Skip to main content
Normal View

Dáil Éireann debate -
Tuesday, 16 Nov 2010

Vol. 722 No. 1

Financial Stability Development in Ireland and Elsewhere: Statements

We are all well aware that there has been much comment and speculation in recent days on developments within the euro area and especially with regard to Ireland. We are living in a fragile atmosphere and we need to be careful about what we say so that we do not add to that turbulence.

Since the middle of 2008 we have taken significant steps in response to the rapid deterioration in our public finances in order to stabilise the situation and begin the process of returning this country to a sustainable fiscal position.

In total, adjustments amounting to close to €15 billion have been implemented over the course of the past two and half years. The measures we have taken are working. Our deficit for 2010 is estimated, on an underlying basis, at 11.9% of GDP this year. This is broadly in line with our budget day forecast and provides further evidence that the public finances are under control. We will therefore achieve our aim of stabilising the underlying deficit this year at the 2009 level.

Those who are now commenting on Ireland's financial situation should also remember that the Exchequer is fully funded into the first half of 2011, so the impending sense of crisis that some wish to suggest the Irish State faces is not a fair reflection of all the facts.

Our gross level of general Government debt will increase this year, to around 98.5% of GDP, but a large part of that is due to the statistical accounting treatment of the capital support being provided to some of our financial institutions. Statistically, we are taking the hit upfront but in reality we are borrowing the money over a much longer period.

Taking account of the substantial assets of the National Pensions Reserve Fund, our net debt to GDP ratio is better, estimated at around 83% at the end of 2010.

While substantial progress has been made in tackling and stabilising the deficit, this Government is acutely aware that further measures will be required to restore sustainability to the public finances. That is vital to underpin future economic growth.

Despite the weaker economic outlook we remain fully committed to reducing the general Government deficit to below 3% of GDP by the end of 2014. This means budgetary adjustments of some €15 billion must be implemented over the course of the next four years, which is a significant amount by any measure. Let us not forget, however, that we have already implemented measures worth close to €15 billion since mid-2008, at a time of economic decline. The €15 billion in adjustments can be delivered in a way that will allow the economy to return to growth.

Our revenues and our spending are out of line to the tune of €19 billion and this is a gap that is currently being filled by borrowing. That cannot continue. We must continue along the road of budgetary consolidation which we first embarked upon in 2008.

With a significant front-loading of consolidation into 2011, we will have completed two thirds of the overall adjustment by the end of next year. This will demonstrate clearly to all that we take our commitments seriously and that we will take the necessary actions to return this country to a sustainable fiscal position. We will stabilise our gross debt to GDP ratio over the 2012-13 period.

A four-year budgetary plan is being prepared and will be published shortly. The plan will be clear and workable and will map out a way forward to national recovery. The plan is not just about cutting the budget deficit, as important as that is; it is also about setting out the key reform measures that the Government has decided to take to restore competitiveness, boost employment and return us to a sustainable medium-term economic growth path.

The recent increase in our bond spreads is of course a concern. However, it is important to remember that we are not currently active in the market so we are not borrowing at the current elevated levels. The NTMA decided to withdraw from the market until early next year to allow markets to digest the end-September statement on banking, the upcoming four-year plan and budget 2011.

As I have already mentioned, we are fully funded into the first half of next year so there is no immediate funding pressure on the sovereignty. Clearly, there is a need to bring stability to markets here and elsewhere, as the current costs of borrowing are very high and are at a level that would make it difficult for banks here to operate as engines of recovery.

It is important to point out that the European Central Bank continues to meet the liquidity requirements of the banking system. In addition, this Government's priority throughout the banking crisis has been to safeguard deposits, and this is a concern shared by governments across Europe and by the European Commission.

I want to take this opportunity to reiterate the strength of the Government's commitment to safeguarding deposits in the Irish banking system in view of the recent ill-informed and inaccurate speculation by a small number of external analysts and commentators on this issue.

Tomorrow this House will consider a motion to extend the current bank guarantee scheme for a further year. This scheme guarantees the security of all deposits in the participating institutions in the scheme, along with that of other bank liabilities guaranteed under it. The scheme complements the protection afforded to all depositors up to €100,000 under the permanent deposit guarantee scheme which has no expiry date. The protection of depositors has been and remains one of the over-arching priorities of the Government in responding to the difficulties in the Irish banking system.

I wish to reiterate what I have been saying in response to speculation over the last number of days that Ireland is seeking financial assistance. Ireland has made no application for external support. The EU Commission has stressed this point as have other member states. Given the current market conditions, there have been ongoing contacts at official level with our international partners. The Department of Finance is continually in contact with these bodies. The engagement has been particularly intense in the run up to the budget and the four-year plan. The Minister for Finance has not been involved in these discussions. However, he is in Brussels this evening to discuss these issues with his eurozone counterparts at their usual monthly Eurogroup meeting, and he will also attend the usual monthly meeting of EU Finance Ministers tomorrow.

It is in all of our interests that we find a credible, efficient and, above all, workable solution that will provide assurance to the markets and thereby restore confidence and stability. There is no doubt that financial markets have been extremely volatile over recent weeks and we need to provide them with a level of reassurance. However, this is not an insurmountable challenge. Through working together with our partners in a calm and rational manner, we can resolve these issues and underpin financial stability in the medium and longer term.

The strategy being pursued by Government has addressed the difficulties facing the banking system, is bringing sustainability to the public finances and is resulting in ongoing improvements in competitiveness. Pursuing these policies is essential for a return to growth, the evidence of which we are already beginning to see.

I am also encouraged by the broad consensus among the main political parties on the need to reduce the deficit to 3% of GDP by 2014. Delaying taking action will only make the task more difficult and will add to our debt burden, so it is simply not an option. In his recent visit, Commissioner Rehn noted that our assessment was correct and agreed that significant front-loading, amounting to €6 billion for next year, was appropriate.

Growth is returning to the Irish economy, so that the environment in which future adjustments must be made is different from that which prevailed in recent years. Our exports are performing well, as confirmed by figures this week which show that industrial production rose by 12% in annual terms in the third quarter. Our strong export performance reflects the significant price and wage adjustments that have taken place, which is testament to the flexibility of the Irish economy.

Another key fact is that Ireland remains an attractive place in which to do business. We continue to attract inward investment, notably in knowledge-intensive sectors. Ireland remains open for business and is still the destination of choice for many of the world's leading firms.

We have taken measures to ensure that the banking system can continue to function as a vital element of our economy. These measures have been approved by the appropriate European authorities and supported by the European Central Bank.

The turbulence in the markets over recent weeks has been about issues of wider concern than Ireland's situation. It is appropriate therefore that we discuss with our partners, as we are doing, how these issues should best be addressed. Through the clarity and determination of the Government's position on stabilising the public finances and restoring growth, we can create the conditions through which confidence in the Irish economy will be maintained on the part of citizens, investors and our international partners.

There is nothing new in what the Taoiseach announced compared to what we have heard already. Ireland is on the front page of major international newspapers again today for all the wrong reasons. The country is on the airwaves of our nearest neighbour again today for all the wrong reasons. Let us be clear that it is not because the bond markets, the EU or the international media have lost faith in Ireland. They have not. They have not lost faith in the Irish people. They have not lost faith in Irish resilience, ingenuity, energy or education. They have lost faith in a Government. They have lost faith in a Government that boasted about a bank bailout it said would be the cheapest of its kind. It has turned out to cost more than €50 billion, more money than this country drew from the social and cohesion funds since Ireland joined the EU.

To be clear for members of the Cabinet, this is not a crisis of liquidity for our banks, this is about their solvency. Liquidity was the argument used on the night of the bank guarantee to shoehorn Anglo Irish Bank into the guarantee, even though it was known by some that Anglo Irish Bank was trying to hawk itself to potential buyers in the week of the guarantee. That deception fooled people then; it will not wash today.

People have lost faith in a Government that, two years ago, brought in an emergency budget it said would stabilise the nation's finances. We are still waiting for that to happen. The world is now waiting for that to happen. They have lost faith in a Government that said it must cut €3 billion this year and, just two months later, has more than doubled that figure. They have lost faith in a Government that stood idly by as one of the world's greatest property bubbles swelled and burst.

The Government consistently turned a deaf ear to the calls from this side of the House and other quarters to reform the public service and put the citizens at the core of what Government does. Lastly, they have lost faith in a Government that does what all discredited regimes do in their dying days — use the courts to try to prevent the people exercising their right to vote. The international markets and the international community have not lost faith in Ireland. They have lost faith in the Government.

In particular, they have lost faith in the Government's policy on Anglo Irish Bank. Anglo Irish Bank was a disaster but it is not clear that this Government has learned the lessons. If media reports are to be believed, the Government seems intent on persisting with further bailouts of other institutions, this time with money borrowed from the EU and other European countries. For two years, the Government has talked about its bravery and courage in taking tough decisions and it has taken some. One of those supposedly tough decisions is that the taxpayer must bail out private investors in the banks to protect the State's credibility. This has proved to be a catastrophic error of judgment.

It is not the decisions that are tough or that require courage; it is the consequences of those decisions for every family in this country. Every family in this country now knows or is beginning to know a new poverty. Every family in this country now knows the new fear. What they need is competence in their Government, courage, clarity and consistency. This party can offer all four.

Fine Gael continues to take money from banks, developers and vested interests.

Deputy Gogarty should keep reading his computer.

We are the only party with clear plans to rescue Ireland from the tsunami of misery this Government and the Taoiseach's party has visited upon the nation. We have not, would not and will not try to sweeten the bitter pill Fianna Fáil and the Green Party has forced this country to swallow. That bitter pill is the potential loss of a key aspect of our cherished freedom. This Government will be remembered for generations to come if that applies.

Fine Gael has set out how it will make cuts, effect savings, demand efficiencies and be able to pay back the mountain of debt left to the people. This House, this country and those who watch and listen around the world need to understand this economy can be repaired and Ireland will again be a beacon of enterprise and initiative.

The one tough decision this Government has not faced up to and which it does not have the courage to make is to ask the people to provide the mandate to do what must be done. If the Government makes that decision, everything can change for the better. Does the Taoiseach have the courage to put the nation first or will we continue to be dragged through the mire of uncertainty, fear and confusion the Government created and seems determined to sustain, even when the solution is clear and present? It is that mire of uncertainty, concern and anxiety that one independent commentator described as the downfall of the country. This is a downfall that sees sons and daughters of proud Irish mothers and fathers reared once again for export. It may be that their remittances from Dubai, Sydney and Toronto will replicate what happened in the past. It is a downfall that sees young and old in ever-lengthening dole queues as we break economic records and make international headlines for all the wrong reasons when things could be so different. It is a downfall that has seen the hope and ambition of a generation of Irish people crushed by the political and economic madness of a golden circle at which the Taoiseach's party was at the heart.

Before the full impact of this downfall unfolds, the Taoiseach has an opportunity to do something in the national interest. People talk about the budget. The Government has a majority to vote in favour of the budget but that will not end the uncertainty in the new year, with the Supreme Court making its decision on Donegal South-West, a further three by-elections pending, the Finance Bill to give legislative impact to the budget and the bond markets still having gross uncertainty about the political stability of this country. In the national interest, the Taoiseach can let the people have their say. Hundreds of thousands of people are concerned about their country, their futures, their families, their businesses and their careers. They should have the opportunity to have their say and provide a mandate for what must be done in the future. The Taoiseach should let the people have their say in order to shape the future destiny of our nation. Let the people decide who will run the country. This is their decision. This should be their decision because the Government has lost the authority to govern.

With regard to the bank investors and bondholders, what is needed is a new Government with a strong mandate from the people. The Taoiseach may not like what they have to say but they are entitled to be heard. The choice is clear. The Taoiseach should give the people their opportunity and let the people have their say. A new future and a new direction for our country will bring about a change of confidence, a new stability and a new future.

This country's best days are ahead of it. This country's economy has great strengths. I agree with some of the things the Taoiseach has said in the House today, that, for example, our exports are growing and that this is a good country in which to do business. I believe we will get through the economic crisis the country is now facing. I believe also that the majority of people in this country want to put their shoulder to the wheel to help us do that.

We have a big problem, namely, that there is no sense that anybody is in charge. I am not sure why the Taoiseach made this statement today. I am not sure what it adds to the sense of confidence or lack of it in the country. It certainly does not add anything to clarity about what is happening at the moment to our finances and in regard to discussions that are taking place with Europe.

In the course of the past fortnight we have seen a dramatic increase in the cost of borrowing for the State. It reached a peak of approximately 9% last week. It still remains at approximately 8% today which is really at crisis levels. That is the market sentiment. That is what the Taoiseach calls irrational. That is where we are at after, as the Taoiseach has said, budgetary adjustments of the order of €14 billion to €15 billion have been made already. An announcement has been made by Government that it is committed to saving another €15 billion, €6 billion of it in the coming year. It comes shortly after a statement by Government that we had got the final figure for the money that was to go into the banks. The Taoiseach has acknowledged that it is also in a context where the main Opposition parties are committed to getting our deficit down to the targets that were agreed with the European Commission.

It is manifestly clear that the markets are not responding to all of the signals coming from this country. It is clear that they are not responding because they do not see the problem as purely a public finance or budgetary issue. They see a country where the banks have been tied at the hip to the State as a result of the bank guarantee that was introduced in September 2008. In addition, they have also lost confidence in the Government, as indeed have the people.

The Taoiseach has referred to the problem as being a general European one. I accept there is a European problem. Europe has a responsibility to work with this country to resolve the problem. I accept that the issue does not relate solely to the Irish national interest. The reality is that it is this country which is now at the apex of that storm. It is Ireland that is at the centre of international attention and is the story in all of the various media. In that context, there is a responsibility on Government to clarify what is happening. That has not happened in the House today. What we got over the weekend was a series of qualified denials from Ministers and official sources. There have been stories, speculation and ponderings in the international media and comments from European Central Bank sources about hypothetical talks. We need to know what has happened. The Taoiseach has told us that there have been discussions at official level but that no Ministers have been involved. We must take that at face value. It is astonishing that given what has been happening over the course of the weekend and in recent days that there would not have been direct ministerial involvement in the discussions that have been taking place. There is speculation that this country is in bailout territory as far as the European institutions and our banks are concerned. That is adding to the worries people already have.

People have been affected directly by the crisis that has occurred. More than 400,000 people are out of work. Many people have lost businesses. Many businesses are not able to access credit from the banking institutions. Large numbers of people have mortgages. Many of them are in negative equity and are worried about how they will pay. In addition to the worry of families that are seeing their children, many of them well educated, having to emigrate in order to make a future for themselves, people are now seriously worried about the future of the country's economy and finances and its economic sovereignty and independence. There is a mood across the country that we are about to lose our economic independence if in fact we have not already done so. There is a responsibility on the Taoiseach and the Government to address that in an upfront way. His statement does not do that.

It is not just what is happening now. It is the sequence of things that have happened. We can go back over the history of how the Government managed or mismanaged the economy. We can go back over the decision on the bank guarantee which the Taoiseach told us would not cost the taxpayer anything. We now know the consequence of that. We can go back over the mistake and tragedy it was to provide the guarantee to Anglo Irish Bank and the Irish Nationwide Building Society and the consequences that has had for the banking system, the country and the economy.

The Deputy is rewriting history.

All of that has contributed to a situation where the credibility of the Government has been shot and where confidence in the Government both at home and abroad is at an all-time low. I drew attention to the comments made by Daniel Gros of the Centre for European Policy Studies this morning where he set out clearly that the banking guarantee has led to the economic downfall of the country and that the consequence of that guarantee is that the fortunes of the banks and of the State are now perceived to be as one by investors and others outside of the country. That is what has us where we are.

The Taoiseach indicated that he wants market conditions to stabilise and that anything that can be done should be done, or that anything that he can do, he will do to make that happen. There is one thing he can do to help make that happen. That is for his Government to resign. That is necessary for a number of reasons. First, because any Government with any sense of self-respect that would have got the country into the mess that he and his Government have got it into would do the decent thing and go. Second, even if that were not a consideration, what is now required is the change and the renewal of confidence that comes with giving the people the opportunity to have their say, to elect a new Government which will have a mandate for four to five years and that will provide a fresh start for the country.

We can try, as we will at whatever opportunity is given to us, to defeat the Government in the House and to bring that about. We cannot force it unless the numbers so dictate — unless there are defections either by the Greens or by Independents or from the Government's back benches. However, the Government can decide to bring to an end the uncertainty and lack of confidence which the Taoiseach's and the Government's continuation in office is bringing down on this country.

That is something practical that the Taoiseach can do in order to stabilise market conditions and restore confidence in the country. It is simply unthinkable that the Taoiseach intends to continue to serve out the next 18 months or whatever is left of the normal life of the Government in circumstances where there is no confidence in the Government among the people and where clearly and more significantly there is no confidence in the Government internationally. Outside Ireland, people believe there will be a general election in the next 18 months.

The Deputy's time has expired.

The Taoiseach can do something to restore confidence — put an end to it. Let the people have the opportunity to elect a new Government and give a fresh start to the country. Let us hope this will help provide the confidence required to restore the country's fortunes.

On Deputy Gilmore's own admission, he will not do what needs to be done.

Put Labour in coalition and——

I call Deputy Morgan.

Frank is going to contribute.

(Interruptions).

Deputy Gilmore will not do it. He admitted that on Friday night.

Let the people decide.

He will not do what needs to be done.

Neither will the Taoiseach.

Deputy Gilmore admitted it.

Is that a new cant the Taoiseach has?

He will not be around for much longer.

If the Taoiseach was going to give us some information,——

(Interruptions).

Surely we could have a little order in the House for Deputy Morgan.

The Labour Party will not change anything. That is what it——

The Government put us where we are.

Will the Ceann Comhairle establish order?

Did the Taoiseach's analysts advise him of that?

Deputies, please.

(Interruptions).

Please, could we have silence for my constituency colleague, Deputy Morgan?

If the Taoiseach would give the House real information, I would happily give way to him, but he said nothing in his ten minutes. He behaved exactly as he did during Leaders' Questions this afternoon, in that he danced on the head of a pin around a concoction of words that was probably put together by an official in the Department of Finance and which provided no information whatsoever.

Let us be clear. I welcome the opportunity at any time to discuss this urgent matter in the House. In order to do so constructively, we need information from the Government as to what talks are ongoing in Europe and what talks have been held in Europe in recent days, but the Taoiseach told us nothing about them. He is hiding behind words. We are long beyond the stage of hiding behind words. The bluffing and fibbing that have been ongoing for two years are part of the problem because they are part of the reason the markets and the Irish people have no confidence in the Government. When will the Taoiseach ever learn? When will he consider returning honesty and integrity to the project that is government in this State? It does not exist currently. It simply is not there.

The banking crisis has been at the centre of policy and the Government for two years while the latter ignored any stimulus. By and large, it also ignored anything to do with job retention and job creation. It announced some 650,000 in the past six months, but where are they? This is further bluff and nonsense. In the same way, the House was misled in September 2008 when we were told the banks were not too serious a problem and that it was down to a liquidity issue. We were to get over that hump, introduce the guarantee and live happily ever after. It was nonsense. We now know that the Taoiseach was sitting in the Department of Finance with the very characters who, alongside the Government, created this mess. Did they not tell him the truth? According to some of the innuendo in reports, they shared with the Taoiseach the seriousness of the situation.

The Taoiseach has been feeding us innuendo for the past two years. He has not been straight down the line with us.

The Deputy is fairly good at that.

He does not need to look at the Press Gallery. Recently, I noticed that, when the Taoiseach addresses the House, he spends more time facing the Press Gallery than he does the Opposition benches.

Look over here. We will handle it for whatever few months are left.

I am not impressed.

The Taoiseach has made enough of a mess that we will put up with him facing this way. We can handle it. Come around.

It is Gerry who will give Deputy Morgan the heave ho. It is not my fault.

The bluff, banter and, dare I say, lies he has projected for more than two years have washed——

Withdraw that statement.

He caught the Irish people in 2007——

——but he will not bluff the markets in the same way.

Deputy Morgan will need to withdraw his comment.

The markets will not accept that type of guff, so he is wasting his time peddling it in the Chamber.

Deputy Morgan will need to use other words. He has been in the House for long enough to know he cannot use that word, so I would appreciate it if——

My hope is I will not be in the House for much longer. I certainly hope it will not be the 18 or 20 months or whatever is left of the Government's term of office.

The Deputy might be kind enough not to use that offensive word.

I thank the Acting Chairman.

If it will be that long, I will be like the poor working people outside the House, in that I will be buckled and broke.

Stop stuttering.

The banks are totally broke. They have no funding. The Taoiseach is telling the House the State can handle the burden.

Deputy Morgan still has not done it.

On a point of order——

The Taoiseach is continuing to tell us that this——

Has the Deputy withdrawn his statement?

I understood he would, but perhaps he will spell it out.

I inappropriately used the word "lies",——

——although that is what they were. I intended to use the word "fibs".

Deputy Morgan could not be accused of telling a few fibs.

If Deputy Morgan keeps attracting attention to himself, he will keep getting in trouble. He might be kind enough to use proper words.

Dermot, do not start me. I want to deal with this character over here. I do not want to be wasting time with you.

Deputy Morgan might proceed and address his remarks through the Chair.

Has he nothing to say?

Some €50 billion has already gone into recapitalisation, plus in the order of €100 billion from the ECB. The latter constitutes one fifth of the ECB's total investment in banks across Europe. Does the Taoiseach believe we can continue to fill the black hole that is the Irish banking system? Does he believe this is good enough? It is not working. One reason for this is that many of the crooks who headed the banking sector are still in place. I would not expect them to change, seeing as how they are getting plenty of encouragement from the Government.

The Taoiseach is telling us another fib, namely, that we are doing brilliantly and do not need to return to the market for funding until the middle of 2011. Why do he and Ministers keeping repeating it? They know it cannot be done.

What is the Deputy talking about?

On a good day, they probably know they have until the end of January or very early February before the State must return to the markets.

It is a statement of fact.

What is the Government going to do? Will it start pouring the funds in the National Pensions Reserve Fund, NPRF, into the banks? If not, it will need to return to the markets. This is more fibbing on the part of the Government.

It is time for integrity and honesty. Take my word on this — the markets would enjoy a level of openness and honesty from the Government, as would the House. In the past while, the nonsensical figures coming from the Government have been so far out. I do not know whether the Government is getting it wrong, which would constitute incompetence — I am sure none of us on the Opposition benches would be surprised — or deliberately misleading us. One is as bad as the other. We need integrity and openness on all of these matters. In that event, the House could deal with them properly.

If the Government wants a solution to the banking problem, it is important that I share with it the Sinn Féin position. We are still adamant that what is required is a stable, steady and trustworthy State bank. Had one been put in place two years ago instead of the nonsense the Government got up to, we would not be in this deep crisis. We would have economic difficulties, but we would not be in this difficulty. Whatever crazy ideological opposition the Government has to the proposal is beyond me. However, had it put in place a proper and stable State bank, there would not have been nearly as many job losses because our businesses would have been viable. Those SMEs, which are folding because of the lack of credit, would still be operating and we would be generating some type of stimulus in the real economy. However, the Government chose not to do that and opted for the easy option, to bail out these corrupt bankers and prolong the agony the taxpayers of this State and others will have to pay for over decades, and it is now inter-generational. Until the Taoiseach changes his mind, we shall be in serious difficulty.

I hope there is an opportunity to debate the outcome of whatever messing is going on in Europe at these meetings this evening and tomorrow. Unless something positive emerges — I do not expect that it will — then God help the poor unfortunate people of this State who are not among the wealthy elite that is constantly protected by this Government.

Top
Share