European Financial Stability Facility and Euro Area Loan Facility (Amendment) Bill 2011: Second Stage (Resumed)

Question again proposed: "That the Bill be now read a Second Time."

Prior to the adjournment of the debate I spoke about the size of the EFSF. One issue which is causing concern among the markets is credibility. The size of the fund does not have the capacity to deal with the functions that have now been assigned to it.

In recent weeks as the issue of contagion has begun to affect larger economies such as Italy and Spain, the issue of credibility crystallised all the more. It is important, especially in the context of the potential, through the EFSF, of recapitalising Europe's banks. The head of the IMF, Christine Lagarde, speaking at the August annual meeting of central bankers in Wyoming in the US suggested there was a need for the urgent recapitalisation of Europe's weakest lenders and shoring up the banking system was the key to cutting the chain of contagion across the Continent.

In its global economic outlook, the IMF today reiterated the point that many of Europe's banks need additional capital. While the cost of recapitalising the Irish banks has been horrendous, we are further down the road than many of our European counterparts at getting to the bottom of the black hole in our banking system. While the measures agreed give governments the opportunity to borrow from the EFSF to recapitalise their banks, Christine Lagarde was, in essence, suggesting it could be used to recapitalise banks by force.

The results of last July's stress tests revealed that nine of the 91 banks tested failed, with a core tier 1 capital ratio of less than 5%. While national regulators are due to report in October on progress made on forcing recapitalisation of banks that failed or nearly failed the stress tests, the question arises as to how long this process will take. Decisive action by policy makers to accelerate the rollout of the EFSF and cover the write-down of Greek exposures by the banks is urgently needed.

In addition to stabilising Italy and Spain, the euro area should make it clear that it will do whatever it takes to quell what is increasingly becoming a self fulfilling debt crisis. Put simply, the EFSF may not have enough funds to undertake the massive bond purchases that may ultimately be required to stabilise the market.

The Minister and his eurozone colleagues should give consideration to it obtaining a line of credit from the ECB in addition to the funds it can raise to the issuing of bonds. A scheme of this sort could give it at least €2,000 billion euro in firepower, perhaps significantly more. The US Treasury Secretary, Timothy Geithner, is reported as having alluded to this possibility during recent discussions in Poland and it is something that needs to be given serious consideration.

In addition to addressing the size of the fund, the potential for it to be used for imaginative solutions to assist member states needs to be examined. I note the Minister is currently giving consideration to changes in the operation of the promissory notes provided as part of the recapitalisation work done in Anglo Irish Bank. The suggestion from Karl Whelan of involving the EFSF in this regard is worthy of close consideration because we would all welcome a restructuring of the arrangement and whether a reduction in the overall bill could be achieved.

Under that proposal, the EFSF would provide a 30 year loan to Anglo Irish Bank to pay off the emergency funding from the ECB for which it currently uses the promissory note as collateral. The note could then be restructured as a 30 year bond to be repaid in full at the end of the period.

I find it very difficult to understand the attitude of the ECB to the efforts of the Government to secure some burden sharing among the remaining unsecured unguaranteed bondholders at Anglo Irish Bank and the Irish Nationwide Building Society. These institutions are being wound down, their deposits have been transferred and they no longer issue any new loans. They are in a completely different scenario from AIB and Bank of Ireland, the two pillar banks.

In concluding this debate, the Minister should give us the bottom line from the ECB in terms of what it is saying to us, its objection and what it would do if the Government decided to proceed with imposing losses on the bondholders. It is important that we know this. I welcome the Bill, which we will support. I look forward to continuing this debate with the Minister on Committee Stage.

With every day that passes the euro crisis gets deeper. Last night Italy was again in the spotlight as Standard & Poor's cut its credit rating by one notch from A+ to A. Meanwhile the world's financial media is camped out in Athens waiting for what many people believe is the inevitable Greek default. All the while the financial markets circle the eurozone like a wake of vultures, drooling over the prospect of yet another currency carcase to devour.

In response to this escalating crisis, the Governments of Germany, France and Greece hold endless emergency conference calls, followed by resolute words but very little action. On the sidelines, the rest of Europe's governments sit passively, watching on and hoping that somebody else does something about the crisis which they were partly responsible for creating.

In truth the actions and inactions of leaders across Europe are making the crisis worse. Endless EU summitry, ambiguous summit conclusions and the inevitable post-summit disagreements are wasting valuable time and energy. All the while the ordinary people of Greece, Ireland and Portugal are paying a very real human price as endless rounds of austerity push hundreds of thousands if not millions of families further into poverty and financial hardship.

At the core of this failure of political leadership across Europe is the simple fact that our governments do not understand the causes of the crisis in the eurozone. This is not a debt crisis. This is not a crisis of overspending or bad economic management in the periphery of the eurozone. This is not a crisis that can be solved by forcing countries to bleed their economies and societies dry in return for meeting EU and IMF-imposed deficit reduction targets. The crisis of the eurozone is first and foremost a banking crisis. Years of reckless lending and borrowing within the European banking system created a financial bubble of enormous proportions. When that bubble burst the result was a drought of investment and a slowdown of consumer spending. In turn unemployment rose, tax revenues fell and borrowing increased.

Some countries, such as Ireland, added fuel to the recessionary fire. A reliance on property-based tax reliefs and other fair weather taxes hollowed out the tax base. When the bubble burst they went even further by excessively guaranteeing the toxic debts of bad banks such as Anglo Irish Bank and underwriting loans from the ECB to repay these debts. Is it any wonder that the deficit spiralled out of control? The end result was an ever-growing mountain of sovereign debt bloated with extra toxic banking debt coupled with spiralling unemployment. Under this dual strain of debt and unemployment the euro started to crack. Inherent design flaws and clear mismanagement exposed the fact that the single currency was not designed to handle a crisis on this scale.

Unfortunately, European political leaders appear even less equipped to handle this social and economic strain. Rather than dealing directly with the growing levels of debt and the drought of investment, the EU institutions, supported willingly by member state governments, tried to treat the symptoms of the crisis rather than the cause. Their response was to deal with a banking crisis by bailing out the banks and to impose the cost of these bailouts on ordinary working people through crippling EU-IMF austerity programmes. Somehow this magic formula was supposed to reduce the governments' deficits and reassure the markets to lend to the indebted states at lower interest rates.

The European Financial Stability Facility was a key element of this policy. Using guarantees from all EU member states it borrowed money from the financial markets to lend back to member states that were blocked out of the international markets. This money was and is being loaned to Ireland, Portugal and Greece, on condition that the EU-IMF policies of bank bailouts and crippling austerity were adhered to. The proposition was as simple as it was illogical. Seeking to resolve a debt mountain by heaping more debt on member states is absurd. It is not possible to stimulate economic recovery by wrenching billions of euro from the domestic economy and from the pockets of those who spend in the local economy.

More than 18 months has passed since the EU agreed the first austerity programme with Greece. Has the policy prescription meted out by the European Union and the IMF cured the Greek patient? Clearly it has not. If anything it has made the Greek economy weaker and the suffering of the Greek people greater. It gives me no pleasure at all to say that former Deputy, Arthur Morgan, predicted this when he opposed the original Euro Area Loan Facility Bill in May 2010. He said then that the EU facility and the loans it would provide to Greece were not an act of solidarity to assist a beleaguered fellow member state. He told this House that it was a massive bailout for toxic banks the cost of which would be paid by taxpayers across Europe. Unfortunately the recent news from Greece confirms beyond any doubt that Arthur Morgan's and Sinn Féin's analysis at that time was right. Greece is probably soon to receive its second bailout. Its government bond yields have hit historical highs of 23% and almost every economist and commentator in the world believes that it is only a matter of time before Greece defaults.

Clearly aware of the fact that their dual approach of bank bailout and crippling austerity was not working EU leaders gathered in June and July this year in Brussels. We were told that these summits would be different. We were told that our governments finally understood the scale of the crisis and decisive action would follow, yet when the dust had settled after the summits, a very different picture emerged. While some form of burden sharing on toxic private banking debt was to be allowed for Greece, albeit of a voluntary nature, all other member states, including ours, agreed to "solemnly reaffirm their inflexible determination to honour fully their own individual sovereign signature". This is Euro-speak for a cast iron commitment to bailing out toxic banks irrespective of the cost to the taxpayer. However, worse was to come. The summit conclusions also included a guarantee from each government to meet "commitments to sustainable fiscal conditions and structural reforms". In Ireland's case this is a commitment to fully implement the EU-IMF austerity programme agreed by Fianna Fáil in 2010.

Greece, weighed down by bank bailouts and crippling austerity, was brought to the brink of financial collapse, a collapse that contained the potential to destroy the euro. In response the governments of the eurozone, including this Fine Gael and Labour Party Government, signed a commitment to follow exactly the same policies, and to blindly follow in Greece's footsteps, led ably by the IMF and the European Union.

The summit also agreed to further centralisation of fiscal and macroeconomic decision making at an EU level, further undermining the ability of individual member states to respond with the flexibility required to meet each state's individual economic and social needs. The stupidity of all of this is truly breathtaking. Even more breathtaking was the spin placed on this agreement by the Fine Gael and Labour Party Government when its delegation returned from Brussels. We were told this was a major achievement in that the Government secured an interest rate reduction and in addition the State would have an option of extending the maturities on that debt from 7.5 years to 15 years at a minimum. There were other changes of which the State could avail at a later stage, including accessing EFSF moneys to further recapitalise the banks and facilitating the ECB to buy back government bonds on the secondary market at a potentially reduced rate.

Sinn Féin's response to these measures was very clear at the time. Of course, we welcomed any reduction in the interest rate — we called for it — and any other measure which would assist in making the State's sovereign debt more sustainable. However, crucially the package of measures outlined in the 21 July eurozone summit conclusions completely ignored the central problems facing the peripheral eurozone economies and the eurozone as a whole. It completely failed to address the overall level of debt held by those eurozone countries most at risk from default, including Ireland. It did nothing to address the urgent need for investment in job creation and economic and social recovery. The so-called positives at the 21 July summit are nothing more than a sideshow when compared to the tsunami of debt currently engulfing the State. The much lauded July deal was nothing more than a sticking plaster on a wound so great that only amputation would halt the loss of blood and keep the patient alive.

Two months have passed since the leaders of the eurozone economies agreed to this package of measures. Have the markets calmed since? Have the Government bond yields of Greece, Portugal and Ireland fallen sufficiently? Has the prospect of a Greek default receded? The answer to each of these questions is "No". Once again European leaders, including Fine Gael and the Labour Party, are failing. They are failing their own citizens, the citizens of their neighbouring countries and the eurozone.

On this basis Sinn Féin is not in a position to support this Bill. While it contains some elements that without doubt are positive, particularly the interest rate reduction, it cannot be presented as anything close to the kind of comprehensive solution to the crisis gripping the eurozone. Worse still, it introduces, in the most underhand way, the permanent European Stability Mechanism which contains greater risk to Ireland and the European Union as a whole. Sinn Féin is already on record calling for a referendum on the ESM, and for the Government to introduce this measure under the cover of the EFSF legislation is downright dishonest.

Stabilising the euro will only be achieved when the policies of bank bailout and crippling austerity are abandoned. In their place the Government and its eurozone counterparts need to force significant burden-sharing on toxic debt from the European Central Bank such as the infamous Anglo Irish Bank promissory note. As the overall toxic debt burden is lifted, governments across Europe must start to invest in social and economic recovery. Anything short of this will drive the eurozone, and the economy, deeper into crisis.

Sinn Féin is against bank bailouts, austerity and making ordinary working people and those on low incomes pay for the reckless behaviour of banks and governments. Sinn Féin is for banks shouldering their fair share of the burden of the crisis and investment in jobs, services, communities and people. We are for a new deal for Europe that puts economic recovery first. On that basis we will oppose this Bill and continue to argue for a more comprehensive and sustainable solution to the crisis across the eurozone.

I call Deputy Catherine Murphy and I note she is sharing her time with Deputy Finian McGrath.

We are aware that while we can table any number of amendments to this legislation, the one thing that is certain is that none of them will be accepted. That seems to be the message, and that is deeply troubling. Most Members would be unhappy with that kind of arrangement.

A question that keeps going through my head is what will happen in 2013. We are supposed to return to the markets by then, yet we will have to come up with our share of this new fund. There are many questions in my mind about that.

We are buying into something at a time when there is deep political uncertainty. There is a lack of leadership at European level. It is not that long ago that Chancellor Merkel reminded us that she wanted to be the Chancellor of Germany. Nor is it that long ago since President Sarkozy used the argument of his concerns about our corporate tax rate for his own purposes for internal consumption within France. That lack of solidarity is a backdrop to this legislation and this mechanism. It is not clear from where the required leadership will come but the one thing that is certain is that it is required.

We saw today the downgrading of the credit rating of Italy, a country we are told is too big to bail out, yet the provisions in this legislation allow for a stepping-out of guarantors and a sharing of the amount that must be contributed to the fund. What happens if a very large country steps out? That would put incredible pressure on the other countries.

I was no fan of the Maastricht treaty. I knocked on doors during the campaign for it because I thought it was being sold as a measure under which we would get €6 billion or €8 million. It was not fairly sold on the merits of what was being proposed. If something was going to go belly-up, the people who would pay the price if we could not meet the criteria would be poor people and our public services. It did not take much to figure that out. We were sold the treaty on the basis that we would get €6 billion or €8 billion and we are paying an awful price for the hoodwinking of the electorate. We saw the convincing that needed to be done in regard to the Lisbon and Nice treaties as a consequence of this.

What will be the governance arrangements around this mechanism? Are we moving towards a federal Europe? In the same way as we were mis-sold the Maastricht treaty, are we being mis-sold this measure in that we are moving towards a federal model? If we are, we should know about it. We should decide we will do it if we think it is good for us or decide we will not do it if we think it is bad for us. This is not benign.

The Minister said, as was stated in some of the background material to this measure, that it will give us access to a triple A rating. The agencies that decided our credit rating, Moody's and Standard & Poor's, are the ones that decided to assign a tripe A rating to Anglo Irish Bank, AIB and Bank of Ireland. I do not place a great deal of confidence on their credit rating being some sort of a guarantee for the future when they got it so wrong in the past, and it is not that long ago since they assigned those ratings.

I wish to quote a few extracts from a discussion paper prepared by TASC on the debt and banking crisis. The paper states:

The design of the Euro zone's permanent loan facility, the European Stabilisation Mechanism (ESM), is flawed for a number of reasons. The reasons are as follows:

First of all, the interest rates charged under the ESM will be ... unsustainable high levels. Second, the preferred creditor status taken by the official lenders is a disincentive for investors to purchase member state bonds. This exacerbates the difficulty for member states wishing to access the bond market at sustainable rates. Third, the proposed collective action clauses (the creditor bail-ins) on bonds issued after 2013 will increase the difficulty for member states trying to access the bond markets at sustainable interest rates in the future. Finally, the conditionality of extreme austerity imposed on members states wishing to obtain access to the EFSF and/or the ESM reduces the ability of the members state to grow out its crisis.

Our domestic economy is very depressed. The austerity measures particularly hit that part of the economy that accounts for 60% of it. In all the discussion on this prior to the general election it was stated that we would not be able to cut or tax our way out of this but that we would have to have some element of growing our way out of it. Essentially, we have moved on from that now. It is a question of us being able to reduce the amount we owe if we are going to be able to solve our problems.

The TASC discussion document describes Ireland as an emerging economy. It states that in the case of emerging economies, an 80% to 90% debt to GDP ratio is the danger zone, yet Ireland's debt to GDP level will be approximately 120% by 2013. In this document they themselves say there is no silver bullet, and I accept this. However, we should consider issues other than the simple ability to borrow from a lender of last resort. Governance issues are not being stated. We are moving blindly towards something instead of confronting the possibility that we are opting into a federal Europe.

I thank the Leas-Cheann Comhairle for giving me the opportunity to speak on this important legislation, the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Bill 2011. It deeply saddens me to see where the country is. Our economic sovereignty is gone and we all want it back. Politicians, bankers and developers have brought us to where we are and it is depressing to see some of them, such as Michael McDowell on television last night, sticking their heads up again and talking about our Constitution and our Presidency while they were the ones, with their free market housing and mad stamp duty policies, who wrecked the country.

Supported by some Independent Deputies.

I am not afraid to say I look forward to the day when we get out of this mess. In doing so, we should never penalise the unemployed, the old, the sick or the disabled. Sadly, that is what the Government is doing. Punishing people for the sins of others should never be an option. There is another way and I would like to outline it in this debate. We all have a duty to work together on this huge financial matter. All members of the Oireachtas have a duty to come up with ideas to resolve this crisis. During the past five or six months, Members from the Independent group have put forward relevant proposals to resolve the crisis. I commend my colleagues in the Independent-Technical group on some of their positive and constructive proposals.

That is the group that supported the previous Government.

We were not here.

Many of them were not Members of the previous Dáil.

We are not responsible now, are we not?

I stood up to the previous Government, as Deputy Durkan knows well. I was one of the few people who stood up to the Government and for the people.

Deputy McGrath was there.

In May 2010 the euro area member states agreed to create a European Financial Stability Facility, EFSF, to financially support the euro area member states that were in difficulties caused by the exceptional circumstances beyond their control. The EFSF was incorporated on 7 June 2010 for the purpose of providing stability and support to the euro area member states in the form of guaranteed loans of up to €440 billion within a limited period. To ensure a AAA rating, which provides access to low cost funds, the EFSF adopted complex structures involving over-guarantee of lending and credit enhancement measures such as cash buffers and prepaid margins on loans. These measures reduced its effective lending capacity to some €250 billion and also increased the effective cost of borrowing for borrowers.

Under the EU-IMF financial assistance programme agreed on 28 November 2010, Ireland has accessed a loan from the EFSF of €4.2 billion, maturing in July 2016. The amount available to Ireland from the EFSF under the programme is €17.7 billion. That is what is at the heart of the legislation. This is what we are talking about.

We also need to change our mindset in the House and in the country with regard to dealing with proposals for solving our economic crisis. It is important we do not dismiss those who say we should look at the taxation issue. We should not walk away from the T word as we debate ways of getting out of our current situation.

I wonder if the Minister and other Deputies are following the debate in the United States where a multi-billionaire, Warren Buffett, says the mega-rich should pay more tax. This idea should be taken up in Ireland. This wealthy billionaire is advocating a policy of taxing the rich rather than lower and middle income people. Ever since the Thatcher and Reagan era of the 1980s, there has been a steady transfer of wealth to the very rich, which has accelerated in recent years as hard-working people have taken the cuts in income to bail out super wealthy bankers. Not only is this socially unjust, it is also economic insanity. Those on low and middle incomes reinvest practically all their money in their local economies, keeping more people in work. On the other hand, the mega-rich hoard much of their wealth, buy gold and silver and high end luxury imports or speculate on money markets, which is causing so much turmoil in the European Union. All of this generates fewer jobs. If money is given to lower and middle income people, they will spend it in their localities and employment will be created.

I say to Deputy Durkan and the Minister that it is time the Government stopped implementing the failed policies of the past ten years——

Will Deputy McGrath accept his share of the responsibility for the problem?

——and adopted the sensible suggestion of Warren Buffett, which has led to economic and social progress in many small countries all over the world.

Independents supported the previous Government, the Administration that scuppered the country.

That is my first proposal.

Do not tell me there is another one.

My second proposal is that the Minister should look at another taxation system which has been floating around Europe during the summer. This would see 0.5% of every euro spent on business related financial transactions, or merely 50 cent in every €1,000, levied on those involved in the transaction. This is not a tax on banks, which are prone to making losses, but on the transactions themselves, such as financial speculation and other purchases. Globally, it is estimated that this mechanism could raise €500 billion a year, money that could be used to tackle poverty and climate change issues at home and abroad and lessen the cuts to the poor, the disabled and special needs assistants.

Who pays for a tax on transactions? It is the consumer who pays.

There are two sensible proposals.

I hope Deputy McGrath will apologise for supporting the previous Administration.

A Leas-Cheann Comhairle, I ask you to protect me from Deputy Durkan.

After supporting the previous Administration, he needs protection.

I am sure Deputy Durkan will be interested in my third point.

Please, Deputy Durkan.

I apologise, a Leas-Cheann Comhairle.

I accept Deputy Durkan's apology. I would like the Minister to consider another proposal as he prepares the budget. It relates to the cigarette industry. Extra Government revenue of €758 million is possible. The Government will earn €10.4 billion from tobacco excise duty in the next ten years assuming there is no change in the excise structure, no excise increases and no industry price increase, and assuming a decline in duty due to lower consumption and the growth of the value sector at the expense of the premium sector. Tobacco is not politically correct, but I am interested in raising money for the Government. The tobacco industry contributes €1.6 billion in excise or 24% of total excise receipts. Changing the excise structure protects Government revenue and discourages price wars. Moderate and predictable increases maximise Government revenues. Sharp increases in excise threaten Government revenues and strengthen the illicit cigarette trade.

I have put forward three sensible solutions to raise a few bob for the State. I welcome the debate and I hope some of my ideas and proposals on the economy will help us get out of this very difficult situation.

Fair play to Deputy McGrath.

I will start from the point where I hope to finish, that is to say, I will be supporting the European Financial Stability Facility and the Euro Area Loan Facility (Amendment) Bill 2011. However, this debate requires some serious consideration of important aspects, many of which have already been made.

Italy's credit grading has been reduced. Europe's banks and the European economies are on the most fragile ground ever since the European project got under way. The yield on Greek one year bonds — forget about ten year bonds — was at 147% the other day. That means they have been written down by 50%, certainly. That is the mathematical expression, yet the meeting on 21 July looked at a write down of only 21%-22%. Deutsche Bank, which represents about 60% of the entire German economy, with €1.6 trillion on its balance sheet, has leverage of 52:1. Crédit Agricole in France has leverage of 74:1. These are just expressions of how fragile is the banking system. When it entered the troika agreement in November 2010, Ireland was stretched to its limit. It remains stretched to its limit, notwithstanding the reliefs of the cups of water in interest rate reductions in recent months. The actual size of the debts in our banking system, together with national debt, are crushing the economy. One of the most important aspects of the Wyoming meeting of central bankers at the end of August looked at the whole question of debt as a proportion of GDP in 18 of the OECD countries. I am currently trying to get the figures that would apply to Ireland if it had been included in that table. Japan led that table and we know that growth in the Japanese economy has been pretty well smothered for the past few years.

This was alluded to by Deputy Doherty and I want to be fair to all the contributors in the House, because the expressions are honest expressions of homework well done and proposals well made. This Parliament, as a member of the eurozone, in passing the Bill before us, can send a very strong caution and message to Europe, which is that the debt burden on the country should be reviewed. There are ways of doing this, such as re-examining the promissory notes in Anglo Irish Bank, which arose as a result of the failure to write down the amounts owing to bondholders.

I would like to remind the larger countries in the eurozone, particularly Germany, as they debate and dither on what kind of firm action is needed, that they should remember the 1953 London Debt Agreement, where large levels of loans were written down, following which the German economy began to grow and recover. That proposal on revisiting the pro-note liability has been put forward by Karl Whelan. I have had conversations with him on that subject going back nearly a year, and I would commend it on the consideration and support of this House.

The crisis is severe and Europe's leaders have not stepped up to their responsibilities. I encourage the Minister for Finance to keep explaining to the people of Europe and to the ECB the provenance of our indebtedness to the ECB. It was a result of us redeeming bondholders in full, when the previous Government did not acknowledge the level of losses in the banks. It behoves us to get that message across and it behoves the Europeans to pay attention to it. They must recognise the truth of the situation and recognise it tangibly.

I want to respond to a couple of points made by Deputy Finian McGrath. We all have to come together to work through this crisis. My country is dear to me. That is why I put my name forward to become a public representative. There are people who should consider their positions, such as very wealthy non-resident and high earning citizens of this country. There is a crisis and they should consider Warren Buffet's suggestion that they can contribute by way of taxation. They can also consider the justification for a special levy for four years on incomes above, say, €200,000 per annum. Just because they live abroad does not mean they do not benefit from their families remaining here. If they have a fire in their homes in Dublin, it is not the Monte Carlo or Swiss fire brigade that will put out that fire. They should remember this.

In every meeting with the European Commission or the ECB, we should remind them that we have justification in persisting to seek a loan write down to relieve the overall burden of debt in this economy, in order that it can be passed and transferred back to businesses and households that need it. We spoke two weeks ago about mortgage debt write down, which was called forgiveness. It is actually about writing down to collectable amounts.

I call on the political leaders of Europe to commit and to cease the words, words and words. There has been an interminable amount of words and a lack of action and commitment. About €75 billion needs to be written down in our banking system. In Portugal, it is about €65 billion. In Greece, it is at least €175-200 billion, and not the €50 billion that was discussed on 21 July. Italy and Spain need write downs equivalent to about €200 billion. If we tot it all up and make a cushion provision, we are approaching €2 trillion. That needs to be done sooner rather than later. A limp along and unsynchronised progression of legislation in the 17 eurozone countries is a dangerous cocktail. We need to keep getting that message across and not detract from it for one moment.

I appreciate the opportunity to speak this evening on the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Bill 2011. That title is a bit of a mouthful. This Bill will essentially implement the decision agreed by the EU member states on 21 July 2011. The Bill will increase the effective lending capacity of the EFSF to €440 billion, and will increase the flexibility of the EFSF and ESM by allowing them to act on the basis of a precautionary programme.

The euro member states agreed in May to create a European financial stability facility to support financially eurozone member states that are in difficulties caused by exceptional circumstances beyond their control. This is part of the essence of why we are all here today. We are going to be here next year and the following year, because I do not believe that some of what we are dealing with is beyond the control of the respective member states. It is essentially as a result of decisions by governments and states, and perhaps the population of Europe at large, to run a deficit and to spend money we do not have. We have a financial problem and not a political problem.

Ireland was the first beneficiary from this and Portugal followed shortly afterwards. On 30 June 2011, the euro area Ministers of Finance signed the European financial stability facility framework agreement, subject to the completion of national parliamentary procedures. The purpose of this discussion is to allow the Oireachtas to complete this procedure. Ireland, Portugal and Greece cannot benefit from reduced interest rates, an issue to which I will return, and increased flexibility until the agreement is fully implemented. Hence, legislation on the agreement must pass through all relevant national parliaments, including that of Greece.

The cost of bailing out bankrupt banks has been a particular problem in Ireland. However, the cost of the budget deficit is a much larger problem in Ireland and at European level generally. Most European countries, including France and Germany, are running deficits, as is the United States. A few years ago, one used figures of thousands. We subsequently spoke of millions and later billions. The word "trillions" now hangs in the air and the US debt of between €16 trillion and €17 trillion is beginning to give us an indication of where we are. Japan has been running a deficit for some time and has some of the highest borrowing levels in the world. I concur with Deputy Mathews that its growth rates have been muted. How could they be other than muted when the country has such a large debt? As with any household, one cannot spend and invest when one has a large overhang of debt.

Where is all this leading? China is essentially financing the overspending of western democracies, which used to borrow for capital investment programmes and repay the borrowing over a period. How many western countries are running current deficits with the result that their citizens have lifestyles that are not based on the income they are generating? This cost must be paid and essentially people are asking future generations to pay for their lifestyle. That may sound a little harsh but it goes to the heart of this debate.

The agreement refers to reduced interest rates and increasing the flexibility of and extending the repayment schedule. I have a simple view on this matter. While a person with a bank loan or mortgage who extends the loan will succeed in having his or her monthly payment reduced, he or she will pay more interest in the long term because the life of the loan is being extended. For this reason, I ask responsible journalists to give a complete picture when they are reporting on these matters. I noticed a headline in a reputable paper the other day stating that the changes to our loan facility will deliver savings of €10 billion. This reminds me of a person who, having bought an item in a sale which has been marked down from €100 to €90, returns home and when asked how the Saturday shopping trip went, says he or she saved €10. This is a nonsensical concept and I am surprised that a responsible journalist would put such a headline on an article. The person returning from the shop does not tell us how much he or she spent in the first place. In fact, he or she may not have saved anything because we do not know whether the item in question ever cost €100 as it may have been marked up before being marked down. The same applies to the extension of the loan period for our loan.

When representatives of the National Treasury Management Agency appeared before the Joint Committee on Finance, Public Service and Reform recently, they could not pin down the actual savings being made on our loan. I would like to know what will be the savings over the original agreement based on the interest rate we paid. The NTMA should be able to compute a figure on the actual accumulated interest Ireland will pay based on a matrix of using the loan facility to its maximum and rescheduling repayments at the reduced interest rate. The overall interest payment will increase. To put the matter in simple English, the country is living on hire purchase which it is repeatedly extending.

This returns me to my basic position. The crisis at European level is not political but financial. I have been saying for months, although I am not sure if anyone has been listening, that the problem will persist because it is one to which there is no political solution. It is a financial problem for which a financial solution must be found. People give out about the reaction of the markets and ratings agencies such as Standard & Poor's and Moody's. The markets react in a logical fashion when they see a band aid of an agreement. While I support the legislation, it is only a band aid or patch up job to get us over the next few months, at which point another band aid will be applied. We will be back at this point ad infinitum or until western countries are in a position to get their debt under control. By continuing to borrow more money that one does not have, one passes on the debt to one’s children. This is unfair. In Japan and some other countries, people have two generation mortgages. Ireland will have a two or three generational national debt unless we start getting it under control. The Minister will argue that my party added to the problem. I will not engage in party politics and will admit that we did so, but the problem is continuing and must be addressed.

Eurobonds are the latest trick proposed by some people. If I was a German, I would tell those proposing eurobonds to take a hike because the concept is essentially one of asking Germany to open up its bank accounts and allow all other countries to be joint signatories to them. This is daft and Germany and France are correct to tell the rest of Europe to take a hike. The current problem stems from the failure to introduce a proper infrastructure to back up the euro when it was introduced. We had money in our pocket and the euro worked well within a few days of the changeover. While we did the public relations, front-of-house job, we did not establish the infrastructure or back office facilities to back up the euro. There should be one central bank in Europe managing one currency. The concept of having a Mickey Mouse central bank in each of the 27 countries printing its own little currency with its own little pictures on it is a nonsense. While I am not praising or criticising Germany and France, it is utterly financially logical that they would not have anything to do with a eurobond when they do not have any control over how other countries are spending money.

The IMF, in the growth projections it published today, stated that financial sovereignty is needed in Europe. We will rear up to this proposal and it will not be realised because it would require a referendum in this country and there is no chance that Irish people would pass a referendum in the foreseeable future to give Europe more powers over our financial affairs. People resent the level of intrusion into our affairs at present and would not go further down that road. We will have to address this issue.

Seven or eight years ago I used to ask that the debt of some of the heavily indebted sub-Saharan countries be written off. Ireland has come full circle and become a heavily indebted country. Until western democracies start to live within their means, we will continue to borrow and wonder every so often why the financial markets have a problem with political solutions to what are essentially financial problems.

While I welcome the legislation, it is a sticking plaster and we will, unfortunately, be back discussing this issue again.

This will not be the longest speech I have ever made. I congratulate the Minister and the Government on their efforts. I do not wish to apportion political blame but they have found themselves in a very difficult position and have stuck to their task valiantly. They have nudged away successfully to the point where gains have been made and every little gain is welcome. Much more needs to be done and I have no doubt the Government is committed to doing much more.

I concur with many of the views expressed by Deputy Fleming on the need for the country to live within its means. Annual growth rates of 10% or 11% are not necessary to believe the country is one of the most powerful in the world. In fact, it is a very dangerous position to be in, as we now know.

Debate adjourned.
The Dáil adjourned at 10 p.m. until 10.30 a.m. on Wednesday, 21 September 2011.