Developments in the Eurozone: Statements (Resumed)

Deputy Michael McGrath

I thank the Minister for his opening remarks on this critical issue. At a time of deepening crisis across the eurozone, which is spreading beyond it to the global economy, it is appropriate that we are in the House today and are being given an opportunity to make our contributions. The debate can sometimes seem abstract to people at home who are watching what is happening in Greece and turbulence in the stock markets, and they can understandably ask how it affects them and their families. The answer is quite straightforward. It affects people in a very real way, something I will discuss.

If proof were needed, there is evidence that Ireland could potentially be affected by the turbulence in the eurozone, namely the decision of the EFSF today to postpone a bond auction of €3 billion which was earmarked for Ireland as part of the programme of assistance with the EU and IMF. I assume it has no impact on the funding position of the State, even though bonds are maturing in November. However, it serves to highlight the possible implications for Ireland if the crisis is not resolved decisively and with some speed. That is the fundamental issue we all want to see dealt with.

We are in a bailout programme with the EU, the IMF and the ECB. In a sense we are insulated from movements in the markets, in particular the cost of borrowing which is beneficial for Ireland at this time. We do not have to go to the markets at a time when there is such volatility in the cost of borrowing for other eurozone members, a point which is worth making. We do not want to see a situation develop where the tranches of funding we have to draw down from the EU and IMF are jeopardised by turbulence in the markets. It was significant that the bond auction had to be postponed today by the EFSF but it is to be hoped it will take place shortly.

The Government will announce the new medium-term fiscal framework on Friday. There are potential implications for Ireland because the question of our debt sustainability and economic recovery is very much tied up with the wider economic situation in Europe. We are focused on an export-led recovery. We are doing very well with exports but if our main trading partners in the eurozone and the UK are struggling to generate growth in their economies inevitably the demand for goods and services produced in Ireland will be affected. The single most dangerous threat to our economic recovery is a weakened eurozone and global economy. It is a very real threat.

At the end of this week the Government will outline its new growth forecasts for 2012. The 2.5% growth forecast for GDP now looks wholly optimistic and will be significantly downgraded. If the media reports over the weekend are to be believed, a percentage point will be deducted and the growth projection for next year will probably be in the range of 1.5% which has budgetary implications, as the Minister outlined. Every 1% growth in GDP that is not achieved impacts on State revenue to the tune of about €800 million. Economic growth is absolutely central to our economic prospects, debt sustainability and Ireland returning to the bond markets as a sovereign country again, something we all aspire to.

The October Exchequer returns have been released. I have not received any information on them but I hope they are in line with the budget adopted last December and we are continuing to make progress on the public finances. It is a central element of our efforts in that regard.

The Greek situation could hardly be more serious. I was somewhat shocked and surprised when I read that the Greek Prime Minister decided to call a referendum on the outcome of the European summit negotiations. The main issue it raises is that the certainty we all hoped for and investors were optimistic about following the summit of 26 October has now been replaced with huge uncertainty and turbulence in the markets. There were stock market collapses yesterday on a par with those in the autumn of 2008, a place to which we have returned.

Prime Minister Papandreou is meeting the German Chancellor and President Sarkozy this evening. I am sure there will be some straight talking, as there needs to be. From a democratic point of view it is commendable that he wishes to put the proposal to the Greek people. It would give it democratic legitimacy. However, there are also huge risks involved. There will now be a vacuum for an undefined period of time. The timing of the referendum is not clear. Whether the Greeks have the capacity to hold it before Christmas is seriously open to question.

There are elements of the communiqué from the summit that have yet to be finalised. Even if the Greeks were ready to press a button on a referendum tomorrow they do not have a full package of measures to put before the people. It is not clear what question or questions will be put to the Greek people. It may well be a political calculation by Mr. Papandreou.

The Greeks have already obtained a substantially better deal than that which was negotiated last July. They now understand that when the referendum is put before the people, as seems increasingly likely provided the Government survives a vote of confidence on Friday, the eyes of not just Europe but the world will be on Greece. The question of additional concessions for Greece may be on the table.

The German Foreign Minister made it clear today that the deal was not open to negotiation and was concluded in Brussels on 26 October. I would not be surprised if the Greeks made a calculation that there was more to give on the various issues under discussion.

It would be in all our interests if that referendum were held as quickly as possible. In light of the fact that Greece has not held a referendum since 1974 and given its record on issues relating to corporate governance, financial control and public administration, one is obliged to question the capacity of that country to hold and administer a referendum successfully in a short period. It is to be hoped, however, that it will be able to do so. It is critically important that the vacuum created which gave rise to the carnage that took place on the stock markets yesterday and, to a lesser extent, today be replaced by an element of certainty. Such certainty is essential.

Clearly, the elephant in the room is Italy. While the entire focus has been on Greece, rightly so, as a result of the forthcoming referendum to be held there, the situation in Italy is becoming more serious by the day. Its cost of borrowing increased to 6.3% yesterday and remains at over 6% today. A country with a debt of €1.9 trillion — equating to approximately 120% of GDP — faces fundamental questions about the sustainability of that debt. I am aware that emergency meetings are taking place in Italy today in advance of the G20 meeting tomorrow. The commitments which Mr. Berlusconi made to his European colleagues will have to be honoured in full. However, the issue of the sustainability of Italian debt is coming centre stage. The fact that the existing eurozone infrastructure simply does not possess the capacity to bail out a country of Italy's size is one which must be confronted. It is clear that Italy is relying almost entirely on the interventions of the ECB in the markets in order to keep its bond spreads within reasonable parameters. However, I wonder how sustainable it is for that country to continue to borrow at rates of over 6% when programme countries such as Ireland, Greece and Portugal can access funding through the EFSF at a rate of approximately 3%. That is a question for which an answer must be provided. The Italian stock market dropped by 6.8% in value yesterday, the largest decline since October 2008. This provides a measure of the crisis in Italy and throughout the wider eurozone.

I wish to deal with some of the individual elements of the communiqué signed in Brussels on 26 October. Moving from a position where the Greeks were offered a discount of 21% on sovereign bonds held by European financial institutions in July to one where they are being offered a discount of 50% demonstrates the extent to which summit meetings can be affected by an air of unreality. The most recent summit is one of a series which have singularly failed to address the current crisis in a meaningful way. This is particularly evident when one considers the increase in the discount on offer, from 21% to 50%, in just a few months. Some commentators have pointed out that because the bonds held by state institutions and European authorities will not be subject to the haircut, the actual discount on overall Greek debt will be approximately 20%. That fact appears to have been lost in the general debate.

Spain was the subject of comment in the communiqué and is going to be obliged to deal with serious challenges in its economy and the difficulties with which it is faced. Ireland is commended in the communiqué for the progress made in the full implementation of its adjustment programme which is delivering positive results. This is true, to an extent. However, the Minister is a practising politician. He is well aware that the people will not agree with the assertion made in the communiqué and that they will not see any tangible difference until jobs begin to be created and the 450,000 individuals on the live register are given a measure of hope and some grounds for optimism. All Members are focused on ensuring the latter will happen as soon as possible.

I will not discuss at length the issue of the bond relating to Anglo Irish Bank that was redeemed earlier today. This matter has been well and truly debated, both inside and outside the House. However, I disagree with the ECB's analysis. I accept that there are risks involved from the point of view of the Government and that the Minister is now in a position to fully appreciate the difference between being on this side of the House and on the opposite side. The risks to which I refer must be weighed up in a more careful way, particularly in the light of the level of turbulence in the markets. The extraordinary cost — €64 billion or over 40% of GDP — the State has been obliged to take on in order to recapitalise the banks does not compare to that taken on by any other country in Europe or elsewhere.

Some recognition must be given in this matter. The bond to which I refer was paid earlier today. However, Ireland's case in redesigning the promissory note structure must have been strengthened by recent developments. I admit that the promissory note structure was costly, but it was put in place at a time when Ireland simply did not have €30 billion to recapitalise Anglo Irish Bank and the Irish Nationwide Building Society. It was developed at a time when there was no European fund of which Ireland could avail in order to lessen the burden in bailing out Anglo-Irish Bank.

Deputy Michael Noonan

The previous Government should have placed Anglo Irish Bank in administration. It was a mistake not to do so.

Deputy Michael McGrath

The EFSF is being established as a lender of last resort and will come into play following the injection of any available funding by the private sector and national governments. However, its existence will mean that countries across Europe which need to recapitalise their banks will ultimately be able to avail of a relatively cheap source of funding at a rate of approximately 3%. This highlights the exceptional case for Ireland to press for the promissory note structure to be redesigned.

Everyone wants the elements of the deal agreed on 26 October to be finalised. This will allow the Greek Government to put the matter to its people in a referendum at the earliest possible opportunity. The outcome of that referendum will indicate whether Greece will remain in the euro and whether it will accept the terms of the second bailout deal. It is clear that the situation in Greece is contaminating the remainder of the eurozone and the global economy. We must continue to focus on domestic issues and exert pressure on our colleagues across Europe in order that this matter is put to bed.

Deputy Pearse Doherty

If there is one word which sums up Irish and European political leaders during the past week, it is "failure". In Brussels last Wednesday the European Council failed to reach the promised and much hyped comprehensive deal to end the eurozone crisis. Later that day the leaders of the European Council and the European Commission, together with the IMF and leaders of Europe's banking sector, failed to reach a workable deal to stabilise the financial system. Once again, the Irish Government failed to even get a seat at the table when the most important discussions were taking place. It is not as if this would really have mattered, particularly when one considers the position taken by the Minister for Finance and the Taoiseach on their way to Brussels. In advance of negotiations that would see the Greek Government secure a reduction in its debt burden, the Irish Government stated unequivocally — not for the first time — that it would honour all of its debts, including those which do not even belong to it, namely, the toxic banking debt with which we were saddled by the previous Administration.

Gone were the pre-election promise not to pay a single cent more of toxic private banking debt, the promise to amend legislation — contained in the programme for Government — to allow for the restructuring of unsecured and unguaranteed senior bonds and the promise the Minister made in Washington last June to the effect that senior unguaranteed bondholders in Anglo Irish Bank would be burned. Once again, the Irish delegation sat through a eurozone summit and asked for nothing, offered nothing and quietly hoped that something would be thrown its way. When the serious discussions were taking place between the European Union, the IMF and the banks, where was the Irish delegation? It was either in an hotel or on its way back home. When Greece was securing a reduction of 40% in its debt-to-GDP ratio, did the Minister even ask whether we could obtain a similar reduction? In the discussions in which he engaged at the summit, did he make the case for a reduction in the private banking debt imposed on the taxpayer by the previous Government? Did the Taoiseach raise these issues? Unfortunately, I and many others know the Minister did not. While Greece secured a debt write-down, our Government gave a promise to force Irish taxpayers to pay every cent of toxic private banking debt, even where there is no legal or moral obligation on the Minister or his colleagues to do so.

If this was not bad enough, the Minister then came back home and told people the deal signed was in our interests. He told us this agreement would help stabilise the euro and assist Ireland's economic recovery. Worse than that, he suggested we were lucky not to have secured a debt write-down. He explained that had we had such misfortune, we would have been saddled with a decade — 16 years was trotted out by the Government — of deep austerity. These claims are untrue. It is sad the Minister has reduced himself to the level of throwing out this nonsense on the airwaves in an attempt to confuse listeners.

Today, Greece's debt-to-GDP ratio stands at 180%. The write-down struck last week in Brussels will see that ratio reduce to 120% over ten years. Even then, Greece's debt will not be sustainable. Ireland's debt-to-GDP ratio, however, is nowhere near that figure. According to the Department's prediction, it will peak at 118% in several years' time. A write-down similar to Greece's would bring our debt-to-GDP ratio down to between 70% and 80%. Would Ireland suffer 16 years of austerity? Would we have no moneys to pay our doctors and nurses? Has Greece no moneys to pay its nurses and doctors? Of course it has. It is still in a programme and yet it gets a 50% write-down of its debt. The Taoiseach and Minister for Finance, along with other Government spokespersons, tried to confuse the people with rubbish last week, however. This was done in an attempt to put on a brave face when in fact the Taoiseach and Minister for Finance walked away from a crucial negotiation after betraying the people and the commitments they made in the elections only eight months ago. The Minister for Finance was reduced to telling absolute lies and trying to confuse the people.

An Leas-Cheann Comhairle

The Deputy should withdraw that.

Deputy Pearse Doherty

It is a complete and utter lie to say that if Ireland got a 50% write-down of its debts then it would have 16 years of austerity.

An Leas-Cheann Comhairle

Deputy Pearse Doherty will resume his seat.

Deputy Michael Noonan

Throw him out.

An Leas-Cheann Comhairle

I am a good while in this House. The word "lie" is not used. The Deputy should withdraw it.

Deputy Pearse Doherty

I am not going to withdraw it. These were lies that were told on the radio. I believe the Minister is clever enough to know that the 16 years of austerity claim is not the case. I will continue.

An Leas-Cheann Comhairle

The Deputy will not continue until he withdraws that word.

Deputy Pearse Doherty

Okay, I believe it was a deliberate mistruth that was told.

An Leas-Cheann Comhairle

Deputy, the Chair is on its feet. You will withdraw that.

Deputy Pearse Doherty

A deliberate mistruth was told by Government spokespersons in an effort to confuse the public. Anyone with any sense of economics knows that one does not compare a country with 180% of debt to GDP to one with less than 100%.

An Leas-Cheann Comhairle

Deputy, the Chair is on its feet and you are out of order. The words "lie" and "mistruth" cannot be used in this House. Do you withdraw them?

Deputy Luke ‘Ming’ Flanagan

How about using the word "mislead"?

Deputy Michael Noonan

Abair é as Gaeilge, "bréag".

Deputy Pearse Doherty

Tarraingím siar é sin.

An Leas-Cheann Comhairle

Go raibh maith agat.

Deputy Pearse Doherty

Tá a fhios agam agus ag muintir na hÉireann go bhfuil an rud a dúirt mé fíor.

An Leas-Cheann Comhairle

Tá Gaeilge agam.

Deputy Pearse Doherty

Is é sin é. The majority knows my assessment that the Minister attempted to salvage a brave face when coming back from these negotiations is correct.

An Leas-Cheann Comhairle

I do not think it is an assessment but go on.

Deputy Pearse Doherty

What the Government is involved in is deeply dishonest. It is hardly surprising the Government has not been able to do its maths. It still does not know the full cost to the taxpayer of the Anglo Irish promissory note. It is confused on the scale of the national debt to the order of a staggering €3.6 billion. All of this is now academic, however, as it appears the Government never even sought a debt write-down. It prefers to continue with a policy that makes every man, woman and child in this State pay for the mistakes of bankers, developers and politicians rather than force the banks to pay their fair share.

Today of all days, when taxpayers' money has been used by Anglo Irish Bank to pay over €700 million to a bondholder, does the Minister not think it is time to come clean on his policy on toxic banking debt? The people have a right to know if the Government has abandoned its pre-election promises and programme for Government commitments. If so, when did the Cabinet abandon the policy of seeking to impose losses on private banking debt? What did the Minister for Social Protection, Deputy Burton, say when the Minister told her about paying this bondholder after his conversation with Trichet? She jumped up and down on these Opposition benches about imposing burden sharing on unguaranteed bondholders. How did she react when the Minister for Finance told the Cabinet that even though the bond was sold on at 20 cent in the euro, the Government must pay the full 100 cent? What did she say when the Minister added Ireland would have to pay another €1.25 billion on unguaranteed bonds to Anglo Irish Bank on 24 January 2012? Did the Labour Party Cabinet members say anything against this or did they just vote to put the people to the slaughter and come up with more austerity measures so the people can bail out these high finance bankers who lent recklessly to Anglo Irish Bank?

This is not the commitment the Government entered into with the people before the last general election. In the past eight months, the Minister has done little to reduce the debt burden on ordinary families. While he may wax lyrical about the reduction of the bailout interest rate, which is to be welcomed, it must be remembered it only happened because of the Greek situation. These were crumbs thrown from the table. The Government's approach is ask for nothing, expect nothing but welcome everything.

Last week was the Minister's golden opportunity. He could have argued that our debt levels were unsustainable and that the toxic private banking debt was not the responsibility of the Irish, or indeed the German or French taxpayer. He could have argued the Irish Government should not be liable for the infamous Anglo Irish Bank promissory note with which Fianna Fáil and the Green Party saddled us.

Instead, he did nothing. Consequently, hundreds of thousands of people will remain on the dole because money that could have been used to invest in job creation will be wasted paying off toxic banking debts. Tens of thousands of people will fall into mortgage arrears because the Government refuses to consider making the banks shoulder their fair share of the cost of the crisis. A whole generation of young people will be forced to seek a future abroad because the Government refuses to break with the failed Fianna Fáil policy of putting the interests of banks and bondholders before the interests of our children's education and our grandparents' health care.

At least the Greek Prime Minister, George Papandreou, had the decency to seek a mandate for his austerity policies. While his move has come a little late in the day and his motivations are far from noble, he has given the people the final say.

What was the Government's response to this development? The Minister of State, Deputy Creighton, talked about hand grenades. That is some way to talk about the will of the people. Is this how the Government sees the exercise of democracy, as a hand grenade thrown into the machinations of unelected political elites in the European Commission and Central Bank? God forbid that we ask the people their opinion on matters that will impact on their lives and those of their children and grandchildren. God forbid we seek a mandate for policies that put bondholders and hedge funds before citizens. The Government's disregard for the basic principles of democracy is a matter of record. Deputies opposite disregarded the will of the people after the first referendum on the Lisbon treaty. They continue, in government, to disregard the will of the people by denying them a referendum on the current bailout programme and on the future of the European Stability Mechanism. I repeat Sinn Féin's demand for a referendum on the policies of bank bailout and austerity contained in the EU-IMF programme and the proposed changes to the European Financial Stability Facility and the future permanent bailout mechanism, the ESM. The Minister has failed once again to stand up for the interests of Irish people. His meek and cowardly acceptance of the European Commission and European Central Bank's policies of bank bailout and crippling austerity is nothing short of social and economic sabotage, forced on a population which only eight months ago voted his party into office on a promise of change. How those voters must regret their decision.

Regarding the detail of the deal announced last week in Brussels, the Minister can at least take comfort in the fact that his failure is shared in equal measure among his counterparts in the European Council. This was the 14th eurozone crisis summit and it followed what has become a predictable pattern. First we have the hype, with talk of the summit to end the crisis and the deal to calm the markets. Then we have the last-minute rush to dampen expectations as the inevitable disagreements, particularly between the French and Germans, once again appear unsurmountable. After that we have the summit itself running late into the night, followed by a hastily cobbled together half-agreement which is big on rhetoric but short on detail. The following morning we have political leaders basking in the initially positive market reaction before the inevitable unravelling of the deal as the unworked out detail is exposed and the markets once again take fright.

The same problems emerge time after time. The European leaders simply do not understand the causes of the crisis and, as a consequence, are unable to devise the solutions to bring it to an end. Instead, everything they do makes it worse, with more austerity imposed on already suffering populations in deeply indebted countries. Is it any wonder Greece is in such chaos? The policy of bank bailout is continued despite the lack of certainty as to the size of the black hole at the heart of the European banking system. Last week the Minister and his European colleagues agreed to increase massively the funds available to the EFSF. In doing so they dramatically increased the exposure of ordinary European taxpayers to that toxic black hole. They fixed the EFSF so well that they cannot even go to the bond markets today to raise €3 billion for Ireland.

Deputy Michael Noonan

The Deputy did not make a single constructive point.

Deputy Pearse Doherty

All the points I made are constructive.

(Interruptions).

Deputy Liam Twomey

The Deputy is not offering a solution.

Deputy Michael Noonan

It is all wind. We will have to go to Sinn Féin night school to learn about democracy.

Deputy Pearse Doherty

The Minister has some nerve, on this of all days.

Deputy Mick Wallace

I agree with many of the points raised by Deputy Pearse Doherty. All of the summits have adhered to a trend whereby we get a great sense of optimism in the lead-up followed immediately afterwards by a degree of rallying on the markets before sober reality kicks in some days later and any gains are lost. Europe has proved unsuccessful to date in solving the main problems it faces. The Minister claimed in a radio interview last week that the euro now looks secure, that Europe will return to growth and that the threat of a recession emanating from Europe has been removed. Those claims are surely somewhat optimistic.

Several major questions emerged from last week's summit, namely, whether it would make Greece viable; whether the banks would be able to increase their capital ratios without causing another credit crunch; where would the money come from for the EFSF; would it take the heat off Italy; and, what are the chances of improving Europe's growth prospects. The notion that Greece will be able to reduce its debt to 120% of GDP by 2020 is grossly optimistic. That target is calculated on the basis that the country will have an average annual growth rate of 2% in the next nine years. Given that it is currently at minus 5.5%, such a positive prediction is stretching credibility. Moreover, the markets have indicated that Greece will need to reduce its debt to approximately 80% of GDP before they will resume lending to it. Developments in recent days bear out the reality that Greece is far from out of the woods.

In regard to banking, European banks have been quite open in their indications that in order to deleverage they will either refuse to extend credit or else call in loans which they would not otherwise have called in so quickly. We all know how difficult it is to secure credit in the current environment. If the European banks become as closed as their Irish counterparts, it does not bode well for Europe's growth prospects.

On the EFSF, we will have to adopt a wait and see approach. The facility seems to have been divided into two sections: first, a special-purpose investment vehicle which there is a reliance on the Chinese to fund; and, second, an insurance fund which will indemnify investors against the first 20% of any losses on sovereign bond purchases. Given that we are already at 50% in the case of the Greek debt, it is difficult to see how the EFSF will be Europe's saviour. Moreover, it will not function as a lender of last resort; that is not the German plan.

With regard to growth, I remain to be convinced that the austerity measures being promoted by European leaders will stimulate growth. Rather, Europe will likely be obliged to do aU-turn on this issue. Krugman and Stiglitz have been shouting from the rooftops for several years that austerity will not bring about the growth we are seeking.

Deputy Maureen O’Sullivan

Although it is a done deal at this stage, I wish to comment on what happened earlier today. To find an analogy one must imagine a sign outside Boylesports or Paddy Power advising customers that they need not worry if their horse, dog or team loses because their bet will pay out regardless. That is what has happened with the decision to pay €750 million to unsecured bondholders at Anglo Irish Bank. We are rewarding speculators who gambled and lost. We seem to feel some moral obligation to pay these people, many of whom bought at a discount and are thus reaping substantial profits. These are nameless, faceless entities; the Taoiseach has acknowledged he does not know who they are. Deputy Joe Higgins made an interesting suggestion about a Greek person; it certainly does not say much for Greek patriotism that all of this money is apparently out of the country.

The situation in which we find ourselves is the responsibility of the previous Government and, as such, it is difficult to listen to the objections of Fianna Fáil Members. Theirs was a quick-fix solution which has come back to haunt us. I hope there are no more quick-fix solutions when it comes to selling State assets. The Taoiseach said this morning that paying this money is in the best interests of the people. The Minister said on radio this morning that it is not in Ireland's interest to impose a cut on bondholders. I am still trying to figure out how it is in Ireland's best interest to honour a gamble. I am certainly in favour of honouring our obligations, but where is the morality in honouring this particular debt? Why have Anglo Irish Bank's unsecured bondholders — gamblers and speculators — been deemed a priority?

Was any consideration given to paying a reduced rate, which would have made significant savings for the country? Where is the liability for this country's taxpayers to pay the bondholders? The latter expect justice, but where is the justice for ordinary Irish people? Saving the euro and keeping the ECB happy seems to be the mantra of Government. That is fine, but where are the concessions for Ireland, which is playing the role of the dutiful child? It does not make sense to pay out €700 million on a failed bond from a failed bank. It is ludicrous to give these people precedence over our citizens.

The new eurozone debt deal seeks to counteract the threat of a European crisis and a double-dip recession and to minimise the risk of contagion to weakened eurozone countries. Sovereign and private investors from countries such as China are being sought. The concerns over the inroads that country is making in certain developing countries does not augur well for any such co-operation. I am not sure that Greece has secured a better deal. The package is extremely severe, with cuts in the public sector, reductions in pay and pensions, new taxes and privatisation of services. There is a need for us to renegotiate our debt repayments. Many believe that if our bailout terms are reduced, Ireland will enjoy higher economic growth. This morning the Minister intimated the possibility of a lower interest rate. Our priority should be this country; we should not get caught in the crossfire between European countries.

Deputy Joan Collins

Several times today and as reported in The Irish Times, the Taoiseach said the policy of the Government was to ensure growth, not default, a message that was repeated by the Minister. Is it not more correct to say the Government’s policy is one of a wing and a prayer, namely, to comply with all of the terms of the troika bailout, follow to the letter the orders from the ECB and in the process inflict austerity on the people and the economy which neither can afford and then hope for the best?

We cannot get out of the mess we are in without growth in the economy, and we cannot achieve the level of growth needed if the Government continues with the savage austerity programme of the past three years, taking €20 billion out of the economy in cuts and taxes, and plans to take out another €10 billion in the next three years. People expected more from it. Continuing with this level of austerity is not a strategy for growth but, at best, a strategy for very low growth and stagnation, with mass unemployment, high emigration and the dismantling of essential services. Is it not obvious that the problems of Greece, Italy, Spain, Portugal and Ireland cannot be solved by austerity? Surely we should learn the lesson of Greece, the economy of which is expected to contract by 7% this year and must now face ten more years of austerity. If the Greek referendum is held, there is little doubt about what the result will be.

In the same way that the Government has no strategy for growth, the solutions from the EU summit contain no strategy for growth, no strategy to deal with the 17 million jobless, to respond to the OECD prediction that the growth rate in the euro area will be a mere 0.3% in 2012, and to deal with the €16.5 trillion debt in the European Union. There is not a snowball's chance in hell of any of this working and it is only a matter of time before Italy seeks a bailout and the Greeks default. The idea that we can decouple from these problems by following the programme laid down for us is ludicrous. Instead of decoupling, why are we not linking up with Greece, Italy, Spain and Portugal to demand real solutions? Why are we not telling Chancellor Merkel and President Sarkozy that if they want to save the euro and the German and French banks and the peoples of Europe, they need to put their hands in their pockets and challenge the dictatorship of the market? The people are not prepared to stand by and take the austerity measures which are not in our interests and will not solve the problems or deliver growth. The Government should give the people the opportunity to vote on this issue in a referendum.

Deputy Luke ‘Ming’ Flanagan

In the past week Chancellor Angela Merkel said:

Nobody should take for granted another 50 years of peace and prosperity in Europe ... That's why I say: if the euro fails, Europe fails. We have an historical obligation: to protect by all means Europe's unification process begun by our forefathers after centuries of hatred and blood spill.

Someone should remind Chancellor Merkel that it was her country that started the Second World War. It was her country's lust for control that led to the deaths of millions of innocent people. While there were obviously contributory factors as to why this happened, it would not have happened without the acquiescence of a large proportion of the German population. In order that we do not face such a prospect again, is she seriously saying we must all be subsumed into a united Europe with Germany calling the shots?

In the 1990s I spent two and a half years living in Germany, during which time I visited Dachau Concentration Camp. I was curious as to why such a place remained open as a museum and they had never bulldozed it and moved on. The answer I was given was that people should never forget. It appears that Chancellor Merkel has certainly forgotten one thing, that people do not want to have Germany in control of their lives, whether it be as a result of a war or financial threats. She should also remember that one of the reasons given for the Second World War and the rise of extreme right-wing politicians was that the German people and state had been treated too harshly after the First World War. Now she wants the people of Ireland to suffer extreme austerity as a punishment for the crimes of a previous Government. It is this very pressure which increases the chances of Europe falling apart and descending into mayhem.

What real lessons has Chancellor Merkel learned from the catastrophe of war? We hear that she is incandescent with rage at the idea of a referendum being held in Greece. In other words, we again have a German leader who is annoyed that a sovereign state is making its own decisions through a legitimate democratic process. She is also forcing us to put the interests of gamblers in the bond markets before those of people with special needs, old people and the most vulnerable in our society. In the past week it has also become clear that one of the ways her dream of European integration is being kept alive is by borrowing money from China, a country which to this day has concentration camps.

Many people, including Anthony Coughlan, warned that the process of monetary union would end in tears and the only way it would work was by having complete fiscal union. At the time we were told this was not necessary as a way of fobbing off those who did not want to see further integration into a European super state. Now that the inevitable has come to pass, we are being told that full fiscal union is the only way forward by the very ones who denied it was a requirement in the first place.

While I do not know if this is out of order, the man who inspired me to become involved in politics died yesterday. I dedicate this contribution to John Conneely who was a hero of mine.

Deputy Dan Neville

I welcome the opportunity to contribute to this debate. I commend the Minister for Finance, Deputy Noonan, for the work he has been doing. Everybody agrees he has risen to the most difficult task with which he was presented on the formation of the Government. I record my admiration and that of the people of Limerick to whom I listen for the work he is doing in responding to the difficulties presented to him.

We are dealing with economics in a very harsh way. I would like to deal with the social aspect which is often depicted in economic terms. I refer to some information I gathered in undertaking some research into the social aspects of default and a reneging on agreements made by a previous Government and changing the approach taken. This was outlined very clearly prior to this debate when the Minister was responding to a Topical Issue debate, which I found extremely informative.

People are talking about default as a solution. Earlier this year Louise McBride in a Sunday Independent article analysed the effect a default would have on the social fabric of the State and how it would affect the people. It could be debated that default might be an economic solution, but what would be the social implications? It would destroy our international reputation and there would be serious implications for life opportunities and the standing of our citizens. We might decide to leave the eurozone, but if we were to default, it is likely we would be thrown out of the eurozone and revert back to our own currency. It is likely that the value of the Irish currency would collapse causing a currency crisis as happened in Argentina. Before that country defaulted on its foreign debt in 2001, the Argentinian peso was on a par with the US dollar. After the default, it lost 70% of its value. Mr. Kevin O’Doherty, a director of Compliance Ireland, has claimed that a default would probably result in the value of savings being wiped out and make it impossible for people to get their hands on their savings. He claims that if Ireland defaults on its foreign debt and reintroduces the punt most of the money in our bank accounts would be in punts rather than euro and as such given the economic situation in the country the value of the punt would plummet; the value of savings would decrease as the currency depreciated, and people with life savings in a credit union would find the value of them diminished as the cost of foreign goods and services became more expensive.

I am quoting the experts in this area because I am not an expert but believe both sides of an argument should be presented. Mr. Cian Twomey, a lecturer in financial economics at NUI Galway, claims that if Ireland defaults and leaves the eurozone the value of people's savings would be halved, our savings would be worth 50% to 70% less in punts than they would have been in euro and that people might also find themselves locked out of their savings accounts. When Argentina defaulted in 2001, the Argentine Government froze deposits to prevent savers converting them into a more valuable foreign currency. It also restricted the amount of money Argentinians could withdraw from their accounts to 250 pesos — €135 — per week. Not long afterwards it was common to see Argentinians search for ATMs that were not empty. Also, people could lose their savings if their bank or credit union went bust.

The Irish Government currently guarantees savings of up to €100,000 and in excess of that figure in particular circumstances. In this regard, Mr. Twomey asks, "If Ireland defaults, how would the Government continue to guarantee deposits?" The Government can only continue to guarantee deposits if its ability to borrow is guaranteed. If Ireland defaults on its EU-IMF loans, the chances of anyone lending it money at non-prohibitive interest rates are slim. More than €100 billion worth of savings were withdrawn from Irish banks last year amid fears caused by our banking crisis. If Ireland defaults and the Government, as did the Argentinians, clamps down on savings, billions of euro could leave the country. In this regard Mr. O'Doherty claims that people with a little money would fly off to France and other European countries to open euro bank accounts. Some believe that if Ireland leaves the eurozone a person with a cheap tracker mortgage might have to kiss goodbye to it. According to Mr. O'Doherty, interest rates on such mortgages could be set to Irish punts, which means one's ECB tracker would disappear. A tracker mortgage is a contract which a person has with a bank. As such, the question of whether a person would lose his or her tracker mortgage if Ireland left the eurozone remains to be seen. In circumstances where interest rates on mortgages are tied to the Irish punt, following an Irish exit of the eurozone, they would soar.

Less than 20 years ago a currency crisis hit Ireland. The Irish punt was devalued by 10% and Irish interest rates reached unprecedented levels. Mortgage interest rates in Ireland climbed as high as 16% in 1993. What would be the level of interest rates if our currency was to devalue by 50% to 70% against the euro? Those who have taken out a loan from a European bank would also be in deep trouble. An Irish citizen being paid in punts would find it much harder to repay a mortgage in euro as the punt would rapidly be worth less than the euro. What would be the situation if Ireland followed the footsteps of other countries that have defaulted? When Argentina defaulted, it expropriated pension funds transforming them into Government bank loans to service debt. The price of goods in foreign countries embroiled in currency crises has exploded.

A few months after default, inflation in Argentina hit 30%. The same would probably happen here. Domestic prices, including for newspapers or milk, would remain the same because they would be in punts as devalued. However, Mr. O'Doherty claims the cost of products produced outside of Ireland, including foreign holidays, cars and half of what consumers purchase in the supermarkets, given 50% of what we purchase in supermarkets is sourced outside this country, would become much more unaffordable. The only positive of a currency crisis would be for tourists whose foreign dollars or euro would be twice or triple the value of the Irish punt.

As regards what might happen in terms of social welfare, the Department of Finance — I accept some might be concerned about taking its view on board — claims that if Ireland defaults on the EU-IMF loan it would no longer have the financial support it needed to plug the massive budget deficit. The Government would have to unleash spending cuts of €18 billion to fund itself. To achieve this the Government could slash by one third, child benefit, dole payments, State pensions and public sector wages for our doctors, nurses, local authority workers and those working in other sectors.

An Leas-Cheann Comhairle

I must ask Deputy Neville to conclude.

Deputy Dan Neville

That is what default means. That is what is being proposed by some members of the Opposition. This is what they see as the solution, namely, the destruction of the social aspect of Irish society.

Deputy Sean Fleming

I welcome the opportunity to contribute to this debate on the eurozone and related financial matters, which issues have been the main topic of discussion today not alone in the House but throughout the country at large and will remain so for some time to come.

The problem we have at European level is a financial one. Part of the problem is that politicians believe they can solve what is not a political problem. I have said on a couple of occasions during the past few months that the solution put forward by politicians, despite their being the democratically elected leaders of their countries, might not necessarily be the right solution. Unless the financial basics underlying political agreements are corrected, they will not hold.

The recently held fourth summit of Heads of State and Government was a failure despite the Taoiseach returning home and expressing his pleasure with the outcome of it. The problem that is not being dealt with by the various governments is the level of deficit likely to be run up each year by governments. Not alone Greece, Ireland and Italy but practically every country in the EU, and eurozone in particular, are running deficits. Germany is to a small extent doing the same. A country that is running a deficit year-in and year-out must borrow money year-in, year-out, resulting in an increasing accumulation in debt taking account of borrowings and interest rates. This issue is not being tackled at source. The EU is simply trying to deal with the mountain of debt. The mountain of debt is not what is causing pain for citizens across Europe in whose countries austerity measures are being implemented, including in Greece and Ireland. There needs to be consideration of how to cut budget deficits on a year to year basis to ensure we do not continue to add to the debt mountain. This has not yet been fully grasped.

While Greece might have been offered a 50% reduction in its debt, Greek people will have to suffer enormous pain to achieve that by way of cutbacks in expenditure and increased taxation. The two issues are separate. I believe there is a specific problem facing the 17 members of the eurozone. I also believe in the euro currency. It is a good idea that has not been given an opportunity to work. I support a common euro currency throughout Europe. I would like to see all 27 members of the EU become members of the eurozone area. The problem is that we set up a euro currency without putting in place the infrastructure to support it.

As I recall, in recent years, the operation of that currency could be compared to a facade of a building. It looked good and everybody had the currency in their hands and in their bank accounts. We believed we had a real currency like the US dollar. However, we did not have the financial infrastructure in place to back it up, as in one central bank equivalent to the US Federal Reserve. There are 17 mini-central banks in the eurozone and a governor from each of these banks goes to the European Central Bank to try to operate on a European basis. This is not the best way to run a central bank. I acknowledge there needs to be direct input from the various countries but a currency must be managed and it is not just a case of keeping everyone happy. This is what has happened in recent times. Greater monetary union will be required but fiscal union and agreement on taxation rates and various other expenditure measures cannot be undertaken on a European-wide basis. The United States of America comprises 50 states and different local economic circumstances apply, but there is one federal reserve and one dollar which is supreme. This has not as yet been achieved in Europe.

Last week, Greece was on the trolley in the accident and emergency department. Nobody was dealing with the European problem nor with the underlying issues. The Greek Government arrived and it needed a Band-Aid to get it over the weekend. Even though Heads of State believed they had done a good day's work, we all know this has been short-lived as a result of Prime Minister Papandreou calling a referendum. Europe will need to be very careful that it does not chastise democratically elected leaders who for whatever reason ask their public to express their views on a particular issue. There is a democratic deficit in Europe and this is part of the reason people are not engaging with Europe as strongly as they should be.

I contrast what is happening in Europe with the situation in the United States of America. The US has a strong currency and people believe in it and have confidence in it. The Americans were strong enough to let Lehman Brothers fail and as recently as last weekend they were strong enough to allow MF Global, a US brokerage firm, to fail, collapse and disappear off the face of the planet. This represents the strength of the US authorities that they would allow financial institutions, some of them bigger than most of the banks in Europe, to fail. This is a very important point. The dollar is strong enough to allow failures in the American financial system. Europe must do the same. In recent years, Europe has been operating out of a sign of weakness. Phoney stress tests are arranged whenever an issue arises with regard to a bank. These tests do not examine the big issue. No sooner do banks pass a stress test than they are in financial difficulty a few months later because the terms of reference of the stress test did not include a wide enough examination. For example, some stress testing of banks did not deal with mortgages or with possible sovereign failure at EU level.

Europe must allow banks and bankrupt financial institutions to go bust. Ireland today is a microcosm of the European problem. Anglo Irish Bank has a new name, the Irish Bank Resolution Corporation Limited. There was a big debate about the billion dollar unsecured senior bondholders being repaid, but the issue goes deeper. We must recognise that Anglo Irish Bank was bankrupt from the very beginning. Europe would not permit us to allow Anglo Irish Bank go to the wall as it did not want a financial failure. It insisted that we should prop up Anglo Irish Bank, that the Irish taxpayer should pay the bondholders and that the bank should be nationalised. We have come a long way and our two pillar banks have been separated from any contagion from the former Anglo Irish Bank. The time has come to re-privatise Anglo Irish Bank and immediately liquidate it. The cost will then be borne by everybody who has a bond or a share or a deposit in the bank and those who have taken the risk to leave funds there. Like any liquidation, those people will get their return of 10 cent, 30 cent or 40 cent in the euro. The Minister knows that it could be done even though our partners in Europe may not like it.

The Minister adverted in his contribution to the EU-IMF deal which stated there would be no deal if burden-sharing with senior bondholders was on the table. The Minister was correct in this regard but Europe crossed the Rubicon last week when it agreed to a 50% write-down for Greece. Europe now accepts there has to be burden-sharing by senior bondholders and this can now be applied to Anglo Irish Bank under its new name. Legislation will be required to re-privatise it and the liquidator should be called in. Any assets should be sold. Any company going into liquidation has to take its chances. It would be a sign of strength for the euro if a bankrupt bank is allowed to fail. Otherwise, it will be a continuing draw on the euro if Europe does not face up to the financial realities and let a bankrupt bank go to the wall.

Deputy Joe McHugh

I welcome this opportunity to speak on the development of the European Union which is the conversation on everybody's lips. Greece is the subject of comment every morning on national radio and Italy is the subject of comment on local radio. This morning, the president of the Athens chamber of commerce was interviewed on "Morning Ireland" which was a sign that this world has changed. Five years ago, a conversation about Greece would have been with regard to holiday destinations and temperature and sandy beaches. Now we are hanging on every word of the president of the Athens chamber of commerce. This is an evolving and serious debate which affects every individual in this country.

Different degrees of the monopoly of wisdom exist in this House. There seems to be a concrete monopoly on wisdom on the other side of the House. I do not have a monopoly on wisdom and I am not good at predicting the future, unlike others on the other side of the House. I like to stick to the facts and the debate should deal with what is known and what is possible. There is uncertainty within the EU. Following the announcement of a referendum in Greece there was an increase in this uncertainty. Prior to the EU agreement, money had started to flow back into our banks and capital started moving back into this country. Investors watch the situation on Twitter and anything that happens in New York is monitored instantaneously in Beijing.

The Government was given a twofold mandate last February. It was a mandate to clean up the mess and a mandate to renegotiate the EU-IMF deal.

I wish to put on record the important interventions by the Minister for Finance and the Taoiseach, in the first place to get our house in order but also to renegotiate different aspects of the deal. It is a naive argument to state this is not an ongoing process. It would be foolhardy to say our officials are not constantly engaged in trying to renegotiate this deal for the future.

We divide the argument into what we cannot do, what we know and what we can do but as a politician I have my reservations and I would be disingenuous not to articulate reservations from within my constituency regarding the EU project. We gave a resounding "No" vote to Lisbon in the first treaty referendum and in the second one Donegal people were consistent — the county was the only one in the country that voted "No". There are reservations, therefore, about certain democratic deficits in the EU project, as mentioned by the previous speaker. That is where the debate lies — how do we address these democratic deficits? As we go into the future with the EU project how can we ensure we have certain safeguards? We need to ensure the 17 eurozone members have a better fiscal capability and there is understanding between nations rather than consensus on one level and broken deals on another.

It concerns both me and my constituents that there is a cosy Sarkozy-Merkel duet going on. Every time they turn on the television people are consciously and subconsciously looking at those two figureheads. They see them every time something seems to be going wrong, every time there is a summit or when certain language is used such as Prime Minister Papandreou being "summoned" to the G20 for a "dressing-down". This type of language is not healthy. It does not sit well or rest comfortably with me that from a media point of view these two figureheads seem to be driving the EU project and its development. That is certainly not the case but it is the perception which is being orchestrated at EU level. Our officials, our Minister and everybody within the EU, whether the Finns or the Irish, are working hard and together. We should be conscious of this.

Where do we go from here? We can look at the crystal ball territory through which certain Members of the Opposition are travelling. I do not believe we have a monopoly on predicting the future. We should keep at what we are doing, try to get our own house in order and instil that confidence which is permeating internationally at present. If one speaks to investors, to people across the United Kingdom, as I did recently in Brighton, or to colleagues, one finds we are developing a reputation. This is a reputation that used to be present but it was tarnished. We are rebuilding it. It is not an easy job but it is happening.

The populist moves and options exist. There is the populist option of reneging on the €700 million due from Anglo Irish Bank to which we are legally bound, although not from a bank guarantee point of view. Let us call a spade a spade. Who in this Chamber knows the ramifications of what might happen if certain unsecured bonds are reneged on or defaulted upon? What are the knock-on effects? They could involve not only that €700 million but also other unsecured and unguaranteed bonds. Does anybody have a monopoly on the future? The finance spokesperson from Sinn Féin, who is not in the Chamber at present, had a monopoly on wisdom before the last general election. His party was going to run the country using €15 billion, plus another €15 billion from the Central Bank, after they had reneged on the EU-IMF deal. That was to take us up to the end of the year but now that we are near the end of the year, when that €30 billion would have been spent, where would we go? We need a genuine debate. We must be very careful about the kinds of confusion that come not only from politicians but from the very magnitude of the challenge that lies in the EU project. We owe it to our citizens at least to be honest regarding the job we have.

There is and will be a great deal of emotion. No doubt, when the Greek referendum is put to the people there will be much emotion, whatever the result. There is dangerous territory when we use emotion as a political tool in this House. We on this side of the House are conscious there are people who are losing special needs services and people leaving the country on a daily basis. These are not just young people but men who are leaving their families to go to Australia. We know this emotion because we come across it every day. People on the other side of the House do not have a monopoly on understanding what our constituents are going through at the moment, what people in this country are going through. It is very tempting and alluring to use emotion as a political tool. Times are grave. We do not need to tell the people this — they are absolutely terrified about the future. Let us bring them a bit of sense with this debate, tell them what we know and what we can do. Let us bring this debate to a position that is not simply about coming out of uncertainty. We will never have constant certainty but we must at least be genuine with our constituents and the people of this country.

Deputy Seán Crowe

I will not get into electioneering. There must be some worries in County Donegal in regard to the outcome of the presidential election.

It is clear, even to the most casual observers, that the handling of the euro crisis by European leaders has been nothing short of disastrous for many of their citizens. As member states teeter on the brink of bankruptcy and lurch from one crisis to the next much of the focus that should go towards finding a viable strategy to deal with the crisis has instead been wasted on securing the interests of big bankers and meeting the narrow political interests of the French and German Governments. The Irish Government has been complicit in allowing this to happen. For many outside observers, the coalition partners, despite all their pre-election promises, have failed to negotiate robustly with our European partners in order to achieve a fairer deal for Irish people. We are going on the information we are receiving in that regard. The Minister may have a different view.

As recently as last Sunday, the President of the European Council, Mr. Herman Van Rompuy, spoke of the need for what he called "limited treaty change". The aim of such changes points towards a greater centralisation of economic and fiscal powers. The Taoiseach is on record as stating he is opposed to such measures but it is unclear whether he voiced those views at the Council meeting. Now, in his latest U-turn, he states he has no problem with limited treaty change. Consistency on these matters is clearly not one of his strong points. For anybody involved in negotiations, it is very difficult to negotiate with an individual who flip-flops from one issue to another. It also shows a weakness in regard to the argument.

Let us be clear that before any current EU treaties are changed, especially if such change would lead to further loss of our fiscal powers and economic sovereignty, a referendum must be held in order to give our citizens their say on the issue. Clarity and strong leadership are needed but the Taoiseach is flip-flopping on the issue and is seemingly ready to agree to treaty changes that will have far-reaching implications for our economy and future prosperity.

This is also further proof, if such were needed, that the leaders of France and Germany are being allowed to drive EU policy in the arrogant belief they have the sole right to decide the future of the European Union. One need only examine their approach to tackling the crisis in the eurozone. Key policy decisions have been taken to further their own countries' narrow national and political interests, with little or no consideration being given to how this will impact on fellow member states. As this happens, the Irish Government is allowing itself to be sidelined and patronised with faint praise which extols our efforts to bail out the banks and repay the bondholders in our role as good Europeans. We may be good Europeans, but we are certainly not in a Europe of equals. No one in Sinn Féin underestimates the extent of the problem facing the banking sector in Europe. We have consistently called for greater stress testing to clarify the extent of the problem so viable solutions can be found.

This crisis was not created by the citizens of this State, nor by the people of Greece, Portugal or Italy, many of whom are suffering as a result of increasingly punitive austerity measures that have the greatest impact on the weak and the vulnerable. The greed and the reckless unregulated lending of the banks led us to the point of economic meltdown. These large European institutions perversely appear to be determined to obstruct the reaching of an agreement that would recapitalise the banking system, create a stronger European Financial Stability Facility and involve a write-down of Greek debt. In their determination to support big bankers and the narrow political interests of the French and German Governments, EU leaders have manifestly failed to help smaller or less prosperous states in the European Union. The rights and future prospects of millions of EU citizens are being callously disregarded as eurozone Governments fail to work collectively to find solutions to this worsening crisis.

The previous Government, which was led by Fianna Fáil, failed to stop this country's banks from behaving recklessly. It put the interests of bankers and speculators above the interests of ordinary citizens. Its approach has been replicated by Fine Gael and the Labour Party. Despite their past lofty rhetoric, they have failed to deliver any meaningful change. It is clear that it is Frankfurt's way and not Labour's way. The implications of this crisis for ordinary Irish people are becoming more pronounced with each passing day. Growing hardship is resulting from the sweeping cuts that are destroying our education and health systems, which were already at crisis point. Job losses have resulted in large scale emigration and hundreds of thousands of people are on the live register.

Climate change and severe weather are causing further damage to our already antiquated infrastructure. As recently as last week, I witnessed the despair of hundreds of families in Tallaght and Dublin South-West, whose homes and personal possessions were destroyed by flood water. Some of those victims had suffered similar catastrophes previously, meaning they were left without insurance. They face a bleak future, if not ruin. The Government can find billions of euro when it wants to bail out toxic banks and repay bank bondholders. This obscene and shameful situation is an indictment of our political system. I cannot understand how we can find this money when there is no money for people in other situations. There is no talk of emergency or crisis funds.

Sinn Féin does not oppose the possible write-down of Greek debt. It has been estimated that the write-down will be between 50% and 60%. By contrast, the Taoiseach has refused to make the case for a reduction in banking debt. The Government is persisting with its policy of paying the unguaranteed and unsecured bondholders in Anglo Irish Bank in full. It beggars belief that the Government can accept the write-down in Greek sovereign debt while Irish taxpayers are forced to pay in full for the recklessness and greed of private speculators. The Government needs to speak with a single voice on this issue. It should campaign and negotiate in the interests of Ireland and reassert our national sovereignty. The future prosperity of our country's citizens must be the Government's priority. Anything less is unacceptable.

Deputy Joe Costello

I would like to share time with Deputy Spring.

Acting Chairman (Deputy Bernard J. Durkan)

Is that agreed? Agreed.

Deputy Joe Costello

I am delighted to have an opportunity to say a few words on the important issue of recent developments in the eurozone. It has often been said that a week is a long time in politics, but a couple of days is a long time nowadays. Such fast and furious changes are most evident in the eurozone during the current economic crisis. It is positive that EU member states, particularly eurozone countries, have started to focus properly on the extent of the problems facing many eurozone countries. They are no longer blaming smaller peripheral countries as they did some months ago. Ireland had argued strongly in favour of a wider focus. At last, Germany and France have taken the initiative and started to take this issue seriously. Germany, in particular, seems to be displaying a new and vigorous determination to consolidate and protect the eurozone, which is very important.

There have been many developments in recent times. A substantial package was put in place at the summit of 21 July last. The establishment of the European Financial Stability Facility and the economic governance proposals are major measures. The European semester is an absolutely fundamental way of conducting our business. All countries will co-ordinate their budgetary facilities. We will come together — not in convergence but in consultation and co-ordination with each other — to ensure there is no breach of the Stability and Growth Pact and we are keeping within the lines that have been set.

On 23 October, a major proposal in relation to the growth agenda was agreed by the European Council. As we know in this country, growth is everything. In the absence of a growth policy, we will not get out of the crisis and the whole consumer side of things will continue to stagnate. On 26 October, it was decided to strengthen the monetary and economic policy of the member states, which is important. Under the package that was proposed for Greece, a 50% write-down will be done on a voluntary basis, largely by the EU banking sector. That, taken with the €130 billion that has been put forward in the new EU-IMF programme, is an extremely significant contribution to bringing Greek public debt back to 120% of GDP. The quid pro quo is that Greece has to reach a certain debt target through further fiscal consolidation, privatisation and structural reforms.

That is the point we had reached when the Greek Prime Minister decided to seek a mandate from the people for austerity measures. Many of us may disagree with that decision, or with the manner in which it was announced. There was an element of surprise. He did not consult his colleagues in the European Union or, as far as I can gather, his colleagues internally in the Greek Government. It was sprung on the people. It certainly left a lot to be desired. It unsettled the markets to an inordinate degree. If the referendum is successful, it will enormously enhance the position of the Greek Government by giving it a mandate to move forward with austerity measures and deal with the situation we see daily on our television screens. I refer to the rioting on the streets, which is causing enormous difficulty for the Greek Government as it tries to act in a cohesive fashion. It is absolutely crucial that a decision be taken soon and any referendum be put before the people as quickly as possible.

The position of Ireland is totally different. We are an export-oriented country. We need to have security in relation to our exports and global trade. Any default on our debt, structured or otherwise, could incur huge difficulties for us. This Government was elected six months ago to deal with the economic crisis. The general election was essentially a referendum on the economic crisis. Last week's elections — the by-election in Dublin North-West and the presidential election — were both won by candidates nominated by the Labour Party. Clearly, there is strong support for the Government's side of things and very little support for the Opposition. We should not forget that.

I look forward to seeing the report that will be published in December by President Van Rompuy, which will examine how to strengthen fiscal matters within the eurozone. It will be a major report, even though it is an interim report. It will merit major debate in the House very shortly. Difficult decisions may be required in response to the report, some of which will determine the direction in which the eurozone will move. In the months ahead we will need to decide whether we are able to move in a certain direction, whether further convergence will be required or if we will be able to operate on a co-ordinated basis and whether treaty changes may be required.

Deputy Arthur Spring

The eurozone is in a crisis that is without parallel since the end of the Second World War. Jean-Claude Trichet put the matter aptly when he described the crisis as the most significant on the Continent in more than 70 years. Developments thus far indicate that people are not working together. In this respect I concur with some of Deputy Crowe's remarks on the European Union. At their meeting today, President Sarkozy and Chancellor Merkel summoned the Greek Prime Minister to discuss austerity measures and the proposed referendum in Greece. Whereas President Sarkozy and Chancellor Merkel have been elected, Commission President Barroso has not received a solitary vote. People who do not have an electoral mandate are bullying others on the Continent who do have a mandate. It is worrying that unelected officials are pushing people around.

Although I did not support the single currency when it was introduced, I accept membership of the euro has been good for Ireland. Without the assistance of the eurozone, we would not be able to pay teachers, nurses, gardaí and other public servants. Everyone in this country must be made aware that it costs €52 billion to run the country every year and our current income is €34 billion. We are borrowing every cent of the difference to keep the country working.

None of what is being done is nice. The €700 million to which Deputy Crowe referred could be considered the lesser of two evils. While the Government may be wrong in that regard, I trust the Ministers we have and the external advice we are receiving. Unfortunately, I do not trust the Department of Finance which made an enormous mistake when, having been informed of an accounting error to the tune of €3.6 billion, failed to act over the past 15 or 16 months. While we are losing credibility on some fronts, we are gaining it in others. Gains include agreement to reduce the interest rate on our loans, the decision to extend the terms of the loans and the possibility that we will return to the markets quicker than other programme countries.

The diplomatic offensive has started. A previous speaker referred to the British-Irish Parliamentary Assembly. When Members meet their European counterparts they tell them what action is being taken to address the country's problems. Ireland is being applauded for the measures we are taking and gaining friends who want to help at every step of the way as we try to emerge from the crisis. I met a German MP who had no idea that Ireland's problems were so bad. When I referred to a number of statistics, she asked me why people were not rioting on the streets if things were really so bad. I replied that we had responded in a peaceful manner at the ballot box. Of the three parties in the previous Government, two were obliterated at the general election and are no longer represented in the Dáil, while the third lost 75% of its seats.

Greece has taken the wrong course of action, as many of its citizens agree. Deputy Crowe is wrong to support the 50% write-down of Greek debt. If we are to believe the information provided by the Bank for International Settlements, Ireland owes Greece €800 million whereas Greece owes Ireland €8.5 billion. I do not want Ireland to be burdened with a further €4.5 billion in debt as a result of the inaction of others.

We need to remove the International Monetary Fund from our shores and everything we do in the coming years will focus on that goal. I will rejoice on the day sovereignty is returned but the country will have junk status for my first term in the House. The Government is cleaning up a mess without the benefit of sovereignty which is a difficult position to be in. I applaud some of the measures taken in the eurozone but as Deputy Wallace noted, Chancellor Merkel does not understand how bad the position is in Ireland. The International Monetary Fund and our colleagues in the eurozone need to comprehend that 130,000 young people, primarily ambitious and skilled graduates, have left our shores. This level of emigration needs to be curbed because we have a great skill base and a promising future. We need more help from Europe, including some substantial wins because the patchwork of wins we have secured is not sufficient.

Deputy Catherine Murphy

Deputy Sean Fleming described the current crisis as financial as opposed to political in nature. We are experiencing a financial crisis that was born out of a particular political model, namely, a neoliberal model with light touch regulation that was predicated on the values of individualism and had greed at its core. Speculators took risks and were supposed to lose because those who lose generally expect to pay a price. That was not the case, however, in respect of Anglo Irish Bank bondholders who received €700 million today and will receive more money next year while the Irish taxpayer picks up the bill. We will pay directly out of our pockets and through the diminution of health and education services and social welfare benefits. Moreover, we will have less scope for investing in the productive economy, including in efforts to develop an indigenous industrial base. People understand the position and are rightly outraged as a result.

We are constantly informed that the Government hopes to re-enter the bond markets in 2013. Decisions taken today will determine what opportunities will be available after 2013. The combined level of personal and national debt is unsustainable and will be unsustainable when we our sovereignty is returned. The choices of how, when and where we spend money will be limited to the extent that we will hardly notice the difference in the decades after sovereignty is restored.

What political model underpins the current debate in Europe and what values support it? Are they the common values espoused by Robert Schuman, for example, who came from the same tradition as the Minister? Schuman called for a democratic model of governance in Europe, one which would develop into a community of people living in freedom, equality, solidarity and peace. I do not know what the European project has become because I cannot detect what values underpin it in the discussions taking place at present.

I did not support the Maastricht treaty, one of the reasons being that I had a specific problem with the convergence criteria, specifically the criterion that the ratio of government debt to GDP must not exceed 60% in the preceding fiscal year. If solidarity is to mean anything, the eurozone countries should adopt the idea of eurobonds. Sovereign states act in their sovereign interests and Ireland should act in its interests if we do not see the values of solidarity and equality underpinning developments in Europe.

Deputy Seamus Healy

I heard a Government Deputy suggest the Government has a mandate for the approach it is taking. Let us be clear on this matter; Fine Gael and the Labour Party do not have a mandate for the policies they are pursuing. When their members travelled the country in January and February last, we heard them distance themselves from the policies of the Fianna Fáil-Green Party Government, promise to burn bondholders and protect vulnerable people and claim that it would be the Labour Party's way rather than Frankfurt's way. We all know what happened. The new Government changed into the old Government's clothes and is operating the same policies as the Fianna Fáil Party before it. We know the austerity and difficulties ordinary people must bear. Someone said earlier that what is happening is not nice. It is not nice, but that is a very mild way of putting it. We handed over €750 million to faceless, anonymous speculators today. These people made a huge profit from speculation. They bought these bonds from 53% to 60% and have made approximately €300 million in a rip-off of the Irish taxpayer today. The Government allowed that to happen, without a murmur.

What is not nice is the other side of the coin, namely, that the so-called Minister for Social Protection is implementing cuts in fuel, electricity and gas allowances, bringing fuel poverty for elderly people. Research to be published in two or three weeks by the Institute of Public Health in Ireland and Dublin Institute of Technology will show that approximately 1,200 people died as a direct result of the lack of heat in the year 2006-07. Age Action Ireland is running a petition currently asking the Government to reverse these cuts. It says it is a life and death situation. I agree. Rather than pay €700 million plus to faceless speculators, the Government should reverse the cuts that affect elderly people who are at risk, not just of ill health or illness but of death, over the coming winter.

Deputy Shane Ross

When I watch debates like this and when I hear the advice like that given today to Mrs. Merkel, Mr. Trichet and other such people, I sometimes wonder whether they will hear it, let alone take it. I tend to see this debate in a narrower context and hope that we can ask the questions and have our words heard by the Ministers here, who will then carry them to Europe. I ask what can Ireland get out of the situation that is happening in the eurozone currently.

The lessons are dismal and dim. For me, the lesson of today's events here and of what is happening in Europe is that a rogue nation is dictating the pace in Europe. Greece is in the driving seat. Greece is calling the tunes. Greece is setting the agenda, not Angela Merkel nor Sarkozy. They will be down on their knees to Greece by the end of the evening rather than dictating to Greece and asking it to do various things. Similarly, this nation and Government are on their knees before Anglo Irish Bank today. The pace in Europe is being dictated by a rogue nation and the pace in Ireland is being dictated by a rogue bank. That is the situation.

I wonder why Ireland is keeping its head down so low in Europe. Why are we so quiet in the mega rows taking place? Admittedly the rows are taking place among people of greater influence, between Berlusconi, Sarkozy and Merkel in particular and Greece and others. What role do we have there? We are not playing any role. Nobody takes any notice of us currently, but why is that? The reason is that we are posing as "good Europeans". However, being good Europeans seems to mean being bad Irish people. To be good Europeans, we must do what Europe wants us to do, but not what is in the interest of people here. I am frequently asked, but find it difficult to answer, why the Government is pursuing this policy. Why is it doing what it is told by Merkel, Sarkozy, Trichet and the lot? Why is it not rebelling a bit and kicking up? Why did it capitulate so immediately to the demands of our European colleagues?

I do not know, but I suggest two reasons. First, this is, to some extent, a vanity project. When they get into government, people get taken over by the structure, the offices and the people they meet in Europe. They get intimidated and sucked in. They also get taken over by the Department of Finance, which has disgraced itself in the past two days. Not only is it incompetent, it is innumerate. They get taken over by the ECB structure and they succumb to it too easily, rather than taking the alternative view. While the alternative view is very credible, it is dismissed. I heard the Minister for Finance, Deputy Noonan, respond to one of his party's Deputies, Deputy Peter Mathews, at the Joint Oireachtas Committee on Finance, Public Expenditure and Reform recently when he suggested a sensible and credible series of write-offs. The Minister said that if he were to suggest that in Europe, he would be accused of being demented. I am not sure the word "demented" was used, but he inferred insanity of some sort.

Deputy Arthur Spring

The word "kindergarten" was used.

Deputy Shane Ross

That word was used as well. It is time the Government thought in a radical way that is not part of Europe "think".

Deputy Liam Twomey

There is no doubt that this is a political and economic crisis across the 17 nations of the eurozone. Many of the comments tonight make the issue out to be simplistic and basic and suggest it is a question of whether we pay or do not pay our bondholders. They suggest that somehow the Government does not have a clue what is going on in Europe and that it is responsible for this awful mess. If it was only so simple, it would be easy to solve this crisis.

What Greece is going through currently is horrible. Its debt is unsustainable and it faces a bleak future and a desperate decade. Some people feel that even the 50% haircut of the debt owed by private banks in Greece will not be enough to get Greece out of the position it is in. That is a terrible situation to be in. If there is one country the situation in Greece does not apply to, it is Ireland. Members of the Opposition speak about sovereignty, republican sentiment and nationhood, but try to drag down the level of the country in this Chamber. It is pitiful and annoying to have to listen to that. I wish they would grow up and stop talking like that. We are not at that level. Most commentators agree our position is fairly sustainable. Our road to recovery will not be affected by Government policy now. It is events outside the country that will have the greatest knock-on effect here, such as a global recession or the failure of the eurozone to get its act together.

I agree with many of those who have spoken on this issue and pointed out that the eurozone comprises 17 sovereign nations that must work together. Allowing Sarkozy and Merkel to control and lead events in this regard is not producing the result we expected. Perhaps that is to do with the situation for Mr. Sarkozy and Angela Merkel in their own countries. They face elections in their countries and face an examination of their position by their people. This may not be constructive towards sorting out the crisis in the wider eurozone.

One thing that is clear is that our Government is doing its job. The Taoiseach is doing his job and the Minister for Finance is doing his. They are building our recovery bit by bit. Members of the Opposition like to go for the big bang theory. They like to think that we can somehow set off a major explosion and that everything will be sorted as a result and we will resolve the crisis. Sinn Féin, in particular, loves the big bang theory. I wonder what would have happened if the election went a different way last February and our Minister for Finance in Europe now was Deputy Pearse Doherty. If he were Minister, he would be going to Europe and telling Angela Merkel and Sarkozy what to do. He would pay nothing to bondholders and would burn all around him. I would love to know what our economic situation would be now if he was in charge. For all the hype, bull and false anger he expresses here, is he really as reckless and irresponsible as he likes to indicate here? The absolute nonsense that has come from Sinn Féin and some Members of the Opposition with regard to a policy for dealing with and resolving this crisis would frighten the daylights out of people.

Deputy Donnelly asked a very sensible question this morning in the Chamber about what would be the consequences if we defaulted. There is a need for us to drill into that a little bit more. However, from what I can gather, it seems the most benign situation is that the European Central Bank would be unhappy with us and the very least it could do is raise interest rates on money we borrow from the bank. As we intend to borrow tens of billions of euro from the ECB over the next couple of years, our little pyrrhic victory gained from not paying the bondholders would quickly become a massive cost to the Irish taxpayer. When members of the Opposition show such great concern about those individuals who are lying on trolleys, living on social welfare payments and relying on old age pensions, do they realise the least benign consequence of defaulting? The least benign consequence is that the State would not be able to borrow money anywhere. If we were not able to borrow money anywhere, as was pointed out by Deputy Spring, we would be left with a deficit between what the Government earns and spends.

This hypocrisy particularly belongs to Sinn Féin. Armchair economists in the Technical Group do not really bother me that much, because they do not affect the overall situation. However, Sinn Féin sells a policy to the people and it projects itself as offering this alternative policy. If Sinn Féin policies do not stack up, it must be exposed by us in the Government. Are Sinn Féin Members saying they would rather gamble with cutting pensions, social welfare payments and pay to gardaí, nurses and teachers by a third in return for burning bondholders in Anglo Irish Bank? That seems to be the most significant consequence of what could happen. If ECB rates went up on money this State needs to borrow to run the country, at the very least we would definitely see it impacting on our hospitals, schools and services we provide to the sick and vulnerable in our society. This needs to be exposed strongly. When Deputy Doherty comes back into the House to make his next "angry young man" speech to the nation, he might tell us the consequences of Sinn Féin policy. I am not an economist, but I have listened to many things and I am still waiting for Deputy Doherty to provide the consequences of his party's policy statements.

This is why I support fully what the Taoiseach and the Minister for Finance are doing. They are not putting the future of this country at risk. They are going out and negotiating our position. We are winning some days and we are not doing as well other days, but we are constantly chipping away to make life better for the people. We must not at any stage let a rush of blood to the head dictate economic policy for this country. There are many unpredictable variables in the eurozone at the moment. There is much happening to the world economy. We are a very small part of that and we are very fortunate that we have managed to get as far as we have got over the last few years. Any individuals who are undermining our sovereignty and our future as a republic need to be questioned on the policy positions they are trying to get the Irish people to take on board.

I do not mind the simplistic talk of the some of the Sinn Féin backbenchers about a lack of leadership, or that we are rigid in what we talk about, because all that is just simple rhetoric. However, they must explain the overall consequences of their policies to the Irish people, as must any other Member who talks about burning bondholders.

Fianna Fáil Members have also spoken about burning bondholders in Anglo Irish Bank. This is quite ironic, considering we have paid €97 billion to bail out the bank. We have a responsibility for €700 million of it this morning and another €3 billion next January, while €94 billion was the responsibility of Fianna Fáil when it was in Government.

Deputy Timmy Dooley

That is an understatement when talking about simplicity in economics.

Deputy Liam Twomey

The Deputy and his party understood the concept of what I am talking about when they were in government, but they seem to have forgotten it purely for simplistic, populist reasons. As a group that considers itself a serious Opposition party, perhaps it should defend policies that it claims were its own when it was in government, although our implementation of those policies is substantially different. We are more focussed on how it affects people, and that is the way it should be. Much of what was done by the previous Government was done in a rushed manner. Much of what happened after the IMF came in was bounced on that Government to some degree, and some of the decisions it made were wrong and perhaps were not proofed to protect the Irish people as they should have been. We have managed to make that shift to protect the Irish people more. I would like to see the Deputy and his party support those moves. We are more realistic about what can be achieved for the people in this terrible crisis.

Deputy Timmy Dooley

I welcome the opportunity to contribute to this important debate. There seems to be no end to the challenges and unexpected shocks to the worldwide economy over the past three years. When this debate was initiated last week, there appeared to be an air of calm in Europe and especially in the eurozone. An accommodation had been reached on the Greek situation. The Greek debt problem had been addressed and the leaders across Europe had looked at the notion of providing a haircut of up to 50% with the support of the banks concerned. To some extent, there was an acceptance that difficult decisions had been taken and we were getting back to addressing the crisis. There was also a recognition that Greece was isolated in a way that prevented contagion and was ring fenced by the solution. That was seen as a positive move overall.

The impact of the haircut on European banks was significant. The leadership across Europe looked at the necessity of addressing the recapitalisation of those banks. That process had been agreed and a path to implementation was clearly underway. The bolstering of the EFSF was also recognised and the broad parameters of that were accepted, so that it could be strong enough to act as a deterrent to the predatory approach of many of the speculators we have spoken about. While more specifics needed to be worked out, it looked like a solid proposal. The funding of the EFSF to deal with the predatory approach of speculators was underway. Klaus Regling had made contact with Asian markets and sovereign wealth funds in that region, and all this looked extremely positive in addressing the crisis.

Suddenly we have been thrown into a crisis that looks infinitely more challenging than what has gone on before. I will not use this opportunity to be critical of any other country or the leadership of any other country. Things have been done with the best intent by the Greek Prime Minister in addressing what he believes was a necessity to have the affirmation of his people. It certainly is not helpful in the current climate, but we should not question the motivation. I am surprised by some of the comments in the last couple of days around Europe and at the criticism being levelled at Greece. It can be argued that the leaders of France and Germany have taken positions that have been in their own interests over the past few months that have allowed this situation to go on and on over the course of 13 or 14 meetings without facing up to the serious issues involved. Some might suggest the Prime Minister of Greece is being a little bit nationalistic in seeking the support of his people through a referendum, but one could argue he has been led by the nose into this due to the approach taken by President Sarkozy and Chancellor Merkel, who have not been able to agree a strategy and have been playing a game of politics in trying to keep their own people behind them. I do not think we should be as surprised as some have sought to suggest about the Greek stance. There is no doubt it has created considerable panic, and not just in Europe — it has also affected the USA in terms of the market write-offs we saw yesterday and the further uncertainty at a time when we need to create much more certainty. There was a view that such certainty was starting to creep back in, but unfortunately it has not.

The biggest difficulty with this economic shock is that although there has been an impact on the markets, we have not reached the end of the life cycle. Previously, when shocks occurred, we started to build from there on, whether it was the collapse of Lehman Brothers or any other crisis that enveloped us. Now, however, it takes much longer to reach the point at which we know the impact of the shock and we can start to rebuild.

It is not clear when the referendum in Greece will take place. I welcome the comments today by the Minister for Finance, who has obviously encouraged Greece — I am sure other leaders are doing the same — to try to advance the date of the referendum, because leaving a vacuum of uncertainty will certainly create greater problems. It is unclear what the outcome of a referendum might be. We do not know what will happen if there is a "No" vote; are we looking at unstructured default? What are the implications for us in Ireland?

In that context, we need to talk about the Anglo Irish Bank bonds. I am somewhat disappointed with the comments of the previous speaker, Deputy Twomey, who sought to suggest that the current Government has an exceptional handle on dealing with the bonds. He seeks to put forward a simplistic approach when he talks about the €93 billion that was invested by the previous Government and says we should take responsibility for that. We have done so. I argue that the current Government is very much following the banking policy that was adopted by us. Much of the €93 billion that was pumped into Anglo Irish Bank was asset-backed and will give a return in the long run.

It was the Deputy's own Minister for Finance, on his 99th day in Government, who raised expectations and, I would charge, had an impact on the euro crisis by seeking to throw further uncertainty on the bond market when, in the United States, he made a clear and public statement that he was seeking to perpetrate a haircut on the bondholders, the first tranche of which we are dealing with today. He said this at the time without reference to Mr. Trichet or the European Central Bank. The Taoiseach, during Leaders' Questions and on the Order of Business today, indicated that as far back as March it was made clear to the Government that there was absolute opposition in Frankfurt to the notion of burning any senior bondholders. I could go through in some detail the comments made by various players on the other side of the House. They were made in the heat of the election campaign, and I am prepared to accept that. The Government wiped the slate clean to an extent and suffered the political fallout by being asked to respond in this House on an ongoing basis to the promises it made. However, this promise was not made prior to the election. It was an intervention by the Minister for Finance, sitting in a comfortable room somewhere in the United States, as far as he possibly could be from Frankfurt, when he told the world the Irish Government intended to take an aggressive approach to senior unsecured and unguaranteed bondholders in Anglo Irish Bank.

Deputy Brian Hayes

As part of an agreement with the ECB.

Deputy Timmy Dooley

Yes, but he indicated that he had not spoken with the ECB about it.

Deputy Brian Hayes

Yes — a negotiation.

Deputy Timmy Dooley

However, today's interjection by the Taoiseach stated it was clear from his perspective that there was no opportunity to do that. I would accept it if the Minister for Finance, in isolation, put on the record his desire to talk to the ECB and challenge it with regard to a policy of reducing the commitment to senior bondholders at Anglo Irish Bank, for all the right reasons. There is scarcely anybody in the House who would not accept there is a case to be made. The Minister put forward the proposition that he would make that case. The indication was that he had not yet done so and that he was starting afresh. However, it now appears, based on what the Taoiseach said today, that the initial conversations had started and that the ECB had spoken vehemently against it from the beginning, when it was first raised in March. Are we to believe there was some kind of discord or disharmony between the Taoiseach and his Minister for Finance — that the Minister for Finance was not aware that the ECB was against the idea? Or was he aware? I do not want to call into question the integrity of the Minister for Finance or, indeed, the Taoiseach——

Deputy Jerry Buttimer

Good.

Deputy Timmy Dooley

——but two people have put forward very different views of our position in the negotiations.

Deputy Brian Hayes

It was a negotiation.

Deputy Timmy Dooley

I have no problem with the principle of negotiation, but it was clear the Government was starting from a point at which it knew it had no chance, which the Taoiseach pretty much admitted today. I ask the Minister of State to read the blacks.

Deputy Jerry Buttimer

Ask Brian Cowen and Deputy Martin what they did in government.

Deputy Timmy Dooley

He clearly said it was not possible.

Deputy Brian Hayes

The Deputy is over-egging it.

Deputy Timmy Dooley

My charge is that the Minister for Finance — this is a political charge, so the Deputies will have to take it in context — was trying to create an air of achievement about the Government's first 100 days in office. It had become a hostage to its commitment at an early stage that it would do a hell of a lot more in 100 days. Nobody expected it to. We realise it is not a sprint. Resolving this crisis is a marathon, and the Government should have stuck to an appropriate plan. I would like some clarification on that, although perhaps we will not get it.

I think I have run out of time, so I will not get an opportunity to make all those political points that would have started to address the issue of what the Government promised us during the election campaign.

Deputy Brian Hayes

The Deputy can have more time if he wants.

Deputy Timmy Dooley

However, I have little doubt that the notes I have prepared will raise their heads again on some future occasion.

Deputy Patrick O’Donovan

It would not be a debate on finance or the eurozone if the words "Lehman Brothers" were not dragged into it somewhere. It is the usual old Fianna Fáil excuse: everything is Lehman Brothers' fault. That old excuse has been dragged around like an old rag for the last couple of years and the Fianna Fáil Members are still dragging it around after them. They should leave it at this stage. Everybody knows the crisis in Ireland was primarily caused by greed. Other middle-of-the-road European countries with a similar population base to Ireland are not in the same position, because they had good governance——

Deputy Timmy Dooley

Would this be Italy or Spain?

Deputy Brian Hayes

Sweden or Denmark — similarly sized countries.

Deputy Patrick O’Donovan

——by governments that managed the affairs of their countries in a fashion that did not leave them in a crisis such as we are experiencing.

It is not surprising that we are hearing the same old rhetoric. We should just hit the "record" button and then we could press "play" every time. On one hand we have the ostrich economics of the Technical Group and Sinn Féin, who want us to bury our head in the sand, pay nobody and pretend it will go away, and on the other we have the Fianna Fáil Members saying it was everybody's fault bar theirs, and now they are going to play Opposition politics with it. On the other side we have the Government, which is trying its best to dig the country out of the massive debt that was placed on us by the previous Government.

Deputy Timmy Dooley

I cannot believe the Deputy is not smiling.

Deputy Patrick O’Donovan

There has been talk today about the Anglo Irish Bank bonds. The reality is that, thanks to the actions of the last Government, this is sovereign debt. We have a choice as a country: do we stand over our sovereign debt, or do we walk away from it? If we were to walk away from our sovereign debt, where would it leave us? It would leave us in a simple situation: we could not pay nurses or gardaí, and we would not be able to keep the lights on in this building. I do not think the ushers would come in, and the Acting Chairman would probably find something better to do than to sit here listening to me. Sinn Féin and the Technical Group, who have now been joined by their cheerleaders in Fianna Fáil, have never yet come up with a single solitary suggestion about what we should do if we walk away from our sovereign debt. If we walked away from our European and international obligations tomorrow morning, we do not have a single suggestion about what to do, not even from the financial editor of the Sunday Independent — he might not be the financial editor, but he is a columnist who used to come into the House on a regular basis and pontificate that Seán FitzPatrick would be a great candidate for Governor of the Central Bank, or God, or whatever he was running for at the time, and is now saying the Government is not doing what it should be doing.

The public is becoming weary of this as well. Ultimately, they want the Government to take this issue by the scruff of the neck.

They want credible politicians to negotiate on behalf of Ireland at a European and international level. They have no wish for this will-o'-the-wisp or Alice in Wonderland economics whereby one bangs the table and declares one will not pay back what one owes and will walk away in the hope that everything will be rosy in the garden. The public is not stupid. People know that if they go to their local credit union and borrow €300, unless the credit union agrees to write down that debt, it must be paid in full. At the moment we are in negotiation to try to get our debt written down.

It is unfortunate that every time we come in here we listen to the same old drone that we should not pay this, that or the other. Those who suggest this do not provide an alternative. It would be far more constructive for the Opposition to take the initiative and the invitation offered to them by the Taoiseach and the Minister for Finance to come up with ways in which this can be done and to use their relationships in the European Union, although limited, to influence their colleagues. I am unsure whether any of their colleagues are in Government anywhere — perhaps there might be one in Government in Libya — but perhaps they could influence their colleagues to do something for this country rather than sending out this diatribe which is being broadcast all over the world. Everyone is listening to what is going on in Ireland because everyone wants to know whether they will get paid, whether we can be trusted and if we will pay them back in future if we borrow from them again. Thanks be to God the people had the foresight and knowledge not to put into Government people who would not repay anyone, who would run us into the ground and who, when everything was gone and the lights were turned off, would turn around and ask what they should do next.

I wish the Government well in its exploits, especially the Taoiseach, the Tánaiste, the Minister for Finance and the Minister for Public Expenditure and Reform. We are in difficult times and it is about time some people in the Chamber put on the green jersey.

Deputy Jerry Buttimer

I welcome the Minister of State, Deputy Hayes. The communiqué at the close of the European summit stated, "The euro is at the core of our European project of peace, stability and prosperity." I am amused when I listen to Deputies Doherty and Dooley. Deputy Dooley spoke about being hostage. The people are hostage to the debauchery of his party when it was in government for the past decade and a half. Greed, poor governance and lack of respect for people have us where we are today.

I challenge Deputy Ó Snodaigh and his party. They are in Government in the North of our country. They have positions of responsibility and they are acting there but they are not acting here. They walked out of the Dáil today and then returned in two minutes because it was a set piece occasion and they had no wish to miss the television opportunity. Deputy Doherty's speech in the House tonight was a rant with no constructive or positive comment.

I pay tribute to our Taoiseach and the Minister for going to Europe and achieving re-negotiation of our position. The success of the summit depends on the implementation of the agreed measures by all signatories. The summit was an attempt by the sovereign Governments to provide reassurance and certainty to the financial markets and throughout the European zone.

I do not play the stock market but let us consider what happened in the stock market. We witnessed the sharpest decline in a five-week period because of a decision by a Greek Prime Minister to hold a referendum. Today, the Taoiseach stated that it is his decision to do as he wishes and he is correct. However, it must be about Europe and the European project. Today, the Taoiseach and the Minister for Finance were at pains to emphasise that if we renege, we have an implication for Europe.

I put it to Deputy Ó Snodaigh, who I like, that, with regard to the Anglo Irish Bank bond repayment, that what is happening today is difficult for many on this side of the House to swallow. However, the reality is that the State has already put all of its share of funding into the failed bank. Under the previous Government, some 97% of Anglo Irish Bank's liabilities were paid. When I hear Deputies Michael McGrath, Martin and Dooley I get sick. They were the people who stood in the Government chamber and paid out the money. These are the people who wanted to end the "Punch and Judy" politics, yet they are on the plinth tonight making capital from it when they were the architects of it.

The reality is that the European Central Bank did not agree to further burden-sharing and it would not be responsible to risk the entire agreement for 3% of a bank's liability. Do the Members opposite believe we should risk the gains we made for 3%? Is that what they are saying? This the reality. If we act alone, we run the risk of causing the same shock waves the Greek referendum proposal caused. This is about the future and about being responsible. The markets are volatile, as we are all aware. It is not the place of a responsible Government to cynically exploit this volatility for a quick fix or for short-sighted or short-term gain. I agree with Deputy Dooley that France and Germany have an obligation to the European project and to play the game of Europe, not the game of Sarkozy or Merkel and their attendant internal political struggles.

I commend the Government and the Minister for Finance on the responsibility they have shown and the leadership they have given. They have shown foresight and sure-footedness in re-negotiating some of the terms of the EU-IMF agreement. I look forward to their continuing efforts in further re-negotiations. The responsibility of being in Government is about bringing people along. It is about ensuring the country will be there in five weeks, five months and five years. A responsible Government will not unnecessarily risk the future of the country or its people on an uncertain outcome. This Government has not done so and will not do so.

Deputy Aengus Ó Snodaigh

Bhí sé spéisiúil éisteacht leis na Teachtaí a chuaigh romham. Tá an ceart ag an Teachta Buttimer, tá Fianna Fáil agus na Teachtaí a sheas do Fhianna Fáil roimhe seo chomh ciontach agus atá an Rialtas seo, go háirithe maidir le Anglo Irish Bank. B'fhéidir go bhfuil siad níos ciontaí fós, mar chothaigh siadsan an fhadhb sa chéad dul síos. Má tá duine ciontach agus má leanann sé ag cur leis an coir agus an botún atá á dhéanamh, tá sé níos ciontaí fós. Sa chás seo, tá an Rialtas seo chomh ciontach céanna le Rialtas Fhianna Fáil a chuaigh roimhe. In ainneoin gurb é Fianna Fáil a chothaigh an ghéarchéim sa tír seo agus a rinne scrios ollmhór ar an tír agus an geilleagar, tá polasaithe an Rialtais seo ó shin ag cur le sin agus leis an agenda céanna.

In the various speeches from Deputies just now we were called upon to be constructive and responsible. People were described as ostriches. I am not an ostrich and I hold my head up high because I believe in Ireland — I would not be here otherwise. However, many people in the Chamber seem to believe that they must be good Europeans first and they have forgotten about the need to be good Irish people — Éireannaigh maithe. This, in the face of demands from faceless gamblers, to whom they are willing to kowtow and give away Irish taxpayer's money hand over fist when it is not required. We saw as much earlier today and it appears we will see it again in January when a further €1.2 billion will be handed over to faceless, unsecured bondholders. This is the consequence of this Government taking power but it is totally contrary to the position adopted by the Minister for Finance in June this year, when he asked for the support of US officials in his application to burn senior bondholders. He might not have received that support or the support of Europe but that was the position he took publicly in the United States. What has changed since? Nothing has changed from the point of view of Ireland except that we are in a bigger hole now than we were at that stage.

The Government figures prove that austerity is not working in this State and cutbacks will not achieve the desired aim. The Exchequer deficit now stands at €22.2 billion, much of which is due to the bailout of Anglo Irish Bank and the recapitalisation of the other banks. There is a pot within that which does not need to be spent and should not be on our deficit book, namely the €711 million which was handed over today. The €3 billion handed over every year in promissory notes could be better invested in services and setting up a proper fund to create jobs.

The figures show that income tax receipts are down and projected VAT receipts have decreased by €383 million, a figure which will rise to €500 million by the end of the year. People are not spending because they do not have money. The only figure which has increased is income tax take, a result of the universal social charge, which is on the back of——

Deputy Brian Hayes

And the pension levy.

Deputy Aengus Ó Snodaigh

Exactly, which affects the ordinary working classes in the main.

All of that money has been taken out of the Exchequer and is contributing to job losses. Europe may not be interested in this and it is perhaps why the Minister was not pushed about attending the latest emergency meeting to deal with the euro crisis. The consequences of what is happening are that people are becoming unemployed, children are going to school hungry, children with disabilities do not receive proper services and hundreds of thousands of Irish people are emigrating.

People are not going abroad to get work experience to return in a year or two, despite what some people seem to think. They are moving lock, stock and barrel to Australia, America, New Zealand and further afield. The investment of the Irish people is being lost to future generations. Their skills are being lost to our economy, yet nothing is being done. The Government is more concerned about dealing with Anglo Irish Bank bondholders than creating jobs.

If we asked for a similar write-down of debt to that obtained by Greece our debt would probably be sustainable. It would be easier for us to begin to rebuild our economy in which people have work and can pay their fair share. The vast majority of Irish taxpayers are on low and medium incomes and are suffering the consequences of the ills of the previous Government but the problem is being compounded by the ills of the current Government.

I am being constructive in saying that the money can be spent in another way and we could have a stimulus package to help retain some of the jobs in the retail industry. Such a proposal is constructive and not, as other Deputies have suggested, irresponsible. It is irresponsible not to negotiate, set out a stall and demand a write-down. The Government is irresponsible because it has not done that.

The State, because of the Government, has taken an unsustainable course of action to pay unsecured bondholders in full. It is not sustainable because it is morally wrong and economic madness. The term "economic treason" was used by the Tánaiste, a term which could be used to properly describe the current course of action, namely to continue to pump more money into a black hole to sustain a pension fund in Germany or other financial institution while Irish jobs and companies are collapsing left, right and centre.

I am interested in whether the Taoiseach is answering to what he considers to be his real boss. His real boss is the Irish electorate. However, he seems to accept what comes from the diktats of Angela Merkel and those in the Christian Democratic group in the European Union and that what he is doing is being a good European. There is nothing Christian about making the poor suffer for the benefit of the rich. In the Bible I read, I thought it was the other way around, that is, that the rich were supposed to suffer to help the poor. The script might have been rewritten by the Government, as the Minister and the Taoiseach have rewritten their pre-election promises.

The poor should not be suffering the consequences of greed and arrogance but they are. We are calling, in a constructive fashion, for another direction because the approach of this and the previous Government is not working and will not work. It is making life unbearable for hundreds of thousands of people in the State. It is unjustifiable because such people did not cause the problem in the first place or benefit from the greed or arrogance of those who went before them.

Unsecured bondholders should not be paid a red cent. Frankfurt's way should be rejected. In its election literature the Labour Party said it was "Labour's way or Frankfurt's way". The same situation pertains now. There is a different way which involves investing Irish taxpayers money and ensuring over time we pay our sovereign debt. Nobody is saying we should welch on it but we will pay it when we have the money and are good and ready.

We should invest money in jobs and recreate the economy. We can then consider addressing Ireland's debts. In the meantime the Government should go to the 15th EU crisis meeting and ask for a similar write-down to that of Greece, which it might get. It would make the situation sustainable for the Irish people.

Minister of State at the Department of Public Expenditure and Reform (Deputy Brian Hayes)

This has been a useful debate because it has exposed a number of very clear positions between the Opposition and Government. There is a majority view in the House for the position as outlined by the Government, a position which stands.

I wish to take up some of the points made by Deputy Ó Snodaigh. Like him, I believe in Ireland and the future of the country. I want a future in this country for my children and everyone else's children. We will only have that if the country can get back on its feet. We are a small, open economy and depend on traded goods and services. Our reputation is crucial in that regard. The idea that we would follow the default position, as the Deputy correctly outlined in regard to Greece, would be a recipe for disaster for this country.

He rightly points out the misery that Irish people have to bear as a result of unemployment, reductions in services and the like. The misery would be compounded threefold this year in terms of the adjustment that would be required if we were to follow the option he and his party have articulated. With the greatest respect to the Deputy, the Government is not prepared to play with people's lives. If one is prepared to follow the Greek option of default, then one is ready to engage in a gigantic game of chance. If Ireland had chosen that option, it would immediately have been obliged to find approximately €16 billion for the current year's budget as opposed to €6 billion. It is as a result of this that I and the majority of other Members occupy a position which is fundamentally different to that held by the Deputy.

There is one group in the House — which comprises the Deputy and others — the members of which argue that for Ireland to go forward, a unilateral position must be adopted. There is another group on the Government side — until recently I thought this group included Fianna Fáil but that party has now caved in to populism — the members of which argue that the option for Ireland is to proceed through negotiation. I argue that our position is best advanced by negotiation rather than by taking unilateral positions on any of the issues under discussion. It is in our national interest to attempt to obtain better terms and conditions in respect of the deal that was put in place by the previous Administration. The Government has enjoyed some success in this regard. I accept that such success has been limited in nature but it is success nonetheless.

In May, in the context of the jobs initiative announced by the Minister for Finance, we were successful in overturning some of the decisions taken by the previous Government and in reducing the rate of VAT. One of the reasons this month's VAT returns announced earlier today are down is that we lowered the rate in respect of certain goods and services from 13% to 9.5%. I accept that this is not the only reason for the decrease in VAT returns and that the problems relating to the domestic economy continue to have an impact. The reduction in the rate of VAT came about as a direct result of our policies, one of which relates to a desire to improve the experience of tourists who visit this country. In July, we concluded a significant settlement in respect of the amount of money the country is borrowing and the period over which it will be obliged to pay it back. This development also came about as a result of negotiation. Was it helped by the fact that the position of Greece had taken centre stage at that point? The honest answer is "yes". However, it was also helped by the fact that we had been involved in careful negotiations with our EU partners in respect of the range of funds that were to become available.

What is our next plan? We want to discover whether we can redesign the promissory notes that were put in place by the previous Administration. The amount to be repaid in respect of those notes is €47 billion. This will have to be repaid by this Government, and that which succeeds it in 2015 or 2016, over a ten-year period. Would it make more sense to repay that €47 million over a longer period and at a lower rate of interest? The answer is "yes". I do not state that we will have immediate success. If we are successful in respect of the €47 billion to which I refer and on redesigning the promissory notes relating to Anglo Irish Bank, that would be infinitely better — I suggest that any honest person would agree with me — than matters going to the wire in respect of the debt of that bank.

It remains the Government's position that it would have wanted to do something different with regard to the senior debt of €3.7 billion that remains on the books at Anglo Irish Bank. Some of that money was repaid today and the remainder will be repaid next year. However, our opinion does not reflect the majority view of the ECB. To return to the Deputy's argument regarding unilateralism as opposed to mine in respect of negotiation — and taking into account what the Minister for Finance said earlier with regard to the lesser of two evils — we must ask whether it would be better to accept the view of the ECB on this issue in the hope of being in a position to try to negotiate something better in the future. In a nutshell, this is the approach we have adopted.

In the run-up to the general election, I did not state — I challenge people to prove me wrong — that there would be unilateral burden-sharing in respect of senior debt. I stated — as reflected in our manifesto — that we would immediately introduce burden-sharing in respect of subordinated debt. We managed to achieve this in the context of recapitalising the banks. However, we did not give a unilateral guarantee to the effect that we would do this outside the framework of the ECB.

When he spoke about this issue in the United States during the summer, the Minister was correct to state that it should be firmly restored to the agenda. That is what one does in negotiations. As a means of achieving something greater, one brings forward issues about which one feels strongly. As other Deputies and I are aware, people feel passionately about this issue because Anglo Irish Bank is no longer functioning. As the Minister stated, that institution is a warehouse. In the context of our ongoing negotiations, I am not prepared to take the risk that we would not be able to achieve our objectives as a result of taking a firm stance on this issue, particularly when the greater prize is a write-down in respect of some of the promissory notes and an extension to the repayment period.

The ECB has invested a great deal of money in Irish banks. To date, it has provided the banking sector here with up to €110 billion in liquidity. The interest rate which applies in respect of this is 1.5%. If any of the Deputies opposite can identify another international agency or institution which would be prepared to lend €110 billion in liquidity to Irish banks at a rate of 1.5%, I would love them to do so. Ireland is on a life support machine, not just in terms of its current deficit but also with regard to the banks. There is agreement among Members that the two banks which are systemically important are AIB and Bank of Ireland. If we want these two pillar banks to have a future, then we should not argue in favour of a 50% haircut. How could we possibly attract private sector funds for those banks if we took a unilateral decision in respect of them tomorrow morning? That is not the way in which developed economies operate.

A 50% haircut similar to that which will apply in the case of Greece does not represent a solution to our problems. Such a development would give rise to a nightmare scenario similar to what would be experienced in a nuclear winter. Ireland would be frozen out of the markets for a considerable time if such a haircut were applied to our debts. Greece will be in the accident and emergency department for more than a decade.

Many Deputies have asked about the Government's plan. Our ambition and our objective is for the country to return to the markets by the latter part of 2013 in order that we might be able to fund our own way again. The only way this can be achieved is by taking a strong position on this issue and by working with our partners in Europe and the IMF to ensure that we can obtain a better deal. We must renegotiate the current deal in Ireland's interests and we must do this is a clever and significant way rather than by engaging in the kind of stampede politics which those on the benches opposite appear to favour. There is not any credibility in politics of that type. We will emerge from the programme and regain our economic sovereignty and the independence Irish people cherish.

Deputy Billy Kelleher

I welcome the opportunity to discuss this issue. I thank the Government for agreeing to demands put forward by the Opposition last week to the effect that the House should sit today to debate it. This is an extremely important issue for us, as European citizens, and for the nation, as a political entity in the context of the European Union and the eurozone. I welcome the comments by those on the Government side in respect of the challenges we face and the difficult choices and decisions which must be made. Unfortunately, these decisions will give rise to pain for citizens across Europe. That pain has never been more evident than today, particularly when one considers the decision taken by the Government of Greece to hold a referendum on the bailout and the potential for a haircut of 50% in respect of its debt which has been foisted on it and its people by the European Union.

Dáil Éireann debate - Wednesday, 2 Nov 2011

Developments in the Eurozone: Statements (Resumed)

Dáil Éireann debate -
Wednesday, 2 Nov 2011