in cattle production as a result of the credit squeeze and other factors. Unless urgent measures are taken to restore confidence and give farmers in the cattle industry reasonable grounds for confidence in the future, that damage will be with us for many years long after the credit squeeze has been forgotten. Farmers have long memories. If they have a bad year in 1979 that will inhibit them from investing and going into debt in order to expand. That fear will be with them even in 1989. That is the background against which we are operating.
The initiative of the ACC in going abroad to get this money and in forcing the Government to introduce this legislation to facilitate them in extending their borrowing capacity is the only measure of a confidence-giving nature being taken by any Government agency in the face of one of the most acute crises of confidence in agriculture. I could almost say that the ACC are doing the Government's job for them so far as agriculture is concerned. The ACC are showing a sense of initiative and urgency which the man chiefly responsible, the Minister for Agriculture, is most assuredly not showing.
I have said already that we are carrying far fewer cattle than we should be carrying and this has the effect that many of our meat factories are working at half-capacity. They have the capacity to slaughter almost twice as many cattle as they are slaughtering now. Because our land is understocked, because farmers have not the confidence to invest, the number of cattle being slaughtered is much less than it should be. It is up to the Government and to the State agencies to give farmers grounds for confidence. That is not being done.
There is another area where the credit squeeze has caused particular problems. I refer to the most efficient farmers in the country who in recent years expanded their farming businesses to such an extent that they were carrying the absolute maximum number of cattle—mostly cows, because I am thinking of dairy farmers—that their land would bear. If these people were to go on expanding they had to buy extra land in the past year or two in order to maintain the pace of development they were setting in the national interest. Many of them have come in for snide criticism—I heard it in this House today—because they have bought up the extra land. They have been treated as some kind of criminals, some kind of anti-national people. Most of them are among our best farmers. They have made the best possible use of their existing land and they would have continued to make even better use of additional land were it not for the crisis of confidence mentioned and the acute pressure many of them are put under because they are so heavily in debt. They borrowed last year to buy land at the going price but they now find that the value of the land is falling as is the value of what they are selling, and the pressure being put on them to repay the money is increasing.
All of those three phenomena combining at the one time are putting acute pressure on our most progressive farmers, the people who are making maximum use of their land on a per acre basis. I can see serious problems, almost amounting to bankruptcy in some cases, among some of the more progressive farmers because of the credit squeeze. These are the men who are supplying our processing factories, who are keeping people engaged in the processing industries in employment. If they go out of production the processing industries which are working at undercapacity—this applies not only to meat but also to milk plants—will be in danger and employment in them will be affected. These progressive farmers are in acute difficulty because of the credit squeeze.
A third category of problem has arisen because of the credit squeeze, namely, a problem among the processing co-operatives. They are in debt but they are not being immediately affected. Their farmer clients have been unable to meet their repayments to the co-ops for seasonal facilities with the result that the effect of the credit squeeze on farmers is being transferred to the co-operatives. In fact, the effects of the credit squeeze are seeping right through agriculture from the farmers to the co-operatives and I foresee them being in acute financial difficulties. This will particularly affect the more intensive co-operatives who have been involved in seasonal credit to their farmer clients this year.
I hope that with this money the ACC will be cognisant of the three areas of difficulty I outlined that have arisen because of the credit squeeze. The three areas are: first, the problem with the cattle industry, particularly the low prices at which cattle are sold; secondly, there is the problem with regard to the intensive farmer who bought land in the recent past and who has acute solvency difficulties and, thirdly, there is a problem with regard to the co-operatives. The three areas should be given serious attention.
A question must be addressed to those who are responsible for the credit squeeze on agriculture. Do they realise that Irish agriculture has one of the best debt equity rations in Europe, that Irish farmers have more security for thier loans and have more capacity to repay their loans in real terms than almost any of the farmers in Europe? We have a debt equity ratio of 93 per cent; in other words, for every £1 loaned, without taking the land into account there are goods on the land ready to match it to the extent of 93p which could be disposed of there and then to repay the loan. That is a very sound position to be in. In Denmark there is only 50p for every £1 loaned to Danish farmers. Taking the industry as a whole, Irish farmers are in a very good position to make repayments. Yet that is the sector being told now: you cannot borrow any more from the banks because the banks have loaned too much this year.
I question the economic wisdom of putting on the brakes at this time of year in agriculture in Ireland. I do not believe it will serve the objects which the Central Bank are seeking to achieve. The Central Bank's chief reason for imposing the credit squeeze was that our balance of payments was in difficulty, there was a danger that our currency—now in the EMS, maintaining quite a high rate of parity, quite a high value within the EMS—would be forced to devalue if our balance of payments situation continued in the bad shape in which it was and still is to a great extent. The Central Bank said: we will have to put the brakes on; we will have to restrict credit so that we can, through that, restrict imports, thereby bringing the balance of payments back into balance.
But the effect of a credit restriction in agriculture will be precisely the opposite. As Deputy Walsh correctly pointed out, agriculture is our largest export industry. Ten per cent only of every £1 worth of agricultural exports is represented by imports of raw materials whereas 80 per cent of every £1 worth of industrial exports is represented by raw materials. If one cuts credit to agriculture one is directly cutting our largest export earner. Therefore in an effort, through this credit squeeze, to restrict imports—thereby restraining the balance of payments—the effect the Central Bank will achieve will be a restriction in exports in agriculture, which will require an even further tightening of the screw to reduce credit to other sectors which are importing, when we will be on the classic downward spiral of economic decline and depression which characterised the economies of Europe in the late nineteentwenties and early nineteen-thirties.
I believe there are grave reasons for doubting the wisdom of the credit squeeze as it affects agriculture at present particularly in view of the basic solvency of Irish agriculture, the fact that we have a 93 per cent debt-equity ratio, the fact that agriculture is an exporting industry and that any depression of agricultural output will immediately hit exports and, therefore, the balance of payments in precisely the opposite way the credit squeeze was designed to achieve.
Why has the credit squeeze occurred? I have indicated already the basic reason—the desire to maintain the value of our currency in a difficult balance of payments situation in the EMS. But the unfortunate aspect of it is that one sector only of our economy is being asked to bear the burden of keeping our currency in line. It is the productive sector only which is borrowing from the credit institutions. There is an 18 per cent limit being imposed on borrowing from the associated banks but there is no 18 per cent limit being imposed on Government borrowing. I should like to know if our Government will keep their borrowing with the 18 per cent limit. I very much doubt it. In fact one of the reasons that this credit squeeze is necessary is that Government borrowing—hence spending by the Government, hence imports by the people who are receiving the results of that spending—has gone completely out of control in the recent past. That is what has brought us into our present balance of payments problems. Instead of the Government cutting back on their borrowing, the people being asked to cut back are those whom I have mentioned in export industries, such as agriculture.
I should like to revert to the basic rationale behind this Bill, which is one of confidence in agriculture. What the ACC are saying to us today, through the Minister, is that whatever else there may be grounds for not investing in, there are good grounds for investing in agriculture. I agree heartily with that proposition. There have been points made already in this debate which would appear to query to a degree the validity of that proposition. These have arisen chiefly from the current very weighty attacks being made on the CAP, which is the ground upon which confidence in agriculture can be based. Indeed in many circles there seems to be a sort of fatalistic approach to the prospects for the forthcoming price negotiations and for the CAP. There seems to be tacit acceptance that: well, there is not much we can really do about it; the budget of the Community is in serious difficulty; far too much money, it is alleged, is being spent on agriculture; I suppose we will have to accept serious cutbacks. I wonder if that attitude of fatalism and quiescence, in the face of the attacks being launched on the CAP, is justified on any ground.
It is worth analysing the reasons the CAP is in difficulty, to see where they lie. The CAP is under attack chiefly because of the very substantial amount being spent on supporting the milk market. The are five basic facts I should like to put on record in relation to the milk market which might indicate that the problem is one that can be solved, that it is certainly not one created by Ireland, and that it is up to the people who created the problem in the milk market to solve it. First of all, I should like to point out that imports of milk products from outside the EEC, from New Zealand, are equivalent to Ireland's entire production. Secondly, there is only a surplus of milk in the Community equivalent to 60 days' comsumption, and we must have milk and food if we are to survive. Yet the very Community which throws up its hands in horror at a surplus of 60 days in milk is the Community that insists that we should have 100 days surplus of oil products in case we run into difficulty. But we need food just as we need oil. If stocks of oil are justified, then certain stocks of food are justified also. The Community must have self-sufficiency in food if it is to be safe in a very unstable international situation.