I am grateful for the opportunity to comment in regard to the extension of the eligible liabilities guarantee scheme. This debate comes at a fundamentally important time for our country, when we are about to embark on very important discussions with the European Commission, the ECB and the IMF in an effort to resolve the ongoing difficulties in the international money markets. In that regard, I wish the Minister, Deputy Brian Lenihan, his colleagues in Government and the officials who represent us every success in the discussions which commence tomorrow in Dublin.
We all accept that the over-riding objective is to wean the banks off the life support machine that is the State guarantee. Unfortunately, due to the ongoing pressures in the market, it is clear that we are not in a position to take them off life support at this stage. They are effectively unable to raise funds on the international money markets and, when they are able to, they do so at rates that are so exorbitant the impact would be that they would have to pass on very high interest rates to both personal and commercial customers in Ireland. Clearly, that is a point of major concern. When Bank of Ireland raised money on the international markets in recent weeks, the cost was approximately 5.5%, which is a very significant cost, and it must add its margin to that, resulting in high interest being charged to the end customer.
Before I deal with the extension of the ELG scheme, I want to go back to the original guarantee decision in September 2008. To pick up on some of the comments made at the outset of this debate in the House today, the impression was given by Fine Gael spokespeople, for example, that the Government knew there was a fundamental insolvency issue with Anglo Irish Bank. That is not the case, as the record shows. For example, there is the report which Merrill Lynch submitted to the Government on the eve of the Government guarantee, which was e-mailed at 6.43 p.m. on 29 September 2008 to the Secretary General of the Department of Finance, Mr. Kevin Cardiff. On the first page of that memo, Merrill Lynch stated:
The liquidity issues facing Irish banks are compounded by investor concerns with regard to the high concentration of commercial property risk in their respective asset portfolios . . . The three institutions where these liquidity issues have been most pronounced have been Irish Nationwide, Anglo Irish Bank and Irish Life & Permanent . . . It is important to stress that at present, liquidity concerns aside, all of the Irish banks are profitable and well capitalised. However, liquidity for some could run out in days rather than weeks.
This was the summary of Merrill Lynch, which had been commissioned by the Government and sent a summary of its work to the Government on the day before the guarantee. Those words could not be clearer — liquidity concerns aside, its view, based on the information it had been able to access, was that all of the banks were profitable and well capitalised. We know now that this was not the case, and Merrill Lynch was not able to get to the bottom of the issues in the banking system, in particular in regard to Anglo Irish Bank, in the time it had to do its work.
I make the point to highlight the fact it is simply incorrect to state that the advice available to the Government leading up to the guarantee at the end of September 2008 was that the Irish banks were insolvent. This was the professional consulting firm commissioned to advise the Government and to prepare a report, and that is essentially what it found on the eve of the guarantee. It is important we are at least honest and put forward the true position.
It has also been said by earlier speakers that the guarantee was in many respects a disaster for the country, and many politicians have put forward this point of view. It is important to reflect on what the Governor, Professor Honohan, said when he examined this issue as part of his preliminary banking report. He stated that it was hard to argue with the view that an extensive guarantee needed to be put in place since all participants correctly believed that we faced the likely collapse of the Irish banking system within days in the absence of decisive and immediate action. Given the hysterical state of global financial markets in those weeks, failure to avoid this outcome would have resulted in immediate and lasting damage to the economy and society. He went on to criticise the inclusion of subordinated debt, which accounted for in excess of 3% of the total liabilities guaranteed at the end of September 2008. That was a fair criticism which can be debated in a legitimate manner. However, the substance of the guarantee was strongly supported by the Governor in the report he brought forward upon request by resolution of this House.
The important objective which we are trying to achieve is to move eventually from a situation where the banks are completely reliant on the State guarantee and on the European Central Bank for ongoing funding requirements to a position where they can access funding on the international money markets at reasonable rates and which will not effectively cripple their ability to serve the needs of the economy here, including personal customers seeking mortgages, personal loans, the crucial small and medium-sized enterprise, SME, sector and the corporate sector generally.
Some of the comments and concerns expressed in recent days regarding the security of people's deposits in Irish institutions are most unhelpful. We must be crystal clear on this point. The money people have in Irish institutions is safe at several levels through the deposit guarantee scheme, which covers up to €100,000 per person in each institution. As the Leas-Cheann Comhairle is aware, this is underpinned by the European directive. The eligible liabilities guarantee, ELG, scheme is also in place, which we propose to extend until the end of next year. If seeds of doubt are sown in people's minds about the security of their money in the Irish banks, they will simply move their money and the problems of the banks in terms of their funding and capital bases will be significantly worsened, an outcome no one wishes to see unfold. We must reassure people that their money is safe and the passage of the motion today will help to copper-fasten this position.
I welcome the Minister's confirmation earlier today of the amount of money which has been collected on foot of the parent guarantee and the eligible liabilities guarantee amounting to €1.3 billion at the end of October. The average fee charged under the ELG scheme is approximately ten times more then the fee charged under the original guarantee from September 2008, which is important.
Important discussions will begin here tomorrow between the Government, the European Central Bank, ECB, the European Commission and the International Monetary Fund, IMF, on issues fundamental to the country's future. If the outcome of those discussions is that funding is needed for the Irish banks, then the taxpayers and citizens of the State should not be asked to take on the bill. We have already committed up to €50 billion to rescue the Irish banks and the burden of any further funding which may be extended to the Irish banks should not be put on the shoulders of this generation or any future generations of the people. This point should be emphasised and it should form the cornerstone of the Government's handling of the discussions that will take place in the coming days.
I welcome the statement last night from the eurogroup, which gave its full support to the efforts the Government has taken and continues to take to face up to the fiscal challenges in the country. The group gave its full support to the achievement of a 3% deficit target by 2014, the four-year plan and the €6 billion front-loading in the forthcoming budget on 7 December. Everyone in the House agrees that we must have as much support as possible in the weeks and months ahead to resolve the outstanding issues such that we can secure proper recovery and growth in the economy.