Dáil Éireann debate -
Wednesday, 2 Nov 2011

Vol. 745 No. 2

European Council: Statements

The Taoiseach

I am happy to have this early opportunity to brief the House on the outcome of the most recent meeting of the European Council and of the Euro Summit that took place in Brussels on Wednesday evening last. The meetings were convened by the European Council President, Mr. Van Rompuy, to take political decisions following the useful discussions we had at the summit meetings on the previous Sunday. A great deal of progress had been made and we met to finalise a comprehensive package to restore stability to the euro area.

When I addressed the House last Wednesday before I left for Brussels, I said the stakes were very high, but I believed that, with the right political will, we could find the necessary agreement. I am happy to be able to come back today to inform the House that though our discussions were long, they were fruitful and we now have the comprehensive deal we were working towards. It covers all the key issues — bank recapitalisation, debt sustainability for Greece, firewalls to prevent contagion and improved governance within the euro area. In each area, Irish interests have been fully protected.

There were two components to our meetings in Brussels. The first involved all 27 Heads of State or Government of the European Union, gathering as an informal meeting of the European Council. This was followed by a meeting of the 17 euro area leaders. The purpose of the informal European Council was threefold. First it was to brief the non-euro member states on the state of preparations for the Euro Summit to follow. Second, it was to provide all member states, but particularly the non-euro states, with an opportunity to express themselves on the draft proposals and to underline the common resolve shared among all 27 member states to overcome the crisis together. Third and most concretely, the meeting of 27 adopted a range of measures designed to restore confidence to the banking sector, as had been worked on by Finance Ministers at their ECOFIN Council meeting on 22 October. Our later meeting of the 17 eurozone leaders was to finalise work on the other elements, most particularly debt sustainability for Greece, firewalls and governance.

On banking, we agreed that access to term-funding, that is short-term funding available at the ECB and relevant national central banks, will be facilitated through a co-ordinated approach at EU level. Banks will be required to increase their capital position to 9% of core tier 1 by the end of June 2012. Where extra capital is required, this should, in the first instance, come from the private sector. Where this is unavailable to the institution in question, national governments should step in. Only in the last resort would the EFSF intervene in the case of banks in the euro area. The ECOFIN Council will now adopt the necessary follow-up measures. I am happy to report to the House that these bank recapitalisation requirements have no implications for the funding of Irish banks. As the House will recall, the banks in this country were the subject of an extremely rigorous and independent stress testing process this spring, and the resultant recapitalisation process, painful as it was, has ensured that further strengthening of their capital positions is not now required.

Each of the steps agreed last week, concerning European banks, are aimed at stabilising a system which is absolutely essential for a functioning market economy. The real economy needs access to funds and credit. Without functioning, solid and secure banks, confidence in the economy evaporates and without that our system grinds to a halt, with disastrous implications for jobs and for the welfare of our people. This is a good outcome for Ireland and for the euro.

A key and in many respects the most difficult element of the comprehensive package was agreement on measures to place Greek debt back on a path to sustainability. After long discussions, including extensive contact on our behalf with industry representatives of the banks, there was agreement that a new programme would be put in place to enable Greece to return to a debt-GDP ratio of 120% by 2020. This will be achieved through significantly deeper private sector involvement, PSI, based on a voluntary bond exchange, which was signed by the IIF with a nominal discount of 50% on nominal Greek debt which is held by private investors.

Euro area countries have agreed to contribute up to €30 billion, while the official sector — effectively the EFSF and IMF — have indicated a willingness to provide additional programme financing to Greece of up to €100 billion. The detail of this complex package will now be filled in, with the intention that the new programme for Greece should be agreed before the end of next month. Mechanisms to oversee implementation will also be strengthened, though this is not intended to take away from Greek ownership of their programme. The responsibility for its implementation rests firmly with the Greek authorities, which is, of course, as it should be.

Critically from an Irish perspective, euro area leaders have reiterated that Greece requires an exceptional and unique solution. As we did in July, euro area member states reaffirmed their determination that each member state will honour fully its own individual sovereign debt and the Government welcomes this. As I said to the House last week we are working our way through our programme. Any uncertainty as to our intention to repay what we owe can only have deeply damaging consequences for our efforts to return to the markets at as early a date as is possible. I therefore insisted that the vulnerable situation of other member states must be fully taken into account in reaching agreement, and it was.

Another key consideration for Ireland was that there should be adequate firewalls in place to prevent contagion to other vulnerable member states, including ourselves. In this regard, we agreed to extend the capacity of the European Financial Stability Facility through two basic leverage options. The first is effectively through an insurance — credit enhancement — model; and the second is a special purpose vehicle, SPV. The EFSF will have the flexibility to use these two options simultaneously, deploying them depending on the specific objective pursued and on market circumstances. The leverage effect of both options will vary, but could be up to four or five. This is expected to yield in the region of €1 trillion. That represents serious economic fire power for the EFSF. Crucially for Ireland it represents a secure and credible firewall.

I have said many times that we should neither underestimate nor under-sell the extensive range of measures which the European Union has taken in recent years to strengthen our common economic and fiscal policy co-ordination and surveillance. The recently adopted package of six legislative measures — the so-called "six pack" — represents an important strengthening of the Stability and Growth Pact. Similarly, the European semester has helped to ensure that structural reforms stay on track and are co-ordinated, including on the Stability and Growth Pact. Further, each of the participating member states, including all euro countries, have made commitments under the euro plus pact, with the objective of improving the quality of economic policy co-ordination. These were all necessary steps which member states are bound to implement.

Last week's euro summit acknowledged something that the current crisis has brought into stark relief — that our monetary union implies a necessity for a far greater level of co-ordination and surveillance among those member states that share our common currency. This is not for its own sake, but to ensure the stability and sustainability of our currency union. As we have seen time and again over the past three years, what happens in one European country, particularly within the euro area, has the potential to spill over on to others. With that in mind, we agreed to implement a series of additional measures at national level. These measures include the adoption by each euro area member state of balanced budget rules which translate the Stability and Growth Pact into national legislation. National parliaments, including this House, will be invited to take into account EU recommendations on the conduct of economic and budgetary policies.

For euro area members in excessive deficit procedures, the Commission and the Council will be able to examine and adopt an opinion on national draft budgets before their adoption by national parliaments. The Commission will also be able to monitor budget execution and suggest amendments during the course of the year. This does not impinge on the budgetary powers and prerogatives of this House. In respect of a country in excessive deficit procedures, a request to examine the draft budget may come and, if considered necessary, an opinion may issue. However, it will remain for the national parliament to decide whether, and on what terms, the budget should be adopted, which is an important and necessary distinction. Nonetheless, the provision is important and one that we should support. When a country is in excessive deficit, its fellow members of the euro area have a heightened and entirely legitimate interest in how its national budget is managed. If we have learned anything in recent years, it is that the decisions we take as individual member states have potentially serious consequences for all. As a small member state, this offers us important protection.

As a further step to strengthen co-ordination and surveillance, President Barroso announced in the aftermath of the summit that Economic and Monetary Affairs Commissioner, Olli Rehn, would become a vice president of the Commission. I welcome this development which should see the Commission's hand reinforced.

The final element of the comprehensive package was agreement on ten measures to improve euro area governance. These include regular euro summit meetings — at least twice a year — and regular meetings of the Presidents of the euro summit, the Commission and the Eurogroup. There is a requirement for the President of the euro summit, currently President Van Rompuy, to keep non-euro member states fully informed on the preparations for and outcomes of euro summits, which again is to be welcomed. I was among those who argued strongly that we should take the utmost care to guard the integrity of the union of 27 countries. I would not wish to see a situation evolve where there would be two categories of membership or an arrangement of inner and outer circles.

As agreed at the European Council on 23 October and as I briefed this House last week, we confirmed that the President of the European Council, working closely with the Presidents of the European Commission and the Eurogroup, would prepare a report for the December European Council on possible steps to further strengthen economic convergence within the euro area, improve fiscal discipline and deepen economic union. As part of the report, President Van Rompuy will explore the possibility of limited treaty change. The report is to propose a roadmap on how to proceed with these measures which will, of course, be the subject of discussion in the run-up to and at the December European Council. A further report with proposals on how to implement any measures agreed is to be finalised by March 2012.

I reiterate what I said last week on the possibility of limited treaty change, namely, that it is just that: a possibility. As I suggested, we are approaching the work in the right order, examining what needs to be done and then how to go about it. Where no other means are available, treaty change will remain a possibility. I made clear my view that treaty change cannot be part of our response to the immediate crisis because it is too long and too uncertain a process. Looking to the longer term, it is part of a spectrum of possibilities, even if one that should only ever be approached with the utmost caution, as we well know. There remains considerable potential within the existing treaties which has not been fully explored or exhausted, a view widely shared among partners. However, as I said previously, a small number of member states take a different view. I look forward to hearing from President Van Rompuy in December.

I would like now speak about the situation in Greece. Last Wednesday's euro summit commended Ireland for its progress in fully implementing its programme, which is gratifying and welcome. However, I reminded colleagues that although we were making headway, we had a long and difficult journey ahead of us and would need the continuing support of our partners if we were to reach our destination. Our partners in Europe recognise that after years of decline the economy has again started to grow. They recognise that even in a difficult international trading environment, we are exporting strongly, our competitiveness has improved markedly and the public finances have stabilised after years of disarray.

I am convinced that the best thing we can do now to help ourselves is to continue to implement our EU-IMF programme in full and on time. It is only in doing so that we will manage to return to the open markets at an early stage. That is what I want for Ireland. I want full economic sovereignty returned to us as soon as possible. I have listened to those who have suggested what has been agreed for Greece is an easy ride or a sweet deal. I point to the political and economic turmoil in that country. In Athens they do not think they have got off lightly. They know that they face a long and very difficult road to recovery. Even with the new agreement, the level of Greek debt will only be reined in to 120% of GDP in 2020 and the reality is Greece is highly unlikely to return to the open markets in the foreseeable future.

The decision by Prime Minister Papandreou to put the terms of the new programme for Greece to the Greek people in a referendum is, of course, one for him and his government. However, for a country in Ireland's position the requirement for certainty and stability is very real, which is what European leaders aimed to secure last week. The agreement we have reached is a good one. What is more, it was the only one available. There should be no doubt in people's minds on whether another set of arrangements can easily be plucked from the air.

I share the view expressed yesterday by Presidents Van Rompuy and Barroso that last week's agreement is the best one for Greece. I know from my dealings with him that this view is fully shared by Prime Minister Papandreou. I strongly support Greece in its efforts to recover, as, in turn, Greece supports Ireland. We are partners in a union and a currency and wish each other well.

We now have available to us a comprehensive package that, taken together, can enable the European Union to move beyond fire fighting a series of crises to grow the economy and get people back to work. What we must do with urgency is implement it.

Deputy Micheál Martin

Last week the leaders of Europe held their 14th summit devoted to the economic crisis. Having watched events escalate to the stage where the scale of the emergency threatened the foundations of the European Union, the leaders expressed their determination to act decisively. They announced that they were finally going to face down the crisis, prevent contagion and move the European Union towards recovery. The challenges were clear and public expectations were high. Emerging from the marathon session, the leaders talked about having agreed a final and decisive package which would finally draw a line under the crisis and provide a foundation for a return to growth. The Taoiseach joined the consensus and expressed his pleasure at the outcome. The rise in stock markets on Thursday was quickly seized upon as proof that confidence had been restored and the deal was working. Unfortunately, the experience of other summits, in particular the July and March summits, is that a couple of day's figures from the stock markets are about as bad a predictor of the course of the crisis as it is possible to have.

The summit's 15-page communiqué is a sobering document. Regardless of how much one wants the deal to work, the detail gives little or no hope. It falls short on each of the key issues. It provides for no actions, only targets; rigidly adheres to failed policies; ignores the real causes of the crisis; does not provide funding as a firewall against future contagion and, worst of all, commits the European Union to many more months of confidence sapping negotiations. The leaders, once again, failed to put aside narrow agendas and work together in the spirit which created and built the Union.

In regard to Ireland specifically, this was the summit at which the Government of self-praised tough talkers chose to propose and negotiate nothing, not even to raise the issue of the repayment of €700 million today, for which there is no justification. For yet another summit the Taoiseach called no leader, met no leader and tabled no issue for discussion. He sat on the sidelines waiting to find something for which he could claim credit, using his time to script brazen articles about his own record. It was a failed summit for the European Union and Ireland.

The events of the past two days were the logical outcome of a deal which was incomplete and inadequate. The situation in Greece is not the cause of the overall crisis but its most dramatic expression. A core objective of the summit was to agree to a write-down of Greek debt to allow it to become sustainable. Austerity is inevitable for Greece because of the size of its deficit but any continued austerity programme has to be based on the idea that there is an end point. The deal fails to deliver this and that is why it is already falling apart.

The summit agreed to target reaching a debt limit of 120% of Greek national income in nine years time. This is based on growth projections from the European Commission which are widely viewed as unrealistically high. Equally, the Commission failed to factor in the much higher ongoing cost of borrowing which Greece will face when it eventually returns to the market. Greece does not have Ireland's export base and it has no ability to suddenly create growth potential during a period of austerity. The agreed figure appears to be based on doing everything possible to avoid the ECB having to take losses on bonds it bought on the market before last year's bailout. Policy on Greek debt is being driven by the demands of the ECB and not by what is needed. The fact that the exact details of how the private bank losses on bonds will be implemented are unknown, is remarkable, given that this has been under discussion for two months.

The call for a referendum is clearly motivated by the parliamentary situation and pre-election manoeuvring. Irrespective of the motivation, Prime Minister Papandreou is faced with a deal which he cannot sell as a final answer to Greece's problems. He cannot say that there is a deal which shows how his country can return to a secure level of public service delivery within the next few years. What is required is a deeper cut in Greek debt with the ECB accepting its role in this. Nothing else offers the possibility of a programme which can end Greece's sovereign debt crisis and earn public legitimacy.

The parties in this House calling for an Irish referendum on our EU-IMF programme forget that this was their position in February and it was rejected. They have also continued to refuse to show how they would fund welfare, education, health and every other public service once the lenders had been told to get lost.

Increasing the funds available for any potential future bailouts was another core objective for the summit. The headline figure of €1 trillion is at the lower end of what is required. Given that Italy requires €250 billion next year just to refinance existing debt, the new figure does not provide the definitive answer which was promised. The detail of the communiqué shows that the €1 trillion is nothing but a general aspiration at the moment. I refer to page six of the communiqué which states that the existing funds will be leveraged by over four times with no extra money from any EU country, with no new basic rules and "in the context of the agreed instruments". What is actually involved is a highly risky insurance scheme — yet to be detailed — and the making of telephone calls to China, Brazil and others who might have money. The deal is so complex and so conditional on a string of agreements with others that it is almost designed to undermine confidence rather then to build it. The simpler and more credible approach of using the ECB to leverage national funding has been discarded, once again putting the protection of a failed policy framework ahead of doing what is necessary.

As was seen in March, leaving detail to the Finance Ministers is not the same as something being a done deal. In March, they failed completely to complete an agreement which was effectively ready in February. They kept failing to act and thereby helped make the situation much worse so that by July another crisis summit was required. Given this situation, leaving the finalisation of measures to ECOFIN was a bad decision.

Recapitalising banks to take account of uncertainty and Greek default forms a significant part of the response this time of all 27 members and not just of the euro group. The higher capital ratios are welcome, but it will surprise many that there is no detail provided about what is actually involved. The communiqué states that private funding should be the first option followed by national governments and finally, possible loans by the EFSF to those national governments. This is cumbersome and unclear. It also fails to address the legitimate case for Ireland to restructure key elements of bank-related bonds.

Perhaps the most depressing part of the summit's communiqué relates to the section on reform and governance within the eurozone. It is based on a flawed and blinkered understanding of the crisis. Almost bizarrely, it fails to even mention reform of financial regulation and the institutions of the euro. It focuses solely on fiscal control and advances a pre-crisis agenda which is already distracting the Union from the urgent business at hand.

I cannot understand how the Taoiseach could have agreed the wording on page nine of the communiqué which states, "Pragmatic coordination of tax policies in the euro area is a necessary element of stronger economic policy coordination to support fiscal consolidation and economic growth". Co-ordinating tax policy has nothing to do with this crisis; it has nothing to do with fiscal consolidation and nothing to do with economic growth. I note the Taoiseach studiously avoided making reference to this in his own contribution to the House this morning.

The control mechanisms of the eurozone, most particularly the Stability and Growth Pact negotiated during the Irish Presidency of the European Council in 1996, concentrated solely on public sector imbalances. However, it is private sector imbalances which have caused much of the damage to the eurozone. The ECB has fundamentally refused to operate as a normal central bank. The fiscal problems in the United Kingdom and in the United States are worse than in the eurozone yet the crisis is not hitting them as badly. Their central banks have embraced the role of lender of last resort and have been highly creative in finding new ways to intervene in the markets and the wider economy. In contrast, the ECB has embraced a destructive orthodoxy, proudly seeking out ways of not acting rather than showing a real urgency or any creativity. The support it is giving to banks and to sovereign bonds should not be seen as some exceptional actions deserving of praise because this a basic part of its job and the reluctance to go further is a tragic error. The ECB has been behind the curve at every significant point in the crisis and remains committed to this approach. There is no part of the deal announced last week where the ECB makes a significant contribution.

What is most damaging about the flawed reform agenda which is contained in the summit's communiqué is the fact that it commits member states to a process which cannot reach a positive outcome and which will involve a major loss of time exactly when we can least afford it. The President of the Council is due to propose measures, including treaty changes, next month. Final agreement on measures is due to be reached by next March. This is an absurd timetable. There can be no progress without genuine consultation between and within all member states. There must be an opportunity to consider the real failures of the eurozone, not just the dated fiscal control agenda of a core group.

The issue of reforms and potential treaty changes is one of many where the Taoiseach and Government have failed to outline or to promote their policies at this or previous summits. The more we discuss EU matters here the greater the lengths the Taoiseach goes to avoid responding to basic questions about his policies. Last week's summit marks a very significant moment in the short history of this Government. After eight months of posturing, it finally became clear that the Government has no European agenda and that it has formally abandoned all of its pre-election commitments. The only sentence in the 15-page communiqué which refers directly to Ireland praises the implementation of an agreement which Fine Gael and Labour condemned and a budget which they voted against. Otherwise, Ireland and its demands are completely absent. As the Taoiseach and the Minister of State, Deputy Creighton, revealed under pressure in this House, he sought no meetings with other leaders; he made no calls to other leaders; he neither tabled no issues nor circulated any papers and he made no demands. This is exactly as it has been for eight months. In July, the Greek deal was extended to every country so the Taoiseach could rush out of the Council meeting and claim to have negotiated something, but he was not as lucky this time.

Every member of this Government and every one of those sitting behind them, were elected on a commitment not to pay the full €700 million Anglo bond which is being repaid today. The Taoiseach can dress up his position in all of the brazen nonsense he wishes, but he cannot wriggle out of his own clear words. In fact, the value of the bond collapsed in February as a result of the statements made by Fine Gael and Labour. Yet, since then, they have done nothing to implement their commitments. It is almost incredible the lengths to which they have gone not to burn these bondholders.

A major haircut for these bondholders was a demand of the previous Government which could not be implemented because others argued that it could only happen in the context of a comprehensive deal. The burning of junior bondholders was insisted upon and delivered upon although the Taoiseach is now writing articles claiming that he was responsible for decisions taken before he was in power.

The demand to burn other bondholders was repeated in negotiations in January and February as part of the successful negotiation of the principle that Ireland's debt needed to be more sustainable. Both the July deal and this one remove all previous barriers to burning these bondholders but the Government has refused even to attempt this. The spin aside, what has happened since is a complete refusal to push something the Government claimed was fundamental when it was looking for votes. The Minister for Finance, Deputy Noonan, went to Washington after briefing RTE on how much he would do there but he did not raise this matter with the Treasury Secretary, Mr. Timothy Geithner. He then said he would raise it in Frankfurt with Mr. Trichet, then President of the ECB, but he did not. At the four crisis summits he attended, the Taoiseach did not table any measure that would allow for the burning of these bondholders. He did not meet Mr. Trichet on the matter nor did he ask Mr. Draghi about it when he voted to appoint him as the new president of the ECB. He did not raise it with his close friend, Chancellor Merkel. He made a solemn promise, "not a red cent more", which evaporated as soon as it got the votes he had targeted.

During their years in opposition, the Government parties developed a very skilled political operation. As everybody saw during the general election, they put an enormous effort into the presentation of policy rather than into its substance. As the Taoiseach repeatedly stated, the only focus was on polling day. In Government the parties have continued their well-oiled media operation, with an ability to hype even the most minor development and make claims which are divorced from reality. That is how the Taoiseach can remove a net €250 million from the economy and claim it as a jobs initiative. On major issues and small ones alike, finding things to claim credit for has taken priority over actually setting out new policies. In area after area this has been a deeply cynical, increasingly arrogant and surprisingly inactive Government.

The Taoiseach's ridiculous article today is a classic demonstration of a Government which is self-righteous and brazen in equal measure. Claiming credit for growth which began before one took up office takes a special brand of cynicism. Every day Ministers industriously praise themselves for a budget they voted against and for a bank restructuring plan which was written by the late Brian Lenihan. In February the Taoiseach stated that export-led recovery was an illusion but now he claims to have created it. He voted for the bank guarantee in opposition and renewed it in government yet writes articles attacking it. He lectures people about trust and reform but systematically fails to consult or to release basic information before forcing decisions through the Oireachtas.

In many areas the Government's politics first strategy is disappointing, but in others it is very dangerous. The failure to set out an agenda or even to talk about key issues with other European leaders is beyond doubt. It does not matter how many Ministers the Taoiseach sends out to praise him for negotiating deals he had nothing to do with — his refusal even to try to honour a major pre-election commitment will not be forgotten.

Last week's deal will not hold. The only question now is whether there will be an opportunity to try again. Everyone who believes in the European ideal hopes there will be another chance, that Greece's debt will be reduced to a sustainable level, the bailout fund will be finalised and sufficient and banks will have enough capital. Most of all they hope the leaders of Europe will start to work together on a real reform agenda which learns the lessons of the crisis and helps to restore growth to much of Europe.

Deputy Gerry Adams

The outcome of last Wednesday's EU summit marked a missed opportunity for the Taoiseach's Government. He, along with other EU leaders, signed off on a 50% write-down of Greek debt but today at noon, with the Taoiseach's support and authority, a State-owned bank is handing over a cheque for €700 million to unguaranteed bondholders in Anglo Irish Bank.

The Government missed a clear opportunity to put the issue of Irish banking debt on the agenda and to negotiate a reduction in the billions of euro Irish taxpayers must pay to toxic bad banks and unguaranteed bondholders. Before the election and his becoming Taoiseach, Deputy Kenny rightly criticised the logic of paying such bondholders when he stated:

The fact of the matter is that there is now €25 billion of unguaranteed bonded debt for which the Irish taxpayer is being asked to accept liability. I think that is a crushing burden and it is something we should do something about. In so far as Fine Gael are concerned we will seek a mandate from the people as part of our programme that we should be given the authority and mandate from the people to renegotiate this element of what is a crushing debt on our taxpayers.

Sin ráiteas an Taoisigh. In the language of Fine Gael election sound bites, this became "not another red cent" to bad banks.

There is no political, legal or moral obligation on the Government to pay this debt nor was there at the time. The Taoiseach was right then. Ní fiacha na ndaoine iad seo. Seo fiacha amhantraithe sanntacha a bhí ag déanamh amhantraíochta ar an mbanc Anglo agus a chaill, ach fós tá an Rialtas ag rith isteach agus ag tabhairt tarrthála dóibh.

Before the summit last week, when my party raised this, the Taoiseach and the Minister of State, Deputy Creighton, ruled out bringing up the issue at the summit but they were able to put forward a credible explanation for why these bondholders should be paid. Why has the Government decided not to stand up for Ireland's interest? Is it happy to receive pats on the head from the governments of France and Germany? Cad í an straitéis? An í, suigh siar agus a bheith ag súil go n-oibreoidh gach aon rud amach as a stuaim féin? Ní féidir aon rud eile a rá faoi seo.

The pain caused by honouring this bond is unjustified as is that caused by any part of the €3.5 billion in unsecured debt left in Anglo Irish Bank or Irish Nationwide. These banks are now merged and renamed the Irish Bank Resolution Corporation, a zombie bank. The Taoiseach knows better than I that it does not have deposits, does not lend to customers and is not functioning. Nevertheless, Irish taxpayers are being forced by this Government to endure extreme hardship by paying billions of euro of private banking debt to unguaranteed bondholders. The refusal of the Government even to consider burden sharing with bondholders in a defunct bank is absolutely bizarre. There is no logic, rhyme or reason to the Government's decision to pursue its current course of bailing out bank bondholders.

The Taoiseach tells the House he is powerless to do otherwise yet he sat at a negotiating table in Europe when the halving of Greek sovereign debt was agreed. Níl an Rialtas ionraic le vótálaithe nó leis an Dáil. Inné agus inniu, chuir an Taoiseach stad le haon seans an obair thábhachtach seo a phlé. Last week the Taoiseach told the Dáil the Government had to oversee the payment of this bond because the previous Government had placed €31 billion of promissory notes in Anglo Irish Bank. That is neither credible nor true. The Government would not default on the promissory notes if it ordered Anglo Irish Bank not to pay the private bondholders. There was and is no compulsion on the Government to pay this, regardless of the disastrous decisions of Fianna Fáil.

Last week, members of the Government argued that this bond would be paid out, not from Irish taxpayers' money but from the actual resources of Anglo Irish Bank. Perhaps the Taoiseach might explain to the citizens how a bank which has received €30 billion of Irish taxpayers' money, is in full State ownership and completely insolvent, can be described as having its own "resources"? Ministers also sought to link the bailing out of these bondholders with the EU-IMF deal. On the "Six-One News" on Thursday, the Minister, Deputy Noonan, claimed we had the choice of either "repudiating the programme or working the programme" and the Government is working the programme. As the Taoiseach conceded, this matter is not part of the programme, and certainly is not part of the memorandum agreement.

Sinn Féin welcomes the decision of the Greek Government to hold a referendum on the EU-IMF bailout. We call for a referendum on the memorandum agreement which the previous Government introduced after negotiation with the EU and the IMF. The Taoiseach's Government is now implementing that agreement against which it railed at the time. The approach of the Greek Government on this issue is in marked contrast to that of our Government. Last week the Taoiseach indicated he was prepared to accept changes to EU treaties, changes which would give Europe greater fiscal control over Irish affairs. He refused to give assurances that any changes to EU treaties which would mean a further loss of sovereignty would be put to a referendum. This was yet another flip-flop given that he had previously ruled out treaty change as a means of tackling the European crisis. Fianna Fáil and the Green Party gave away monetary power; the Taoiseach is poised to give away fiscal powers. The Taoiseach said, "I would not wish to see a situation evolve where there would be two categories of membership or an arrangement of inner and outer circles." That is exactly what he is acquiescing in.

The leaders of France and Germany have dithered in dealing with the crisis for months on end. They have acted in their own national interests, rather than in the interests of citizens across Europe. It is not acceptable that the EU approach to this European crisis is being dictated by the Prime Minister of France and the leader in Germany but not by the Taoiseach. It is equally unacceptable that European civil servants should make decisions about budgetary matters in Ireland. The Taoiseach needs to rule out any further loss of fiscal powers. He needs to assure the Dáil and the citizens of the country that any treaty change will be put to the people in a referendum.

As I have said many times, I accept that the Government inherited the current disastrous economic situation as a result of the disastrous policies of the Fianna Fáil and Green Party Government. However, this does not excuse the Government's failures. It has stuck steadfastly to the plan it inherited from the previous Government. As a newly elected Government, it had a chance to try to renegotiate the EU-IMF deal. It sought and, more importantly, received a mandate to go back to the European Union and the IMF to ask them to engage in such a renegotiation. It had an opportunity to tell the European Central Bank that Irish taxpayers would not pay the debts of gamblers and speculators.

Deputy McDonald and I raised this issue recently when we met the troika on behalf of Sinn Féin. Obviously, the European Central Bank has an issue with the repudiation of unguaranteed bonds. We told them that we would not pay them. The Taoiseach and the Minister should have told them the exact same thing, but they failed to do so. That failure is evident in today's payment of €700 million of taxpayers' money to Anglo Irish Bank bondholders, while citizens languish on hospital trolleys and in dole queues and other parts of the globe.

The Taoiseach

What did they say when the Deputies told them this?

Deputy Gerry Adams

They said they had done a deal with the Government.

The Taoiseach

Did they agree with the Deputies?

Deputy Gerry Adams

Of course they did not. They were not there to agree with me but to push their own case.

The Taoiseach

The Deputies told them — big deal.

Deputy Gerry Adams

It is very simple. The Taoiseach had every opportunity to do so, but he refused. This is the first chance we have had to raise these issues.

Deputy Michael Noonan

The Deputy is misleading. He has made an ambiguous statement.

The Taoiseach

He walked off the pitch.

Deputy Pádraig Mac Lochlainn

The Taoiseach and the Minister for Finance, Deputy Noonan, know that regardless of the public position they take, it is profoundly wrong that we are paying over €700 million to the bondholders mentioned today. They know it is absolutely, fundamentally and morally wrong. What is happening today does a total disservice to the people. I will not remind them of what they said before the general election because my party leader has already done so. When the Minister was in New York, he made a dramatic announcement to the effect that the arrangement reached with unguaranteed bondholders would have to be renegotiated and sorted out. That announcement was put to the financial markets while he was in New York, but the renegotiation has not happened.

Deputy Michael Noonan

I said it would happen with the consent of the European Central Bank.

Deputy Pádraig Mac Lochlainn

It was a fine speech but it has not happened.

Deputy Michael Noonan

If the Deputy wants to quote me, he should quote me in full.

Deputy Pádraig Mac Lochlainn

The speech in question was made after the general election.

Deputy Michael Noonan

This is makey-up stuff.

Deputy Micheál Martin

It was a great stroke. It was brilliant.

The Taoiseach

The Deputy should also quote people in context.

Deputy Micheál Martin

I concede I am not in the same league as the Taoiseach when it comes to snow jobs.

Deputy Michael Noonan

The Deputy is great when he is angry.

Deputy Pádraig Mac Lochlainn

Who are the bondholders who are being given €711 million of our money, plus interest? Are they hedge fund speculators, as has been reported? Did they pay knock-down prices, in the correct belief the Government would pay them in full? Are speculators in Paris, Frankfurt and New York popping open champagne bottles to celebrate the decision of the Minister? They must have known he was talking nonsense when he made his speech in New York. Like the grand old Duke of York, he went to the top of the hill, but nothing happened thereafter. They can count on him as they pop champagne bottles in celebration. Who are the hedge fund gamblers who have made a killing on the backs of the people today? Is Goldman Sachs involved? It is on the list in the public domain. Is the former Attorney General, Mr. Peter Sutherland, involved? He told the people they should pay the bondholders. Is his company benefiting? Why can the Government not give the names of the bondholders to the people who are paying them? In the absence of information, we can only presume that hedge fund speculators are having a fantastic day at the races today.

I would like to refer to the decision of the Prime Minister of Greece, Mr. Papandreou, to have a referendum in that country. Why is the Government not giving the people an opportunity to have their say on the huge burden they are facing? A further €3.6 billion in cuts will be made in the forthcoming budget. Why did the Government decide, on the advice of the Attorney General, that the European Stability Mechanism did not have to be put to the people? Why will the Government not publish the advice of the Attorney General? Like my party leader, Deputy Adams, our finance spokesperson, Deputy Pearse Doherty, and other Sinn Féin Deputies, I have repeatedly asked the Government to publish the Attorney General's advice, but it has consistently refused to do so. The Government is not prepared to allow the people to vote in a referendum on the issue. It is not even prepared to explain why that is the case.

As a result of their protests and campaigns, it looks like the people of Greece will at least have a say on the decisions that will impact on them. I suggest this proposition would be rejected by the peoples of Ireland, Portugal, Spain and Italy because it has failed. I also expect it to be rejected by the people of Greece. There are three aspects to the issue. It is a question of unsustainable debt, a banking crisis that has not been properly addressed and a systemic banking failure, not at Irish or Greek levels but at European and international levels. In the banking system there was a failure of regulation and prudence and people in countries such as Ireland, Greece and Portugal have been forced to saddle the burden.

The Taoiseach is smiling on the other side of the House. Since his election to this House after winning a by-election in the 1970s, he has put himself before the people to the extent that he is now the father of the House. I take it that his commitment to politics is absolute and that he wants to see change. Does he believe in his heart that it is fair and acceptable that the people are facing another austerity budget to pay the private debts of bankers who gambled recklessly, took advantage of failures of regulation and accountability and are now benefitting from the crisis? Does he think it is fair that we may be forced to partially or fully privatise our assets and suffer austerity, unemployment and emigration in order to reward a system that has utterly failed the people? I do not think he believes in his heart that that is fair. I do not think the Minister does so either.

What would be the right thing to do? Somebody will have to take a stand at some point by saying this is crazy, unsustainable and has to change. Who will do this? Will it be the Minister? Will it be the Taoiseach? They have to ask themselves these questions. When the Taoiseach won a by-election in the 1970s and took a seat in this House, just as the new Labour Party Deputy did today, did he think he would be in a position to see the people utterly failed?

Deputy Stephen Donnelly

I would like to share time with Deputies Boyd Barrett and Higgins.

Acting Chairman (Deputy Joanna Tuffy)

Is that agreed? Agreed.

Deputy Stephen Donnelly

The Minister for Finance, Deputy Noonan, has asked to be quoted in context. I will cite the words of the Minister in a contribution he made in the House on 15 December 2010 when he was essentially the Minister for Finance in waiting:

Ireland's commitments on sovereign debt and debt under guarantee must be honoured in full. What legal or moral compulsion is on Ireland, however, to honour in full debt incurred by Irish banks when there was no State involvement in the arrangements? These loans were entered into freely by willing lenders and borrowers with absolutely no State participation. The interest rate charged represented the risk at the time and there never was a State liability. It is obscene that liability for these loans is now being transferred to the Irish taxpayer, in many respects to the poorest of the Irish taxpayers ... In the budget the Minister for Finance reduced social welfare payments, punished the blind, disabled, widows, carers and the unemployed and he taxed the poorest at work, and for what? It was so that the taxpayer can take on liability for debts the country never incurred and arose from private arrangements between private institutions. What a disaster and an obscenity. How can the Government stand over it?

He continued:

The latest available bank data shows that Irish guaranteed bank debt has been sold on at a discount to hedge funds in the USA, the UK and Luxembourg, as well as to smaller speculative investors ... The position has now become indefensible that the Irish taxpayer, even the poorest taxpayers, should be required to underpin the speculation of hedge fund investors. There must be transparent, open, negotiated burden sharing of bank debt.

These are the words of a Minister for Finance of whom I would have been proud. I believe he continues to hold these views but has made a call that the lesser of two evils is to pay the money to the bondholders. At the start of this Dáil, the Technical Group called on the Government to hold a referendum on this issue. Understandably perhaps, it argued that we had just had a referendum, namely, the general election and it had, therefore, a clear mandate. I put it to the Taoiseach that the mandate his Government secured was for the position articulated by his Minister for Finance while in Opposition. If the Government now chooses to adopt precisely the opposite position, there is a strong case for putting the matter to the people again. We have heard the Taoiseach and Minister for Finance repeatedly state on the national and international airwaves that Ireland is a country that can pay its way in the world and will pay its debts. Every time they make this statement, they make it more difficult for the country to enter into voluntary arrangements such as those that were agreed with Greece first on senior bank debt and, more recently, on its sovereign debt.

Accepting that none of us wants to pay the bondholders, what is the case for doing so? I have heard three arguments. The Taoiseach this morning referred to an agreement with the European Central Bank. I have tabled parliamentary questions asking for details on the agreement. In reply, the Minister states he is not aware of any agreement, as was alluded to by the Governor of the Central Bank, Professor Patrick Honohan, in a television interview with Vincent Browne. As parliamentarians, we do not know what agreement is in place. The language being used, however, suggests a nod and a wink. I ask the Minister to supply to the House the details of the agreement and a cost-benefit analysis of the reason the Government has chosen this course of action.

The ECB's initial position was that it was of paramount importance that no senior debt or sovereign debt be restructured. Given that both types of debt have been restructured in Europe, that position no longer stands. Further, the purported ECB threat that it would withdraw emergency liquidity assistance is not credible as to do so would achieve precisely the outcome the bank is trying to prevent, namely, the collapse of the European banking system. It is also reasonable to argue that no one agrees with the ECB. Ireland, for example, does not agree with it and the International Monetary Fund has stated publicly it does not agree with it. It is ridiculous to argue, as the ECB does, that choosing not to pay €715 million to people who we all accept are short-term speculative investors would collapse the European banking system. That is not a credible position. The Taoiseach referred to county councils this morning. By his own admission, however, we do not know who owns the relevant bonds and, as such, we do not know who we are bailing out.

I fully accept that the Taoiseach and Minister for Finance are acting in what they believe to be the best interests of the country. However, I and other Deputies have received hundreds of e-mails from people who point out that paying the bondholders is not the mandate on which the Government was elected. I ask the Taoiseach and Minister to reflect on that and, at a minimum, return to Parliament and lay out the pros and cons of the measure and allow the people to decide on the issue.

Deputy Richard Boyd Barrett

Where is our referendum on this crazy policy of bailing out bondholders and inflicting brutal austerity on ordinary people? How can the Taoiseach justify the pre-election rhetoric of describing the bailing out of the bondholders of Anglo Irish Bank as economic treason when his Government has chosen to continue committing treason now that the election is over? Where is his respect for democracy and the citizens of the country when the people of Greece have won the right, through protest and people power, to have a democratic vote on whether they want to continue with the crazy policy of bailing out bondholders and having brutal austerity imposed on them and he denies to the people of this country the same right? Where is his concern for the many dozens of sick and vulnerable elderly and young people who are lying on trolleys in hospitals throughout the country as we speak, and for the communities from west Cork to Loughlinstown, Blanchardstown, Letterkenny and Roscommon who are living with the fear that, arising from the cuts the Government is inflicting on the health service, they may not have an accident and emergency service in their community if they ever have such a service? It is shameful that while such cuts are being made, the Taoiseach is willing to hand over €700 million, almost exactly the same amount as has been slashed from the health budget, to anonymous speculators and gamblers on the financial market.

Where is the Government's analysis of developments in the eurozone? Does it have any idea of what is taking place? According to every serious commentator and analysis, the Government's strategy for achieving export-led growth is delusional because the European economy is contracting under the impact of the austerity this Government and other European leaders are imposing and more of which they are demanding be imposed across the eurozone. The United Nations Conference on Trade and Development and the International Labour Organisation have both stated austerity is not working, as has the OECD. Even the IMF has downgraded its growth projections for the European economy. Despite these warnings, the Government continues to peddle the fantasy that Ireland will have an export-led recovery and repeatedly speaks of achieving growth. All the facts, whether in Greece, here or anywhere else in Europe, demonstrate that imposing brutal austerity, slashing jobs and leaving large numbers of people unemployed — in our case, almost 500,000 people — have the effect of contracting growth, deepening recession and choking off any possibility of achieving the type of recovery the Government seeks. Notwithstanding this, it persists with the madness.

There is an expression that when one is in a hole, one should stop digging, but the Government continues to dig under the diktat of the European Union, International Monetary Fund and European Central Bank. Is it not the case that the people of Greece, through people power and protest, have achieved much more than any of the European leaders at all their crisis summits with all their talk of comprehensive solutions that unravel within days because, and the Taoiseach should not, as he consistently does, misinterpret what I am saying, the Greeks have at least forced on to the agenda the idea that the bondholders should pay and be burned and also forced others to question the austerity policy that has been such a disaster for them and the rest of Europe? Is it not also the case that people in this country should do exactly the same as people are doing on Wall Street and in Athens, Italy and many other parts of the world, namely, getting out on the streets and calling for an end to the madness? This is a simple choice, one of deciding who comes first: the anonymous bondholders and speculators or ordinary people and their right to a job, decent public services and a future. It is time for the Taoiseach to make the choice. However, it seems that currently he has pinned his colours to the mast with the greedy vultures who are wrecking our society. It is about time he remembered who put him in power.

Deputy Joe Higgins

The process whereby the prime minister of a country goes to a European summit and then reports back to the national parliament is supposedly a democratic process. What is happening here this morning is happening in parliaments all over the European Union, but far from being an exercise in democracy, it is a masquerade and a sham because the democratically elected prime ministers, presidents and finance ministers who attend European Union summits and summits of finance ministers are not the ones making the crucial economic decisions which have such serious ramifications for hundreds of millions of Europeans. Those decisions are being made in the financial markets and the prime ministers and finance ministers of the European Union countries are slavishly bending the knee to the decisions that are made by major bankers, hedge fund operators and assorted speculators in the interest of corporate and private profit.

This morning in this Parliament we have the spectacle of one prime minister, the Taoiseach, Deputy Enda Kenny, telling the national Parliament, Dáil Éireann, that he does not know the identity of bondholders to whom €700 million from the resources of the people of this country has just been paid on his instructions. In the England of the 18th century and of the highwayman Dick Turpin, at least the victims of his robbery knew who was carrying it out and could look for their property back. It is incredible that in this era of information saturation we are denied, deliberately as a matter of policy, this most fundamental information. Shamefully, the establishment media in this State conspires with this shameful secrecy. Shamefully and with nauseating regularity the key question put by our national broadcaster, RTE, and other broadcasting media, when querying each so-called expert and economist that they bring before them to comment on the latest measure of slash and burn by governments throughout Europe, is whether these cuts or measures which hammer the living standards and livelihoods of our people are enough to convince, reassure and satisfy the markets. They never ask who are the financial markets or these institutions, individuals, profit-seeking corporations and speculators who wield such enormous power over the livelihoods and the societies of the people of Europe.

What we have is an economic dictatorship of the financial markets in front of which prime ministers, governments and finance ministers all over Europe fall on their face. It is in that context that we must see the referendum that is now being offered to the hard-pressed people of Greece. The people of Greece are being given a false choice by a Greek Prime Minister who up until now has been a messenger for the financial markets, shamefully pulverising the living standards and services of his people at the behest of those markets. The Greek left will work might and main for a "No" vote in this referendum, which is the correct thing to do. However, that is only the beginning. The false choice is either to vote for the savage austerity or, on the basis of capitalism and the ongoing financial markets, be plunged into a crisis where the markets taking their revenge would try to drive the Greek people back to the dark ages.

We must offer a fundamental and radical alternative. We must break the dictatorship of the financial markets, bondholders and bankers and recreate the financial system of Ireland and of Europe on the basis of public ownership, democratic control and accountability, where these institutions are then used to develop our society and invest in jobs and services to recreate a decent society for the people of Europe. That is the alternative, rather than the savage austerity the Taoiseach and the Minister for Finance are imposing on our people, as if they were slaves to these unelected, unaccountable financial entities that they allow to wield such power over our people and the people of Europe.

Acting Chairman (Deputy Joanna Tuffy)

We will move on to questions. We will take one question at a time in party order.

Deputy Micheál Martin

Given that the Taoiseach saw the issue of burning the bondholders as central in the months leading up to the last general election and that as late as June of this year the Minister for Finance, Deputy Noonan, made it clear that he wanted to do the same and made an ostentatious and public announcement in that regard in the United States to RTE for all to see, I cannot understand how, at the four crisis summits he has attended, the Taoiseach has taken a very hands-off approach to this issue. He has not shown any leadership in terms of the burning of the specific bondholders and did not meet Mr. Trichet on the issue. It is clear that at the time of the appointment of Mr. Draghi as president of the ECB — I suggested in the House this was an opportunity for us to question both the role of the ECB and its policy position on the crisis — the Taoiseach did not raise the issue with him. He has not raised the issue with Chancellor Merkel and last week in the Dáil, the Minister for State confirmed that the Taoiseach was not putting the issue on the agenda for this summit.

There has been a significant change between six or nine months ago and now, namely, the restructuring of Greek debt. This was agreed at last week's summit, as were the recapitalisation plans. This creates an opportunity for Ireland to place the restructuring of its bank debt on the table, and specifically this issue. All along, the ECB would have said that would cause contagion and collapse. We do not have the details of what is involved because the communiqué is lacking in detail, but has the Taoiseach not shown a singular lack of leadership on the restructuring issue by his failure to put it on the agenda of the summit? Why did he decide not to put it on the agenda and why has he decided not even to pursue the issue? This question is not about not doing it. The Taoiseach said he would do it, but he did not. However, he did not even try to do it. Why did he not even try to do it?

The Taoiseach

Deputy Martin seems to suffer from some sort of illusions with regard to what happens at European Council meetings. The agenda for this meeting was set because of the potential catastrophe which faced the eurozone. The first meeting was postponed because of ongoing negotiations about the Greek situation. The first item on the agenda was Greek debt and the Greek situation. It was not about Ireland paying Anglo Irish Bank. The second issue was about recapitalisation of European banks. The third issue was the fear of contagion and the fourth issue was about governance and how we could focus on the future while 23 of the 27 member countries are currently outside the conditions of the Stability and Growth Pact.

Portuguese debt was not on the agenda. The repayment of this bond was not on the agenda.

Deputy Micheál Martin

The Taoiseach chose not to put it on the agenda. Why not?

The Taoiseach

I want to assure the Deputy that on behalf of this country I contributed where appropriate on every issue at both of these meetings. Deputy Martin spoke about leadership. We saw a lot of it when the Deputy was in Government. Deputy Martin made a number of assertions in his contribution.

Deputy Micheál Martin

Why did the Taoiseach not raise the issue?

The Taoiseach

This was a crisis meeting of the European Council on the eurozone because of the potential catastrophe facing Europe and the euro due to the Greek situation.

Deputy Micheál Martin

Greek default.

The Taoiseach

That is the issue that was on the agenda and as a consequence Ireland is associated with the issues that affect us here.

The Deputy made a number of assertions in his contribution about the comments made by the Minister for Finance and me, as did the absent Deputy Adams. We always said that not one cent more than what was already committed would go into Anglo Irish Bank. The Deputy deliberately left out those words, or his researcher did so.

Deputy Micheál Martin

No we did not.

The Taoiseach

Not one cent more is going in than what was already committed. I said this morning that it was not possible for us to rearrange this particular deal, which was done by the previous Government, without the consent of the ECB. I am going to quote something I think the Deputy should hear. It comes from the late, lamented Brian Lenihan, speaking in this House in November 2010 and it is about the issue of senior bondholders not being in the memorandum of understanding. He said the following:

There has been much commentary about the need for senior bondholders to accept their share of the burden of this crisis. I certainly raised this matter in the course of the negotiations, and the unanimous view of the ECB and the Commission was and is that no programme would be possible if it were intended by us to dishonour senior debt... The strongly held belief among our European partners is that any move to impose burden sharing on this group of investors would have the potential to create a huge wave of further negative market sentiment towards the eurozone and its bank system. That apprehension was confirmed by Professor Honohan in an interview last Monday, when he said there was no enthusiasm in Europe for this course of action... There is simply no way that this country, whose banks are so dependent on international investors, can unilaterally renege on senior bondholders against the wishes of the ECB.

Deputy Micheál Martin

I made reference to that in my speech. What did the Taoiseach say?

The Taoiseach

I spoke to Mr. Trichet about bondholders by telephone in March when he was in China. The ECB held a meeting. This matter was raised specifically and was very aggressively rejected. The Minister for Finance spoke to Mr. Trichet on several occasions——

Deputy Micheál Martin

Restructuring in Greece was discussed last week, as was the recapitalisation of banks exposed as a result of that. The Taoiseach did not bring this issue up.

Acting Chairman (Deputy Joanna Tuffy)

Please allow the Taoiseach to speak without interruption.

The Taoiseach

——and the ECB rejected the issue. As it is not in the memorandum of understanding, we are still locked into the commitments that were entered into at the highest level by the Deputy's Government with our external partners. That is a fact.

Deputy Micheál Martin

That will not wash. The Taoiseach said he would do "X", but he did nothing. He did not even try.

The Taoiseach

The Deputy's assertions that this matter was not raised are patently false.

Deputy Micheál Martin

No they are not. The Minister said before the House last week that it would not be raised at the summit. It is incredible to be hearing this.

The Taoiseach

Before he took up his job with the ECB, Mr. Draghi already repeated that there would be no change in European Central Bank policy towards this matter. He also repeated that the European Central Bank would continue to buy where necessary and to whatever extent required to put the firewall facility of the EFSF in place.

The Deputy seems to be asserting that I can dictate every item of the agenda and that I spend my time going around Europe meeting the leaders. Unlike much of what went on in the past, the Ministers of this Government attend their meetings and I spoke to them all——

Deputy Micheál Martin

The Taoiseach did not even try. That is the issue.

The Taoiseach

——at the meeting. I contributed comprehensively to the discussions. I am not sure if anybody was reporting to him, but the Deputy was not there so he does not know.

Deputy Michael Noonan

The Deputy is being silly.

Deputy Micheál Martin

The Minister of State, Deputy Creighton, reported to me last week. She said in this House that the Taoiseach was not tabling this as an issue. That is the basis upon which I make my assertion.

Acting Chairman (Deputy Joanna Tuffy)

Deputy Martin, you can come in at a later stage. Other Deputies have indicated they want to ask questions.

The Taoiseach

The meeting was called to deal with the potential Greek catastrophe and arising from that——

Deputy Micheál Martin

That is interrelated. It gave the Taoiseach his first and only opportunity to do something about this since the original crisis arose.

The Taoiseach

——every other country raised issues relevant to their own need. The point I made on behalf of Ireland was that while the focus was not on Ireland, where they say we are proceeding with confidence, which we are, and that our reputation is in tact, which it is, people should still not lose sight of the fact that we still need assistance and encouragement. It is in those areas where we have taken a different route to have the overall debt burden reduced on our citizens, and this is paying dividends. As the late former Minister said, if we acted unilaterally here, there would not be agreement on an interest rate reduction.

Deputy Micheál Martin

I said all of that to the Taoiseach before the election and he rejected it completely. He is chancing his arm.

Acting Chairman (Deputy Joanna Tuffy)

A number of Deputies have indicated they want to ask questions. I call on Deputy Mac Lochlainn.

Deputy Michael Noonan

It was the Deputy's crowd that put the country in this state.

Deputy Micheál Martin

That is rubbish. He knows the complexity of all that. It will not wash for too much longer.

Deputy Michael Noonan

Why can he not be a bit embarrassed?

Deputy Micheál Martin

What about the Minister?

Acting Chairman (Deputy Joanna Tuffy)

Please allow Deputy Mac Lochlainn to ask his question.

Deputy Pádraig Mac Lochlainn

Hundreds of people have sent emails to TDs and Senators, appealing to them not to support the payment of this money today. There is massive interest among the Irish people in this. In that context, I would like the Taoiseach to tell us two things. What is the rationale for the ECB insisting we pay these unsecured bondholders today and that we pay €1.2 billion in January and a further €2.5 billion in 2012? How does the ECB define contagion? How does it define the impact this might have in Europe?

Can the Taoiseach tell us who are these bondholders? We have hedge fund speculators who have purchased these bonds from the original bondholders at a knock down price and have now benefitted from the Government's decision to allow this to be paid. If the Taoiseach cannot tell us who these bondholders are, can he please tell us what legal barrier is in the way of him sourcing this information and putting it into the public domain?

Acting Chairman (Deputy Joanna Tuffy)

Taoiseach, you have a right to reply at the end, so I would like you to keep your answers brief if possible.

The Taoiseach

The rationale of the ECB is that if we do not pay our way, we default and if we default, we have a real problem and we will cause a real problem. We do not want to go that route. Our mandate is to sort out the mess that we inherited and follow a programme and a pattern of growth. That is not easy to shift.

Deputy Pádraig Mac Lochlainn

That is not an answer. Why are they saying we should pay?

The Taoiseach

When we enter into commitments, we are expected to honour our commitments. That is part of the agreement worked out last Wednesday by the 27 member states and the 17 eurozone states. It is also relevant that the ECB has forked out €150 billion for Irish banks and that it continues to provide finance that pays nurses, gardaí, public servants and everybody else. It has also extended that from short-term funding to 12 month funding. The rationale is that if we do not pay, we ruin our reputation and destroy the possibility of continued further investment in here.

I listened to Deputy Boyd Barrett, who has vacated the House since making rather hysterical comments about having an export growth policy. Clearly, exports account for 100% of our GDP. Is the Deputy seriously suggesting that we should not continue to grow exports on an island nation where one element of the growth of our economy is critically dependant on exports? The other element is to stimulate our indigenous economy.

I cannot tell the Deputy who are the bondholders. I do not know who they are. There is some anecdotal evidence of the categories of bondholders, be they pension funds, hedge funds or whatever. That is the nature of the bond market. They buy and sell on a regular basis. I do not know the names of the individuals. A deep analysis could give us the category of those who purchase these bonds and sell them on.

Deputy Stephen Donnelly

On the previous point, the emergency liquidity assistance does not pay our public sector bills but remains within the banking sector.

I have two questions which are based on the so-called agreement with the ECB, which Members on this side of the House do not get. What does the Taoiseach think would happen if we decided not to pay short-term speculators $1 billion? Does he believe the ECB would try to pull back the emergency liquidity assistance?

There has been a lot of talk about reputation from both the Taoiseach and the Minister, Deputy Noonan. Who does the Taoiseach think this reputational issue is with? With regard to the markets, we are already at junk status. The Minister, in a speech he gave on 15 December last, laid out the rationale that paying this money would worsen our status in the markets. Clearly, paying this money worsens our reputation. Is it for the sake of foreign corporates that are considering investing here? Colleagues I have spoken to in these foreign corporates cannot understand what we are doing; they have absolutely no idea why we are doing this. It does not seem to be for foreign direct investment reasons. Is it for the international media? Again, those I speak to in the international media cannot understand why we are doing this.

The first question is what the Taoiseach thinks would happen if we do not pay this bond, and the second is with whom our reputation would be damaged were we to stand up and refuse to pay, as Deputy Noonan put very well in his speech on 15 December last.

Deputy Joe Higgins

The Taoiseach said that one of the issues at the summit was that of contagion. Does he accept that so-called contagion, as it relates to Italy and Spain, is not an uncontrollable disease, but the threatened actions of financial speculators who would take the opportunity to blackmail the people of Italy and Spain by implementing usurious interest rates because of their control of the financial markets? Does he see any contradiction in the supposedly democratically elected leaders at EU summits jumping to the diktats of private institutions in the financial markets which dictate economic policy, savage austerity policies and cuts in services? Is there not a massive contradiction there? Does the Taoiseach not think it is a vile system that sees, today, the speculators who bought Anglo Irish Bank bonds on the secondary or tertiary markets walking away with perhaps €300 million in profit on the backs of the Irish people? Does he not think this is a vile system that needs to be fundamentally remade?

The Taoiseach

For the information of Deputies, Prime Minister Papandreou wrote to me and said in the course of his letter:

As you are aware, the domestic, political and social situation in Greece is particularly tense and critical. The Greek Government considers these decisions of historical importance for the country and the Greek people. However, all opposition parties are absolutely and intensely opposed to the Government's policies and have fiercely and publicly rejected the October 26 decisions. General strikes, occupations of public buildings, shutting down the Ministry of Finance, disrupting the educational process in schools and universities, demonstrations, violent clashes in Athens and other cities, have become an everyday occurrence.

That is life in Greece. That is what some people in this House seem to assume Ireland should be like, based on their interventions.

Deputies

Hear, hear.

Deputy Joan Collins

That is why the government has allowed the people of Greece to respond.

Deputy Micheál Martin

That is not fair.

Deputy Michael Noonan

It is very fair.

Deputy Micheál Martin

He cannot say that.

The Taoiseach

The Deputy raised two questions about what might happen if we did not pay this. It is a valid question.

Deputy Micheál Martin

We said all of these things six months ago and pointed out the inconsistency of the Government's position.

The Taoiseach

A number of options would be open to the ECB if Ireland were to refuse to pay the bond in question. It could, for instance, increase the interest rate, which would result in substantial difficulty for this country. It could lend at a higher rate than 1.5% to banks that it felt were overly dependent on central banks, and that would have an absolutely devastating impact on Irish banks and on the wider Irish economy.

Deputies are aware that Irish banks can borrow at present from the ECB at 1.5%, and the only other option would be to seek this funding through customer deposits, for which the bank pays 4%. That is one central issue. The ECB could raise the interest rate if we decided not to pay, which would have even worse consequences than paying the bond.

Deputy Donnelly asked a legitimate question about reputational damage. There are a number of areas in which this applies. The first is foreign investors. As the Deputy is aware, there have been investments in Bank of Ireland, and banking deposits are starting to grow here, but in addition, the foreign direct investment line in the country is strong because potential investors in business see this as a country with a clear view and with certainty attached to its decisions — a country that knows where it is going. Second, there is the attitude of the EU institutions and authorities to a country that has a clear focus on where it wants to be and how it intends to get there. That is important from their perspective in working with us here in Ireland. Third, and most important, we expect to return to the markets by mid-2013, and the market reaction to a country such as Ireland, which wants to get out of the bailout situation as quickly as possible, is absolutely fundamental. That market reaction would not be favourable if the country were jumping from one situation to the next.

Deputy Joe Higgins

Dictatorship.

The Taoiseach

We have made a clear set of decisions and we intend to follow that through. Greece, on the other hand, faces ten to 15 years of austerity programmes, as Prime Minister Papandreou has outlined for me here. We certainly do not want to see that in our country for our people. We want to follow a growth pattern in which we get the 440,000 who are on the live register back to work and enable them to play their part with dignity and respect for their own localities and for the general economy.

Deputy Joe Higgins

Dictatorship of the markets.

Acting Chairman (Deputy Joanna Tuffy)

I ask the Taoiseach to make some brief concluding remarks, after which we will move on to the next business.

The Taoiseach

Obviously——

Deputy Joe Higgins

Can the Taoiseach address the contradiction between democracy and the dictatorship of the markets?

Deputy Liam Twomey

For God's sake, it was Deputy Higgins who mentioned dictators.

The Taoiseach

Yes. I saw the Deputy in the corner earlier when the new Deputy was arriving and I wondered why he went in there. It certainly was not to skulk away and hide to avoid receiving a new Deputy from his own constituency, I am sure.

Deputy Bernard J. Durkan

He was not spectacularly welcoming.

Deputy Michael Noonan

That is democracy.

The Taoiseach

That is the impact of democracy — Deputy Higgins will get new help in the constituency.

Deputy Joe Higgins

The Taoiseach can do better than that.

Deputy Micheál Martin

If he went into the corner, where did the Taoiseach go?

Deputy Seamus Healy

The Taoiseach should withdraw that.

The Taoiseach

Rather than, as the Deputy says, jumping to the diktat of the markets like slaves, the point is that in this democracy in which we contribute both as one of the 17 eurozone members and as one of the 27 member states——

Deputy Seamus Healy

He knows he should withdraw it.

The Taoiseach

——we do so in the interests of our people and our country.

Deputy Micheál Martin

He told us something else six months ago.

The Taoiseach

That is why the findings and conclusions not only from my own contribution but from others have been inserted into the agreement that was reached for guaranteed funding even when a country ends its programme, provided it continues to meet the conditions. That is the guarantee of our future. As has been pointed out, the extension of money on a longer-term basis is also critical. I know the Deputies do not agree with the Government on many issues. It is not a situation we like to be in, standing up and saying: "You have to meet the requirement of this bond."

Deputy Joan Collins

Major organisations do not agree with the Taoiseach.

The Taoiseach

We must look at the longer-term view for our country and reduce the overall debt burden by alternative methods. That is where we are making progress. It would not have been possible to have a €10 billion reduction in interest rates if we had been acting the mick with our European partners. Of the four Heads of Government meetings I have attended, this was the first at which there was a focus on the real issues — the state of the Greek debt and what we could do to prevent this contagion from spilling over into other countries with potentially catastrophic consequences not just for Europe but globally — and a decision to provide the vehicles to leverage that and deal with it in a comprehensive fashion. Stability and confidence are necessary for this.

I hope as much as anyone that stability and calm will return to Greece as soon as possible. Now, we move from this debate to the question of the eurozone with which the Minister, Deputy Noonan, will deal. However, I was asked a question earlier by Deputy Ross, who is not present. He asked why Anglo Irish Bank did not buy back bonds when they were at a cheaper rate. The answer is that Anglo Irish Bank and the State did not have the cash reserves to engage in buying back bonds because every cent the bank had was on loan from the European Central Bank. To engage in buying back bonds at an earlier date would have involved even more borrowing from the ECB and it is not in the business of lending to the State or banks to buy back their own bonds. That is the answer to the question which I forgot to answer when he put it to me.

Deputy Micheál Martin

On a point of order, given the crisis within Europe at the moment — we all acknowledge that it is a severe crisis — the allocation of 15 minutes at the end of a debate such as this does not reflect the seriousness of the situation and it is unacceptable.

Deputy Michael Noonan

Deputy Martin had every opportunity to ask a decent question.

Deputy Micheál Martin

People walked out this morning because of the Government's continued arrogance towards the House.

(Interruptions).

Deputy Micheál Martin

There is arrogance all of the time. This is why people are fed up. The Government can contort and twist. There is no limit to the contortions the Government can make. In future we would appreciate a greater amount of time. If those in Government were serious about it, they could organise the debate better.

The Taoiseach

Deputy Donnelly asked the most relevant questions.

Deputy Micheál Martin

The allocation of 15 minutes is not adequate.

Acting Chairman (Deputy Joanna Tuffy)

Deputy, you have made your point.

Deputy Micheál Martin

Two debates are being held. The Government could have one debate and far more questions.

Deputy Bernard J. Durkan

That is aimless posturing.

Deputy Micheál Martin

It would have been better for everyone. Government Members keep going on about Dáil reform but they do not mean it.

Acting Chairman (Deputy Joanna Tuffy)

We must move to the next business.

(Interruptions).

The Taoiseach

It is on the Order Paper since last week. Deputy Martin has had all the time since then.

Deputy Micheál Martin

The Government Deputies are getting ratty. I realise I brought them back from their holidays but there is no need for that.

Deputy Bernard J. Durkan

It is no wonder, only so much nonsense can be tolerated.

Acting Chairman (Deputy Joanna Tuffy)

Can I have order, please?

Deputy Micheál Martin

The Government tried to dodge this one last week.

The Taoiseach

We heard Deputy Michael McGrath's speech this morning.

Acting Chairman (Deputy Joanna Tuffy)

Deputy Martin, you have made your point. Now we must move to the next business, which is statements on the development in the eurozone.

Deputy Micheál Martin

I thank the Acting Chairman for her forbearance, tolerance and co-operation.