Irish Banking: Statements

I wish to provide the House with an update on recent developments affecting the Irish banking and financial systems following my discussions with European colleagues both at the euro group and the ECOFIN council earlier this week. First, I wish to reassure all depositors in the guaranteed banks and building societies in Ireland that their deposits continue to be safe and secure.

The commencement of technical discussions between the Irish and international authorities seems to have generated misinformed, inaccurate and, in some instances, mischievous comment about the protection of deposits under the State's bank guarantee scheme. In such circumstances, it is important to reaffirm the State's commitment to the safeguarding of all deposits and the other liabilities guaranteed under the eligible liabilities guarantee, ELG, scheme approved yesterday by both Houses of the Oireachtas. The scheme will be in force until the end of 2011 subject to a six month review by the European Commission.

The extension of the guarantee has been approved by the European Commission and was endorsed by the European Central Bank on financial stability grounds. The urgent and essential requirement for the prolongation of the scheme to underpin the funding position of the banking system was set out clearly in the House yesterday. It is inconceivable that any measure would be proposed by any party to jeopardise the protection afforded by the Irish State to depositors under the bank guarantee scheme. Any other view is simply wrong and wholly at variance with the fact that in their statement on Ireland on Tuesday evening the euro group lent its support to bank guarantee arrangements in Ireland. Let me be clear: deposits are safe. Nothing in the content of the discussions underway or anything that may arise thereafter will affect that fact. Depositors can depend and rely on the protection afforded by the State guarantee up to now and into the future. This was under-scored yesterday with the passage of the guarantee scheme for a further 12 month period in national law to the end of 2011.

It is legitimate and appropriate for a continuing and vigorous public debate on the Government's banking strategy. However, it is incumbent on all of us as public representatives and those in positions of influence in the media and to public discourse generally to ensure that needless concern and anxiety is not caused to the public on the basis of spurious and often alarmist speculation. I have not found nor has any instance been reported to me of any spurious or alarmist speculation by Members. It is important that we reaffirm that deposits are guaranteed by the State and that the guarantee is underpinned by our membership of the euro, one of the strongest currencies in the world. I know Deputies have received individual queries about these matters, and this position must be maintained and constantly affirmed. As long as this is established, we can proceed with our debate in as vigorous a manner as we wish.

The common and agreed position of our eurozone partners is set out clearly in the statement issued by the euro group on Tuesday evening, which welcomed the significant efforts of Ireland to deal with the challenges it faces in the fiscal and financial sector areas and endorsed the budgetary strategy that will underpin the Government's four-year plan for returning the public finances to sustainability, which will be published by the end of the month. The euro group also welcomed the actions taken by the Government to date to seek to resolve our banking sector issues, including the guarantee and the policies of asset segregation through NAMA and capital investment in the banking institutions. However, it also acknowledged that notwithstanding these measures, market conditions have not normalised and significant pressures remain. This gives rise to concerns that further reforms and stabilisation measures for the banking sector may be appropriate. On this basis, the statement endorsed a short and focused consultation between the Irish authorities and the Commission, the ECB and the IMF to determine the best way to provide any necessary support to address market risks, especially in the banking sector, in the context of the four-year budgetary plan and the upcoming budget.

In any talks with the relevant authorities, the Government has acting on its behalf my officials at the Department of Finance, assisted by the National Treasury Management Agency. Naturally, the Central Bank, although independent in the operation of its functions, has a separate and distinct role in any discussions that take place by virtue of its unique position in our banking system.

The statement reflects the shared analysis of the Irish authorities and the euro group that further steps may be required in restructuring the Irish banking system to restore long-term market confidence in our banks and ensure they can function in the future without the need for continued significant Government guarantee supports or significant reliance on ECB liquidity facilities. The purpose of the technical discussions that are being initiated in Dublin today is to assess the possibility of building on the significant interventions already undertaken by the Irish authorities — the NAMA scheme, the Central Bank's stress tests, and the restructuring and recapitalisation — to secure an enduring and permanent resolution to the problems of our banking system. I welcome this morning's comments by the Governor of the Central Bank, who reiterated what I said about deposits and said that were the talks to result in the availability of a substantial contingency capital fund to back Ireland and create confidence in the firepower available but not drawn down by the banking system, that would be a desirable outcome. However, we are not at that point at this stage.

The job of Government is to protect the taxpayer. That is what we have been doing and what we are now doing. If the Government has been reticent in making public comment, it has been in the interest of protecting the taxpayer. Jumping to conclusions ahead of the facts is not to the benefit of the taxpayer, nor is it in our interest to do this in advance of the discussions that are now taking place. It is the Government's job to assess the options in light of the facts, and the facts can best be established after having a short and focused discussion. That is what the people would expect.

The international teams and our officials are working towards a common analysis of the problem. The problems we are facing do not relate to our budgetary position. Our budgetary strategy this year — to implement a €6 billion adjustment in the budget — has been fully endorsed by all finance Ministers in Europe, whether they belong to our group, the European Liberal Democrat and Reform Party, the European People's Party or the Party of European Socialists. There has been a unanimous endorsement at European level of what we are doing on the budgetary front. It is important to understand that the problems we are addressing are of a structural character in the banking system. They are, of necessity, technical issues requiring intensive discussions, which are now under way.

As I said yesterday, the Government and its EU partners are still examining options in terms of the shape a package of financial assistance might take. I am glad it was reported that I said, "There is no question of loading on to the Irish sovereign and the Irish state some kind of unspecified burden."

Like Anglo Irish Bank.

"That is why the government took great care not to make a formal application at this stage but to engage in intensive discussions to see exactly what the options are."

Let us be clear about what is happening at present. Officials from the various international organisations are here to engage in an intense process of consultation. I had good discussions with our European colleagues over the past few days, and I remind Deputies of the conclusions of the euro group: they welcomed the actions taken by the Irish Government on both budgetary matters and the banking situation, including the guarantee, NAMA and recapitalisation. We must have a clear and shared understanding of the facts. Furthermore, we are working on our consideration of the four-year plan, which will be made public very shortly. This will set out the difficult but necessary decisions we must take as a country to bring order and sustainability back to our public finances.

The main focus of the ongoing discussions will be on the banking system. I agree there are major issues in this regard, and our officials will, in the coming days, be working closely and intensively with officials from the European Commission, the ECB and the IMF. We are strongly committed to the success of the consultation process which has been agreed by the euro group in light of the serious market disturbances that have led to substantial increases in sovereign bond yields, particularly for Ireland but also for other eurozone member states. These developments not only jeopardise Ireland but threaten the integrity of the eurozone, so it is absolutely essential that the structural issues that underlie negative market sentiment and the loss of market confidence are dealt with in a detailed and comprehensive fashion.

Recent developments have inevitably led to a further escalation of the claim being made inside and outside the House that the bank guarantee of September 2008 had some connection with our present difficulties. Some commentators are blaming the ills of the country on the State guarantee. The fact is that every finance Minister in Europe indicated the other evening that the guarantee was the correct policy at the time. We have to work towards the future in order to stabilise the banking system in the dangerous market conditions that now exist.

In the period now extending over two years, no one has provided any compelling rationale for the superiority of any practical or feasible alternative to the guarantee adopted on 29 September 2008. My view, and that of the Government, on the basis of its assessment of the advice it received, remains that Ireland faced the likely collapse of its banking system within days in the absence of immediate decisive action. It is interesting that only yesterday we had another vote in the House about the extension of the guarantee to the end of next year. On that occasion the Opposition chose to divide the House on an issue about which the European Central Bank, the Commission and ourselves were unanimous — the need to stabilise the Irish banking system by giving a guarantee to protect confidence in it. Despite that unanimity of opinion from our international advisers and the Government——

The Minister should have been here.

They were unanimous about the goals, but what about the methodology?

——the Opposition decided to divide the House on this issue——

Why was the Minister not here?

——because it constantly tries to avoid a debate on the real issues.

The Minister is wrong.

It is the Minister who wants to avoid debate.

The Minister should not blame the Opposition.

I assure the Deputies I have debated this issue at great length on many occasions.

He has also debased our economy.

I have read into the record many times the extract of the report by the Governor of the Central Bank, Professor Honohan, of 29 September last endorsing this assessment. This conclusion is not open to being refuted by anyone who is prepared to read the findings and the conclusions of the report with an open mind, in particular, paragraph 1.25 on page 14. No amount of obfuscation with the aim of confusing the issue by drawing on the criticisms made by the Governor of the blanket scope of the guarantee alters that conclusion. If anyone remains in any doubt regarding the Governor's assessment of this issue, I refer him or her to the Governor's speech at the SUERF conference on 20 September 2010——

The Minister should read the report and see what the Governor had to say.

——in which he said that the Government had little alternative——

Read the report.

Deputy Burton will have plenty of opportunity to speak.

He said that the Government had little alternative to announcing an extensive guarantee of bank liabilities.

What will reassure depositors more than anything is a stable and restored banking system, and the achievement of this has been central to our continued actions.

It has not been the result.

As has been discussed several times in the House——

It is not working.

——the introduction of a special resolution regime would be a powerful weapon for securing the necessary restructuring of the Irish banking system.

Two and a quarter years later.

Such a regime would provide the authorities with an enhanced toolkit for the future, in line with best practice internationally, for dealing with distressed financial institutions.

However, it is important to be clear contrary to what is rapidly becoming the conventional wisdom that such a regime is not necessarily a panacea for minimising the fiscal costs to the State of our banking crisis particularly in light of various legal considerations in Ireland.

In Ireland's case, the major fiscal costs, which the State has borne as a result of huge loan losses suffered by the Irish banks, could only be reduced where some of these losses were imposed on creditors of the banks. The Government has already made clear its intention to secure appropriate sharing with holders of subordinated debt in Anglo Irish Bank and Irish Nationwide Building Society, and Anglo Irish Bank has launched a recent offer to buy back subordinated debt at a deep discount.

Discussions are ongoing at EU and international level on the mechanisms that may be available in the future to share the fiscal costs of bank resolution with senior creditors of banks other than depositors. However, this work remains preliminary and many important legal, financial and commercial hurdles will need to be cleared before there is any prospect of it becoming accepted market practice. It is important to draw attention to that because this debate in Ireland is not taking place in isolation from developments with our EU partners.

The recent substantial widening in Irish Government bond spreads since the end of October in response to market concerns relating to possible burden-sharing that might arise in circumstances that a eurozone member state accesses the proposed permanent crisis resolution fund and the requirement for a joint statement from the finance Ministers of Germany, France, the UK and Spain provides strong confirmation of the critical importance of exercising extreme care in asserting that costs can easily be imposed on senior creditors of banks. The current difficult funding position for both the Government and the banking system implies very strongly that we should be very cautious about even contemplating such a step in the current crisis, never mind whatever legal and constitutional obstacles would need to be resolved.

I welcome the support in recent days from my European colleagues as reflected in the statement issued by the eurogroup on Tuesday evening. We are aware that there is a European dimension to our considerations. We are part of a common currency within a broader European Union, which brings benefits but also obligations. We are now in a short focussed and intense process. It is crucial to complete this process before any decisions are made that could have implications for the taxpayer.

The Minister's aunt, Deputy O'Rourke, in a speech last week reminded her audience of the common origins of Fianna Fáil and Fine Gael. Both parties spring from the old Sinn Féin, before that honourable title was besmirched by more recent events. Sinn Féin means "ourselves alone" and was not only the title of the national movement, but the title contained its principal objective, that as a nation we would run our own affairs for the betterment of the Irish people. This is what the patriot dead fought and died for and what they achieved was a sovereign Irish State.

Now an inept Government, through its arrogance and avarice has given it away.The Irish Times editorial today asks: “whether this is what the men of 1916 died for: a bailout from the German chancellor with a few shillings of sympathy from the British chancellor on the side.” The Minister should be ashamed and his colleagues should share the shame. That a Fianna Fáil-led Government should be the one to surrender our sovereignty has its own irony. For years it posed as the super green patriots and the uncompromising republicans. Again I quote from The Irish Times:

It [Fianna Fáil] lists among its primary aims the commitment to "maintain the status of Ireland as a sovereign state" [which is one of the principles in its party documentation]. Its founder, Eamon de Valera, in his inaugural address to his new party in 1926, spoke of "the inalienability of national sovereignty" as being fundamental to its beliefs. The Republican Party's ideals are in tatters now.

In every crisis in Ireland, sooner or later a clown emerges. Last night in Dromoland Castle, the Minister, Deputy Batt O'Keeffe, took over this role. He assured his audience that the crisis was nothing more that a game of poker by saying: "We've got to play poker over the next couple of days to see what cards these people have to play... We would like to see the colour of their money." I am sure his audience from Silicon Valley in Dromoland Castle was suitably impressed.

They thought it was Texas hold ‘em poker.

If it is poker the Minister is playing, it is liar's poker as was proved over the weekend.

A Deputy

Russian roulette.

The Minister has no cards left. His colleagues over the weekend with their incredible denials embarrassed the nation and I am afraid their denials did not work. The other strategy the Minister has drawn from poker is bluff and he is the greatest proponent of bluff I have ever seen in this House. He and the Taoiseach have been bluffing for weeks now, but the bluff is not working and the Government continues to be an embarrassment to the people. They will not speak plainly or share the nation's grief with the people who elected them or tell them what lies ahead. This morning was a classic example of the Government's ineptitude when the Governor of the Central Bank felt he had an onus to come out and explain what was happening in the absence of any explanation from the elected Government.

That is not why the Governor spoke. The Government spoke the truth to reassure the public.

Please, Minister, allow Members to speak.

That is the unvarnished truth of the situation. The Governor of the Central Bank, Professor Honohan — fair dues to him — told the people this morning what the Taoiseach, under questioning yesterday, failed to tell this House.

The origins of this crisis are in the Government's disastrous banking policy. It was warned when it implemented it that it was on the road to disaster. It was warned in detail by Fine Gael, which for two years has argued that Anglo Irish Bank should be been wound down in an orderly fashion. The concept of moral hazard should have applied and I am sure the Minister is hearing from his colleagues in ECOFIN that the concept of moral hazard needs to be restored to the European Union. Put simply this means that not only those who recklessly invested in Anglo Irish Bank and lost all their money, and those who borrowed recklessly from Anglo Irish Bank and lost those assets should be held to account, but also those who lent recklessly to Anglo Irish Bank should share the burden and the pain like everybody else. Why should reckless lenders who got premium interest rates to cover their risks in lending to Anglo Irish Bank be bailed out by the taxpayer? Why should the responsibility of repayment transfer to the taxpayer from reckless lenders who were getting premium interest rates to lend to the banks?

Is Fine Gael still continuing its default strategy?

Deputy Fahey should allow Members to speak without interruption.

I will come to the default strategy and if the Deputy reads the Minister's speech he would see to where he has moved; the Deputy probably missed that part of it.

The Government has never explained adequately in this House why it decided to take over Anglo Irish Bank lock, stock and barrel. It has been alleged that there was close social contact between the Taoiseach and the principals of the bank and that has been advanced as a reason. Regardless of whether that is a true allegation, it is hardly a credible reason, but the Government has yet to explain its actions.

Some months agoThe New York Times ran the headline: “Can One Bank Bring Down a Country?” What is the answer this morning?

The answer has to be "Yes" this morning — one bank can bring down a country. The Government's banking policy has been an absolute disaster and it pursued it in the teeth of opposition here and expert opinion outside this House. That is what brought us to this point this morning.

As the crisis broke in recent days the Government has been trying to spin itself out of accepting the blame for the disaster. It claims that it is not really a sovereign problem, but merely a bank rescue by the ECB. Of course that is not correct; the IMF does not deal with banks, but with sovereign nations. The fact that the IMF is involved means it is dealing with the sovereign and not dealing with the bank directly. The Financial Stability Fund operating, under law, out of Berlin can only deal with euro states in difficulty. It has no legal mandate to deal with any company in the private sector or any bank. The fact that part of the source of the funds is the Financial Stability Fund and that one of the organisations represented in the Department of Finance this morning is the IMF proves without shadow of doubt that those that are examining Ireland are looking at Ireland incorporated and seeing it as a rescue, an injection of funds into Ireland, a major loan on which Ireland can draw, a bailout for Ireland and not a bailout for the narrow banking sector. Yet the Government continues to spin by pretending and not being straight with the people. It is trying to put a gloss on it by claiming that this is really an unfortunate event in the banks over which it had little or no control.

The Minister has also claimed in his spin that this is a European, not an Irish, problem, that it is European action to protect the euro and that Ireland is the innocent victim of the strategy. This is total nonsense. Of course there has been a knock-on effect in Portugal from Ireland's problems with its banking sector and in bond prices being paid by the Portuguese, and there is an imminent knock-on effect on Spain. However, it is a matter of the contagion, as it is described, spreading from the infection in Ireland and when the ECB seeks to address it, it does not do so in Spain or Portugal but, like a good doctor, it goes back to the source of the infection and addresses it in Ireland. It is Ireland's problem that is being addressed. The Minister has put us in our current position and he cannot spin his way out of it.

The Minister's speech is interesting and I agree with one part of it. I join him in stating that there is no threat to Irish people's deposits in Irish banks. That is covered adequately under our law and under the law in Europe. I join the Minister in stressing that, because I have had numerous calls from constituents to ask if they should open sterling accounts and move out their money. If people act in that way, it will be a self-fulfilling prophecy. Deposits are safe and secure and should be left in the Irish banking system now that Europe is taking action.

The second interesting part of the Minister's speech is the section on the special resolution regime. All the documents about banking and what happened in the time leading up to the guarantee in September 2008 were released to the Committee of Public Accounts. One of those documents showed there was a memorandum in circulation in the Department of Finance as early as February 2008 which discussed resolution legislation so banks could be wound down in an orderly manner. On seeing the word "resolution" many people tend to think it means to resolve or solve the Irish banking problem. That is not what "resolution" means in the technical sense. Resolution is a legal mechanism whereby a bank in trouble may be wound down systematically and those with an input into the bank share the burden of the wind down. The Minister has been promising resolution legislation and the Department has been discussing it for nearly three years, yet we have seen nothing.

However, the Minister has moved dramatically. A couple of weeks ago he moved to agree with the Fine Gael position that subordinated bondholders could be negotiated with and discounts achieved in Anglo Irish Bank.

It was always the position.

Not at all. Why did the Minister not do it?

The Deputy is misrepresenting the position.

He did it under pressure from the House. Now, he has moved again. He is now opening the door to the possibility that moral hazard will apply in Europe and that negotiations could take place with senior bondholders so they, as the Minister put it, would share the burden as well. To disguise the very significant policy move, he warned, "Discussions are ongoing at EU and international level on the mechanisms that may be available in the future to share the fiscal costs of bank resolution with senior creditors of banks other than depositors. However, this work remains preliminary and many important legal, financial and commercial hurdles will need to be cleared. . .".

Look at the distance the Minister has moved. He lectured Members of the House, saying members of Fine Gael were talking nonsense. He told us this was mission impossible and no negotiations were possible with senior bondholders. He claimed he had legal advice from the Attorney General which made it impossible even to contemplate it. Now he says there are preliminary discussions in Europe that moral hazard should apply——

That is after 2013. The Deputy is misrepresenting the facts.

——in Europe. Under pressure from his visitors in the Department of Finance he is exploring the possibility——

The Deputy is misrepresenting the Minister.

You have misrepresented the facts for five years.

It is in the second-last paragraph of page 4 of the Minister's script. Deputy Fahey is living in fantasy land. I was not using my own words, but quoting the Minister.

The Deputy is misrepresenting the Minister.

Allow Members to address the House without interruption.

There might be another version but I can quote only from what the Minister circulated.

On a point of fact, that was in my statement on 30 September.

There is a big policy change this morning. Now the Government, under pressure from Europe, is contemplating negotiations whereby senior bondholders would not be paid in full for the disaster in the banks. I welcome that. It should have been done years ago. If it had, we would not be in the current fix.

I do not know what mechanism will be finally put in place. I presume the Minister has a good idea about it but he is not sharing his views with the House this morning. However, in his last sentence another cat was deliberately let out of the bag. He said. "It is crucial to complete this process before any decisions are made that could have implications for the taxpayer." Obviously, whatever is introduced will have conditions attached to it and these conditions could have implications for the taxpayer, so it is important to complete the process before the implications for the taxpayer are seen. It confirms that the Minister is deferring the publication of the four-year plan until after the negotiations take place because there will be implications for the Irish taxpayer.

Will the Minister come clean? Will the Croke Park agreement be shelved? Will there be a restructuring of the labour market? Will there be initiatives to cut social welfare so the poverty trap is narrowed? Are these not the type of structural changes that people in Europe are seeking?

The editorial inThe Irish Times this morning carried the headline “Was it for this?” For the benefit of the younger Members of the House who would not be familiar with W. B. Yeats, I will complete the quotation:

Was it for this the wild geese spread

The grey wing upon every tide;

For this that all that blood was shed,

For this Edward Fitzgerald died,

And Robert Emmet and Wolfe Tone,

All that delirium of the brave?

Romantic Ireland's dead and gone,

It's with O'Leary in the grave.

Was it for this that a Fianna Fáil Government would finally sell out the sovereignty of the Irish people?

That is the kind of talk that caused the Deputy to be shafted by the Irish people.

Deputy Fahey, please. I will not ask you again.

All is changed, changed utterly.

Perhaps we should take a break so the nurse could come to Deputy Fahey.

He is lost at sea, leave him alone.

The only honourable thing the Minister and his colleagues can do now is resign and give the Irish people the opportunity to elect a Government with a clean mandate to sort out the situation.

If we are talking about W. B. Yeats, I should mention the greatNigerian novelist Chinua Achebe wrote the novelThings Fall Apart. Listening to Deputy Fahey, I was also reminded of lines in another poem by W. B. Yeats:

The best lack all conviction, while the worst

Are full of passionate intensity.

Deputy Fahey definitely comes to mind in that respect.

Confidence will return to Irish bank depositors, Irish businesses and foreign business in Ireland only when the banking crisis is settled and we have a functioning banking system. Regardless of what defence Fianna Fáil offers for its actions with regard to the banking crisis, the crisis dates back to March 2008, when Deputy Brian Cowen was still the Minister for Finance and waiting to see when Deputy Bertie Ahern should be taken out. In that month the price of shares in Anglo Irish Bank collapsed and Deputy Brian Cowen refused to do anything. A month later, as he waited to become Taoiseach, he was wined and dined by Anglo Irish Bank but still apparently knew nothing.

It is only when we have worked through this crisis and this Government has gone that reliable confidence will return in Ireland, in banking in Ireland and in bank deposits in Ireland. The statements by the Governor of the Central Bank, the Minister and various European agencies such as the ECB with regard to guaranteeing and back-stopping deposits are welcome. We will only regain our confidence and sovereignty when we see the passing of this Government and a focus on a plan for economic restoration and growth with a final sorting out and accounting of the banking crisis.

The Minister can sweet-talk us with notions that all the European Ministers crowded around him at the meeting to force him into this position. I heard, however, they were extremely annoyed that he was not just an hour and a quarter late for the first meeting but over an hour late again for yesterday's meeting. There was extreme annoyance with people losing patience with the way the Government is presenting the Irish case.

Where did the Deputy hear that?

I would not confuse diplomatic acceptance that Ireland is where it is and this is nothing more than a grumbling acceptance from our European partners. The Minister and Fianna Fáil are trying to shift the blame to our European and eurozone partners. The unilateral action on the night of the guarantee by the two Brians and then informing our European partners afterwards caused consternation in many different parts of Europe. That is the diplomatic and historic record of the brave overnight move on the guarantee two years ago.

When does denial turn into delusion? This is the question I ask myself all the time about this Government. Fianna Fáil talks up a storm. This is an elemental snowstorm in which we have lost our compass and have no idea how to get out of it. The Government has been in such a storm for nearly three years but still has no idea how to get the country out of this disastrous mess with our dignity, independence and sovereignty intact. Following the US chain store, Toys ‘R' Us, Fianna Fáil's new slogan for the country should be Banks ‘R' Us. The unlimited blanket guarantee made the banks' debt——

The Labour Party's proposal then was to nationalise the banks.

——the sovereign debt. The gentlemen in town from the International Monetary Fund, the European Central Bank and the Commission see nothing other than a technical distinction between the banks' debt and the State's sovereign debt. I am sorry to have to tell this to Deputy Dooley but, unfortunately, that is a fact.

Deputy Burton's proposal was to nationalise the banks.

The Minister's statement——

Deputy Burton's proposal was to nationalise the banks.

Will Deputy Dooley please refrain from interrupting? Members will not be shouted down.

The Minister‘s statement was devoid of any information to the people as to who the chief negotiator will be in the next few days. Will it be Professor Honohan? Will there be a team of negotiators? Who are they? Are they qualified? Have they the interests of the banks primarily at heart or those of the taxpayers and, more important, the citizens? We are entitled to know the names of the negotiators and if Professor Honohan is the chief negotiator. The Minister should have addressed that in his speech.

The Minister needs to tell us the structure and the template of these negotiations. We want to know what is and what is not on the negotiation table. The Labour Party believes it is not advisable for the Government to include the 12.5% corporation tax rate in the negotiations. Will we get a serious briefing from the Minister as to what is on the table? The people want only one thing from the Minister — to tell them the whole unvarnished truth and nothing but the truth. If we are to work our way out of this crisis, the Minister should forget the grandstanding of Fianna Fáil.

In his report on the banking crisis, Professor Honohan stated:

[While] an extensive guarantee needed to be put in place. . . . Nevertheless, the extent of the cover provided (including to outstanding long-term bonds) can — even without the benefit of hindsight — be criticised inasmuch as it complicated and narrowed the eventual resolution options for the failing institutions and increased the State‘s potential share of the losses.

Professor Honohan has it all there in four lines. A bank guarantee——

There have been no losses on subordinated debt.

Deputy Fahey, please.

——and rescue is expensive no matter who it is done by. I said that at the time. Check the Official Report for my speech.

Through the Chair, please Deputy.

There were significantly cheaper, better and faster ways of doing it.

It meant nationalising the banks.

The Labour Party did not consent to the guarantee because we did not believe Fianna Fáil should be given a blank cheque. That blank cheque has turned out to be the largest cheque in the history of the State.

Will the Deputy give way?

We are in a limited time debate. Will Deputy Burton yield for a question?

We are disappointed.

Professor Honohan also stated:

Second, the wisdom of leaving senior management in place while providing an open-ended guarantee to two institutions [could that be Fianna Fáil's friends in Anglo Irish Bank and the Irish Nationwide Building Society?] which — it should have been clear — were on the road to insolvency does not seem to have been considered.

That is a condemnation of this pathetic Government by the Governor of the Central Bank, Professor Honohan. Will the Minister put that in his list of quotations and quietly read it at night the way monks used to read books of prayers? It might actually bring forth what is appropriate at this point — a little bit of humility from the Government so we can work our way out of this banking crisis.

Who saw to it that Mr. FitzPatrick left the State two months later?

What kind of accusation is that?

Will the Minister set out the proposed additional debt burden of the current ongoing discussions? The Taoiseach yesterday spoke about several possible different types of arrangement. Professor Honohan this morning spoke about a bank bailout in the form of loan facilities. If this is correct — which I believe it is anyway because most of this has already been agreed — it means a further large loan facility will be given largely, if not exclusively, for the banks. The interest rates for the loan facilities from the two European funds, particularly from the Regling fund, will be three-year money. The rates are at least on a penalty point system. As I understand it, Professor Regling's fund attracts at least a 300 basis points charge or penalty over and beyond certain baseline interest rates. That means we are getting three-year money, at somewhere potentially around 5% and upwards. It means that all our debt — which is the problem for Greece and other countries that go into IMF bailouts — gradually shifts therefore——

The Deputy does not want to accept it.

——over the time that we are in this, from ten years, being how most Government debt is funded, into three years. So it means that we join a red queen's race where we are constantly racing to try to catch up, but cannot move any further. Three-year money at an interest rate of 5% plus is not cheap. It is a penalty rate of interest. Is that what the Government has now conceded and is that all for the banks? If the banks are sold——

The Deputy needs a crystal ball.

The Deputy should listen to the questions because he might learn something.

If Deputy Dooley continues to interrupt I will ask him to leave.

We had the guarantee for six crippled institutions with different ranges of problems.

They would have closed in days, if not. That is what Professor Honohan said. Does the Deputy agree with him?

Deputy Burton has one minute left. If Deputy Fahey continues to shout down Members, I will ask him to leave the House.

Okay. I apologise.

We had six crippled institutions. Two and a quarter years later, we still have the same six institutions. Two of them are albatrosses around our neck. Another two are large, important banks that we would like to have seen restored to financial health. One of them seemed to be almost there, but the current situation over the last eight weeks has damaged that institution again. If we sell off these banks and strangers are kind enough to buy one or more of them, do they walk away having received our euro IMF loans while we continue to take the liability? More importantly, our debt-to-GDP ratio changes almost immediately and we will have a huge extra annual interest charge.

When Professor John McHale addressed the Labour Party's away day in Roscommon, we had a discussion about how we did not wish to see Ireland entering a bailout. That is because entering a bailout is an extremely expensive operation for the country which goes into one. The Minister owes the people of this country the truth about whatever arrangements the Government is contemplating coming up with. That is why I want to know who these negotiators are and what is their approach to this country. Are they people from the tea party side of political and economic views? Or are they people who will have the interests of ordinary Irish citizens, including old age pensioners and infants, in mind, as well as those of the money men in the banks whom Fianna Fáil has striven to protect for the last two years while the rest of us could go hang?

There is a proposal to construct a casino in County Tipperary, but I do not know if it is necessary because the biggest casino in the world is next door in Government Buildings. This Government is gambling not just with the entire economy of the State but also with the future of our people on this island. The Government even acknowledges it. Deputy Noonan quoted the Minister for Enterprise, Trade and Innovation, Deputy Batt O'Keeffe, as saying that we will have to play poker over the next couple of days. So it is about playing poker. That is how this Government is handling this crisis. I do not gamble myself and it is not for any pious religious reasons. I would probably lose all the time if I did gamble, but this Government certainly does.

This is crazy. The Government has lost every single gamble it has taken in the last two years. As a result of the Government's gambling, we now need not so much a bank bailout but a Government clear out. If we had that, we could put in place the infrastructure to deal with the banking and economic crisis in this State. I do not for a moment believe that we need the likes of the IMF coming in here with their terms and conditions to run this State.

Let us look at the example of the puppet show over the weekend between the Ministers, Deputy Dermot Ahern and Deputy Noel Dempsey. When asked about the negotiations and dealings with EcoFin, Deputy Dermot Ahern said: "I heard nothing about that. Did you hear anything about that, Noel?" Deputy Dempsey replied: "No, Dermot. I heard nothing about that either". That is why we owe a huge debt to Professor Honohan for his honesty and integrity on RTE Radio this morning, in coming out and laying it bare. He said that negotiations were ongoing about trying to secure a contingency fund or loan, and that it will involve substantial sums — tens of billions of euro. If the Government had been even close to honest with the Irish people from the middle of last week when all of these rumours were being churned out, we would not have had this concern, annoyance and deep public anger.

The Government could not lie straight in bed. Why did the Minister think that pulling the wool over people's eyes and bluffing was a better course of action than being reasonably open and honest with them? The public know exactly how incompetent the Minister and the Government are. If the Minister had shared at least some level of openness and honesty with them, he would have served the people of this State better.

Of course, they got away with it before. In the run up to the 2007 election, they were promising more tax cuts and more jobs. Similarly, in the Lisbon treaty referendum they promised more jobs for everybody. They were bluffing and gambling. What the Minister, Deputy Batt O'Keeffe, said the other day was right. He and his Government colleagues see this as some kind of poker game. It is time Government Buildings were cleared out and changed from being a casino to a proper, functioning centre of governance.

Pouring billions of euro into the broken banking system will not solve it. If it goes some way towards stabilising it temporarily it will do so by breaking the backs of the Irish people. As the Minister knows, Anglo Irish Bank and Irish Nationwide are zombie banks. Anglo Irish Bank is holed below the water-line and is almost entirely in public ownership, or will be very shortly. The Bank of Ireland requires substantial additional funding for recapitalisation.

I think the Deputy was referring to Allied Irish Bank.

Allied Irish Bank, yes. We also have the whole mortgage default crisis coming down the line at us. We need stability in the banking sector. Pouring out loans, stabilisation funds or whatever name the Minister wants to put on them — he is playing tricks with names — will not solve the banking crisis. We need to do the business correctly and nationalise AIB. Bank of Ireland is not going to survive and it should be nationalised as well. That will give us what we need in the economy, in this State and in this society. It will bring stability and security to the situation. Dare I use the words integrity and trust? It depends on who we put in to run it but it is achievable. I know that words such as integrity and trust do not rest lightly on the party over there. I know this is a huge problem for them.

Steady on now.

They scarcely understand the concept.

There is major concern in respect of something the Minister and the other spokespersons dealt with in the course of their contributions. This is the notion that deposits are safe. I am getting telephone calls from worried constituents asking whether they should move deposits. No, they should not. Deposits are underwritten by the Government, to €100,000, but also by the EU. People should not have concern about deposits. Sums up to €100,000 are completely safe and will remain so. There is no doubt whatsoever about it and it is important that we acknowledge it. The EU and the IMF support will do no good unless we tackle the source of doubt about solvency. This is not what seems to have been discussed in Europe in the past few days. Instead, the idea was mooted that Ireland should tap European funds for the purpose of recapitalising its battered banking sector further. That would be a fatal mistake. It would keep the Irish people indentured to those who recklessly funded their banks for almost a decade. An EU-IMF bailout will not be a bailout for the Irish people. It will not secure social welfare, nurses' wages or the provision of education. It will be money provided for the Government to pursue its current failed banking policy. As the ECB is one of the largest investors in Irish banks, it is obvious this is money being frontloaded to the Irish Government under the pretext of a bailout so the Irish Government can, in turn, give it to the banks which will, in turn, give it to the ECB when it takes it back from the taxpayer. The added dimension is that this bailout will come with terms and conditions that strip future Governments of sovereignty in fiscal decision making matters. A bailout is only needed if the Government proceeds with its failed banking plan as it stands, a complete bailout for bondholders. A large percentage of the bailout costs arise from the decision to honour 100% of senior bondholders debt rather than burning or negotiating with them. I welcome the suggestion, at the very minimum a strong hint, in the Minister's statement that at long last international pressure has grown to buckle Government and bring it to some kind of common sense in terms of negotiation with senior bondholders. It should have happened a long time ago.

It is not in the statement.

I am interpreting this in the same way as Deputy Noonan did in respect of the last paragraph on page 4.

Deputy Morgan is being mischievous.

I said that last September.

Deputy Morgan has a lot in common with Deputy Noonan since he took over from Deputy Richard Bruton.

The Minister did nothing about it because he was not forced to do anything about it. The difference is that there is now international pressure to get some common sense into the Government. The sooner that happens, the better. Financing these zombie banks can buy time but not indefinite time. We must underpin banking and financial stability. This banking system cannot be salvaged in its current form and cannot be saved while the Government is holding the reins. The State needs a Government clear-out, not a banking clear-out. Whatever way the banking crisis is dealt with — whether the Government's inept and corrupt way or, better still, the Sinn Féin way, which involves burning bondholders through negotiation, allowing Anglo Irish Bank to go and not recapitalising the smaller banks — there will be costs incurred. However, the costs incurred by the Sinn Féin plan will be substantially less than what is proposed by this Government. Once the bailout is reduced——

How much will it cost?

Once the bailout is reduced, Ireland would not need to EU or IMF intervention. It could go back to the international bond markets to continue funding the country. However, this time it would have a set of finance books that are honest, transparent, stabilised and with a proper working plan. The sovereign bond markets are punishing Ireland and why would they not when bond rates are in excess of 9% in recent weeks and while the current policy of protecting all bank bondholders is in place? These markets want to see a Government and a country that is not bound by its banking fates and fortune but is interested in securing the real economy and stabilising the banking sector where necessary in order to secure the real economy.

Our pre-budget submission shows how the Government's structural deficit can be dealt with over a period of six years. Behind the scenes everyone is admitting it cannot be done in four years. If the Government wants to continue playing that bluff, so be it. The cat is well and truly out of the bag on that front. If we had honest figures arising from a more straightforward banking resolution, we could produce a multi-annual plan that took those additional costs into account. The Government's approach to both the structural deficit and the banking crisis is what is causing the problem.

I have explained the reasons the banking approach is wrong but, similarly, the structural deficit reduction plan of cutting €15 billion over four years is wrong and is making the markets nervous. The markets do not believe it will work because history and international experience shows one cannot cut to deficit reduction. If anything, it expands the deficit, as has been the case in Ireland over the each of past three years. We do not have to look internationally for examples. If cutting worked, the problem would be solved by now. International finance markets want to see a plan that looks like it will work, not just the intensification of a policy that has failed to date and involved cutting faster and deeper with each successive budget. The public may feel that, given the option of a Fianna Fáil or a Fine Gael and Labour Party bailout, the IMF and the EU looks like a better option. It is important to point out that the bailout would just be for the benefit of the banks, not in the public interest but the taxpayer and members of society would end up paying back all the money for the bank bailout. No matter how Fianna Fáil tries to spin it, the IMF coming to run our economy is the most shameful route for any country to take. It is shameful because the history of the IMF is that it robs a country of economic sovereignty, imposes horrendous terms and conditions on its loans and is a reflection of a complete failure of Government and administration in the economy. That is how it will be seen. We want to see the Government's four-year plan, we want the Government to postpone the budget scheduled for 7 December and we want an immediate general election. A new Government can pick up the pieces very quickly early in the new year. That will give some level of stability to the international markets and some level of stability to our economy. More importantly, hopefully it will provide moral and political leadership to the people of the State because they need it now more than ever, following 13 years of atrocious governance under Fianna Fáil-led Governments.

I have four questions initially. Will the Minister state the protections available to Irish depositors? The statutory guarantee is limited to €100,000. Does the guarantee re-enacted in the House yesterday provide a guarantee to depositors of an unlimited nature? Will the Minister set this out because people are concerned?

The Minister has a strong legal background and has acknowledged legal ability. He is aware he is the only Cabinet Minister, apart from the Taoiseach, specifically mentioned in the Constitution and his role is enshrined in the Constitution. Has he sought legal advice from the Attorney General on what his position will be in the process of budgetary control if in future the Minister becomes, in effect, a kind of puppet on a string for the IMF? Has the Minister checked whether his actions could be challengeable in law if he is not carrying out his constitutional functions independently?

Third, the trigger for this crisis, as I understand it, was the liquidity crisis in the banks. The Irish banks had two sources of funding, depositors, money from the ECB, and money from the ECB through the Central Bank. The risk of the flow drying up was the trigger but the reason people were losing confidence in the Irish banks was due to an underlying fear of insolvency. Independent commentators and colleagues in Europe have moved away from the concept of recapitalising the Irish banks, which was the term we used previously in debates in the House in terms of the bank having a black hole and that we needed to recapitalise. They are now talking about restructuring the sector. Is the distinction in language significant? What does the Minister understand the approach from Europe will be now to the banking sector?

The fourth question is for the Minister to expand on Professor Honohan's statement of this morning. Will he try to put figures on his general statement that a loan fund of several billions on which the Government could draw was to be put in place and that the drawdowns would be conditional? Will the Minister comment on the size of the loan and the conditionality which would be required in terms of budgetary policy?

I outlined the protection for depositors at the beginning of the statement. I restate the existence of the State guarantee. It is not limited to the €100,000 permanent guarantee which is established in our statute law but also extends by virtue of the vote in the House yesterday evening on an unlimited basis to all deposits, be they corporate or retail. That is an important issue. I am pleased the Deputy mentioned it. I welcome the constructive tone of the debate on deposits that was taken by all speakers.

Deputy Noonan's second question was on the constitutional position of the Government, my position, and what advices have been taken from the Attorney General in that regard. I, personally, have not taken advice in that regard because I have not committed to anything in the process. Preliminary advices were obtained on the ECOFIN statement by my officials to ensure that the type of short focussed dialogue which is now envisaged is permissible. The advice was that it was permissible. That is where the matter lies at this stage. I will take into account the advice of the Attorney General in anything I do. I do not sit here as a lawyer. As I often tell Deputy Burton, I sit here as a Deputy of the Dublin West constituency. I accept the advice of the Attorney General on legal matters.

On the question of the liquidity crisis, and collateral and emergency support from the European Central Bank, again, the Deputy referred to an underlying fear of insolvency. It is important to note what Professor Honohan said about that this morning in his interview. He stated:

I don't think there's any question of it all going into the banks, as you put it. Talk about the banks, it's true that the banks need additional confidence. Our efforts, the huge sums of money that have been put in by the Government to support the banks, have not been sufficient, have not generated sufficient confidence yet. The money is enough objectively, [That is the view of the Governor of the Central Bank.] but if the confidence isn't there, and it's partly not there because investors are concerned in general about the Government finances, and the future prospects for growth and employment. So with the market uncertainty generally high, for the last four to five months, effectively since the end of April, I think it is desirable that the banks should have more capital, that's Government capital, ownership funds, available to show to the market, look this is beyond question.

He made the point earlier that it would be "a large loan, because the purpose of the amount to be advanced or to be made available to be borrowed, is to show that Ireland has sufficient firepower to deal with any concerns of the market". Professor Honohan was not suggesting that it is a bailout, in fact he deliberately repudiated the use of the word bailout. Deputies who are fond of quoting him should take note of that. His point was that a large contingency fund available to the State to stand behind the banking system would of itself create confidence. He expressed the clear expectation that discussions would eventuate in such a fund. The discussions have only commenced this morning.

I ask Members to be as succinct as they can as time is very limited.

In his radio interview this morning Professor Honohan spoke about a large loan of tens of billions of euro. He spoke of large teams of negotiators. He said: "That's why the large technical teams are sitting down discussing these matters." Who is the leader of the Irish team? Is it Professor Honohan? Does he havecarte blanche from the Government on the negotiations? Is he a plenipotentiary? I accept there is a reference in the Constitution to the Minister. Is this like Michael Collins going to London, that Professor Honohan has been sent by the Minister presumably with large teams on the Irish side as there are three large teams on the foreign side, the IMF, the ECB and the Commission?

The Deputy should ask a question please.

Could the Minister tell us who is the leader of the Irish team of negotiators? Broadly, what are their terms of reference and what is the template to which they are working? That comes back to Deputy Noonan's previous question. Two European funds can be accessed. Which fund does the Minister see the teams accessing? Presumably they are acting at his direction, or is it at the direction of the Taoiseach and his Department? We do not know. The Minister needs to tell the people of this country at whose direction the team is operating and which of the two European stabilisation mechanisms or stability funds they are approaching. Most importantly, what is the likely structure? In other words, we understand that the money is mostly for the banks.

Is the money an actual transfer for which we incur liability and interest, which is what I understand from what Professor Honohan has said? The Minister has used new terminology. He has called it a contingency fund. He often lectures me, deservedly, that there is a difference between Government accounting and ordinary financial accounting. I accept that. However, in ordinary financial accounting, a contingency is something that is available which one does not have to use unless it becomes necessary. Therefore, at the most, one pays a very small fee for it and one only pays 5.5%, for example, if one draws down the funds. What does the Minister's use of "contingency" mean in this case? That is a genuine question to which I would like an answer.

The Deputy asked a number of questions but the one she is most anxious about is who is in charge of the negotiations. As Minister for Finance, I am accountable to this House and I am responsible for the negotiations.

So the Minister is in charge of them. Is he the negotiator?

I am in charge of these negotiations. The persons conducting the negotiations are officials and officers of my Department, assisted, as I indicated in my opening statement, by officials from the National Treasury Management Agency who are subject to my direction.

Has the Minister met the teams?

Deputy Burton should please allow the Minister to respond.

That is the position in regard to these talks. Of course I have constant liaison with the officers concerned and with the National Treasury Management Agency. The Central Bank——

I am sorry, what does the Deputy want clarified further than that?

I want to know if the Minister is the leader of the negotiating team or if there is a Michael Collins figure, be it Professor Honohan——

No. Could I deal——

——or someone else who has been given plenipotentiary powers by the Minister to negotiate.

Please, allow the Minister to respond to the series of questions.

Let us be clear. I have not given plenipotentiary powers to anyone.

The Minister is responsible.

Yes, but I am not participating in the conduct of the discussions because they are of a technical nature.

But the Minister will sign off on them.

I would need to sign off on any conclusion that might be reached and bring an appropriate proposal before the Government. It is important that Professor Honohan's role be understood. The Governor is independent in the performance of his functions, but he associates himself with the discussions or negotiations — I prefer the word "talks" — given his and his organisation's knowledge of the banking system. He is also in liaison with Frankfurt. Indeed, his interview this morning was from Frankfurt.

He is an associate. Who is the chief negotiator?

Please, Deputy. I am trying to accommodate many Deputies.

No. I will say it again. Professor Honohan was very careful this morning to make clear that the decision in these matters rested with the Government, not himself. He said this during the course of his interview this morning. He was adamant on the point. Of course he is of great assistance in these discussions and I am in constant contact with him because of his organisation's deep knowledge of the banking sector and given his participation in the work of the governing council of the European Central Bank, ECB. Naturally and properly, he is associated with these discussions, but he is not a plenipotentiary in them. Any result of the discussions is subject to Government approval and the conduct of the negotiations is subject to my direction. That is the position in respect of the discussions themselves. It is important that it be understood.

Briefly on the balance.

Regarding the question on contingencies, Professor Honohan clearly pointed out this morning that what he envisaged was the assembling of a large fund that would demonstrate that adequate firepower is behind the banking system. Naturally and correctly, there have been many political charges today, but there have also been many constructive contributions by Members from all sides of the House regarding the concerns discussions of this type bring, for example, concerns about adding to the burden of the national debt and about the workability of any strategy that is adopted to put confidence into the banking system. For this reason, one needs technical discussions. It is important that these technical issues be worked through. In the passage I quoted to Deputy Noonan, Professor Honohan made the point that the money already put into the banks is enough objectively but, if the confidence is not there — according to him, it is not there partly because of Government finances and general economic factors — it is desirable that there be a demonstration effect in terms of what capital is available to the banks. This is an issue the technical teams will examine. The Government cannot possibly sign off on such a concept without this technical work being done in the first instance. I very much——

I call Deputy Morgan.

Will the Minister answer the question about the contingency fund? Is it going on our black book?

Please, Deputy. Other Members are trying to get in.

These talks started this morning. It is important that this be understood. ECOFIN made a statement on Tuesday. On the Order of Business, I pointed out that some of the people in question arrived yesterday although there seems to have been a great deal of reporting to the effect they all arrived today. They are now engaging with my office in respect of these matters.

I want to move on.

What are the parameters of the terms and conditions currently under negotiation? For example, do they include the selling off of State assets like the ESB, Coillte and An Post? Will the negotiations conclude before the budget or the publication of the four-year plan? Has the Minister set a deadline for their conclusion? What is the amount of funding under negotiation? Is the extent of the bailout €70 billion, €90 billion or €100 billion?

I thank the Deputy for his succinct questions.

These are urgent discussions. I have made that clear. If a quick resolution can be brought to these matters, I will welcome it. These urgent discussions will take place quickly. At that stage, the Government will be in a position to make a definitive decision on the matter. The negotiations will not be dragged out.

Will it be next week?

I will not put a limit in terms of a number of days on it. The technical issues are important and must be addressed. The Government must be in a position to make the correct decision.

Regarding the question on the amounts involved, as Professor Honohan pointed out this morning, it is a technical matter that must be evaluated on that basis. No precise figure can be given at this stage because of the very considerations Deputies advanced in the course of the debate.

Will the Minister put me right if I am incorrect? Our banks are sourcing liquidity from the ECB at approximately 1.5%. Under the new arrangement, they will source moneys from the fund through the State at approximately 4.5% or 5%. If the banks needed €20 billion, for example, they were sourcing it at 1.5% until the ECB called a halt, but we may now pay 4.5% or 5% for it. Is this the position?

No, although it is a pertinent question in these discussions. The ECB is the lender of last resort. As such, it has advanced substantial sums into the Irish banking system to ensure the system's stability. I do not want to anticipate the technical discussions, but the State is not being put in a position in these discussions of becoming a lender of last resort, since it is not a central bank. The issue that will be explored in these discussions is the very one identified by the Governor this morning, namely, whether a contingency fund can be established to demonstrate in terms of capital the robustness and indestructibility of the institutions. This is one of the issues that arises.

The questions of liquidity support and the funding of the banking system are also crucial in these discussions. As I have consistently stated since we first discussed this matter in the Oireachtas committee in March 2009——

On a point of order, I did not quite understand what the Minister was saying. I ask his forgiveness. Could he explain it to the House in layman's terms?

I was answering Deputy Rabbitte's question. What aspect of it did Deputy Sherlock not understand? I will explain myself.

I would rather not have a dialogue. The question was whether the interest rates would be at a higher rate.

The current ECB interest rates on liquidity funding are 1.5%, as Deputy Rabbitte indicated. As I indicated, it will not be a focus in these discussions to somehow turn the State into a central bank lending at 4% or 5% at its own cost. These matters can be explored in the discussions. I understand that one of the issues in focus in the discussions was identified by Professor Honohan this morning, namely, the question of providing a contingency capital fund that can stand behind the banks as distinct from liquidity.

I understand that, but it is likely that a chunk of the moneys will go into the banks after being borrowed by the State at what will certainly be a higher rate of interest than is currently the case.

Just this net point.

That is correct. It is an important issue in these discussions. Incidentally, another concern was raised.

I want to allow other Deputies.

On that point, the Minister referred to the concern about an additional burden on the taxpayer. From his reply to Deputy Rabbitte, does he anticipate further investment in the banks will be such an additional burden?

The Minister referred to a special resolution regime. A short time ago, he gave a commitment to the House that a special resolution regime for the banks was being prepared by the Government. Will it form part of the discussions with the International Monetary Fund, IMF, the EU and the ECB?

Will the National Treasury Management Agency, NTMA, form part of the team negotiating with the IMF? Sourcing funding for the sovereign is a key issue.

The NTMA is taking part in the discussions and clearly it is subject to my direction as Minister. With regard to the exposure of the taxpayer, the situation was made clear by the Governor of the Central Bank this morning and he was very anxious to reassure the public in that regard. The question of additional capital would not necessarily involve additional exposure for the taxpayer, other than the payment of whatever appropriate fee the contingency capital entailed.

What was Deputy O'Donnell's other question?

I asked about the special resolution regime.

As the Deputy acknowledged, I indicated that a special resolution regime was part of my 30 September announcement on banking. Work continues and is ongoing regarding the regime. In regard to the query as to whether it is part of the discussions, every aspect of the banking sector is, of course, under discussion. Clearly, the focus will be on that question of capital adequacy and liquidity support.

I now ask Deputies for brief individual questions.

I have two quick questions. Will the Minister say whether the Secretary General of the Department of Finance is part of the negotiating team? Second, I am somewhat bemused at Britain's Chancellor of the Exchequer indicating that he is standing by to assist. My understanding is that we are talking about the sum of money that is the European stabilisation facility, which is a combination of the IMF and the European Union, and is limited purely to the eurozone of which Britain is not a member. Can Britain make any contribution in financial terms to the bailout?

The Deputy insists on using the word "bailout", despite the views of the Governor of the Central Bank but——

One man's bailout is another man's loan.

He refers to it as loans but in any event, of course the Secretary General of the Department is involved in some of the meetings and is fully aware of the meetings that are taking place.

Is he a negotiator?

I am not entering into a debate about discussions and negotiations. The Secretary General is involved in these talks but no decision has been taken by the Government at this stage. He is involved in the talks and in the elucidation of the proposals that can be formulated for the Government. He is also involved in direct bilateral discussions with the IMF and the European authorities but of course he is not present at all discussions.

On the question of the funds that are available and what funds can be pointed to, as such, there are, in fact three distinct funds involved. One is the European facility agreed last May, which is——-

Yes, but it is a multilateral arrangement by the member states of the eurozone.

That is Mr. Regling's fund.

Yes, Mr. Regling is now the manager of that fund, and we have passed the necessary legislation here in this House. That is the facility, but there is also a separate fund at the disposal of the Commission, which again would be subject to a majority vote of the ECOFIN. Then, of course, the IMF has its own funds. The IMF——

Does the Regling fund not charge penal rates of interest? That is in its terms and conditions.

I am identifying the different funds that are available. In addition, the United Kingdom authorities have made clear that they would provide direct bilateral assistance to Ireland through the facility, or otherwise.

That is a fourth fund.

That is a fourth possible fund, subject to the approval of the UK Parliament. The Chancellor has indicated——

They are paying to bring us back into the empire.

I call Deputy Sherlock.

Will we be joining the Commonwealth?

They are not looking for any conditions.

It is not fair for people who have asked many questions to exclude those who have not.

How much will all this cost the ordinary taxpayer? How much will it cost the ordinary taxpayer to fund the loan, the bailout or whatever? In its quarterly report, dated October 2010, the Central Bank stated that the unemployment rate next year would be about 13.3%. I want to know what the permutations of this current initiative will have for the unemployment rate next year.

Deputy Sherlock's concern is shared by the Government. That is why we are not giving any figures at this stage, because none have been elaborated or proposed and there is no range of figures. Clearly, when figures are available they will be brought to Government and considered by it before any decision is taken. That is the position in regard to figures. I am not sure whether there was any other point.

I referred to the unemployment rate. There is a projected rate for next year.

There is no connection between these discussions and unemployment.

There is a correlation.

Is it the intention of the Government to seek the approval of Dáil Éireann when negotiations are concluded, before this is finally accepted as afait accompli? As the situation is unprecedented, at the very least the representatives of the people should have a say in the final decision.

I shall examine that suggestion and bring it before my colleagues in Government. The Government does not generally require specific authority to borrow money, but this is a more unusual circumstance and, as I said earlier to Deputy Burton, in the event of it materialising the advice of the Attorney General will be obtained in that regard.

Will the Minister confirm there is no question of a default on senior bondholders in the banks covered by the State guarantee? Will he confirm, too, that funding at present provided by the ECB will continue to be provided by it as a lender of last resort, irrespective of the outcome of these negotiations, and at the interest rates that apply at present?

With regard to guaranteed liabilities, clearly the sovereign does not intend to renege on anything the sovereign has undertaken, and that has not been raised as an issue at any stage since last Tuesday in these discussions. It is very important that this is understood.

On the question of senior debt generally — and some senior debt is off the guarantee — Commissioner Rehn's opinion was to the effect that there would be no hair-cuts of such debt. Again, that issue has not arisen in the discussions, which however, are at a very preliminary stage.

With regard to the meetings, since Deputy Burton made a charge about my attendance at the meetings on Tuesday, the position that day was that there was very serious fog in Brussels and my flight was delayed.

The Minister will have the opportunity to make a statement at the conclusion of this debate.

I will not have much opportunity at the conclusion. At the meeting the following morning, I did a number of interviews with the Irish media, and Ireland was not under discussion at the ECOFIN. It was discussed, informally, by the Ministers at lunchtime, and I participated fully in that.

Could the Minister please address my question about the ECB continuing to lend, and at the rates that apply at present?

The ECB lends, as lender of last resort, at the appropriate applicable rate which is current 1.5%, and that will continue

The Minister cannot say that.

I can, it will be a low rate, but the determination of the precise rate is a matter for the ECB.

What input, if any, will these people from the European institutions have on decisions to do with the forthcoming budgetary process?

None. Of course the Stability and Growth Pact requirements were discussed with the European authorities, and €6 billion as an appropriate frontloading figure was agreed with them. The precise distribution of expenditure and revenue decisions are a matter for the Government.

The Minister will recall that at the end of the Greek process, there was a detailed Memorandum of Understanding, which enshrined all the decisions, and this was published. Does he envisage a similar conclusion in Ireland?

I am not clear about the document or the process to which the Deputy refers.

When the negotiations between the Greeks and the European institutions concluded, all the decisions were enshrined in a very detailed Memorandum of Understanding, which is available in the Oireachtas Library. Will there be a similar conclusion in Ireland?

That is unclear at this stage. The Deputy is predetermining the outcome of the discussions.

I presume there will be agreement on something.

He is predetermining the outcome of the discussions.

I am simply asking what is the mechanism for letting the public know what has been agreed. I presume something will be agreed.

The Deputy is predetermining the outcome of the discussions.

I am inquiring about the mechanism for letting the public know what has been agreed.

It is a secret.

Deputy Noonan is predetermining the discussions. We are at a stage of technical discussions, which only began this morning.

Certain preliminary matters were discussed earlier in the week between the Commission and myself.

I will allow a final brief question from Deputy Burton.

The terms of the European Financial Stability Facility require — it is conditional — the relevant State, which is Ireland, to enter a Memorandum of Understanding, MOU, with the European Commission acting on behalf of the euro state areas. Will the Minister confirm if those arrangements apply in this case? The Minister said that the Irish covered institutions have approximately €130 billion to €140 billion of facilities from the ECB. When in Dublin last week, Commissioner Rehn——

A question Deputy, please.

——advised the parties that Jean Claude Trichet had stated this support could not continue forever. He did not give a time limit but did say it could not continue forever. Is it envisaged that, given that the Central Bank — this was confirmed this morning by Professor Honohan — also gave between €20 billion and €30 billion to Irish covered institutions who no longer have collateral, that we are looking at a shift of the €20 billion to €30 billion from the Central Bank into this fund and a shift of some of the money coming from the European Central Bank into the fund, in which case the interest rate would rise from 1.5% to plus 300 basis points penalties bringing it up to a minimum of 4.5%? Does the Minister agree that this would be expensive for Irish citizens and taxpayers? It would be an extra €6 billion a year minimum.

I understand the Deputy's second question but did not quite grasp her first question.

The first question relates to the legal requirement for a Memorandum of Understanding under the terms of the establishment of the fund.

It is in the Regling report.

Yes. We are not at the stage of having any agreement in principle to access the fund. My reply to that question is the same as the reply I gave to Deputy Noonan, namely, the Deputy is anticipating matters. The Deputy is anticipating that a particular fund will be used.

The IMF does a Memorandum of Understanding as well. It is standard practise in all these situations.

Yes but the Deputy is anticipating where we might be at this stage. We are not there. That is important.

We think we are.

Professor Honohan believes it is going to happen.

Allow the Minister to answer the questions, please.

I agree. I welcome Professor Honohan's comments this morning. Clearly, if it happened on the basis he advocated, which is at a very minimal cost to the taxpayer——

He said that is what is going to happen.

——that would be a very welcome development for the Irish State. I agree with what Professor Honohan said this morning.

A Memorandum of Understanding will come out of that.

The difficulty is that my Department, the NTMA and officials from the Central Bank associated with them, have to engage in these discussions to ensure that we do protect the taxpayer and that we do get the best possible arrangement in the event of a decision being made by the Government.

I now invite the Minister to make his statement in reply to the debate.

I thank Members of the House for reinforcing what I and the Governor of the Central Bank said in regard to the position of depositors in Irish banks. The issue of the guarantee was ventilated again. I am not sure that the public wants to hear us endlessly argue about this.

Let us be clear, Deputy Burton and her party opposed the guarantee in principle and in totality. Deputy Burton, as she now seeks to represent it, now only objects to the blanket nature of the guarantee. Her party took a populist anti-bank line, which the Deputy has been peddling ever since. It is cheap politics. Let us not pretend otherwise.

Who wrote that for the Minister?

As I have said repeatedly, had the bank guarantee not been introduced two years ago——

Let us hope they are not on the negotiating team or we will be in trouble.

——we would not now have an economy, never mind a banking system.

Deputy Burton please allow the Minister to continue.

The Deputy should stop digging.

I would not put Deputy Fahey on the team.

Deputy Burton, please.

The entire banking system faced collapse at that time. Funding for our banking system had all but dried up and the banks faced closure within days. Deputy Burton quoted from Professor Honohan's report. I, too, have quoted from that report. I accepted that the Governor had reservations about some of the categories included in the guarantee. It is important to note that the category of subordinated debt about which he expressed a specific reservation was one in respect of which no principal payments were made by Anglo Irish Bank or Irish Nationwide Building Society.

The Governor reserved against senior bond holders.

They are the facts. The Deputy should stop misrepresenting the position.

Deputies, please allow the Minister to continue.

He accepted that a broad guarantee was necessary and he painted a picture of the devastation that would have ensued if we followed the advice of Deputy Burton and the Labour Party. The Governor said there would have been additional lost income and unemployment, amounting to tens of billions of euro.

The euro group statement on Tuesday welcomed the significant measures the Government has taken and endorsed this short and focused consultation now underway between the Irish authorities and the Commission, the ECB and IMF to determine the best way to provide any necessary support to address market risks, especially as regards the banking sector in the context of the four year budgetary plan and the upcoming budget. I welcome many of the contributions in this respect from the other side of the House in the context of the legitimate concerns they raised in regard to exposure of the taxpayer, the nature of the interest rate that might apply to any such arrangement and the nature of the collateral support which will continue to become available from the European Central Bank.

The purpose of the technical discussions which begin today is to assess how it may be possible to build on the significant interventions already undertaken. As I said on 30 September, the introduction of a special resolution regime will be a powerful tool for securing the necessary restructuring of the Irish banking system for the future. Such a regime is not necessarily a panacea for all ills. Discussions are ongoing at EU and international level on the measures that may be available in the future to share the costs of bank resolution with senior creditors of banks other than depositors. However, the recent widening in Irish bond spreads, in response to speculation regarding burden sharing, proves the importance of exercising caution in this area.

Deputy Noonan appeared earlier to be surprised at this part of my speech. The Deputy must not have been listening. He is normally a good listener. I have spoken several times in this House about the work underway for a special resolution mechanism and referred in my statement of 30 September last to burden sharing by holders of subordinated debt in Anglo Irish Bank and Irish Nationwide Building Society. We need to be cautious. We know the unsettling impact of the recent references in Europe to the prospect of burden sharing, and as such we need to exercise care in this matter.

On corporation tax, which was mentioned in several contributions, I have on many different occasions made clear to the European authorities that our 12.5% rate of corporation tax is an important arm of our industrial policy. As a peripheral member state, it is our industrial policy. It is a key element in our growth model. It is clear to all that growth will be essential in improving our longer term debt stability. That is the position under the treaties. It is also the case that it is an essential policy to sustain economic growth in the future. I am satisfied, based on preliminary discussions I have had earlier this week, that this is a view shared by many of the parties to these discussions.