European Financial Stability Facility Bill: Second Stage

I move: "That the Bill be now read a Second Time."

The draft legislation before the House will enable Ireland to join with the other euro area member states in the implementation of the European financial stability facility. The facility is a contingent €440 billion financial support instrument that will be able to provide loans to euro area member states that are unable to access capital markets due to exceptional circumstances beyond their control. Ireland's key obligation under the facility will be to provide guarantees up to a ceiling of just over €7 billion, if needed, for any funds raised by the facility to provide loans to such euro area member states.

The Bill is a logical consequence of the steps that the European Union and the IMF took in response to the recent Greek funding difficulties. In that case, the euro area loan facility was established to provide loans of up to €80 billion to Greece over a three-year period. In conjunction with this, the IMF agreed to provide a maximum of a further €30 billion, making a total of €110 billion available for lending to Greece. I remind the House that Ireland's share is of the order of €1.5 billion and legislation was enacted last month giving effect to our participation. The measures put in place ensure that Greece will not need to rely on the sovereign debt markets for the next three years, thus giving it the necessary breathing space to rectify its public finances, while at the same time meeting the policy conditionality attached to the loan facility. However, at the time it also was recognised that developing and implementing bespoke instruments each time a member state faced difficulties is not a sustainable or prudent approach. In light of this, it was decided that the EU needed to develop and adopt a comprehensive package of measures that would be of sufficient magnitude to address future potential needs. On 9 May last, ECOFIN adopted a package of measures, including an IMF contribution, that will provide up to €750 billion in financial support to euro area member states, if required.

There are three distinct elements in this package. The first is the establishment of the European financial stabilisation mechanism, under which up to €60 billion may be borrowed by the European Commission and loaned to member states, subject to strict conditions on budgetary consolidation. The Council regulation establishing the stabilisation mechanism was adopted by the Council on 10 May 2010. The stabilisation will be the instrument of first resort should a euro area member state seek assistance. The second element is the €440 billion European financial stability facility, which is the subject of the Bill before the House. It will be governed by the intergovernmental framework agreement agreed between the euro area member states and the special purpose vehicle company that will be used to implement the facility. While the facility is independent of the EU budget, the European Commission will play a key role in its operation. There is also provision for important functions to be carried out by the EIB and the ECB. The framework agreement, which I signed on behalf of Ireland on 10 June, subject to the enactment of the Bill before the House, is included in the Schedule to the Bill.

The third element is the assistance that the IMF can provide to member states under its existing stand-by arrangements. It is estimated that this amounts to an aggregate of €250 billion. The IMF has stated that upon request in individual country cases, it is ready to provide financial assistance to its European members in conjunction with the new European financial stabilisation mechanism and the European financial stability facility. This would be on a similar basis to the assistance that the IMF has agreed to provide to Greece in conjunction with the euro area loan facility. Consequently, in overall terms, an aggregate amount to the value of approximately €750 billion is now being put in place to provide support for euro area member states, if needed.

The direct financial implications of the Bill relate to the subscription of capital for the European financial stability facility company that will operate the facility. The State has already committed to contribute its 1.59% share of the currently issued share capital of €31,000, that is, approximately €490. In addition to the issued share capital, there is an unissued but authorised share capital of €30 million. Calling up further capital from the authorised share capital requires a unanimous decision by the board of directors and each shareholder is represented by a director. The provisions relating to this and other matters are all set out in the company's articles of association, which have been laid before the Oireachtas. If the entire authorised share capital is called up, then Ireland's share would be just under €478,000. However, this will be reduced slightly following the accession of Estonia to the euro next January.

The key obligation of the State under the framework agreement is to provide guarantees to the European financial stability facility company to enable it to raise money to provide loans to euro area member states. It is only if a guarantee is called that the State will be obliged to fund its share of the guarantee in question. Therefore, apart from a small amount of paid-up capital, no money is being called upon. The contribution key, which dictates how much of each funding instrument the State will guarantee, will vary in each case and I will outline the reasons for this when I run through the articles of the framework agreement. Under the agreement, Ireland's guarantee ceiling is just over €7 billion. In the highly unlikely event that a guarantee is called, this will not mean that Ireland will never see its money again. The European financial stability facility company remains liable for funds paid under any guarantee and it will endeavour to secure repayment of any underlying loan in default with a view to returning such funds to guarantors as soon as possible. In such an event, it is likely that a lengthy period would elapse before losses, if any, could be quantified.

The purpose of the Bill is to permit Ireland to work together with its fellow euro area member states to ensure the overall financial stability of the euro area. The Bill will allow Ireland to issue guarantees in accordance with the European financial stability facility framework agreement and provide for payments to be made from the Central Fund in respect of any obligations arising under the agreement, subject to a maximum ceiling of €7.5 billion. The Bill is a very straightforward item of legislation because member states' obligations are spelt out in detail in the framework agreement, which is scheduled to the Bill. After I have explained each of the sections of the Bill, I will explain the key articles of the framework agreement.

Section 1 defines the company that will implement the instrument on behalf of the euro area member states and the European financial stability facility framework agreement. Section 2 provides that the Minister for Finance may issue guarantees on behalf of the State for the purposes of the framework agreement. Section 3 provides that money may be paid from the Central Fund to meet the obligations of the State arising from the framework agreement, up to a maximum sum of €7.5 billion. There is an obligation to subscribe to the capital and other costs of the company and additional obligations could arise if a guarantee is called. Section 4 provides that any money received by the State is to be paid into the Central Fund.

Section 5 deals with the reporting obligations. The Minister must ensure that a report is laid before Dáil Éireann as soon as is practicable after 31 December 2010 and every six months thereafter. There is provision for more frequent reporting from time to time, if considered necessary. The report must include information on outstanding guarantees, moneys advanced by the State and money that has been repaid to the State under the framework agreement. Section 6 amends the reporting requirements of the Euro Area Loan Facility Act 2010. This amendment to the earlier legislation for the assistance to Greece takes on board the views expressed during the passage of the legislation for more frequent reporting. The amendment also makes the reporting requirements consistent with the reporting requirements of this Bill. Section 7 is a standard section on the expenses incurred in the administration of the Bill and section 8 sets out the Short Title.

The Schedule to the Bill contains the European financial stability facility framework agreement. The agreement begins by stipulating the parties to the agreement. These consist of the euro area member states and the European financial stability facility company. This is followed by a preamble, which outlines the origins of the facility and explains its purpose. As the agreement is a lengthy and detailed document, I wish to highlight some of the key points.

Article 1 of the agreement covers the entry into force provisions for the facility. Essentially, the obligation to issue guarantees becomes operational when member states comprising 90% of the guarantee commitments have submitted their commitment confirmations. Article 2 covers the granting of loans, funding instruments, the issuance of guarantees and generally sets out how the facility will operate. It provides that a euro area member state seeking financial assistance must agree a memorandum of understanding with the European Commission in liaison with the IMF and the European Central Bank that sets out the budgetary and economic policy conditions with which the borrower must comply in order to receive financial assistance. In addition, detailed terms and conditions will be set out in a loan facility agreement between the company and the member state in question, subject to the approval of all guarantors. Article 2 also provides that the company will be responsible for raising the money it requires to advance the loans to borrowers and establishing the terms on which it issues or enters into funding instruments. In addition, the interest rate to be charged to a borrower will cover the company's cost of funding, plus a margin to provide remuneration to the guarantors. Guarantors will be required to issue irrevocable and unconditional guarantees in respect of funding instruments issued or entered into under the agreement. The amount of each member state's guarantee is based on its contribution key to the capital of the ECB, multiplied by 120% of the value of the principal, interest and any other amounts due under a particular funding instrument. Each guarantor's total potential exposure is limited, as set out in Annexe 1, to its share of ECB capital among the existing 16 euro area member states. In Ireland's case, the limit is €7.002 billion. Finally, article 2 provides that the issuing of guarantees is limited to funding instruments related to loan facility agreements entered into on or before 30 June 2013. It is worth noting, however, that individual loan tranches may be issued after that date.

Article 3 covers the preparation and authorisation of loan disbursements. The strong conditionality of any country programme is emphasised by the requirement that the Commission, in liaison with the ECB, must present a report to the euro group on the compliance of the borrower with the terms and conditions of the memorandum of understanding before each disbursement of a loan, apart from the initial disbursement. The guarantors will evaluate the report and unanimously decide whether to permit the disbursement.

Article 4 covers the issuance of or entry into force of funding instruments. In particular, the company is required to fund the loans it makes by the issuance of or entry into funding instruments on a matched-funding basis, if market conditions permit it. It also requires the payment dates for loans to be 14 business days before scheduled payment dates for funding instruments. If matched funding is not possible, then the company may, with the unanimous approval of the guarantors pursue a diversified funding strategy. There is provision in this regard for the company to delegate the management of it to one or more debt management agencies of euro area member states or to other institutions.

Article 5 provides for credit enhancement, liquidity and treasury matters. Credit enhancement is seen as an extremely important matter because such measures are designed to help secure the highest possible ratings from the credit rating agencies with obvious benefits for the rates at which the company can raise funding. The first element of credit enhancement is that each guarantee issued by a member state will be for 120% of its actual share of the amount being guaranteed. That will be of great comfort to holders of funding instruments issued by the company because it builds in redundancy and allows for the extremely difficult to imagine scenario that one of the guarantors fails to honour a call on a guarantee.

The second element is that the money raised by the company from the 50 basis point service fees and from the upfront payment of the NPV of the margin of each loan it issues, will be held in a cash reserve to form a cash buffer. Should the company ever issue any loans, the cash reserve will quickly reach a substantial size thereby boosting the resources of the company. The cash reserve is there to cover shortfalls in payment to holders of funding instruments and it will only be distributed back to guarantors when the company has fulfilled its purpose and been dissolved. The cash reserve must be invested in high quality liquid debt instruments. The company will, in the event of a delay or failure to pay by a borrower, first make a demand on the guarantee from each guarantor. If that does not cover the due payment on the funding instrument, then the cash reserve can be used.

Article 6 covers claims under a guarantee. If the company does not receive a scheduled payment under a loan it will call in the guarantees from the relevant guarantors. It will also, if necessary, draw on the cash reserve. Once a guarantee has been paid, the company is liable to reimburse each guarantor subject to the extent of the funds actually received from the underlying borrowers in respect of the relevant loans.

Article 7 covers the contribution between guarantors. If a guarantee is called to meet a scheduled payment and, due to the non-payment by one or more of the other guarantors, a guarantor ends up paying more than its required proportion, that is, its share of the guarantee in question before it is increased to 120%, then, after three business days, that guarantor is entitled to an indemnity from each of the other guarantors for the excess it has paid plus interest at the rate of one month EURIBOR plus 500 basis points.

Article 8 deals with calculations and adjustments of the guarantees. I have already explained that a prospective borrower can make a request to be excused from having to provide further guarantees. If that is accepted unanimously, it becomes a stepping-out guarantor and the contribution key in Annexe 2 for the remaining guarantors will be adjusted accordingly. For example, the article specifically provides that Greece is to be treated as a stepping-out guarantor from the start. As a consequence, Ireland's contribution rate to guarantees of 1.59% in Annexe 2 as it stands will increase to 1.64%. On that basis, under the agreement, Ireland's exposure in respect of its overall guarantees remains at just over €7 billion.

Article 9 outlines the procedures to be followed by the company if it becomes aware of any breaches of conditions by a borrower or the need for any amendments of a loan facility agreement. Article 10 deals with the company, inter-guarantor decisions, directors and governance. It provides that each shareholder, that is each euro area member state, is entitled to be represented by a director, specifically its representative on the eurogroup working group which typically is the relevant economic and financial committee, EFC, member. Each director's voting weight will correspond to the number of shares held by his country. The article identifies what decisions guarantors must take on a unanimous basis. These include decisions on the granting of loan facility agreements, the disbursement of loans, various modifications of loan facility agreements, stepping-out guarantors, significant changes to the credit enhancement structure and the funding strategy of each EFSF programme or any increase in the aggregate amount of guarantees that might be issued under the framework agreement. Corporate matters of the company that require unanimity include the call-up of capital, the employment of the CEO, approving the accounts and any changes to the company's articles of association, a copy of which has been laid before the House.

I draw Deputies' attention to the fact that the definition of the framework agreement includes amendments to it. That has been included for the very good reason that there will be fairly technical amendments to the agreement from time to lime and it would be a gross misuse of resources to have to prepare amending legislation each time. For instance, the definition would accommodate the accession of Estonia to the euro and the consequential amendments that will have to be made to the agreement under Article 13(7). The most significant change that can be made to the agreement would be an increase in the overall ceiling of €440 billion. Under section 3, the maximum amount that the Central Fund can pay out is €7.5 billion. I am asking for some leeway over the current maximum exposure to allow for an emergency increase in the agreement's ceiling of €440 billion, potentially when the House is not sitting. The leeway could permit agreement to an increase of approximately €28 billion on a euro-wide basis over the current €440 billion ceiling without requiring further legislative amendment. That is an appropriate balance. Any increase above that level will require an amendment to our legislation before we could agree to it.

Article 11 deals with the duration and the liquidation of the company. The company will remain in existence until 30 June 2013 as a minimum and it will be liquidated as soon as the loans advanced by it have been repaid and all its liabilities to holders of its funding instruments have been discharged. If no loan facility agreements are in place on or before 30 June 2013, then the company will be dissolved immediately. On its liquidation, any liabilities, if there are any, may be divided among the shareholders and any assets, after the cash reserve has been distributed, will be distributed to shareholders.

Article 12 covers the appointment of the European Central Bank and the European Investment Bank to fulfil various financial functions and Article 13 covers the administrative provisions. These include the use of resources, reporting, the transfer and disposal of shares and amendment of the agreement in the event of the accession of a new member state to theeuro.

Annexe 1 to the agreement sets out the list of guarantor member states and their respective guarantee commitments and Annexe 2 sets out the contribution key for each member state. As I said at the outset, the European financial stability facility is an essential contingency measure. As Deputies are aware, other broad-ranging measures are also being considered at EU level with a view,inter alia, to improving the economic governance of the euro area and the related arrangements for budgetary surveillance. I am participating in these discussions as a member of the task force established by President Van Rompuy. I would like to reassure the House that notwithstanding what has been implied in some media reports, Ireland has nothing to fear and everything to gain from this important process which is likely, if anything, to enhance the role of national parliaments in these matters.

In the difficult times we have been experiencing, our membership of the euro has been and continues to be of critical importance to the economy. It is therefore incumbent upon us to play our part in defending the currency, not only because of the principles of solidarity and responsibility that came with our membership of the euro, but because ensuring the ongoing financial stability of the euro-area is vital to our economic recovery and future success. That is the purpose of the Bill. I have outlined the full implications of the legislation before the House including the possible financial implications. This is an important piece of legislation for us and our European partners. I commend the Bill to the House.

Fine Gael supports the Bill. I wish to address a number of issues relating to the Bill and the broader European measures. In his speech the Minister has provided technical details of the content of the Bill. Perhaps he will be able to clarify a number of points. First, he indicated that the level of the guarantee would be up to 120% of our requirement in terms of the schedule, which was €7 billion. A total of 120% of that would be approximately €8.4 billion yet section 3 specifies the maximum amount we can contribute as €7.5 billion. Is it technically possible that based on the €7 billion we are required to provide under the guarantee that we could have to provide up to €8.4 billion in spite of the fact that the maximum amount of contribution specified in section 3 is €7.5 billion? I ask the Minister to clarify that point.

A number of issues need to be addressed in the Bill. I welcome the fact that the Minister has reduced the frequency of reporting under the euro area loan facility agreement from a year to six months. The European financial stability facility company must report on a quarterly basis to the European Commission. We tabled amendments to require the Minister to lay the reports before the House within two weeks of receiving them from the various European bodies.

It is important to know the level of funding required. I assume the €7.5 billion to which the Minister referred contributes to the €478,000 that we could potentially put into the company by way of additional share capital, plus the running costs. Will the Minster clarify this? The expenditure by way of capital and expenses on foot of the agreement should be reported on annually.

The Euro Area Loan Facility Act contains a mechanism whereby no government would be out of pocket, specifically in respect of Greece. If the cost of funding in respect of borrowing on the part of a member state is higher than what a member state receives from Greece, there is a mechanism whereby that member state will be recompensed. As the Minister is well aware, our bond yields are well in excess of those of Germany, perhaps by 250 basis points. If it arises that Ireland is required to give a guarantee along with other member states, that will certainly affect the cost of borrowing from the international markets. Unlike countries that may not be as affected, will we be compensated in any way through the mechanism for the additional cost to the Irish taxpayer?

The European Financial Stability Facility Bill 2010 is to provide stability in the Union. When the package was launched in early May, bond yields reduced considerably. They reduced from 6% to 4.5% in the Irish case, and subsequently rose to 5.2%. The bond markets are worried that the scale of the problem could be bigger than the actual package. Will the Minister address this? The bond markets fear that European policy is very much being driven by fiscal austerity measures when what is required is a proper growth strategy.

The Europe 2020 document has effectively been agreed by the member states. Ireland will have to produce its own plan in that regard but I do not believe one can bridge a budget deficit without a credible growth strategy. In Ireland, this has been missing. It is a point of discussion with the Minister that takes into account the fundamentals in terms of the economy, low inflation, low interest rates and cost competitiveness. I am not in any way disagreeing with that but various reports state our unemployment level will remain consistently high, at 13.1% in 2010, 12.2% in 2011 and 11% in 2012. In 2014, there will be an unemployment rate of 10%. We do not want purely jobless growth.

The Union has identified that a growth strategy is critical. It has been lacking here and this has not been addressed. There are 440,000 people on the live register as we speak. The Minister will be aware that many people who became unemployed in the past year were on jobseeker's benefit and are now to receive the jobseeker's allowance and the amount they are receiving is decreasing significantly. There will be long-term unemployment, which causes major problems.

The Europe 2020 document refers specifically to people in the younger age bracket. The aim is to raise to 75% the employment rate for women and men aged 20 to 64, including through greater participation of young people, older workers and low-skilled workers, and the better integration of legal migrants.

Our live register figures would be significantly higher but for emigration. It has effectively lowered the real unemployment level and cannot be overlooked. With regard to the European context, the IMF is stating Asia has a tremendous growth pattern and that even the United States has a stronger growth pattern than Ireland. The latter has a growth strategy.

I said in the Chamber approximately 18 months ago that I always felt there should be a contingency fund put aside every year in the budget for a rainy day. Professor Honohan mentioned this also. I refer to an equivalent of the National Pensions Reserve Fund. If we had this, we would have been able to have a fiscal stimulus when the financial crisis arose at the end of 2007. However, the overdraft was at its limit and the Minister did not have that luxury. We needed to have it and, as with banks, we need mechanisms in place that make contingency funds available.

The Minister is constantly referring to the National Pensions Reserve Fund. It was set up for pensions but I am talking about a fund that would be used specifically to create a fiscal stimulus if the country encountered a financial crisis. The Government has cut the capital budget, which has major consequences. The cuts over recent years have probably cost 40,000 jobs.

The Taoiseach referred last night to the capital budget and the jobs it creates. Many of the capital projects of the past were not geared towards employment creation. Fine Gael feels strongly that the capital budget should be left unchecked. It has always advocated that there should be proper cost-benefit analysis. Many of the plans under the national development plan were never subject to rigorous cost-benefit analysis before they were implemented. Doing so is fundamental.

I note in media reports today that the Department of Finance stated it highlighted the existence of the property bubble in 2005 to the Ministers in charge, including the current Taoiseach. The tax incentive schemes were continued until July 2008, two and a half years later. This needs to be addressed.

The only person we have not heard from on this issue is the Taoiseach. We have had this discussion many times. All the eminent and excellent reports issued to date imply the key missing ingredient was discussion with the relevant Minister when issues arose. It is critical that the terms of reference for the external review of the Department of Finance be made public and that they include the policy decisions made by Ministers at given times. The external review is to cover the period from 2000. To ensure public confidence and accountability, it is critical that the terms of reference refer in absolute terms to the Ministers for Finance in office during the period covered by the review. There were three, including the current Minister, Deputy Brian Lenihan. I note that the Minister, Deputy Lenihan, is willing. The two previous Ministers, namely the Taoiseach and the former Deputy Charlie McCreevy, would be available to give evidence in public. People want accountability and transparency. The ESRI and other bodies have stated that they all had difficulties in looking at issues at a moment in time. For the sake of completeness, we need to hear from the Taoiseach as well.

If this package is never called in, we will have succeeded. If it is called in, then there are major issues. A number of questions must be asked. Will the austerity measures be complied with by the countries that need to comply with them and will there be a situation where one size fits all? My worry would be that large economies such as Germany benefit significantly from the euro. Germany is very much an export orientated country. In the natural environment without a common currency the deutsche mark would have appreciated and this would have enabled other countries to improve their competitiveness. However, Germany is extremely strong in terms of exports and it needs to boost domestic consumption. If it boosts domestic consumption, that would benefit the rest of the EU.

It is critical when looking at Europe as a whole that we have financial measures in place that enable all countries to function, not necessarily the larger countries but countries such as ourselves as well. We are an export nation and we must get to a situation where we can export into Europe in a competitive way. Germany has a major comparative advantage because it is exporting to such an enormous degree and it is gaining such an enormous advantage from a common currency. The key feature is domestic consumption in Germany and if we can find a mechanism by which that can rise, that would be a significant element.

The critical issue, which I mentioned earlier, is the growth strategy and the Europe 2020 document. I want to know when the Minister will put forward Ireland's proposals for targets. There is a national programme to be put forward to that effect to the EU as well. Targets must be set. How can we ensure that people come off the live register in a constructive way?

We must look at, while not necessarily commenting on, the British emergency budget yesterday in which there was a point of principle, which was that the private sector will be key to economic recovery. The British Government reduced its corporation tax rate, which has implications for us as a country. In the wider context, it will be the SME sector that will bring about growth.

We discussed NAMA on the Order of Business, but it would be critical in terms of the role of Mr. John Trethowan in the SME sector to get credit flowing so that there would be sectoral limits of credit to flow to various sectoral areas so that we identify areas where we are strong and very much export driven. We have a situation whereby we are providing credit flowing to the SME sector with an element being policy driven. One must have something here that will enable the SME sector to come out of the situation in which it is.

Often this is like a bubble where we speak about matters in abstract terms. There are businesses around the country which are losing one and two employees. There are 320,000 SME employers in the country, 155,000 of which employ two or three persons or more. If each of those could take on an extra person, that would result in 155,000 persons coming off the live register. These are the straightforward simple questions.

In my experience over many years in practice as an accountant — I was a sole trader for many years — cash is king and credit is the key element that puts businesses out of operation. If they have not cashflow, profitable viable entities will go out of business. One can have a profitable business that will cease to trade because it has not cashflow. Equally, one can have an unprofitable business that can continue because it has cashflow. With the approach in Ireland, we must ensure that credit flows to the SME sector.

My party put forward a range of suggestions. There is a strong case for cutting employers' PRSI. My party put forward, in our last pre-budget document, that the lower rate should be halved and the upper rate should be reduced considerably, by 2% or 3%, to give a benefit.

In Europe, there is a need for fiscal consolidation and structural reform. I spoke about structural reform in terms of Germany and the other countries. Greece's economy is heavily reliant on tourism and has a soft underbelly. There must be ways to facilitate structural reform across Europe to ensure that this guarantee is never called upon. The way that will arise is if each country deals with its cost base, fiscal measures and growth measures.

The other issue I want to address is banking. The European Union is currently looking into financial stability measures for the banking sector and I understand they will be produced in 2011. It is critical that there would be consistency between member states in how regulation is enforced. We are now moving towards very much principles' based regulation, which I welcome. It must be done in a way to ensure that we can balance it with attracting industry. It will be to our benefit. If we have capital ratio crime, it is in the banking sector. Effectively, it will ensure the security of those banks. It is something about which I feel strongly and is something we badly need to address in a European context.

In looking at it from both a European context and a national context, for this proposal to operate the key features are that it must never be called upon, and that is about Europe dealing with the issues of financial stability, structural reform, the area of banking regulation and the area of a growth strategy. In terms of Ireland Inc, it is critical that we address all of those issues as well. In Ireland, the key issue that stands out is the stark levels of unemployment with 440,000 plus on the live register. That is the issue for us as a country.

Banking is being dealt with. Issues over which we will have concerns are NAMA, the flow of credit and fiscal consolidation. We have concerns about the cutting of the capital budget. We have issues with bringing in a property tax on home owners who are under severe pressure at a time when many of them are in negative equity. There are ways the Minister can make savings in general public spending and these are issues that should be looked at rather than taking the easy option of imposing a property tax on residential homes. As we well know, its previous incarnation was the residential property tax measure, which did not work and was a nightmare. The difference in this context is people cannot afford it. Governments are there to represent people and it is something that must be taken on board.

Of the 440,000 people unemployed, many are fast becoming chronically long-term unemployed. Each Deputy's constituency office is visited by people who have become unemployed, received redundancy payments and gone on jobseeker's benefit only to find that, after 12 months, they must be means tested for jobseeker's allowance. Since a person's husband or wife might still be working, the allowance is significantly reduced. This places people in considerable financial difficulties. They could have a mortgage they are finding difficult to service, yet the Government is discussing the introduction of a property tax that could be applied to them, as they would be still in receipt of income. I note from reports that the tax might not be applied to the unemployed, but what about a married couple in which only one partner has become unemployed? The principle of a property tax on residential homes is draconian and unfair. It is a retrograde step by the Government. The issue could be addressed in another fashion.

In the European context, the concern is that Ireland is moving into a debt crisis. Our national debt has doubled. One reason for our bond yields being the second highest in Europe after Portugal's is our debt level. We have borrowed close to €50 billion in respect of NAMA, an amount that will fall on the taxpayer. There is a general view that the Government did not move quickly enough to react to the financial crisis when it evolved in 2007. I remember the then Minister for Finance, the current Taoiseach, telling the House we were in for a soft landing. He repeated this comment over many months. According to Dan O'Connor, an eminent economist, our bond yields are so high because of our debt levels and because the Government did not move quickly enough to deal with the budget deficit going out of control, although we still have an element of credibility. Something should have been done in the December 2007 budget. Instead, we waited virtually 18 months until April 2009 before measures were introduced to address the financial crisis.

Two further measures will impact on the cost of borrowing, namely, the eurozone loan facility in respect of Greece and this Bill. The former requires €1.5 billion and the latter requires €7.5 billion, amounting to €9 billion in total, nearly 6% of our GDP. This figure is phenomenal, but still manages to put into context the sheer scale of the money invested in Anglo Irish Bank. That investment is almost three times larger. When the bank's board appeared before the Oireachtas finance committee, I asked whether €22 billion had gone down the toilet. The answer was "Yes". The €9 billion is an horrendous amount of money. It is €1 billion more than our annual investment in the Department of Education and Skills and is an exposure for the taxpayer. We must ensure the European Financial Stability Facility Bill 2010 is never called upon.

Europe has identified that we will not bridge our budget deficit without a proper growth strategy. It is time that the Government recognised this fact also, as it will have implications for the 440,000 people on the live register. Taking someone off the live register restores his or her dignity and saves the Exchequer approximately €20,000.

Ireland is seeking to borrow up to €40 billion from the international markets between now and 2012. If our bond yields are increasing, the cost to the taxpayer will be greater and the service we can provide will be reduced. I would like a twin-track approach to reducing the budget deficit. We must make cuts in expenditure and savings, but we must find ways to boost our revenue from structured taxes like income tax instead of through, for example, a property tax that would place an unfair burden on people. Let us find mechanisms through which we can have a sustainable and export-driven economy and ensure that people return to work and that our markets are competitive. Side by side with these must be structural reforms in Europe, since it should not be a case of one size fitting all, given the presence of Germany and other large countries. We must ensure that our country can export and have a comparative advantage in Europe in that regard.

Fine Gael will support the Bill and I look forward to the Minister of State's response to my queries. We have tabled a number of amendments in respect of reporting requirements, as the Minister for Finance should lay the quarterly reports on the European Financial Stability Facility Bill and the eurozone loan Bill before the House two weeks after receiving them. We need more details on the arrangements entered into under this legislation and the Greek bailout Bill on behalf of the taxpayer, as €440 billion of the €750 billion involved in the former will come from EU member states.

With the Acting Chairman's permission, I wish to share time with Deputy Morgan of Sinn Féin. Will the Acting Chairman tell me when 20 minutes have elapsed?

This Bill is the technical expression of the deal reached by eurozone countries in a bid to avoid the wave of sovereign debt defaults threatening Europe. Before discussing Europe in general, I wish to reflect on a number of issues pertaining to the Irish situation. There is an onus on the Minister for Finance and his Department to make a number of statements and to provide information before the recess that would allow us to assess genuinely the Irish position before entering the guarantee's exit period. According to Fianna Fáil, that €440 billion guarantee would cost the taxpayer nothing, be the cheapest in the world and restore our fortunes. It will officially expire at the end of September. The Minister appears to be confident that he can extend it by a further month, if not to the end of the year.

Nonetheless, we are in the exit period for the Irish bank guarantee. What is the debt cliff as we approach the end game in the bank guarantee? The Government has established the eligible liabilities guarantee, ELG, with the permission of Europe so that new debt that can be rolled out of the guarantee will be guaranteed by our Government for a period of up to five more years. I have been continuously requesting information from the Minister and from the Department of Finance in respect of this. From the Minister's most recent suggestion, some €30 billion of senior debt is coming up for rollover between now and the end of the year. Earlier answers by the Minister suggest the figure may be as high as €74 billion. It is wrong that I, as spokesperson on finance for the Labour Party, have not been provided with a definitive answer. I refer to the mismanagement of the Irish banking crisis, not simply by Fianna Fáil but also because of the lack of appropriate advice from the Department of Finance. We do not know this because we have not seen the documents. It may well be that the Department of Finance advised the Minister well but was overridden by the Department of the Taoiseach. As far as banking and financial information is concerned, we are living in a secret society. We are prepared to let the international bond markets know our financial position and the senior bankers in the discredited banking institutions seem to know what the position is but the people of Ireland and their elected representatives in the Oireachtas do not have that information. This is a serious mistake in trying to help the country to exit from the decision by Fianna Fáil to provide a blanket guarantee, including the guarantees to the failed Anglo Irish Bank and the even more failed but smaller Irish Nationwide Building Society.

We also have a debt overhang in respect of NAMA. We have passed the middle part of June. In discussions on NAMA, we were promised the revised business plan of NAMA would be published and available. We are approaching the end of June but we do not have a clue what is the revised NAMA business plan, nor do we know if the Minister has a clue. The indications, in revised answers, were that the revised plan would be made available to the Minister by the end of June and perhaps the mere Parliament of the Irish people would receive it shortly thereafter. However, we do not know. This is a core element of the Irish problem. We have a Government that has chosen to adopt total secrecy. The advice of Merrill Lynch to the Government has not been published, nor has the stress testing of Irish banks. This inevitably will be adopted by the eurozone to appease financial markets so they know how good or bad is the sovereign debt of individual banks and individual countries. That is as inevitable as night follows day yet years after stress testing, which we were told showed everything in the Irish banks was fine and dandy, we do not have a word of information published.

I challenge the Minister of Finance to deliver on his promise that he and the Taoiseach will face the Oireachtas Joint Committee on Finance and the Public Service to answer these questions. He threw out the rhetoric last week to the effect that he was prepared to tell us whatever we wanted to know and was prepared to make documentation available but I am standing here empty-handed and I am as wise now as when he issued these rhetorical promises last week. These promises are as good as Fianna Fáil's promise at the time of the last election to cut PRSI by 50% and to raise the old age pension to €300 per week. Promises made by the Minister for Finance last week about the divulging of information about the Irish crisis have not been made good. I challenge the Minister to put the information in the public domain.

NAMA is, in effect, a secret body whose leading figures give interviews and some information from time to time. We know nothing in detail about the top developers, many of whom are into NAMA for sums between €1 billion and €1.5 billion of debt. What is going on between NAMA, Treasury Holdings and the principals associated with Treasury Holdings, Mr. Ronan and Mr. Barrett? It is extremely important the Minister tells us what is going on. A statement was issued yesterday, which was published in the newspapers this morning, by Treasury Holdings and Real Estate Opportunities, REO, that the losses last year in respect of Irish properties were north of 51%. However, according to the story, the company requested the Irish Government, through NAMA, to participate in the development of the Chelsea power station site. According to newspaper reports, this would cost between €5 billion and €6 billion. When the NAMA Bill was before the House, the borrowing powers of NAMA in financing developers to finish projects was listed as €5 billion. I do not think the Government is foolish enough to endorse a suggestion that it would finance the building of the enormous Chelsea power station, but we are entitled to know what view the Government is taking.

We know that China Real Estate Opportunities, CREO, is moving to Singapore to be closer to its eastern markets. Can the Minister for Finance and the Government tell us the position of the principals of Treasury Holdings, REO and CREO, who I understand to include Mr. Barrett and Mr. Ronan? Have they given enforceable personal guarantees to NAMA and the Irish Government in respect of the recovery of the money and advanced via NAMA for distressed loans, most of which arise from the failed Anglo Irish Bank? It is important for the Minister to return to the Dáil and make a statement because vast amounts of money are riding on the proposals in the newspapers this morning. We have been told nothing by the Minister for Finance. It is important that we find out before this day is over. Through Anglo Irish Bank, we know we are on the hook for at least €1 billion in losses in respect of Quinn Insurance. Now, the principals in REO want to complete Chelsea power station and the cost will be between €5 billion and €6 billion. I want a statement on the record as to the position the Minister for Finance is taking on this proposal. The powers NAMA has are extraordinary, and the powers the Minister for Finance has in respect of the covered institutions and NAMA are extraordinary. These are very large amounts of money and we are entitled to know the Government's business plan regarding these proposals because, in effect, the Government is a very large, if not the greatest, stakeholder in these various companies.

If China Real Estate Opportunities is going to Singapore, I want to know if the Government was consulted about the Singapore listing? What is the position on the principals in the company? Are they likely to move to Singapore and go offshore from Ireland? Have guarantees been given by the principals of the company in respect of the obligations NAMA has taken over from the distresses of their companies in order to put the debt of their companies onto the backs of the Irish taxpayers through NAMA?

These are important and fundamental questions, and they must be discussed and responded to by the Department of Finance and by the Minister for Finance. I expect the Minister to return to the House and to give us answers because what is happening in the context of today's debate is that the European Union and the eurozone are essentially offering a stabilisation fund to the markets, which the Labour Party supports. The markets are good now, and all of the institutions of the Irish State — the Minister for Finance, the Department of Finance, the Central Bank and the Financial Regulator — bow down to the markets. They are offering the markets, collectively and through the eurozone, this burnt offering but it is incumbent on Members of this House to make sure that burnt offering does not mean the Irish people become toast as a consequence of the markets. The Minister has been less than forthcoming in the statement he made here this morning.

It is ironic that the National Treasury Management Agency is based in the Treasury Building, which has a figure either climbing down the side of the building or holding on for dear life climbing up the side of it. I am not sure which it is but I know the proprietors and the principal people in Treasury Holdings seem to have been able to hold on to their lifestyles. One of the principals was able to fly off to Morocco in a private jet for a long weekend. I cannot last remember when a civil servant who took a pension levy or a wage cut was able to jet off to Morocco with friends for a long weekend. Are these people so important they are not questionable and they are not to be accountable for their actions? They are clever business people. They have hit a financial crash. They will possibly get themselves out of it again but our interest is to ensure that Irish taxpayers' money is recovered in good time and in good order so that we do not have to spend it on banks but on important areas such as schools and hospitals and getting people back to work. That is the net point.

All of us in Ireland and in Europe have a huge vested interest in a sound euro. It is hard to credit, given the disastrous economic management of Fianna Fáil, but we in Ireland would be much worse off without the euro. We have only to consider what happened in Iceland and the difficulties it had with such a weak and greatly devalued currency. The continued solvency of the participating member states in the eurozone is vital to the euro as it is a more all-encompassing way for Europeans, including us in Ireland, to proceed.

Economic and monetary union in Europe is a unique economic development which has resulted in significant gains for everybody in the euro area. There is no federal state or political union among the states. Instead, sovereign states are sharing their sovereignty for the mutual benefit of the citizens of the states, with effective supranational institutions like the European Commission and the European Central Bank, but uniquely for a union of sovereign states, European Union law has supremacy over national law. We have this continuous tension in Europe between European sovereignty on the one hand and a group of national states on the other.

It is clear that EMU is a work in progress. The original design of this unique monetary union was not adequate for the long-term survival of the euro and, to be honest, the jury is still out on that. It could not withstand a foreseeable solvency crisis, even in a relatively small participating state. Like Ireland, Greece, the country most in the news in that regard, is a very small percentage of the total activity and percentage of the eurozone.

A foreseeable problem is that there is a large risk of contagion from one crisis hit state to other participating states perceived by the financial markets as having similar problems. That remains a problem for us. The exit strategy from the guarantee scheme is coming up. We do not know what is the debt overhang. We have bond rates which are higher than Spain, despite the fact that we have had a much greater level of austerity, yet so far Spain has only committed to future austerity.

After the economic and financial crisis of May 2010 we now know that we need a large stabilisation fund as part of EMU because there will not be a federal government with a corresponding financial capacity in Europe for decades to come, if ever. We cannot let our euro and our economic futures be at the mercy of global financial markets or let anonymous traders have a go and make a quick million bucks without a care or thought for the lives that would be affected as a result of their actions. This stabilisation fund, in the view of the Labour Party, is a belated but essential piece of the architecture of a sound and permanent euro and economic and monetary union in Europe.

Let us be clear. The purpose of that economic and monetary union from the point of view of the Labour Party, and on that we differ from Fianna Fáil, is not about the prosperity of bankers. It is about the prosperity of citizens. Fianna Fáil is focused exclusively on bailing out the bankers and the developers. That is the reason it is so important that the questions I raised earlier are answered. Will we get back our money or will we put more money in the way of the developers through NAMA?

I hope the measures taken here this morning will be accompanied, in the case of Europe, by a financial transactions tax that would operate at a small level on financial transactions. In the Irish case, if the Labour Party gets into power, we want to see our money being recovered and a levy on the banks because we know that with the losses accumulated by the banks it will be decades before any bank in Ireland will pay tax. We want to see a plan from Fianna Fáil — the Minister did not even refer to it — of how the ordinary Irish taxpayer is to recover their money. Instead, we had Fianna Fáil blithely suggesting yesterday that the ordinary Irish taxpayer is good for another soaking in terms of a range of new taxes while the banks will be left on the side to contribute zero. It is no wonder citizens are enraged, and rightly so.

I thank Deputy Burton and the Labour Party for sharing time with me.

The EU has now set up a special purpose vehicle, SPV, under the European stabilisation mechanism that will provide funding of up to €440 billion to any eurozone state or states in debt trouble. This SPV is, of course, underwritten by the same eurozone countries that it has been set up to protect.

The €440 billion fund will act as a guarantee for sovereign debt issuances by eurozone countries. Countries will each secure 120% of their share of the loans to secure the highest rating for the debt. The EU finance Ministers' aim is for ratings companies to assign a triple AAA rating to the facility and whose bonds would be eligible for European Central Bank, ECB, re-financing operations. The agency will sell bonds, backed by guarantees, and use the moneys it raises to make loans to eurozone states in need.

Bizarrely, the debt crisis is being fought with more debt. I do not subscribe to this legislation because one cannot treat a debt-fuelled over-consumption problem by adding much more debt. This is an illogical position in which eurozone governments are guaranteeing their own debt before it is even issued. We are in a position where the ECB is keeping our banks afloat and the eurozone countries are keeping each other afloat through mutual guarantees. The underlying problem of too much bad debt, however, is still there.

It is the significant size of the banking sector in the core European countries and the amount of debt in the peripheral countries that they are holding that is determining who in Europe must be saved and who must make sacrifices. Since these banks are the recipients of the bailout, their losses have even determined the size of the bailout too. The Greek bailout did not aim to revive the Greek economy. Instead, it was to provide a guarantee against a debt default by Greece and other European crisis-hit economies. It was, therefore, entirely a bailout for holders of Greek Government debt.

The European Commissioner for Economic and Monetary Affairs, Ollie Rehn, said any loans from the European financial stability facility, EFSF, would impose the kind of austerity budget conditions on recipients that Greece faces as part of a programme for receiving quarterly aid disbursements under the 2 May accord. The process for providing assistance will be similar to that under the loans-to-Greece package. The loans are strictly conditional on a programme being agreed to by the country concerned, as well as the EU and the IMF. The final decision, however, will be taken by the board of directors of the EFSF. The IMF has become the policeman of the eurozone. With that decision the only thing that can happen is the strengthening of the Stability and Growth Pact to the detriment of smaller countries and the weakest economies. This is not a mechanism of solidarity; it is one of pressure. Already other countries, such as Spain and Portugal, are taking measures against working people, driving up unemployment and poverty without providing any way out of this crisis. Social dumping has become the only instrument of competition in the EU, far from the Europe of solidarity and social cohesion.

We must not forget the role of the IMF in Ireland's banking crisis, as highlighted by the two reports published this month. Professor Patrick Honohan stated in his report that the IMF was not strongly or consistently critical of the underlying dynamics of fiscal policy. Its oversight failed abysmally and now it is charged with overseeing European financial stability. In whose interests is this? It certainly is not in the interest of ordinary people for whom the IMF is recommending cutting wages, welfare and public services.

European governments are currently repeating their age-old mistake of cutting spending and raising taxes for low-income earners well before the economy has recovered. In the US, there is a debate about another stimulus package to ensure the recovery does not prematurely run out of steam, a wise approach. The Europeans, on the other hand, are choking off the recovery before it has even started. The premature austerity programmes will ultimately impede debt reduction as nominal growth remains weak.

The crisis in the EU is badly affecting European economies and societies. Policies adopted to cover its costs have lead to harsh austerity measures that have only deepened the recession, encouraged the growth of unemployment and attacked labour and pension rights.

Sinn Féin is not anti-EU. However, it recognises the push for strengthened fiscal union is undermining the peoples of Europe. This drive for fiscal consolidation has shown a lack of will among European leaders to deliver a social union. The EU must be more than about the Single Market with a common currency. We need sustainable policies for growth and stimulus that will benefit the peoples of Europe rather than depress them. I hope the Minister of State will not try to misrepresent my party's position on this Bill as being anti-EU.

Countries that enter into debt to save jobs and stimulate recovery by investment should not be punished. Taxes that governments rely on to service their debts have plunged and actually led to wider deficits. If any economy does not grow but tries to pay its large debts, it will turn into a debt-servicing agency which hollows out the productive marrow of society.

European finance Ministers have resolved to submit draft budgets for the approval of their counterparts and the European Commission before unveiling them in national parliaments. Ministers have agreed to impose new financial penalties on governments that flout EU budget rules. Responding to pressure on the euro following the Greek debt debacle, they also agreed to widen the scope of existing surveillance measures to compel countries with high national debts to reduce them.

With the combination of these budgetary oversight mechanisms and the stringent terms and conditions that will be attached to countries that need to draw down from the EFSF, it is clear economic recovery and growth will be stunted by harsh contraction measures that will not stimulate the economy, create employment or deliver people from poverty.

Rather than the creation of financial measures that will actually help ailing European economies, the package that has been put together by the Commission and eurozone Ministers is crippling both economically and socially. We should not be mistaken. The European Commission will police national budgets and dictate where cuts and savings should be made. Unless its diktat is followed, countries will not be eligible to draw down certain funding from the EU. If countries do not follow the diktat, they will be punished at EU level.

How can I support this legislation that will undoubtedly and unduly punish and penalise the peoples of Europe? I agree with the objective of trying to create a collective response to the attack on the euro. However, this facility is not the best way of achieving this. A different economic approach is essential. A stimulus package, like that in the United States, must be at the heart of building our way out of this economic crisis rather than punishing and crippling the poorest in our society.

I welcome the support for the legislation from Fine Gael and the Labour Party. Equally, I acknowledge and respect the Sinn Féin party adoption of a different position.

Deputy O'Donnell rightly recognises this facility will succeed best if it were never used, a view heartfelt across the eurozone. As the Minister for Finance outlined, this is essentially a contingency or preventive measure. Across a broad range of areas including financial stability, banking supervision and regulation, economic governance and budgetary surveillance, measures will be taken to ensure, as far as possible, that difficulties such as those experienced in the past two years will not recur. In an earlier debate I quoted a statement by the EU Council President, Mr. Van Rompuy, on the whole crisis. I refer to his words from memory, without necessarily fully endorsing them. Effectively, he stated that the EU and the eurozone had been asleep for seven or eight years and had not seen this problem coming and, therefore, this was the reason for the actions being taken.

It is absolutely in Ireland's interest to play a full part in this as members of the eurozone. I will come back on this matter towards the end of the debate. There are voices, more outside the House than inside, which question the wisdom of this approach and this must be addressed.

I have no wish to do him an injustice but Deputy O'Donnell appeared to be counting the level of guarantees we must provide as money spent.

Perhaps that is not fair. However, I emphasise that the Minister's speech dealt with the financial implications of the Bill. Aside from our capital contribution, which is relatively small, money will only be required if a guarantee is called. Even then, every effort would be made to secure repayments of a so-called guarantee. Our guarantees should not turn into losses and every effort will be made to ensure that scenario does not arise.

Will the Minister of State give me leave to clarify that point?

The point is that 120% of the amount is required to be given under guarantee to enable the country to secure a AAA rating. This is to counter for the possibility that some member states which should provide the guarantee may be unable to do so. The question I am asking is simple. If one is required to provide 120% of the contribution amount——

I was about to deal with that question.

It is a question of linking it back. Could one potentially have a situation whereby the amount required would be well in excess of the €7.5 billion being provided in Part 1 of section 3?

I will come to that within two minutes. The Deputy is raising the matter of the cost of funds to Ireland if the guarantee is called. The framework agreement provides within its structure of fees and expenses for a margin to be charged to borrowers to remunerate guarantors. It is envisaged that in the event that Ireland or any other member state faced a relatively larger cost of funds to meet guarantees, it would as far as possible, as in the case of the Greek facility, be made good to guarantors. The decision to issue guarantees is in all cases subject to unanimity among the member states concerned. These provisions will protect the interests of the taxpayer should the issue arise.

Deputy O'Donnell raised the question of whether the 120% requirement would increase the €7 billion exposure. I admit this is a question I have tried to get my head around as well. The answer is that it will not increase the €7 billion ceiling because the 120% requirement only relates to each individual funding instrument. Annexe 1 sets out an aggregate ceiling for all guarantees from each guarantor. To put it another way, let us suppose there is a loan of €10 billion to country X. Our guarantee is for €10 billion multiplied by the contribution key, which is derived from multiplying by 0.0164%. This corresponds to the reference to 1.64% multiplied by 120%. If the amount guaranteed is €1 million, we guarantee €1.2 million. However, the sum of all our guarantees is still limited to €7 billion.

Deputy O'Donnell also raised the broader issue of the availability of a contingency fund in each year's budget for financial crises. During the past 30 years I recall budgets, which may well have been introduced by Fine Gael and Labour Party Governments and as part of which there was a contingency fund. However, I am speaking from memory.

It is a speculating brief.

Several of the budgets introduced by Alan Dukes during the 1980s may have had a contingency fund provided for.

That would not surprise me.

It is an interesting suggestion and an option for any Minister for Finance at any given time. I will come back on the question of the stimulus later.

The Deputy also raised the question with regard to the EU 2020 strategy and whether Ireland will be putting forward targets. Under existing arrangements, Ireland and other member states publish and submit national reform programmes to the EU. These programmes set out structural aspects of the economy and outline the Government's objectives for various sectors as well as important issues, for example, those related to competitiveness and the labour market. These programmes specifically take account of the areas which have been identified as priorities under the EU 2020 strategy.

I refer to the issues of boosting employment and PRSI. This matter is regularly raised with the Taoiseach during Leaders' Questions. The Deputy will be aware of the new scheme announced last weekend by the Taoiseach, which gives a PRSI exemption for new employees provided they have been on the live register for more than six months.

Deputy Burton raised some large and important issues. It is fair to say they are not directly related to the Bill but rather to the State's banking guarantee, the NAMA business plan and various other issues. I have noted the issues but they are too important for me to give a top-of-the-head reply. They are not directly related to the legislation but I am sure the Deputy will pursue these matters with the Minister for Finance and I will report the matters raised to him. However, I believe she deserves an authoritative response from him rather than me.

The Minister of State is too modest. It is possible that I trust him more than the Minister.

He might tell us a little more as well.

However, I note the Deputy's support for the Bill. Having given that general caveat, I will comment on some of her remarks. I am rather tempted to refer to the Battersea power station rather than the Chelsea power station. While reserving the position of the Minister for Finance on the matter, I would be amazed if we were to become involved as a partner in projects of that type abroad in the context of this discussion. As was said, it is an unfortunate aspect of the world in which we live that the markets are god. In a sense, every European country has found them to be not necessarily an infallible god — far from that. It is not possible for any country, however strongly tempted, to simply disregard the markets. That has been attempted on a few occasion over the past 30 years by one or two governments in Europe but the attempt has not been successful or sustainable.

I refer to some general points raised during the debate. The phrase "jobless growth" originated in the late 1980s when growth came back into the economy but it was some time before there was an employment impact. Since then employment has gone up from approximately 1.1 million to 1.8 million, at which it remains. While we still have some positive job announcements, as yet, they are more than balanced out by job losses. It is unfortunate that even when one has positive momentum in the economy, jobs, in net terms, tend to lag behind somewhat.

I have the height of respect for the contribution and work of the Department of Finance but, nonetheless, I very much welcome the inquiry announced by the Minister for Fiance yesterday which, I believe, is in its interests. It will give it an opportunity to vindicate its reputation and to identify areas which need to be strengthened. Nobody has been without weaknesses in the past few years.

The analysis given by Deputy O'Donnell, in particular, of Germany and the euro was valid. One might think Germany was, in some way, a victim of the euro but that is far from the case. If Germany had a separate currency, it would soar, in particular in current circumstances, in a way that would make German exports very uncompetitive. Some of the sort of aura of political debate is that the Germans are huge beneficiaries. That is being acknowledged increasingly by German commentators who realise where their interests lie.

A debate is going on across the western world, not only in Europe but in America and in Britain in the context of the budget of a couple of days ago, on the relative weighting of a stimulus package versus financial consolidation and reduction of sovereign debt exposure. There is a criticism of those who, like ourselves perhaps, emphasise most the reduction of debt exposure, that it is in some way killing off the economy, whether it is achievable and so on. There has been a move in the past few months in the direction of giving a priority to reducing sovereign indebtedness. That is against the background that several stronger economies had stimulus packages in the past couple of years. We had no capacity to have a stimulus package. The capital programme is important and we discussed a particular corner of that yesterday at the Select Committee on Finance and Public Service as it related to the Office of Public Works.

There are reservations about to what extent a stimulus could be kept within the economy or leak out of it. In the early 1980s, the then Fianna Fáil Government attempted to row against the tide and introduced a major capital programme in 1981 and 1982. It gave a temporary boost to the economy but at the expense of seriously increasing the debt exposure. Broadly speaking, Mitterand's France tried to do the same thing back in 1983 but it was not successful beyond the short term.

The main emphasis must be on a sharp improvement in competitiveness, accepting that we had become exceptionally uncompetitive. This is what we have been doing and we are already beginning to see some of the dividends.

So far I have kept this contribution unpolitical in a party sense. Naturally, any question of extending the tax base and in what particular direction is the prerogative of the Minister for Finance and the Government. I am a little bemused in a detached sort of way by the reaction to the speculative report that appeared——

I used the word "leaked" rather than "speculative".

----about a property tax. In some ways, the silly season has started early. Only a few days ago, there was a story about people on Deputy O'Donnell's benches and on mine wanting to establish a new party. The facts of the case may be that there is a lion, shall we say, outside this House who figured prominently in recent television programmes who might be interested in establishing a vehicle for re-entry and who has close links with Independent News and Media.

About whom is the Minster of State talking? He might as well put it on the record.

I do not believe in naming people outside this House if it can be avoided.

On the property tax, I understand as well as Deputy O'Donnell that we have a very high level of home ownership. Many people, including one of my children, are in negative equity and face all the pressures that creates. The last thing they want to hear about is a property tax. If one was in any doubt about that, one need only listen to a few contributions on Joe Duffy's radio show yesterday. On the other hand, a whole raft of experts — economic experts and economic institutions — suggest, as with third level fees, that the rational economic thing to do is to have a property tax.

While, naturally, the Government tends to be reserved on its budgetary proposals ahead of the Budget Statement, nothing I say should be taken as detracting from that reserve. The reaction, particularly from Deputy O'Donnell's party, has been immediately to tap into a populist vein rather than to subscribe to any of the so-called economic wisdom out there.

My party has had a consistent policy for the past year.

It is not easy to withdraw incentives from the market because transactions are in mid-flow and people must also judge what will be the effect and impact on the market. I am not certain that the decisions the Minister faces are as straightforward as has been presented. There was a consensus, which included the ESRI, that Ireland was facing a soft landing based on the argument that it had fewer houses per head of population. The director of the institute acknowledged that on radio earlier. There were scattered warnings but the consensus was in other directions. That is why we all have to learn lessons.

One would not wish these types of experiences on any country or leader let alone ours but when they happen, one should try to derive what benefit one can from them. For example, in the 1920s, Germany suffered hyperinflation and that lesson has lasted for generations. We had a long-standing love affair with property and believed it was an unbeatable asset. I suspect and I hope that we have been cured of that for good.

I thank Deputies O'Donnell and Burton for their support for the Bill and their recognition of its importance. There are opinion makers who are sharply opposed to our euro membership and there are even certain economists who skirt around the fringes. A commentator in theIrish Examiner earlier this week suggested we would be better off on the outer fringe with Britain than in the eurozone, given the consequences for sovereignty and the inability to devalue and so on. Devaluation can disguise falls in incomes. It is a better course for us to accustom ourselves with and to internalise the logic of euro membership. Most Members share my view that it is overwhelmingly in our interest to sustain our euro membership. The Bill is not only about that, but also about sustaining the euro itself. European countries must come through this serious challenge to the cohesion and sustainability of the euro. When we overcome our current difficulties, we should understand fully what euro membership means. We had the same problem when we joined the EMS in the late 1970s. We did not immediately internalise the logic of that either but the alternative is to become a “low tax Anglo-American economic dependency”. I do not see that as a good future for us.

Without using any phrase that may offend Deputy Morgan, the Sinn Féin attitude to European legislation is relatively predictable. As I said previously, the party in the North would like Northern Ireland to participate in the same currency as the South but that is not feasible. I sometimes wonder about the cohesion of aspects of Sinn Féin economic policy according to whether it is articulated north or south of the Border. It is the Deputy's entitlement to oppose the Bill but it is part of the logic of our euro membership. He can make the argument that euro membership has, in some ways, contributed to our problems and to the problems of many other parts of Europe but, equally, with the problem having arisen — many of us remember the currency crisis of the early 1990s — it is an indispensable and essential shelter for us and it is the way forward for member states. An independent Ireland, perhaps some time in the future a united Ireland in a united Europe, is the way forward.

Question put and declared carried.