Dáil Éireann debate -
Tuesday, 8 Nov 2011

Vol. 745 No. 4

Leaders’ Questions

Deputy Micheál Martin

On 3 November, the new President of the European Central Bank, Mr. Mario Draghi, announced a cut in the bank's main policy rate from 1.5% to 1.25%. This was as result of what he described as a mild recession looming for the eurozone by the end of the year. The Minister for Finance, Deputy Noonan, rightly responded to the rate cut last week by stating the banks obviously should pass on the cut to both tracker mortgage customers and those holding standard variable rate mortgages. The Central Bank also put pressure on lenders to pass on the rate cut to all mortgage borrowers. However, tens of thousands of variable rate mortgage holders still do not know whether their lenders will pass on the interest rate reduction from the bank. Some banks already have indicated they will do so but others have indicated clearly the opposite. The Danske Bank-owned National Irish Bank as well as Ulster Bank have stated they will not be passing on the ECB's latest rate reduction. Alarmingly, National Irish Bank has just confirmed that not only is it not passing on the rate cut but it intends to raise its variable mortgage interest rate by up to 0.95% next Friday. Surprisingly, Bank of Ireland and Allied Irish Banks have failed to indicate whether they intend to follow suit. We are all aware of what banks are obliged to do by contract and what they have discretion over. However, the Taoiseach said he would consider changing legislation if lenders failed to pass on rate reductions. As he knows, the Financial Regulator has been saying this for some months now. The Taoiseach indicated that he would see what headway the Financial Regulator would make — I think he used the phrase "we will wait and see" how the regulator gets on. I suggest that the time to "wait and see" is now well and truly over. Mortgage holders need to see urgent action by the Government on a number of fronts. The Taoiseach indicated that the banks would be forced to absorb interest rate rises rather than customers.

What work has the Taoiseach done in the intervening months in regard to the preparation of legislation to require banks to pass on mortgage rate reductions? If there is such work, when can we expect its publication?

The Taoiseach

This is a matter Deputy Martin and I can agree on. Everybody in the House will have been contacted in their jobs as public representatives about people who are distressed, concerned and very anxious about the difficulties being caused by the extent of mortgage repayments. Deputy Martin is aware that a number of facilities are already in place. The Government put together a group which resulted in the Keane report and its ten recommendations. Arising from that, I can inform the Deputy that personnel from the Minister for Finance's Department have been meeting with different groups which are outside the Keane group and which have proposals to put on the table, as it were, so there would be a full capacity for the Government to respond in whatever way it can. Deputy Martin is aware of the necessity to deal with the personal insolvency Bill, which has a fundamental bearing on the whole question of mortgages and mortgage distress.

In respect of interest rates, I have not prepared legislation and I will tell the Deputy why. Mr. Elderfield some time ago said quite clearly that if he was having difficulty with banks passing on the interest rate reductions, he might well seek support from the Government. I have not had contact from Mr. Elderfield since he made his comments. Nonetheless, I say to Deputy Martin that I do not believe it is fair at all that a bank, because it priced itself in a particular way on tracker mortgages, should assume it can make up for a shortfall there by increases that are causing serious trouble for persons on variable rate mortgages. I do not believe it is fair that this should apply in the case of any banks. The regulator, as Deputy Martin is aware, has a completely independent role in this regard, which is to oversee the level playing pitch that operates in respect of banks and the competition between them.

Arising from Deputy Martin's question, I will say this. If Mr. Elderfield as regulator comes to Government and says in respect of the latest ECB reduction in interest rates, which I support and which may be the first of a number, that he is having difficulty having the banks pass this on to the hard-pressed consumer——

A Deputy

Why wait for him?

The Taoiseach

——I will certainly be prepared to engage with him with a view to increasing his powers to deal with this matter effectively.

Deputy Micheál Martin

I am extremely surprised the Taoiseach has no legislation prepared and that, clearly, no work has been undertaken in recent weeks or months to prepare such legislation. The Keane report came to Government more than six weeks ago but no decisions have emanated from that report, as has been confirmed by the Minister, Deputy Joan Burton. Every single commitment that was made to mortgage holders has been reneged upon and has not been followed through. I say this genuinely in terms of the commitments received some months ago by first-time buyers and the question of interest rates being absorbed by banks rather than mortgage holders, as well as the Keane report.

The Taoiseach said clearly that he would consider the introduction of legislation to force the banks to pass on these interest rate reductions. The banks will not believe anything the Taoiseach says until they see the legislation published and they see that he and the Oireachtas mean business. Otherwise, they will be thumbing their noses at the Taoiseach and at the thousands of mortgage holders across the length and breadth of the country.

Deputy Pat Rabbitte

The Deputy has a good track record of banks paying attention to him.

Deputy Micheál Martin

It is a very serious issue for the hard-pressed mortgage holders across the country.

An Ceann Comhairle

The Deputy's time is concluded.

Deputy Micheál Martin

It is incredible and unbelievable that we do not know what banks such as AIB and Bank of Ireland, which we have substantially recapitalised through the taxpayer, will do on this. There should be no question of what they should do on this, and the Taoiseach should make this clear. Has he or any member of the Government spoken to AIB or Bank of Ireland, for example, to make sure they pass on these rate reductions to hard-pressed mortgage holders?

The Taoiseach

No decisions have been made yet for the simple reason that there are a number of matters that need to be dealt with.

Deputy Finian McGrath

Such as?

The Taoiseach

Some groups that had valid proposals to put forward were not included in the Keane report. It is important, if we are to implement a package for mortgage holders in so far as we can, that it be as inclusive as possible. Central to that is the very complex legislation that deals with personal insolvency. We do not want to bring in legislation that creates an incentive for people to become bankrupt, out of which the taxpayer would have to fork out further moneys. It is a very delicate balance to be got——

Deputy Michael McGrath

It is a fudge.

The Taoiseach

It is an issue on which the views of Deputy Martin and his party will be sought when that comes before us. On the question of preparing legislation for the regulator——

Deputy Micheál Martin

We have tabled legislation.

The Taoiseach

——I can only do that when I know what the regulator wants.

Deputy Barry Cowen

Then take the initiative.

The Taoiseach

The legislation would be in respect of enhancing the powers and the authority of the regulator to do his duty. He has to ensure a level playing pitch across the board.

Deputy Michael McGrath

The Government is supposed to give him direction.

The Taoiseach

It is not fair that this should apply where banks price themselves in a particular way for tracker mortgages and are now seeking to make gains from whose who are on variable rate mortgages.

Tomorrow, I will have the AIB and Bank of Ireland in before the Economic Management Council because I want to find out whether they are living up to their commitment to lend €6 billion before the end of this year in respect of small businesses and job opportunities.

Deputy Finian McGrath

They are not.

Deputy Timmy Dooley

Has the Taoiseach asked them about the interest rates?

An Ceann Comhairle

We are over time on this question.

The Taoiseach

Those sitting behind Deputy Martin are very vocal today. The point is this. If the regulator comes before Government and says "I need enhanced powers——

Deputy Micheál Martin

Has the Taoiseach asked the AIB and Bank of Ireland before——

An Ceann Comhairle

Sorry, Deputy, we are over time.

The Taoiseach

I have the banks coming in tomorrow. The point is that if the regulator comes in here and says "I need enhanced powers in the following areas", the Government will certainly engage with the regulator in the interests of the consumer.

Deputy Micheál Martin

So the Taoiseach has not spoken to them. That is the point.

Deputy Gerry Adams

I understand the Cabinet met this morning to decide how many capital projects to cut. Will the Taoiseach tell the House what these are? We know the Government will cut €750 million next year — that is 7,500 jobs. On Friday, the Government published its medium-term fiscal statement which promised four years of austerity, four years of cuts in public services and four years of higher taxes. What is most striking about all of this is that it confesses that at the end of that time there will still be nearly 500,000 people on the dole. De bharr pholasaithe an Rialtais cuirfear brú ar na mílte daoine, Éire a fhágáil agus beidh maoin an Stáit, maoin gur leis an phobal é, díolta ag an Stát. I rith an gheimhridh seo chugainn, braithfidh fir, mná agus páistí an fuacht a bhaineann le polasaithe an Rialtais.

There is an alternative, there is a better way. Tá a fhios ag an Taoiseach go bhfuil slí eile agus bealach níos fearr ann. Why does the Government not take the €5 billion that remains in the National Pensions Reserve Fund and invest that in job creation? It should not give any more money to unguaranteed bondholders and toxic banks——

Deputy Pat Rabbitte

And end up like Greece.

Deputy Gerry Adams

——and should instead use taxpayers' money to build schools and hospitals, roll out broadband, create jobs and set the economy on the road to recovery.

The Taoiseach

The Cabinet met this morning and it signed off on the capital programme for the next few years. Deputy Adams's name was not mentioned at Cabinet in any shape or form. It was not a Cabinet meeting about abandoning projects but dealt with the building of projects and the provision of a very substantial programme of initiatives to create work and provide infrastructure facilities that are very important for the country. The Deputy ranges on about the subordinated bondholders and the €5 billion left in the National Pensions Reserve Fund. I am completely unhappy with the scale of unemployment in the country and that is the reason the Government has taken the view that we should not tax work or employment, where it can be helped. The programme for Government sets out several initiatives to allow people to be taken off the dole, to reward people for taking the initiative and for creating job opportunities, so that people can have dignity, a life, a career and an opportunity to contribute to their local areas and to their country. That is where the Government is putting the emphasis after it meets the conditions to which it had to sign up in respect of the reduction to 8.6%. The capital programme will be announced in detail on Thursday and then Members will have an opportunity to comment in the knowledge that they have all the facts, on the opportunities that will present to create and build the infrastructure over the coming years.

Deputy Timmy Dooley

There is no way one could tell a man the jobs are gone.

An Ceann Comhairle

Deputy Adams has one minute.

Deputy Gerry Adams

In the interest of co-operating with the Government, and I note that the Taoiseach did not take the opportunity to tell Members about the capital projects, I suggest, as I have said many times, that the Government will not cut its way out of the recession. Is it the case that between the Cabinet meeting today and the announcement on Thursday that the Taoiseach must go off and get permission from the troika, perhaps the best way out of this is to cut out the middle men. Why do the troika not come here and make their announcement directly to the Dáil and then we can discuss that issue? Unless we grow the economy and create jobs, there is no point in the Taoiseach telling us how unhappy he is about the number of people on the dole. His responsibility in Government and our responsibility in Opposition is to assist the Government in getting people off the dole and into meaningful employment.

An Ceann Comhairle

The Deputy can assist me by asking a supplementary question.

Deputy Gerry Adams

Yes. Given the announcement made by the Taoiseach on Friday, why does he not face up to the fact and tell the Dáil, that December's budget will cut public services, push up the unemployment rate, increase taxation and that it is neither a jobs nor a growth package?

The Taoiseach

The Deputy has made the case for a very long time that his party would not cut its way out of a recession and that it will not tax its way out of recession. It is the responsibility of Government to create initiatives and to bring about opportunities so that employment can be created and jobs can come on line and people can be taken off the dole and contribute. The Deputy's party has a very different set of views from any other party in the House. In fact if we were to follow the Deputy's advice of last week, we would be heading down the very rocky road that the citizens of Greece find themselves on not only for the next four years but for the next 15 years, in spite of the Deputy's protestations.

Deputy Caoimhghín Ó Caoláin

Not a chance.

The Taoiseach

If Deputies read the report of what is happening on the streets of Greece from the Prime Minister Papandreou, he would get a feel for that. We have no intention of heading down that road. In balancing our commitments, we will emphasise every opportunity that we can for job creation and employment. Deputy Adams and his party and Deputy Martin and his party will have an opportunity to bring forward ideas and proposals. If any Member has a good idea, I will be prepared to listen to it.

Deputy Gerry Adams

I want the Taoiseach to do more than listen.

The Taoiseach

Do not come into this House, ranting and raving about burning bondholders and all the rest of it. We have to face reality.

Deputy Timmy Dooley

We have to face change.

(Interruptions).

The Taoiseach

The Government has set out its programme and we are now looking for flexibility under the EFSF to get a far greater potential return in reducing the burden on the Irish taxpayer, than the sort of policy the Deputy talked about.

(Interruptions).

Deputy Shane Ross

I am glad the Taoiseach mentioned the EFSF because I wish to ask him a question about it. The Taoiseach will be aware that in about 25 minutes time Mr. Berlusconi is facing a crucial vote and the focus of Europe is moving from Greece to Italy. We are facing a situation that was unthinkable two or three months ago, the ultimate collapse of the euro. The Government's response to the present crisis appears to be for the Minister for Finance and other Government spokespersons to say that what we need is what he calls a financial firewall. We have a problem. There is no financial firewall. The EFSF is not taking off. Mr. Regling went to China last week with the begging bowl and the Chinese said "no". Mr. Putin has already said "no". Ms Angela Merkel let the cat out of the bag last week when she said that emerging markets had also said no. The EFSF is not able to raise the funds because Europe is bad news in the financial world and the markets are signalling quite clearly that the situation is worse than critical. On top of that the EFSF tried to raise €3 billion, a significant figure, last week in the markets and it pulled that particular bond sale. Yesterday, it limped over the line.

The message I am trying to give is this. If the situation continues, very shortly every country will be running for its own lifeboats. In that situation, which I hope does not arise, may I ask the Taoiseach what is plan B for Ireland?

Deputy Gerry Adams

What is plan A?

The Taoiseach

I do not speak for the Italian Government, Deputy Ross, and what the elected members of the Italian Government do is a matter for themselves.

Deputy Barry Cowen

We have enough trouble.

The Taoiseach

The presentation given by the Italian Prime Minister at the Heads of Government meeting was a 15 page document of austerity reforms that he pledged — and he had a majority at that time — to implement in the interests of complying with the conditions that were agreed to by the Heads of Government of the European Union. I believe in politics and in political leadership and that when it makes a series of decisions that these things can work. I agree with the Deputy that there is a problem, an absolute confusion and a great deal of uncertainty. I have stated my views on this before. The only unlimited firepower, in financial terms, is the ECB. Obviously there are very different views, as Deputy Ross knows, within the ECB and the countries of the eurozone about this. The decision taken at the Heads of Government meeting was to use the two facilities, to leverage up the facility under the EFSF to more than a trillion euro and there are complications about that. I note that Mr. Draghi has made his comments that in the meantime the European Central Bank would continue to buy paper in whatever volume, as is necessary. I agree that the complexities arising from the technicalities of the deal to leverage that money still have not been worked out which leaves the ECB in the mainframe, as it were. Beyond that, this is a case of political leadership focusing on the decisions that must be made and those decisions are: to implement what was agreed at the Heads of Government meeting; to create that firewall; to put in place the technical decisions that are required under the insurance facility and the special service vehicle to leverage it so that the firewall can be created and the contagion, which everybody fears, does not spread beyond here.

The situation in Greece seems to have focused a little more clearly on what the future holds. Clearly the decision of the members of the Italian Parliament in the next few minutes may well decide the direction they will take in the future. The very strong feeling at the meeting of the eurozone leaders was to take the political decisions that are necessary to deal with the matter comprehensively. On behalf of Ireland, I contributed to that debate in several areas, with a particular emphasis on not losing focus on countries such as Ireland, because the focus and energy has been on Spain and Italy, to a great extent, arising from the situation in Greece. We do not want to see countries that are being bailed out, but are actually making progress, being left behind. I think that is well recognised now.

Deputy Shane Ross

I understand what the Taoiseach is saying.

Deputy Timmy Dooley

The Deputy is the only one who does.

Deputy Shane Ross

In the House of Commons yesterday the British Prime Minister, Mr. David Cameron, was asked if the British Government had a contingency plan should the euro collapse. He specifically answered "Yes." I am asking the Taoiseach to do likewise. For understandable reasons, he would not want to reveal the plans, but the people would like to know if the Government has plans in place should this catastrophe happen. It is not necessarily likely to happen, but it is a real possibility. Will the Taoiseach assure the House that, in the event of a collapse of the euro, there are plans in place in the Department of Finance, the Central Bank and all Departments of State to deal with such a situation?

The Taoiseach

Unlike what happened some years ago, I do not expect, if there is a crisis within the eurozone, a decision to be taken at 2.30 a.m. with only a few people present. I would expect the leadership of the eurozone to call a special Council meeting if there was to be a focus on a particular crisis or a particular aspect of a crisis. I believe strongly that the European leadership will deal with this issue politically. I am not contemplating the failure of the euro or the break-up of the eurozone.

The comments and remarks of all of those who attended the eurozone meeting were about the need to protect the euro and continue the eurozone. The British Prime Minister, Mr. Cameron, made a point at the prior meeting of the 27 Heads of Government about its importance. Although Britain is outside the eurozone, he appreciates the impact and importance of the Single Market and its potential. In fact, he circulated a document at the second last meeting that I supported strongly on the European Union leveraging the potential for job creation and marketing under the Act.

We focus on what needs to be done. The eurozone Heads of Government made their decision which was thrown into turmoil by the decision of the Greek Prime Minister. That matter appears to be clearing up, with the emphasis shifting to Italy. I expect this matter will be dealt with comprehensively also. If necessary, we will have another meeting of the Council if there is another crisis to deal with. As I said, before the last two meetings, I had hoped we would be able to move this process to a point where the decisions taken would be clear, unequivocal and comprehensive in the interests of the eurozone and the protection of the euro. That is our focus.

Deputy Shane Ross

Therefore, there is no plan B.

Deputy Finian McGrath

There is no plan at all.

Deputy Pat Rabbitte

Does the Deputy have a plan?

Deputy Finian McGrath

We have a plan B and a plan C also.

Deputy Pat Rabbitte

Which way is the wind blowing?