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Dáil Éireann debate -
Tuesday, 8 Nov 2011

Vol. 745 No. 4

Promissory Notes: Motion

Tairgim:

That Dáil Éireann,

noting that:

following the transfer of its assets to the National Asset Management Agency (NAMA) in 2010, Anglo Irish Bank was left with toxic debt of €30.6 billion;

from March to December 2010 the Government issued a series of promissory notes to Anglo Irish Bank and Irish Nationwide Building Society totalling €30.6 billion;

these promissory notes placed an obligation on the State to pay Anglo Irish Bank €30.6 billion;

the interest rate charged on these loans by Anglo Irish Bank will cost the State an additional €16.6 billion;

this debt, totalling €47 billion, amounts to 27% of the State's debt-to-GDP ratio;

the repayment of this debt will take place over a twenty year period from 2011 to 2031;

as the State will have to borrow money to service this debt, it is reasonable to assume that an additional cost of at least €28 billion will be incurred by the State in interest payments on monies borrowed to pay the €47 billion to Anglo Irish Bank;

this additional cost is calculated at an interest rate of 4.7% based on average cost of funds raised by the National Treasury Management Agency (NAMA) in the bond market in 2009 and 2010;

on this basis, the cost to the State and the taxpayer arising from the promissory notes will be at least €74 billion up to when the final payment is made in 2031;

a number of economists argue that this is a conservative estimate and the cost of servicing this debt will be much higher, possibly four times greater than all the combined ‘austerity' spending cuts and tax increases to date;

the first transfer of money to Anglo Irish Bank arising from promissory notes took place on 31st March, 2011, totalling €3.1 billion;

annual transfers of €3.1 billion will be made every year on 31st March from 2011 through to 2023;

from 2024 the annual transfers will gradually decrease from €2.1 billion in 2024 to €0.1 billion in 2031;

these annual payments do not include the additional cost of the interest on monies borrowed to service the €47 billion transfer to Anglo Irish Bank;

alongside these payments Anglo Irish Bank, now operating as Irish Bank Resolution Corporation, will continue to use taxpayers' money to pay unguaranteed, unsecured senior bondholders;

on 2nd November, 2011, the Government allowed Anglo Irish Bank to pay a single unguaranteed, unsecured senior bond to the value of $1 billion despite enormous public opposition;

on 25th January, 2012, Anglo Irish Bank will pay out a single unguaranteed, unsecured bond to the value of €1.2 billion;

on 28th June, 2012, Anglo Irish Bank will pay out a single unguaranteed, unsecured bond to the value of €454 million; and

twenty four additional unguaranteed, unsecured senior bonds with a combined value of €800 million will be paid out from January 2012 through to April 2018;

agrees that:

the former Fianna Fáil-Green Party Government were wrong to issue these promissory notes;

this decision undermined the public finances, increased the deficit and damaged the social and economic stability of the State;

the current Fine Gael-Labour Government must make clear that it is not in a position to pay this toxic private banking debt;

the Taoiseach, Enda Kenny T.D., and the Minister for Finance, Michael Noonan T.D., should enter into immediate discussions with the European Central Bank to have the promissory note withdrawn and to remove this toxic private banking liability from the State and the taxpayer;

the Government should seek support from our European partners in this endeavour on the grounds that removing the obligation created by the promissory note would reduce our debt-to-GDP ratio to approximately 87%, easing the State's transition back to the international bond markets and assisting in reducing the deficit and returning the economy to sustainable social and economic development; and

the practice of using taxpayers' money to repay the promissory note must end; and

calls on the Government to intervene to prevent Anglo Irish Bank from using taxpayers' money to repay unguaranteed senior bondholders.

Ba mhaith liom mo chuid ama a roinnt le mo chomhghleacaithe.

The Anglo Irish Bank promissory note is a national scandal. It is one of the biggest scandals of the entire banking crisis. It will cost the taxpayer at least €74 billion by 2031 and according to some economists may cost up to €90 billion. That the Fianna Fáil-Green Party Government signed the taxpayer up to this toxic private banking debt will surprise no one but that Fine Gael and the Labour Party continue to support its payment is truly shocking. Next month the Government will bring forward a budget that will wrench €3.8 billion from the domestic economy in spending cuts and tax increases aimed at the same groups of people targeted by the previous Government, namely, low and middle income earners, the working poor, the unemployed and those on social welfare. Despite this, one of the first acts of this Government was to give Anglo Irish Bank €3.1 billion of taxpayer's money on 31 March. This was the first instalment of a 21 year long transfer of taxpayers' money to Anglo Irish Bank.

According to the medium term fiscal statement published by the Government last Friday, it proposes an adjustment of €12.4 billion from the economy between 2012 and 2015. During this same period it will give Anglo Irish Bank exactly the same amount of money. To any ordinary intelligent person this simply does not make sense. Out in the real world people are asking why this money cannot be used to fund investment in jobs, hospital beds for people languishing on trolleys, special needs assistants for children with disabilities, adequate payments for pensioners suffering from fuel poverty or adequate allowances for carers in the home. How is it that a Government which criticised its predecessors for issuing these promissory notes now willingly hands billions of euro of taxpayers' money to Anglo Irish Bank at the same time as increasing taxes on working families, cutting services to those in greatest need and abandoning more than 447,000 people to the dole queue? How did we get to this point?

In 2010, after NAMA bought assets from Anglo Irish Bank at a significant discount, the bank was left with a €30.6 billion hole in its accounts. The bank was completely insolvent and was locked out of the interbank market. The State did not have enough money to fill the hole, having already given Anglo Irish Bank €4 billion in 2009, and as an insolvent bank it was ineligible for ECB emergency liquidity assistance. The Government and the Central Bank came up with a brilliant plan. The Government would give the bank an asset, known as a promissory note, to balance their books. This asset is essentially an IOU committing the Government to fill the black hole in the bank's assets over a 21 year period. Emergency liquidity would continue to be provided via the European and Irish Central Banks and once in receipt of the annual cash transfers from the Government, the bank would use that money to repay the Central Bank its emergency liquidity loans. Back in Frankfurt the European Central Bank, as the ultimate source of the emergency liquidity assistance, was reassured that the money it was lending to the Irish Central Bank and then on to Anglo Irish Bank would eventually be paid.

In short the Irish taxpayer would pay the €30.6 billion of toxic debt run up by Seán Fitzpatrick and his developer friends, while the bankers and developers would walk away scot free. The bill does not stop there, however. The interest that has to be paid on the €30.6 billion amounts to an additional €16.6 billion, which means the actual amount that will be transferred from the taxpayer to Anglo Irish Bank will not be €30.6 billion but a massive €47 billion between 2011 and 2031.

The first instalment of this massive bank bailout was paid by the Fine Gael-Labour Party Government on 31 March 2011, when it handed over €3.1 billion of taxpayers' money to Anglo Irish Bank. The same amount will be paid out again on 31 March 2012 and every year until 2023, after which smaller payments will be made through to March 2031. This is not the end of the story. The Government will have to borrow this money to meet the annual pay-out and it will have to pay annual interest on those borrowings. While it is impossible to state exactly how much this extra interest payment will cost, on the basis of pre-euro crisis Irish interest rates the extra cost until the last payment is made on 31 March 2031 will add €28 billion to the total bill. This would mean the total cost to the taxpayer of the Anglo Irish Bank promissory note will be €74 billion by the time the final payment is made in 2031.

A number of independent economists, including Michael Taft, Tom McDonnell and Michael Burke, estimate that the final bill for the promissory note could be between €80 billion and €90 billion. These sums are staggering. To put them in perspective, €74 billion means that every single man, woman and child in this State will pay €16,157 to cover the promissory note to a toxic bank that no longer holds deposits. This is €24 billion more than the cost of running for State for a full year. It would fund the entire health system for nine and a half years. I do not understand how anyone in government can stand over this. The simple fact is that we cannot afford this bill. The promissory note itself amounted to 20% of our national debt in 2010. The annual transfers to Anglo Irish Bank weigh heavily on our annual deficit. Not only is it morally wrong to ask the taxpayer to shoulder this toxic private banking debt but it is socially and economically irresponsible.

The Government must, as a matter of urgency, declare its inability to pay this private banking debt. It must do so on the basis that to try and pay will cripple the economy and further block any meaningful social and economic recovery. Having done this, it must then engage as a matter of urgency with the European Central Bank and its European Council counterparts to negotiate the lifting of this burden from the taxpayer. My party colleagues and I have been calling on the Minister for Finance to take this course of action for several months. In September I raised the matter with the Minister directly, the Governor of the Central Bank and the chairperson of Anglo Irish Bank. I was told the Minister had failed to raise this in any specific way with his European counterparts. I am glad, however, that following persistent questioning from Sinn Féin, he has shifted ground somewhat. At least he now talks about seeking a rescheduling of this debt. If the Minister thinks the rescheduling of interest payments will be sufficient, he should think again. The Government's objective must be to have the promissory notes withdrawn. At the very least, the Minister should seek a lengthy period of non-payment, for example, ten years, at which point discussions on the future of the notes could be reopened. Some will say this is not an achievable objective, that the ECB would withdraw its emergency liquidity assistance from all Irish banks and that the European Union and the IMF would withdraw their programme funding. These arguments are nonsensical, dishonest and, at worst, amount to scaremongering. The withdrawal of temporary liquidity assistance to Irish banks would not only collapse the Irish banking system, it would also bring down the entire European banking system. Does anybody really believe the ECB would pursue this course of action? The withdrawal of EU-IMF programme funding would create market turmoil on an unprecedented scale, bringing with it greater contagion to core eurozone economies and further endangering the euro. Does anybody really believe the European Union and the IMF would pursue this course of action?

It is in the interests of the European Union and the IMF to lift the burden of the Anglo Irish Bank promissory notes from the State. As things stand, with high unemployment and low consumer demand, the prospects for growth in 2012 and 2013 are poor. Interest rates on Government bonds remain at unacceptably high levels. There is simply no way that Ireland will be in a position to return to the international markets in 2013 unless matters improve dramatically. However, the removal of the promissory notes from the national debt, following a successful negotiation with the ECB, would bring our debt-to-GDP ratio down to below90%, reduce the annual deficit by over €3 billion, reduce the cost of servicing the national debt and free up resources to invest in job creation and economic recovery.

It is far from certain that the Government will be able to return fully to the markets in 2013, as is its stated objective. This raises the prospect of a second bailout. A successful outcome on the issue of the promissory notes would not only ensure access to the markets in 2013, it would also likely see an early return to the markets in the first half of 2012. The IMF, the European Union and the ECB know this. The European Union needs a good news story; it needs one of its programmes to succeed. Ireland's failure to re-enter the markets in 2013 would demonstrate that even the poster boy of the austerity programmes could not be cured by the medicine prescribed by the European Union and the IMF. This would have profound repercussions not only for us but also for the eurozone and the Union. As for the ECB, there is an indication that it is open to a policy change under its new president, Mario Draghi. Last week's interest rate cut and the decision to extend the maturity date of the emergency liquidity assistance from three weeks to one year give some room for optimism that the new regime is more open-minded than it was under Mr. Trichet.

There is no moral or legal obligation on the State to continue to use taxpayers' money to pay off Anglo Irish Bank's toxic banking debts. There is also no credible economic argument for pursuing this course of action. The case for lifting this burden from citizens is irrefutable. The issue is not whether the European Union or the IMF can be convinced of this but whether the Government has the political will to stand up for the interests of Irish citizens and secure a better deal than the one it inherited from Fianna Fáil and the Green Party.

Let us be clear about this. The Government was left with a legacy of terrible policy decisions by the last Government. It has the job of cleaning this up. There are many fights worth having in the Minister's task of cleaning up the mess left by the last Government, but the fight that will have the biggest impact on our debt, the budget and, most importantly, the quality of ordinary people's lives is this one. It is time for the Minister to do the right thing and stand up for Irish citizens. It is time to declare that the State will no longer pay the promissory notes, amounting to at least €74 billion, with taxpayers' money up to 2031.

Tá mé an-sásta go bhfuil an tseans seo againn díospóireacht a bheith againn ar an ábhar tabhachtach seo ar an nóta gealltanais do Bhanc Angla Éireannach. As Deputy Pearse Doherty said, paying €31 billion in promissory notes to Anglo Irish Bank and the Irish Nationwide Building society is reckless in the extreme. Tá polasaí díluchtú agus lochtach á n-oibriú ag Páirtí an Lucht Oibre agus ag Fine Gael. It was reckless when the Fianna Fáil and Green Party Government signed up the taxpayer to this toxic private banking debt and it is reckless for Fine Gael and the Labour Party to continue to support its payment. Anglo Irish Bank and the Irish Nationwide Building Society engaged in speculative lending to the extent that they brought the State to the edge of bankruptcy. These banks no longer exist, but they have been merged to form the Irish Bank Resolution Corporation. Figures provided by the Minister for my colleague, Deputy Pearse Doherty, show that the cost of the promissory notes will ultimately be €74.63 billion by the time they are paid off in 2031. Baineann sé seo leis na h-aisíocaíochtaí caipitiúla do Anglo Irish Bank and an suim sa bhreis ar na rátaí úis ar an mhéid iasachtaí atá i gceist. This is a staggering amount of money, equating to almost half the total Government debt this year and over one third of Government debt when we reach our peak debt-to-GDP ratio in the next few years. Ní féidir leis an Stát íoc as seo. Ní féidir le cáin íocoirí íoc as an bhfiacha móra seo.

Paying off the promissory notes calls into question the State's ability to manage the rest of its debt. It is time for the Government to state categorically that it will not pay these promissory notes and to begin negotiations with the ECB to achieve this end. Last week we saw the Government allow the Irish Bank Resolution Corporation to hand over more than €700 million of taxpayers' money to unsecured, unguaranteed bondholders and there are plans to pay another bond worth €1.25 billion in January. This means that within three months the Government will have paid to unguaranteed bondholders the equivalent amount of money it plans to strip away from public services in December's budget, taking money from the elderly, the sick, children with special needs and low and middle income families. This is wrong and does not make sense. It is economic madness. It is bad Government policy and must be stopped. The debt mountain is strangling the economy and will impede recovery for years to come, beyond the lifetime of the Government. It must change tack now.

According to the forecasts outlined in the Government's medium-term fiscal statement released last Friday, the State's debt is due to peak at 118% of GDP by 2013. However, as we have seen under the Minister's watch and many other Ministers, Government forecasts for growth have been notoriously unreliable and are continually being revised downwards. If this continues to be the case, the debt-to-GDP ratio will spiral out of control. This will hamper recovery as the burden of servicing the excessive debt continues to rise. This year the burden of debt servicing amounted to 14% of tax revenues and will rise to 20% in the next few years.

As the Minister knows — it is a calculation or choice being made by the Government — high debt levels caused by the policy of the Government and its predecessor in placing the burden of private banking debt on the shoulders of taxpayers have put the economy in a dangerous position. Ní féidir linn na fiacha seo a íoc agus ní fiacha na ndaoine iad. It is the debt of private bankers. There is no bailout for hospitals, for people on the dole or for those young people who have been obliged to emigrate across the globe. However, there is a bailout for private bankers and speculators and this should stop.

A few short months ago, the Minister, Deputy Noonan, on behalf of the Government promised he would seek to share losses with investors holding unguaranteed, unsecured bonds in Anglo Irish Bank and Irish Nationwide Building Society. I am unsure whether it was the Minister himself or his colleague, Deputy Howlin, who went so far as to describe such bondholders as legitimate targets for haircuts.

That is a Sinn Féin expression. The expression "legitimate target" is a Sinn Féin expression and not ours.

Members were told that burden sharing with bondholders would be sought by agreement and through clear, determined and competent negotiation. A few short months later, the Government's record on negotiation has been found wanting. Despite the pre-election hyperbole of Fine Gael and the Labour Party, they have also been found out because the current Administration's failure to renegotiate this debt, in conjunction with the travesty of its medium-term fiscal statement announced last week, paints its own dismal picture. The last crowd in government walked us into a crisis and the Government now appears intent on keeping us there. Tax revenues continue to fall and the drop in VAT receipts is a grim reflection of the decimation of the domestic economy and people's spending power. These trends are due to the austerity measures directed by the Government at middle and low-income earners and of course growth projections continue on a downward trajectory. Hospital beds remain closed, special needs assistants in schools have become a privilege and not a right and the elderly face into a winter with savage cuts to their gas and electricity allowances.

It is simply wrong and indefensible for the Government to impose such sustained austerity and hardship on the people while at the same time presiding over the payout by Anglo Irish Bank to a single unguaranteed unsecured senior bondholder last week to the value of $1 billion. As the Minister is aware, the Anglo Irish Bank promissory note is an outrage. However, it is simply not good enough for Labour Party and Fine Gael Ministers or their backbench colleagues to come into this Chamber and bemoan Fianna Fáil decisions in government as a fait accompli. By removing the financial obligation on the public purse created by the promissory note, the Government could reduce Ireland’s debt to GDP ratio to approximately 87%. This could ease the State’s transition back into the international bond markets, thereby reducing the deficit and getting the economy and society back on an even keel. While tipping one’s cap to our troika partners in the hope of a pat on the back and a few shillings in one’s pocket is not good Government, it is telling. I believe the refusal to step up and seek openly a renegotiation of the Anglo Irish Bank promissory note and the unsecured unguaranteed Anglo Irish Bank bonds encapsulates the political and social mindset of Fine Gael and the Labour Party in government.

Negotiation is a dialogue in which two sides meet, arguments are made and a compromise eventually is found. I am not talking about a unilateral act but about a process that requires a mature and confident approach. The socialising of private debt is unsustainable. The practice of using taxpayers' money to repay the Anglo Irish Bank promissory note is reprehensible and unnecessary and Ireland cannot afford the social repercussions of paying for speculators' bad gambles on bad banks. The money is needed for job creation, capital investment, next-generation broadband delivery, hospitals, teachers, gardaí and all the services on which citizens legitimately rely. Now is the moment for the Minister and the Government to understand the debt of Anglo Irish Bank is not the people's debt and the people should not be asked to pay the debts of Anglo Irish Bank.

I welcome the opportunity to speak on this important motion. The decision of the former Fianna Fáil-Green Party Government to issue these promissory notes for unguaranteed unsecured senior bonds represents a decision which already has had and will continue to have a devastating impact on the lives of hundreds of thousands of ordinary Irish people. Ultimately, they will cost the taxpayer an estimated €74 billion and could even cost as much as €90 billion. People have become so familiar with talking about exorbitant figures like this that the consequence of such decisions is often lost. However, Members have the moral responsibility to ask how this can be justified. How can this be justified as we watch our children emigrate, our partners lose jobs and our parents being failed by a defunct health service? Moreover, all this is taking place as additional taxes are being heaped in a crude and blunt way onto every worker in the State with a promise of more to come. Health levies and the universal social charge have been imposed while property and water taxes are promised. Ordinary people are suffering greatly to meet their weekly and monthly bills. Mortgages, utility bills, groceries and ever increasing education bills have seen families pressed to the pins of their collars and heaven forbid if one is obliged to depend on the State for social welfare.

It is no consolation when one hears Government spokespersons assert that we must follow this economic pathway, we have no choice and are beholden to the ECB and IMF, which have set out the roadmap we must diligently follow, including the scandalous payment of these promissory notes, to prevent contagion. At the same time, there is a constant suggestion that a better deal is just around the corner. It is suggested that if we are the best boys and girls in the class, if we continue to toe the line at the expense of our people, we will be rewarded at some undefined point in the future. It reminds me a little of the character Baldrick in the "Blackadder" television series, who always had a cunning plan. The Government's cunning plan is like Baldrick's, in that it is not very cunning and is not really a plan.

Separately, it is completely disingenuous of the Government and its spokespersons to continually trot out the line that were it not for this approach, we would be unable to pay doctors, nurses, teachers and gardaí who do such important work every day. In some sort of quick-handed trick, next week's salary is dangled before one's eyes as bus loads of billions are parked outside the homes of the banking and business elites. The current economic strategy is well and truly bust as it fails to deliver jobs or growth. The Government cannot continue down this road on the pretence the world would collapse were we to fight our corner. In fact, by so doing it would give those with us at the heart of Europe the opportunity to deal with this enormous crisis in a real and meaningful way and not in the piecemeal fashion that has marked the Government's efforts to date. The people voted for change last February, much of which was promised by the two Government parties. They have failed to deliver and have failed to live up to their commitments.

Now more than ever, while all around us appears uncertain, Ireland needs a strong and assured Government that will defend the rights of its people to as just an entitlement as that of their European or international colleagues. It needs a Government that will ensure above all that the most vulnerable in society are protected. To date, none of this has been evident. The rules of international capitalism have been thrown out the window. For a well protected few, it does not matter how successful one is at playing the game, as one is a guaranteed winner. Moreover, this is the case even if one had been told specifically at the outset that one was not a guaranteed winner. Unguaranteed can become guaranteed and a winner always stays a winner. In the last two weeks, when faced with a decision between democracy and the markets, Europe spoke loud and clear: the markets rule. Sinn Féin will stand by the people first and not the markets and the Government should do likewise.

Many people watching this debate will be baffled by the figures to which we are referring. Anglo Irish Bank left a toxic debt of €30.6 billion and interest rates charged on these loans will cost a further €16.6 billion, giving a total of €47 billion, and interest on the moneys borrowed by the Government to pay these debts will bring the debt to a massive €74 billion by 2031. If this Government has its way, like its predecessors in Fianna Fáil and the Greens, the debt will all be paid by us, every cent of a massive €78 billion paid by those who never had any hand, act or part to play in creating it.

To put this in perspective, a child born tonight in the Rotunda Hospital will, in 20 years time as a grown adult, still be paying for the mistakes of this and the previous Governments. Every year of that child's life, we will pay €3.1 billion to unsecured bondholders. We have no legal, moral or financial obligation to do so, but Fianna Fáil, the Green Party, Fine Gael and Labour all now believe, apparently, that we must sink in a sea of debt to pay off these bondholders.

While the Government oversees the greatest of grand thefts in history, children continue to receive their education not in schools but in rented portakabins because there are no funds to build schools and no funds to refurbish existing schools. In my constituency of Laois-Offaly, we now have prefab villages surrounding the primary schools. Nursing homes in Abbeyleix, Edenderry and Tullamore are losing beds and the hospital in Abbeyleix is set to close. I attended a protest meeting of more than 1,000 people about this issue last night. This is all simply because the health care system is starved of funds. Community-based drug services and youth services are threatened with further cuts to their funding in this year's budget. A further €3.8 billion is set to be cut out of our economy in this year's budget by a Government which is more concerned with paying off faceless bondholders than serving its own people.

The good news is there is hope. There is always an alternative, which is what we in Sinn Féin are about. We simply cannot pay. The Government can and should pursue the alternative way, some of which its members outlined before they came to power. The Government should enter into immediate discussions with the European Central Bank to have the promissory note withdrawn. If it did this, it would immediately reduce the State's debt to GDP ratio by 27%.

Sinn Féin sees very clearly that this money should be invested in growing our economy, including the green economy. The money that is taking flight to the bondholders could be invested in energy infrastructure that would set a new world standard. To give a few simple examples, we have the potential to develop wind energy along our west coast which would create tens of thousands of jobs over the next 15 years, and some neighbouring countries have asked us to do this. We could also create jobs through retrofitting the 1.4 million units of housing stock in the State to the highest standard. This would immediately create savings of on average €1,000 for each householder and would assist Ireland in reaching its 20% energy efficiency target by 2020. In turn, this would create further jobs. We also have the ability to develop water harvesting, at a cost of €5,000 per home, to reduce our water consumption by a third. Sinn Féin would invest money in completing the regeneration projects that have been abandoned. Our allegiance, as a party, is to the residents of Limerick's Southhill, Dublin's St. Michael's Estate, Dominick Street, St. Teresa's Gardens and Charlemont Street, and many other communities throughout the State, not with the faceless bondholders. That is the difference.

The money that is being sent overseas to the bondholders belongs to us, to the taxpayers of the State, to constituents and to the children born today. Let us invest in them and in a brighter future.

I do not propose to look in detail at the mechanics of how the State and its citizens should handle the €30.6 billion, rising to €74 billion by the time it is repaid in 2031, of toxic debt of the zombie Irish bank which is now known as the Irish Bank Resolution Corporation. I always get suspicious when I see people or corporations changing their names. The reason I do not propose to go into those mechanics is that other Sinn Féin Deputies have covered or will cover these aspects in the course of their contributions today and tomorrow. Instead, I want to express how the citizens of the constituency I represent, Sligo-North Leitrim, and other constituencies feel about all of this.

Talk of billions sometimes goes over people's heads as the sum is too enormous for them to understand its impact. However, if there is one thing I know, and I detect it every day, it is that people are very angry and frustrated that our economic sovereignty has been surrendered by the previous and present Governments, the latter of which promised things would be different if it was elected. The present Government was elected with a massive majority but nothing has changed. Our citizens and their children will be handing over taxpayers' money to the disgraced Anglo Irish Bank gamblers for the next 20 years.

People are close to losing all hope and feel powerless to do anything about it. This is the worst aspect. People are losing hope in the country, hope for themselves and hope for their children and grandchildren. What impact does this have on Irish people, apart from the ignominy of having France, Germany, the ECB and the IMF dictating our future and our potential as citizens of an independent republic?

Let us consider those dependent on social security, who can barely survive on the weekly income they receive. The cost of electricity, gas, school books, school transport and clothing are all going up while the supports that were in place are coming down. It can literally be a choice between giving school books to a child or having a dinner. That is the choice people on social security now face. Supplementary welfare officers are run off their feet. The automatic answer now seems to be "no" and if people really need it, they will appeal and join the long appeals waiting list. Students are facing the dreaded registration bills and in many cases will have their maintenance grants more than halved because of changes in the school proximity rules. We are going back to the bad old days when education was available only to the very wealthy, which is a disgrace.

Low income earners, who are not only in the tax net but must also pay all the other stealth taxes that have been and are being brought in, are having their pay packets eaten into. These include the many thousands of low and average paid civil and public service workers who had their meagre incomes slashed while at the same time being vilified wrongly as the cause of the problem by some politicians and some media commentators. Despite agriculture being the poster boy of the Irish economy at present, farmers are generally living on less than half the average industrial wage, and in the constituency I represent would be on less than half of that again. How long can they contribute to national economic survival and improvement? What of the young people who have left their homes for Australia, Canada or God knows where? What hope have they got? They know they will not be coming home any time soon. The legacy is one of people who need health care being on a waiting list to get on a waiting list for hospital care, and special needs assistants in overcrowded classes.

It could be so different. Sinn Féin has put forward credible and costed alternatives and will do so again in its pre-budget submission. I hope the Government Deputies read our proposals and support them. I hope we will not have the usual shouting and slagging, where abuse replaces logic and political point scoring and not resolving our problems becomes the objective.

I remind the Minister of the key message from the Nyberg report, the post mortem into our financial meltdown, that there was evidence of herd mentality and a reluctance to listen to alternative viewpoints. It is history repeating itself.

I call on the Minister for Finance, Deputy Michael Noonan, to move amendment No. 2.

I move amendment No. 2:

To delete all the words after "Dáil Éireann" and substitute the following:

"recognises that the Government inherited a situation in relation to the banking sector and specifically in relation to Anglo Irish Bank and Irish Nationwide Building Society which resulted directly from the decisions taken by the previous Government;

recognises that decisions taken by the previous Government included the decision to guarantee the debts of the covered institutions. This decision and consequential decisions taken by the previous Government have effectively transferred the liability for private bank debt to the taxpayers of this State and contributed to the need for the EU-IMF bailout;

recognises that the overall cost to the State of promissory notes provided to Anglo Irish Bank and Irish Nationwide Building Society currently stands at €47.4 billion;

acknowledges that the Government should not act unilaterally in relation to the repayment of unguaranteed senior debt and should have regard to the views of our partners who are providing the requisite funding for the financial institutions;

acknowledges that the Government is working with our partners in the EU and IMF to address the situation and is actively involved in discussions with a view to reducing the overall cost to the State;

affirms that the approach being pursued by the Government, given the situation the Government has been presented with, is the optimum approach which will produce the best medium to long-term outcome for the State and the taxpayer; and

encourages the Government to press ahead with discussions and negotiations around a range of support measures that recognise the contribution made by the State in support of the stability of the Eurozone."

With the permission of the chair, may I share time with Deputies Mathews, Costello and McCarthy?

Ar an gcéad dul síos gabhaim buíochas le gach éinne a bhí páirteach sa díospóireacht seo go dtí seo.

In proposing this counter motion I am pleased to present to the House today the Government's measured and structured approach to issues facing the financial sector as the best way to secure the position of the financial services sector. There is little to be achieved at this juncture in regurgitating the failure of past policy approaches. Suffice to say that the initial response of the Government of the time in September 2008 was to provide a full unconditional guarantee for bank debt of the covered institutions. In effect the Government guaranteed hundreds of billions of private bank debt and in that single decision transferred the liability for private bank debt to the taxpayers of the State. Subsequent decisions taken by the Government in regard to the banking sector were clearly driven by the need to ensure that there was no possibility of a call on the guarantee. Effectively, a firm policy was established that no bank or financial institution in the State would be allowed to fail. This policy was underwritten by a guarantee provided by the State. Decisions to capitalise the banks, to nationalise Anglo Irish Bank, Irish Nationwide Building Society and the Educational Building Society all flow directly from and reflect the underlying need to prevent, at all costs , a call on the guarantee. Further, the exposure of the State in terms of direct and indirect support for the banking system was a major causal factor in the necessity for the EU-IMF bailout.

It goes without saying that the collapse of the banking sector has been at the heart of Ireland's economic difficulties. In repairing the banking system, the over-arching challenge for the current Government has been to restructure the sector by, for instance, boosting its resilience and right-sizing it relative to the needs of the Irish economy and providing for the work-out, in a structured way, of Anglo Irish Bank and Irish Nationwide Building Society, INBS. Significant progress has been achieved in recent months in forming pillar banks, merging EBS with AIB, combining Anglo Irish Bank with INBS to form Irish Bank Resolution Corporation, IBRC — an institution that has no role to play in the future of the Irish banking landscape, recapitalising the banking sector and strengthening the governance framework of the banks. At this stage, it is fair to say that there is a growing consensus that a line has now been drawn under the banking crisis and that a steady improvement is under way.

In terms of boosting resilience, a final €24 billion recapitalisation of the banking sector took place following the PCAR process and earlier steps taken by the State during 2009 and 2010. The PCAR process is regarded as robust and comprehensive, a point underlined by the outcome of the European Banking Authority stress tests announced recently. With the additional PCAR capital, Irish banks are now among the best capitalised banks anywhere in the world. It is worth highlighting that around one third of this capital injection was sourced from the private sector, through liability management exercises with subordinated bondholders in the various banks, anticipated asset sales and the injection of private capital into one major bank. The contribution of the private sector is larger than originally envisaged and I view this as a clear vote of confidence in the Irish banking system and in the future of the Irish economy.

At the same time, the programme of asset deleveraging is well under way. For instance, Bank of Ireland recently announced that it had achieved some €5 billion of asset sales so far this year; AIB is also performing in line with its deleveraging targets. As it is sometimes overlooked, I stress that more than 80% of the assets to be disposed of by the Irish banking system by the end of 2013 are located outside of Ireland. To put it simply, deleveraging of these assets will have no effect on the Irish domestic economy because the assets are held outside Ireland.

As for the merger of Anglo Irish Bank and Irish Nationwide Building Society into IBRC, the disposal of deposit books is completed and the work-out of the remaining loan books is progressing. All of these measures are helping to continue the process of rebuilding international investor confidence in the Irish banking sector and we are confident in and committed to the bank restructuring plans.

The motion from the Opposition asks the House to agree that the former Government was wrong to issue the promissory note; that this Government enter in discussions to have the promissory note withdrawn and that the Government intervene to prevent Anglo Irish Bank from using taxpayers' money to repay unguaranteed senior bondholders. There are two distinct issues in this motion, they are the promissory notes and payment to unguaranteed senior bonds.

The promissory notes are a mechanism to provide capital to the institutions without having to pay the cash up front. The previous Government did not pay for these capital contributions in Anglo Irish Bank and INBS with cash. The previous Government effectively issued an IOU, in the form of a promissory note. An IOU means precisely what it says and as the debt is deferred rather than being paid immediately, an interest charge is payable until the debt is settled. The interest charge in question was set by reference to Government yields at the date of issue. The total cost of the promissory notes out to 2031 is around €47.8 billion. That includes not only IBRC but the small amount in the EBS. The reality for the Government at that time was that having set out on its mistaken and misguided journey by committing to unconditionally guarantee the bank's debts, it had no option but like a losing gambler to follow the money by providing capital to those distressed institutions and by committing to maintaining the institutions as going concerns. To do otherwise, in the circumstances of the guarantee, would be to create a situation of default possibly leading to insolvency of the institutions and a call on the State guarantee. Having given the guarantee, the last thing the previous Government wanted to do was to trigger a call on the guarantee. That is the key to what happened. Every policy decision the Government took was to prevent a call on the guarantee. The provision of a guarantee was foolish in the first instance, but it would be a disaster if it was called in. That in a nutshell explains the policy of the previous Government and why it got into such difficulty. Such a situation was simply unthinkable in terms of the implications for the State, so it continued the rake's progress, pledging good money after bad.

If we now consider the impact of withdrawing the promissory notes from the institutions at this time the implications are similar — the institutions will be insolvent. Quite simply if you remove €30.6 billion as an asset from the balance-sheet of the institution you have to fill it from some other source or the institution fails. This situation will require payment of all amounts due under all contracts, even the guaranteed ones, so the State may have to pay up a large amount of cash. A further impact of being insolvent would mean the Central Bank of Ireland and the ECB would no longer be funding IBRC, and that funding of €45 billion would have to be unwound. The €45 billion is predominantly State backed. If the ECB had supported our unwillingness to pay, the situation might have been different but the ECB would not support this course of action despite many discussions with Mr. Trichet and others.

Again, given the level of support provided by the ECB to both IBRC and the other Irish banks, a failure to pay could have a dramatic impact as it would create a doubt over the future of the €110 billion in funding being made available by the ECB and Central Bank of Ireland to Irish banks at a low interest rate. The ECB never issued a threat or said it would withdraw funding but all we had to do was tweak the interest rate slightly and we would lose an awful lot more than we would gain by following the advice we are now getting from across the House. Indeed, it is advice I would not disagree with if we could carry it out with the support of the European institutions, particularly the European Central Bank. It would be unwise, also, to disregard market sentiment in any situation where a sovereign reneges on its obligations or perceived obligations.

I am, nonetheless, eager to have the promissory notes examined to see if they can be re-engineered in a better way for the State by, for example, lengthening their maturity or reducing the interest rates on them or both. As I indicated recently discussions are ongoing with the relevant authorities at a technical level in this regard.

On the payment of unguaranteed unsecured senior bonds it has always been my position that, given the significant cost of Anglo Irish Bank and INBS to the Irish taxpayer, there should be no repayment of this debt. To avoid such repayments, the most logical option would have been to put the bank into administration. This was an option available to the previous Government but, instead, it put the taxpayer on the line for the liabilities. It should have gone into administration. My predecessor, Brian Lenihan, was misled, I believe, with the information he was given. When he came into this House talking about Anglo Irish Bank he said total liabilities were €1.5 billion. It crept up by instalments until it reached €33 billion and he followed the bet all the way because, having taken the first step to guarantee, he could not get off the roundabout. That was the essential problem. It is a tragedy but it is what happened and is why we are now in such a difficult situation.

There was, however, an alternative. When Deputy Michael McGrath's party said it had no alternative, the alternative was to put Anglo Irish Bank into administration and let it work out, letting the debts fall where they would. There was a solution.

If we were to suspend payments to creditors in IBRC this would have a significant impact on both the bank and ultimately the State. This senior debt, unsecured as it is, is an obligation of the bank. If the IBRC does not meet such obligations it would again lead to a default and following that, most likely, insolvency. Insolvency would result in a significant increase in the cost to the State to resolve IBRC and would have a very significant impact on the credit worthiness of our sovereign State, given the guarantee and the fact that IBRC is owned by the State.

Many people, including members of the Opposition, have sought to draw a distinction between guaranteed debt and unguaranteed debt in IBRC. This distinction is spurious, as subsequent to the guarantee, the Irish Government nationalised Anglo and INBS. It took these institutions into public ownership and took on moral responsibility for all their liabilities. The obligation to guaranteed bondholders deriving from the guarantee was now matched by an equal obligation to unguaranteed bondholders, deriving from ownership of the institutions. The mistaken decisions were taken in two steps; the guarantee and then the taking into ownership of the banks. Each step incurred liabilities.

And the Minister did not know it was nationalised last June when he went to the United States and made the promise about burning the bondholders.

No, no. The Deputy insists on misquoting me. It is a feature of Fianna Fáil's defence for its disgraceful period in Government that it misquotes the Opposition. Throughout the election campaign, the spring, in my remarks in the United States and right through to my remarks last week, I always said that Fine Gael in government would not act unilaterally to burn bondholders, guaranteed or unguaranteed.

Others said that for the Minister.

I said we would only do so with the consent of the European Central Bank. That is the solid position and it has been my position consistently.

Many of the Minister's colleagues had a different position.

What about the Tánaiste?

Deputy McGrath might not like it but he should not accuse me of having a different position and when quoting me, he should do so in context.

In the period from the introduction of the guarantee in September 2008 and 31 December 2010, the previous Government allowed substantial repayments of around €20 billion of senior debt for IBRC so it will stick in my craw when Deputy McGrath gets up tonight and does his moaning about paying back bondholders last week when his Government already paid back €20 billion to bondholders in Anglo Irish Bank.

They were under guarantee at that time.

The Deputy then accuses me of not being able to prevent the bondholders taking another €3 billion.

The Minister's party supported that guarantee.

The Deputy should get off the stage; he is a young man around here and he has a future if he gets off the stage and starts to be sincere on these issues.

Since coming into government we have explored options with our European partners on senior debt burden sharing. As I stated after my meeting with ECB President Trichet and Commissioner Rehn last month, our European partners expressed strong reservations about burden sharing with senior bondholders in IBRC. Mr. Trichet voiced his opinion that he is against such actions for two reasons: private sector involvement carries very significant contagion risk and may be inconsistent with encouraging private investors to return to markets and he said Ireland had done particularly well over the summer. He mentioned the narrowing of bond spreads and he said he felt that anything to do with senior debt burden sharing might knock the confidence of the market in the absolute commitment of the Government to take once again its place in normally functioning markets; as a result bond yields could widen again and we would lose the ground we had gained.

Mr. Trichet's views were echoed by Commissioner Rehn. The positive international commentary on Ireland has been created by the Government's successful renegotiation of the memorandum of understanding, the introduction of the jobs initiative, the sizeable reduction of the interest rate on the EU-IMF programme and the reduction in the cost of the banks to the taxpayer.

The value of support, present and future, we receive from our European partners far outweighs any short-term gain from imposing burden sharing on these bonds in the face of European opposition to such a move. For example, €110 billion of funding is provided by the ECB and the Central Bank of Ireland to the Irish banks at a cost below which they could borrow in the market. This is in addition to the €85 billion set out in the programme with the troika. However, we still have unfinished business with our partners to find the most cost effective way of resolving IBRC over the long term. Technical discussions between officials are under way at present on the IBRC promissory notes.

For these reasons I have decided not to take unilateral action on the burden. Have I much time left?

It is a 30 minute slot, so the Minister can take whatever he likes.

I would like to share with my colleagues and I think I have said enough.

Withdraw that remark.

We want our money back.

I am sure students of politics, like Deputy Adams, will read the record and the rest of the speech goes on the record.

Within five minutes, I am not good at speaking quickly, or even thinking quickly. There are, however a few things that need to be said. This Private Members' debate is excellent because it is relevant and timely.

The context, however, is important because it is not just what is happening to this country in the shadow of what is happening in Greece, Italy, Spain or Portugal, it is getting a handle on what has occurred in the developed economies in the last ten or even 15 years. There is an enormous mountain of debt and we have been talking about measured aspects and locations for what has been happening without understanding how the economies are financed, what their exposures and obligations are, and how the banking system and banks are like the electrical circuitry for the interaction of economies. These economies are all bust and the fuse board is continually being tripped as a result.

I recommend two books which every Member of the House should read. The first, Boomerang: Travels in the New Third World, is by Michael Lewis and is written in a type of journalistic English which is easily understandable. It provides an updated position — it was published only eight weeks ago — on the scenarios that obtain across the globe, what has happened and what is likely to happen and how smothered in debt are the various economies. In that context, Ireland’s economy is the one most smothered in debt. The second book, Endgame: The End of the Debt SuperCycle and How It Changes Everything, by John Mauldin and Jonathan Tepper, is somewhat more complex in tone. Mr. Mauldin spoke at a conference in Kilkenny last week.

Is the Deputy on commission to promote these books?

It is like "The Late Late Show".

(Interruptions).

I am hugely disappointed by the lack of comprehension of where the country stands. My disappointment is bordering on anger because people at every level are hurting and they are going to continue to hurt for a long period. It is wrong that this is the case and it could have been avoided. That is why I find it frustrating.

I wish to give the Minister every support in putting the stone in the slingshot, aiming it and ensuring it hits Goliath between the eyes in order that he might wake up. The Goliath to which I refer in this context is our European partners.

I am afraid I will be obliged to say we have reached the endgame soon.

I am out of time already.

The Deputy should come over and join us.

(Interruptions).

If the Leas-Cheann Comhairle gives Deputy Mathews a few more minutes, he might produce a bazooka.

Deputy Mathews should get to the point and tell us which way he is voting.

On the basis that I spent an hour in the Chair earlier, perhaps the Leas-Cheann Comhairle might afford me an extra 30 seconds.

There can be no special pleadings. However, I am sure we can accommodate the Deputy for a further 30 seconds.

The motion is sound and well laid out, and I like the algebra used in it. Whether the figure is €65 billion or €74 billion depends entirely on the cost of funding the initial promissory notes which were issued by the members of the previous Government who were operating in a fog. I do not favour tit-for-tat politics; I deal in facts. I have done this for the past two years and become disappointed when people cannot see the pieces of the jigsaw and identify how they fit together.

The Europeans must be told, loud and clear, that it is not good enough to have negotiations and discussions. We must be informed of the contents of such negotiations and discussions. We know what has been the nature of the Greek discussions because they have taken place on the street. There is a need to ensure the position is publicised, with the volume on high. I will give the Minister every encouragement in that regard. He must explain to the European Union that we need a write-off — I will repeat the figures ad nauseam — to the tune of €75 billion, comprising €50 billion for the account of the ECB and €25 billion for the remaining bondholders across all the banks, including AIB and Bank of Ireland. Only when this write-off occurs will the banks to which I refer be in a position to arrange write-downs for householders and business people who are either on their knees or lying flat out because they have already been crushed.

I welcome the motion. In our hearts, many of us would favour it. Unfortunately, however, our hearts are ruled by our heads and we must look to the amendment brought forward by the Government. I use the word "unfortunately" because there is a certain reality which must be acknowledged.

Those of us who were Members of the previous Dáil are aware of how difficult the situation was when we voted on the bank guarantee on 1 October 2008. On that date Labour Party Members voted against the guarantee, while all other Members voted in favour of it. There are Members present in the Chamber who spoke very strongly in favour of the guarantee but who completely repudiate it now. Most of our liabilities flow from the decisions taken on that occasion. The policy decisions taken in the years prior to 2008, the lack of regulation in the financial system and the greed of certain people led us the situation in which we found ourselves. However, the decisions taken on that fateful day — 1 October 2008 — led us to take on a legal liability in respect of the bank guarantee which covered the secured banks to the tune of €500 billion. In turn, this led to the promissory notes relating to Anglo Irish Bank and the Irish Nationwide Building Society being signed. We should have allowed these two institutions to go to the wall in 2008. We should have allowed Anglo Irish Bank to go bust when it was a private institution, not now when it is in the ownership of the State. We cannot go back and rewrite history. We should have stood up at the time — those of us in the Labour Party did do so — and stated it was a private bank and that its liabilities were also private.

The Deputy's party wanted to nationalise it.

My party voted against the guarantee and that was the correct action to take. I acknowledge, however, that we must address the situation in which we find ourselves. The promissory notes should never have been drawn up and the guarantee should never have been put in place. However, these things happened. As a sovereign state, Ireland took on responsibilities which, as many would now acknowledge, it should not have taken on. These are legal responsibilities. At what stage can these responsibilities be repudiated and what would be the consequences of our doing so, particularly if we were to take unilateral action in this regard? We are in an extremely difficult position. There may be Members who are used to playing poker. We would be getting into a poker game if we were to take a unilateral decision to repudiate our debts. We could take such a route, regardless of whether the notes involved were secured or unsecured. On the other hand, we could follow the advice offered in the Government amendment. In other words, we will not take unilateral action; we will work to the best of our ability with our partners in Europe in respect of the EU-IMF deal and seek to the best of our ability to reduce the effect of and restructure the decisions taken prior to the election of the Government. We must also deal with the commitments made by others which we are legally bound to honour.

That is the nature of the dilemma we face. The motion is lovely and reflects the wishful thinking in which we would all like to engage. However, the Government amendment reflects the reality we are obliged to face. The Government is doing a good job within the parameters it has been set. There is a need for a degree of recognition to the effect that this is the broader context within which we are working. There is also a need to investigate the possibility of restructuring the promissory notes in a way that would reduce the country's financial burden. This must be done in consultation with our EU partners. The approach I have outlined is the correct one to take.

I welcome the opportunity to contribute to the debate on the motion. I agree with Deputy Costello who stated that in his heart he would favour the motion but that his head indicated we should support the Government amendment.

There is not a person in the country who is unaware of the economic crisis or the extent of the banking crisis and all the misery these have wreaked upon thousands of hard-pressed families. There are many people who are unemployed and we have witnessed the return of emigration. All of this is due to the economic collapse which has occurred. What is needed, now more than ever in the history of the country, is strong and decisive leadership. We do not require people to offer simplistic, quick-fix solutions to get us out the mess in which we find ourselves. We are where we are and no one wanted us to get into this position.

Deputy Costello is correct. When the bank guarantee was introduced both here and in the Upper House in 2008, no one realised the full extent of the crisis the country was facing. We all hoped there would be a soft landing and that the recession would not last more than one to three years. However, three years on matters do not appear to be improving. We must be mindful of what occurred in recent years, but, more importantly, we must focus on what can get us out of the situation in which we find ourselves.

The Government inherited a banking crisis that is profound in nature. The scale of that crisis was made all the greater by the extensive blanket guarantee provided for a number of financial institutions in 2008. I reiterate what Deputy Costello stated, that only one party in this and the Upper House opposed the introduction of the bank guarantee. That party was the Labour Party. We did that because we felt it was the right thing to do.

In a short period the Government has done several things and has reached a number of milestones. A significant aspect is that it has renegotiated the EU-IMF deal. According to other parties towards the end of last year and the start of this year, that was unthinkable. That has been done. The term has been extended and the interest rate has been reduced. On another measure, in the height of all of this economic crisis, we have restored the minimum wage.

I find it difficult to listen to Deputies, namely Deputy Doherty, speak about the way out or the solution because I was in the Seanad when he donned the green jersey and voted for the blanket guarantee. That is much of the reason——

The blanket guarantee came into effect on 17 October——

——that this country is in the mess it is in. It is hypocritical, to say the least, that Sinn Féin would have supported——

The Labour Party wanted to nationalise.

——the most arch-conservative right-wing decision ever made by national Parliament here.

No. They paid out unguaranteed bonds——

That is the basis of much of the trouble in which we find ourselves.

(Interruptions).

I thank Deputy McCarthy.

I also find it difficult to listen——

(Interruptions).

——to members of Fianna Fáil who now propose solutions to get us out of this crisis when their fingerprints, actions and voices are all over the blanket guarantee.

(Interruptions).

Let us remain cognisant of the historical context of this problem and let us look to the Government amendment tonight to find a solution and a way forward.

Yes. Let us pay all the unguaranteed bondholders.

Deputy Doherty supported the guarantee. He donned the green jersey.

I call Deputy Michael McGrath.

(Interruptions).

Deputies, order please.

Deputy Doherty donned the green jersey.

(Interruptions).

I call Deputy Michael McGrath.

Deputy Doherty does not know what he did.

That is the Labour Party responding.

(Interruptions).

Deputy Doherty banged up this country because of what he did. Deputy Doherty voted with Fianna Fáil and there is no difference. He is a hypocrite.

Deputies McCarthy and Doherty, please.

(Interruptions).

We will have to adjourn the House if this continues. I call Deputy Michael McGrath, without interruption.

Go and check out the Seanad record.

(Interruptions).

If I may, I will share time with Deputies Calleary, Kelleher and Dooley.

Deputy Mathews wants ten seconds.

No. Please, we are short of time.

I think Deputy Mathews needs much more than ten seconds.

This is out of order, please.

If I may, I have limited time.

It may suit the Minister, Deputy Noonan, and the Government to blame everything on the bank guarantee and that is what he sought to do tonight once again in his speech. He ignored some basic facts. First, he and his party fully supported the bank guarantee. Second, on coming into office in March last there was still €36 billion of unguaranteed senior bonds in the Irish banking system and the Government will pay every single cent of that, which has nothing to do with the bank guarantee.

In relation to his colleagues in Government, the Minister had the good grace to come before the Joint Committee on Finance, Public Expenditure and Reform recently.

Hold on, Deputy McCarthy might learn something.

When the Minister talked about the bank guarantee, he stated that the Labour Party wanted to nationalise the banking system at the time and he stated that this would have been worse than any guarantee.

(Interruptions).

That is what the Minister stated.

Nobody interrupted Deputy Costello.

Deputy Costello's own colleague stated that the Labour Party's proposal at the time would have been worse than any guarantee.

(Interruptions).

That is what the Minister stated.

The Labour Party does not want to hear that.

We all acknowledge, on this side of the House as well, that the information given to the Minister and the Government then was flawed. The banks told mistruths, if I am allowed to say that in this House——

——about the scale of the problem and the scale of the losses. There is no question about that. That is accepted.

With the benefit of hindsight, there have been a number of official reports which have examined the guarantee, including the Honohan report, the Regling Watson report and the Nyberg report. Even with that full benefit of hindsight, none of them and no political party in this House has come up with a credible alternative that was open to the Government on that night. That is not what I wanted to speak about but I had to respond to what the Minister said.

Sinn Féin has raised some important issues. On the promissory note, it must be pointed out that it was put in place at a time when there was no European fund available for any Government in the eurozone to recapitalise its banks. The real issue here is how the promissory note, capital and interest repayments, will be funded. Whatever losses are in Anglo Irish Bank will be dealt with over a period of time and the estimate of the final loss in that bank has come down from between €29 billion and €34 billion to €25 billion. The payment of the promissory note and the interest are going into that bank and whatever is left ultimately will come back to the State. The real issue, which is touched on in the motion, is: how does one fund those payments? That is the option that is now open to the Government using the new facility in the European Union, the EFSF, to secure a proper funding arrangement to have that promissory note refunded and redesigned so that we can get a better deal in that sense.

There are other issues I want to touch on briefly. It is sometimes forgotten that those who suffered most in terms of the banking collapse were the ordinary shareholders in the banks who lost approximately €60 billion since 2008. We all know many of those shareholders. There were many institutional investors but many ordinary investors who put their entire life-savings into banks that they thought were absolutely secure and were assured were absolutely secure by the authorities and by the banks, have lost everything. That is one of the real scandals which transpired in the banking crisis. Some €15 billion of subordinated bondholder losses have been imposed.

Lest it be forgotten, the previous Government put the issue of imposing losses on senior bondholders on the table in November last when the programme of assistance was being negotiated with the EU and the IMF, and it was flatly rejected by the ECB at that time. The ECB has remained utterly consistent and it is still not entertaining any suggestion by the Government, despite all the hysteria we heard.

I must call Deputy Calleary soon. The time has expired.

The context has now changed because of the deal struck in Brussels on 26 October with burden-sharing now being imposed on European banks which hold Greek sovereign bonds. That strengthens the case for the Government to go to Europe and to redesign the promissory note structure and to get some savings, at least on the remaining €2.8 billion of unguaranteed senior bonds left in Anglo Irish Bank and Irish Nationwide Building Society.

I thank Deputy Michael McGrath for putting it in context. I always believe in ceding to greater wisdom and greater knowledge. I note Deputy Mathews is anxious to make a brief point and I have no difficulty——

No. I have absolute discretion on this now. Deputy Calleary is now in for three minutes.

I thank Deputy Calleary.

Deputy Mathews made an important point in the middle of his book review programme about the mountain of debt facing the world. That is the context we must put on this. When one hears the figure mentioned tonight in Italy of €1 trillion of debt, the figures are simply unimaginable and are repeated right across the world. The context within which he has spoken and within which we are negotiating this debate here tonight is set.

Two weeks ago, we were told we had the deal to end all deals. There was a write-down of Greek debt and a building of the stability fund, and that was to have everything sorted. The opportunity to put all of these issues on the table at European level was lost that night. There was an open goal facilitated both by the context of the negotiations and the change in management in the ECB. The change of management in the ECB possibly afforded us an opportunity to discuss all of these matters, but it was not taken. That deal came unstuck through the Greek situation and that situation has become further worsened this evening with Italy. One must ask the question: what country is next?

Until Europe gets its act together once and for all in this area, we will move with sticking plaster after sticking plaster, but the wound is still open and untreated. No matter what decisions we take here, until that is done, both here and in the United States, there will be some other crisis this time next year again and Deputy Mathews' mountain of debt will still need to be faced by people to come.

We have a chance with a new director in the ECB, a man with, hopefully, a better understanding of peripheral economies and a better understanding of the reality of the present position of countries, to push those issues forward. There is the chance of a common agreement. Everybody agrees that the stability fund needs to be built up in order to fire-proof and fire-wall economies. Could we not use the building up of that fund to ensure that Ireland gets a better deal on our debt?

There are so many open goals for the Government. All it takes is a willingness to take them on, a willingness to bring something home for real rather than tacking Ireland on to Greece and to other deals done, and claiming credit for deals that are done on that basis.

I welcome the context that Deputy Michael McGrath has put on the banking guarantee and the way it was introduced. It is amazing how quickly context is forgotten in political debate. I accept the Minister's point that he made no promises, but many of his colleagues did. Many of those sitting around the Cabinet table made explicit promises in advance of the election. We know where those promises have since gone.

We can all decide to support the motion, but the Council of Ministers and the European Council must get their act together. Regardless of how the Government views the decision of Prime Minister Papandreou to hold a referendum, the manner in which two prime ministers bullied him out of making that decision was wrong.

It was a bad day for those of us who believe in European unity and in the European project. Theirs is not the kind of attitude we need. We need the European Council to resolve to deal with this matter once and for all. This and any other such motion will be irrelevant until that occurs.

I welcome the opportunity to contribute to this issue. I believed we would have had a more reflective debate and that, after the white heat of battle and elections past, we could have sat down as a mature Parliament and discussed the realities of the situation confronting our country instead of rewriting history.

Fianna Fáil has already tried that.

I only have a short time available to contribute. When we are trying to put matters in context, it is important that we come from a basis of truth and fact. Prior to the general election, people in Opposition cars swanned around the country — they are now in Government cars — and told anyone who would listen that they would burn bondholders and build a tall pyre outside Dublin Castle to burn bankers as well. Everyone propagated this lie prior to the election. The Minister, Deputy Noonan, is correct, in that he was one of the few who admitted the Government would need to consult our EU partners. With everyone else, mention of our EU partners was far down the script.

I was not there.

The small print was so small, it could not be read. Every speech in the House, even those of the leaders of Fine Gael and Labour, referred to burning bondholders and bankers morning, noon and night.

Like Hallowe'en.

Will the Deputy exempt me, please?

Last week, one of the biggest lies perpetrated against the Irish people was revealed by the issuance of €720 million to unsecured and unguaranteed bondholders. The most interesting aspect is that the markets believed it would be paid. The markets considered those Deputies who, prior to the election, claimed they would not pay bondholders if they got into government and backed them to buckle under the pressure of the ECB and the EU and pay. The markets have proven right. That side of the House did not have the spine to stand up to the ECB in support of the pledges the Government made to the people.

It should not have been paid. I was not present.

Deputy Mathews was on holiday.

Deputy Mathews's integrity is without question. In light of those debates, the deceits perpetrated recently were shameful. Some day when I have more time, I will put more on the record and we might have a more mature and reflective debate than this one.

It is a pity that Deputy Kelleher did not speak like that before the election.

I was too busy promoting trade.

I welcome the opportunity to contribute to the debate. It has always been a hobby of mine to read over Dáil transcripts from decades past. The advent of the Internet has made it a little bit more enjoyable and reviewing them in greater detail is now possible. Since crossing the floor seven or eight months ago, I have taken to reviewing more recent transcripts. Yesterday, I read our debate on the Credit Institutions (Stabilisation) Bill 2010 on 15 December. There was a degree of harmony between the Fine Gael and Labour Members, although they have sought to deny this a number of times. The current Minister for Transport, Tourism and Sport, Deputy Varadkar, stated that the Bill did not contain any provision for the restructuring of the debts of senior bondholders and that up to €16 billion of taxpayers' money could be saved by imposing losses and haircuts on the bondholders. According to the Minister, it was a key policy to be changed upon a change in government, given that the people were not responsible for the banks' debts and should not have been held liable for them.

There has been a change in government and those opposite got their wish — they are Ministers of State and Deputy Varadkar is a senior Minister. I can only assume that it is Labour that is holding Fine Gael back from burning the bondholders. Many times, it has been stated that they fought the election as two individual parties and agreed a compromise programme for Government. If so, they should tell us about it.

I moved on to what the Minister's colleague in Dublin West stated.

The current Minister for Social Protection, Deputy Burton. She made an interesting aside, in that she claimed the Bill was too late. Indeed, she emphasised it several times. She stated:

It is too late because the horse has bolted since the expiry of the original bank guarantee, and too little because it does nothing to address the treatment of liabilities other than subordinated bondholders. It fails to address the issue of senior bondholders now out of the guarantee, the debts for whom amount up to €20 billion.

She also stated:

When any private company goes bust because of reckless trading, its private investors are supposed to lose out if they made a bad bet. If the shortfall between assets and liabilities is greater than shareholders' capital, not only do shareholders lose their shirts, but losses are passed up the line to other creditors depending on their seniority — first to subordinated bondholders and then to other unsecured creditors, including senior bondholders. These are the fundamental rules of a functioning market economy. Using State funds to bail out private investors would be a cynical example of socialism for capitalists.

Is the Government now implementing socialism for capitalists?

It is capitalism for——

I thank Deputy Dooley.

It is great to be able to look back over debates.

She stated: "What we could not accept was a bailout of professional investors, a free lunch for bondholders and a blank cheque for Fianna Fáil." Have the Government's actions provided a blank cheque for Fine Gael and Labour?

Fianna Fáil always had blank cheques.

Reviewing the transcripts would be worth the Minister of State's while. The Government might learn something from it.

Fianna Fáil always had blank cheques.

And the Government is continuing to fund-raise at a phenomenal rate. The Minister of State is denying it. The Government should allow our Bill on corporate fund-raising to go through.

Deputy Dooley, please.

Corporate donations.

(Interruptions).

Does Fianna Fáil remember writing them?

I call Deputy Maureen O'Sullivan.

Fianna Fáil signed them.

What about corporate donations?

Help us ban corporate donations.

Order, please. Deputy Maureen O'Sullivan has the floor.

May I share time with Deputy Mattie McGrath?

Is that agreed? Agreed.

It is the previous Government's responsibility that we are in this situation. I am sure we all watched last night's RTE programme, which laid events out graphically. It reminded me of the expression, "Marry in haste, repent at leisure". A great deal was done in haste. On what basis were decisions made? They appeared to be based on advice from those who got us into this mess in the first place.

Maybe I am being simplistic, but surely the motivating factor should be to work in the best interests of the Irish people. I do not know how it is in our best interests to pay millions of euro to anonymous, nameless, faceless bondholders and to pay promissory notes. The Government must at least work on renegotiating the bailout's terms to remove toxic private banking debt. The Minister, Deputy Noonan, has stated his reasons for not renegotiating the troika deal. He mentioned that it could spread panic on the markets, create a contagion effect and increase bond yields, as is happening with Italy, all of which would reduce any chance of returning to normal market borrowing. He stated that he was not interested in confronting the troika and intends to work with the programme, even though his party came to power on a burn-the-bondholders ticket. He stated that the European institutions and serious players had much respect for Ireland and that it would be appropriate to work with them.

Are we any better? We are facing more austerity. If people are finding it increasingly difficult to pay their bills, how can they help with the ethos of spending our way out of a recession?

We seem to be dominated by the big picture of what is occurring in Europe and economic affairs. I spent recent days with the North Inner City Drugs Task Force, NICDTF, the Cabra drugs task force, people with disabilities, senior citizens and people with mental health issues. We cannot lose sight of such people while discussing promissory notes. It would be obscene.

Will the Leas-Cheann Comhairle allow me to defer to a colleague for a few seconds?

There is a 30-second provision.

I will take less. I thank the Leas-Cheann Comhairle and the Deputy. I wish to indicate that, when the House votes on the motion, I will support the amendment under protest so that we might understand that it is far too important not to be public about our insistence that we should be getting severe debt write-downs à la Greece.

Which amendment?

Does Deputy Mathews mean he will come with us? He should clarify.

I admire Deputy Mathews's honesty. I am delighted to be able to contribute to this debate.

We have also tabled an amendment.

Deputy Mattie McGrath will know what to do.

The public has grown tired and confused. They were cross at what my friends on this side of the House and I did while I was a member of Fianna Fáil.

Esteemed member.

I remember travelling with Deputy Michael McGrath that fateful night we were summoned to Dublin to vote. We were worried, but we needed to listen to the Opposition, which did nothing short of rant. They were going to burn the bondholders.

Hell's fire was not going to be as hot as this country was going to be. Hell's fire would have been only a patch on it.

You were the only opposition——

You were going to burn bondholders, bankers, civil servants and everyone and you told the public so. Deputy Gilmore, now a Minister, stated it would be Labour's way or Frankfurt's way.

You burned your colleagues.

It is from the frying pan into the fire. I cannot believe the diatribe I must listen to now.

We were never in hell.

The most bewildering thing is that we must listen to the Minister of State, Deputy Kehoe, day after day interrupting and having to read apologies into the record like he did last week.

You were in here every day. We were never in hell.

I was here and I heard him. It was difficult to listen to him because we knew what he was saying was — I will not say what I was going to say. Hellfire would be a nice way——

You were the opposition. You were on RTE every night.

One minute remains.

I will try to make the best of it. The ordinary people are bewildered because the Government came in and changed its clothes. It changed seats and put on the clothes of the former Ministers.

You jumped ship with them, so you did.

The programme broadcast last night showed the late Brian Lenihan, who did so much work. Where were his advisers and officials? He cannot be blamed for everything. The Government stated it would change everything——

You were blaming Brian Cowen last night.

——but it has changed nothing and only made it worse and ran over with cheques and pockets full of cash to pay the unsecured bondholders. When the Government is told jump it asks how high? Labour's way or Frankfurt's way. The Labour Party is wagging the coalition tail.

Or Mattie's way.

No, not my way. I did what I had to do. The Government promised so much but has delivered so little. It is going down a cul-de-sac and the public——

You jumped ship.

You accepted Fianna Fáil votes in the election.

I know Deputy Kehoe's pedigree. I thank Deputy Dooley for reminding the Government Members of what they said and did. The public is waiting for them and the proof was in the presidential election. They will not be fooled. Fool them and it is their fault but fool them twice at your peril.

Debate adjourned.
The Dáil adjourned at 9.05 p.m. until 10.30 a.m. on Wednesday, 9 November 2011.
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