Deputy Olivia Mitchell is in possession and has 12 minutes remaining.
Euro Area Loan Facility (Amendment) Bill 2013: Second Stage (Resumed)
Before the break I was speaking about the small but positive signs which may presage a recovery not only here in Ireland, but in Europe. I spoke about the fact that last year was the IDA's most successful year in bringing jobs to Ireland in the past ten years, the commitment by the EU to look at possible debt reduction for us, growth in confidence in the bond market with the drop in interest rates, the recovery of the euro itself and, more importantly, stability in the euro. Given this background, and I am not trying to overstate what is happening, I stated I was rather taken aback by Deputy Donnelly's remarks on RTE yesterday morning, which I felt were churlish to say the least, when he was responding to what the rest of the world regarded as some good news. Of course we could get better news, and it would be great if our lenders told us we did not have to pay interest or that we did not have to pay back the money, but in the real world these things do not happen. I do not expect Deputy Donnelly to congratulate the Government because in the real world these things do not happen either, but I believe that on hearing good news for Ireland, and God knows it is rare enough, any Deputy would at least be pleased for the country and for its citizens, particularly those he or she represents. Instead, the impression came across that Deputy Donnelly would have been happier if RTE had him on to respond to bad news. This is what I objected to.
I know there is a very fine line between fanciful optimism and realistic positivity. I certainly try to draw the line and not be fanciful because it is important to be honest with people and be realistic. The negativity of Deputy Donnelly was not only churlish but potentially damaging, and not only to the economy. On Leaders' Questions this morning Deputy Boyd Barrett spoke about the depressing and tragic suicide numbers and the growth in suicide particularly among young people. This was also raised in the Topical Issue debate by Deputies Troy and Wallace. I do not know whether there is a causal effect between the economy and unemployment and suicide, but there is definitely a relationship between loss of hope and suicide and this is a point worth making. It behoves us as society leaders, if not to be completely positive, then at least to be temperate and honest in our comments and not to plunge people continually into eternal gloom. I would be the first to acknowledge that we in Ireland have had precious little to be happy about in recent years. I heard Deputy Ross make the same point. If Deputies Ross and Donnelly know the importance of perception and confidence and its impact on the economy, and if we want to increase confidence in our people and investors here and abroad, it does not make any sense to constantly denigrate the precious few positive developments we have had.
The overall purpose of the Bill, as the Minister of State stated yesterday in his opening speech, is to facilitate in the public interest the financial stability of the European Union and safeguarding the financial stability of the euro area. Nobody could quibble with this or be against it. It was and is clear the first and second Greek bailouts were not sufficient, or the terms were too onerous, for Greece to ever reach the type of sustainable levels of national debt which would bring the type of recovery it desperately needs. The amendments to the Greek loan facility were agreed before Christmas and have already worked to reduce the crisis and the near catastrophic situation we appeared to be in before Christmas. This is in all our interests and not only in the interests of Greece. Whether it is a permanent turnaround we do not know, but it is a positive development and this is my point. We all hope Greece will weather the extremely difficult times ahead for its citizens, and to call them "difficult times" is to understate it. It will run to certainly two and perhaps three decades for them. Their best case scenario is to reach 110% of GDP by 2022 and this is not a pretty prospect.
The conditionality of the rescue package is extremely onerous and the recent IMF report on Greece was, to say the least, very sobering. It pointed out total lending to Greece since the crisis started three years ago is more than €255 billion and the programme remained at high risk of missing its revised goals. It also pointed out Greece is attempting to achieve an unprecedented amount of fiscal and current account adjustment under a fixed exchange rate with a massive debt overhang and weak confidence. It also stated many of the conditions which caused the problems in Greece still exist as it still has a bloated public sector, rigidity in the jobs market and inflexibility with regard to wage rates. The report also referred to an astonishing scale of tax evasion among the wealthy in particular. I mention this because it may be that some day Greece may decide the demands of remaining in the euro are too much and too demanding, notwithstanding the eurozone's commitment to do everything necessary to save the euro. It may be that some day the eurozone itself will take the view that keeping Greece in the euro is no longer consistent with saving the euro.
In saying that, I am conscious that it is a doomsday scenario for Greece and probably for the rest of us, too. However, the chances of that happening are less now than they were. I think the EU means it when it says it will do everything necessary to save the euro, but we should probably interject the words "within reason". It is not just to save Greece but to save any country, including ourselves, should that become necessary. The caveat of "within reason" must be borne in mind. Given the cost of saving a country could be so huge and the implications for citizens so large, every country should continue to exercise a significant level of democratic control over such decisions. For that reason, I have some reservations about the section in the Bill which permits future adjustments to the Greek loan facility to be approved simply by way of a Dáil resolution rather than by new legislation.
It may be that Greece will never have to come back to the well, and I hope that is the case, but maybe it will, perhaps under some future government in five, ten or 15 years' time. I understand perfectly that it would be far more efficient if we could just nod it through by resolution of the Dáil rather than having to introduce some legislation. However, it is absolutely essential that we have some democratic control. It would be both prudent and desirable to do so. While democracy is never the most efficient form of government and there is often a conflict between democracy and efficiency, in this case, which could have such implications for citizens, it is important to come down on the side of democracy.
I ask the Minister to consider examining the legislation with a view to amending it, not necessarily to require legislation if a further bailout is required but at least requiring a fully informed Dáil debate and a vote of the Dáil before significant decisions are taken in the name of the people which could have such an important impact on them.
That is implicit.
I am not sure it is implicit because we have had resolutions of the Dáil that were nodded through without debate. It is important, therefore, to insert a provision in the legislation that there would have to be a debate.
Overall, however, I completely support the Bill's import. I believe in the mutual solidarity of our membership of the EU and of the euro. We have received international funds to help pay for key services such as health and education, and we would want to support at least some of those services for the citizens of Greece. Even if we were to be brutally self-interested, a stable Europe and a stable euro is in all our interests. That is achieved by passing this Bill.
I call on Deputy Joan Collins who, I understand, is sharing time with Deputy Tom Fleming.
Addressing a recent meeting of the Committee on Finance, Public Expenditure and Reform, the Minister for Finance, Deputy Noonan, said there would be no question of write-offs. He said that longer maturities and low interest were at the core of discussions on the promissory notes. On the issue of money put into the so-called functioning banks, including Bank of Ireland and AIB, the Minister said there would be an examination of the possibility of some of the rescue loans having maturities extended.
It seems to be increasingly obvious that there will be nothing particularly special about the deal for the special case of Ireland promised in June last year, despite the arguments for a very special deal being overwhelming. The economist, Mr. Michael Taft, has undertaken some illuminating number crunching with EUROSTAT statistics on the banking crisis in Europe from 2007 to 2011. The cost to the Irish State, excluding cash from the National Pensions Reserve Fund and the NTMA, was €40.1 billion, just ahead of Germany at €40 billion. However, Ireland has just under 1% of the EU's population and 1.2% of the EU's GDP. That €40.1 billion is 25% of our GDP compared with 1.5% of Germany's GDP. We have paid for 42% of the total bank bailout in the EU. That is €9,000 per head, as opposed to an EU average of €192.
The key question is whether the deal that is being negotiated will change these unbelievable figures. I think the answer is "No" because the Government has not sought to do so. It has tamely accepted the situation by saying we pay our debts and are not seeking a write-down. Ireland was forced into this situation on the ECB's insistence of no burden-sharing for bondholders. The ECB and the European Commission should now be forced into taking their share of the burden. Instead, however, we have a retreat from the promises made in June last year and an increasing inconsistency in the dealings of the troika with different countries.
Last week, there was a leak in the Financial Times of a draft by the European Commission on the ESM and bank bailouts. This ruled out any question of legacy debt being dealt with by the ESM. It went on to say that bank rescues must first rely on private capital, then state funding, and only as a last resort on the ESM. It is only a draft, but taken in conjunction with the Helsinki Three statement, this is a serious retreat from the commitments of the June summit last year.
I also want to raise the inconsistency of the troika in that the insistence of no write-downs or haircuts for bondholders applied to Ireland has not been applied to Greece and is unlikely to be applied to Cyprus. My understanding of the crisis in Cyprus is that it is partly a by-product of the Greek default last year. Cypriot banks were major holders of Greek sovereign debt and took huge losses on these bonds last year. They are now bust, as is the Cypriot Government. The cost of their bank bailout will be between 60% and 100% of their GDP.
It is alleged that a lot of hot money went into Cypriot banks, much of which was from Russia. The IMF is pushing for a haircut not just on bondholders but possibly also depositors. It seems that bailing out Russian oligarchs with taxpayers' money is a step too far, even for the troika. Rather than raise these issues of unfairness and inconsistency, our Government repeats the mantra that we pay our debts, we do not want a write-down, and that if we are given a little break, we will be happy.
I refer to remarks made about the People Before Profit Alliance in this debate. Listening to one or two contributions from the Government side, I was reminded of the old Dublin expression that there is not much point in being an eejit unless one can prove it.
The Greek people are not benefiting from the kindness of the troika. They are being crucified and the country's health service has effectively collapsed. Earlier today, we saw the report of the National Office for Suicide Prevention in Ireland. This referred to alarming and distressing reports that Greece has had one of Europe's highest suicide rate increases since the start of the austerity programme in 2008. Third World conditions are being visited on the people of Greece, but why? It is for an austerity programme that cannot work.
According to the IMF, Greece will not meet the target of debt-to-GDP from the current 170% to 120% by 2020. Its best bet is 135%, which means meeting all fiscal adjustment targets and some growth within that. Even if the 135% level were to be met, which it will not be, there is no question of re-entering the international market for finance. What is being imposed on Greece is not a solution but a social and economic disaster. The People Before Profit Alliance has a responsibility to state clearly what it is and to oppose it. We are proud to do so.
As regards the idiotic remarks made about the former Stalinist regimes in eastern Europe, maybe some Deputies could get someone in their offices to look up the difference between Trotskyism and Stalinism. They should have it explained to them slowly and carefully. If so, the level of debate might rise a little in the Dáil Chamber.
In October 2011, a report on the sustainability of Greek national debt by the EU-IMF-ECB troika made for grim reading. It stated that Greece would need €252 billion in bailout aid by 2021. This was dependent on a 50% haircut on Greece's bondholders, as well as their agreement to enter into a voluntary package in which they would incur such a 50% loss at a minimum. The report also stated that in the long term, in the event of a further economic shock, Greece may need as much as €450 billion by 2027. This is a frightening and appalling vista.
Subsequently, in February 2012, there was a huge relief in respect of Greece's fresh bailout package, which averted the threat of a catastrophic default by Athens although there is constant doubt about this massive bailout and regarding the sustainability of this deal. After the €130 billion deal was concluded, the then Greek Prime Minister, Mr. Papademos, called it an historic day and the European Finance Ministers stated that it provided a comprehensive blueprint for putting Athens's public finances on a sustainable footing. However, in February 2012, David Owen of the American investment bank, Jefferies, stated:
Greece is caught up in a full-blown debt spiral and no one has any certainty over what happens to GDP growth a quarter from now, let alone a decade out. ... More likely than not ... events will blow the country off course.
This statement was reinforced by a confidential document on Greece compiled by European and IMF analysts, which showed that Greece's debt burden could still stagnate at an unsustainable 160% of GDP by the end of this decade. The analysts also expressed doubts over whether the Greek Government would be capable of delivering the austerity measures demanded by Greece's European creditors in exchange for a new bailout.
These measures are imposing unprecedented hardships on the Greek public, which are similar to the effects of Ireland's bailout on the public here. In Ireland, the citizens definitely are taking the brunt of these indefensible measures following the economic crash and, subsequently, those at the lower income scale in this country have been hit disproportionately by the draconian measures. Unfortunately, the European Union financial authorities are not rewarding Ireland for its people's toleration of the extreme austerity measures, which the less well-off in society are bearing. They have no choice except to take the medicine, which is driving the majority of the public further down the road to poverty and suppression. In contrast, Greece is being granted handsome concessions and co-operation by the troika and European Union leaders to shore up its hopeless situation and to help it to limp along. In real terms - to be fair about it - Greece is a bottomless pit. It has experienced political volatility with three different Prime Ministers over the past 12 months. Moreover, its unemployment levels currently stand at 26% and are expected to reach 30% by the end of 2013. In this context, the Bills digest prepared by the Library and Research Service states:
Greece has experienced a major recession that, in terms of magnitude, is far worse than Ireland... Ireland experienced a major fall in GDP in 2008 and 2009, with a small fall in 2010 and some positive economic growth since then.
Greece, however, while initially experiencing a milder recession than Ireland, has had large falls in GDP each year from 2009 to 2012 and is expected to experience another large fall in 2013. Even if GDP does stabilise in 2014, Greece's economy will be 22.5% smaller in 2014 than in 2007. Ireland's cumulative fall from peak was 8% and in 2014 GDP is expected to be 3.5% below 2007 levels.
These statistics illustrate that Ireland, although in a serious predicament, has a viable pathway ahead to reach eventually total stability and solvency in the longer term. However, if Ireland is to recover within a shorter timeframe, it needs tangible solutions and concessions from the European Union similar to the Greek loan facility, as well as similar terms to those Greece obtained last November. I refer, for instance, to the terms of the European Financial Stability Facility, in which the length of the term of the fund payments was increased, interest payments were deferred and a guarantee fee payable by Greece was cancelled completely. These measures conceded to Greece show the farcical position whereby the troika and European Union are holding Ireland practically to ransom at present and there are very few signs of action being taken to ease Ireland's position in any substantive manner.
I believe the Greek solution to be a high-risk strategy by the eurozone to keep Greece in the single currency. If Greece misses its targets, for instance, when the German voters go to the polls next autumn, the bailout could once again be in complete jeopardy. It could happen that Germany could be faced with a nasty dilemma of either restructuring its Greek debt or refusing to offer Greece further help, thereby perhaps allowing the bailout to collapse. I believe it to be futile to throw good money after bad, given Greece's precarious position. It is a country in which tax evasion is rampant whereby in 2011, half of Greece's self-employed professionals, such as doctors, lawyers and engineers, declared incomes of less than €5,000, which is hard to believe. Given such a scenario, I cannot envisage how the several deficiencies present within the country itself will be addressed either by the Greeks themselves or by the European Union. It is obvious and inevitable that Greece will eventually go over the cliff. I hope this will not happen but if such a default takes place in time, it should be effected via a structured exit by Greece to minimise the contagion to the rest of the European Union. Given the current political instability and social unrest in Greece, there is considerable uncertainty regarding the implementation of the programme and the overall success of the plan for Greece. Therefore, due to the reasons I have outlined and on a point of principle, I am extremely reluctant to support this Bill before the House today.
In respect of the Euro Area Loan Facility (Amendment) Bill 2013, the paperwork has followed the negotiating outcome that happened before the year-end. The paperwork is, as can be expected, complex, cumbersome and requires lots of member states to put their pen to it. The euro crisis appears to have abated and while it is in remission, the root causes have not been addressed. In the noise, the clear voices are forgotten. In the blizzard, the outline of the impending scale of what could be an unmitigated disaster for everyone is not seen. On previous occasions, I have mentioned a couple of books for Members to read. I wonder whether anyone has read them. The most recent was John Mauldin's work, Endgame, which discusses the debt super cycle and what happens when financial markets create derivatives and other financial products that cause the entire system to be structurally unsound. That is the position at present.
Play has been made of the reduced bond yields on the other side. This has happened because a wall of cash has been created across the system, not just in Europe, and has gone to the financial system where the players are moving mountains of money in different directions.
With those mountains of money there have been increases in equity stock market prices; that is illogical as the equity behind the industries relates to shrinking markets and volatility in end product and services purchasing. With the equity market prices, commodity market prices have also risen. Bond yields have fallen in a way reminiscent of property prices falling when there was too much credit and cash in this country advancing prices.
The leaders of Europe have examined the stress or strain points in the countries that have bailout arrangements. As Deputy Tom Fleming has just stated, Greece is bordering a black hole. This Bill relates to what was agreed in autumn last year, which is not enough. We may approve this Bill because we are going in the "right direction". I have heard that phrase often with regard to our national and international economies. We may be going in the right direction but we should try to go from gear one to gear three or four; that would approach the right scale for solving this problem. That would be okay. Nevertheless, as they stand, the measures are not enough. I will not advocate voting against the Bill but everybody, including those aligned with the Government, should accept this Bill only if there is an amendment to indicate it is being accepted under protest because it is not enough and has not addressed the problem.
In 1918, after World War I, the burdensome payment of reparations was imposed on Germany, which was seen as the cause of the war. Those reparations were strong-armed by France, in particular, on Germany. The insistence lasted for many years, until well into the 1920s, when the failure of the German currency to make those reparations devolved into hyperinflation. France insisted that if the debt could not be paid in fiat currency backed by gold or anything else, troop trains would be sent to Germany to take steel and coal.
That sort of strong-arm behaviour is happening in a different guise today and has been evident over the past two and a half or three years. My colleague, Deputy Olivia Mitchell, stated that Ireland was a little unfortunate because we were early movers in addressing the financial collapse. We were not early movers but rather early victims, and we remain victims. The cost was a banking collapse, fuelled by unregulated and unmitigated walls of credit coming to this country, following illusory growth that was ultimately a bubble. The financial people managed to get out, having taken income, with all their capital, leaving the poison of the debt on this country.
Financial people will try to convince us that the system requires the recognition of those debts as being valid, with our economy struggling honestly and well to recover and doing everything, both in the public and private sector, to bring in efficiencies, reduce costs and find export markets. They will argue that the system is being forced to take the losses that should have been shared by the people responsible for the investments made to create that bubble.
It is not good enough to argue that we had abatement or reductions in interest rates in 2011 amounting to €9 billion. The principle is wrong. We should be doing whatever it takes to get the honest attention of the power brokers in our community because the EU is the most historically wonderful creation in the history of mankind. We were able to create a community or family of 27 nations and it should not be lost on any of us or our leaders that such a sense of community and family is important and valuable, as there is mutual responsibility, accountability and respect.
Nevertheless, we are being horsed around. There is the idea that robust negotiations are taking place and action is being taken but there is no clear and expressed recognition of the principal and quantity of write-down of debt arising from losses in our banking system, fuelled by our colleagues in the financial world in Europe. If there is no honest recognition of the principal amount and scale of relief, the process is a waste of time. Two years later we are still talking about negotiations.
I was laughed at in 2011 when I argued that the 3% margin on the rescue loans of the original bailout package was morally wrong and that it should have been a zero interest rate. That was a loan package mainly to address the imbalance of revenues and expenditure in the Government arising from the collapse of a property market bubble. Greece went into its first free fall and because it would not have been tenable for the EU and European Central Bank to leave Ireland exposed on a 3% margin while Greece was being dealt with at 1.5%, the rates came down. That was the only reason it happened, and Mr. Dan O'Brien mentioned today that the loan deal on Monday came about because Portugal is tanking.
We should face the issue and all look to the same honest analysis, based on correct facts. We should in unison - not even harmony - look to Europe and say that this debt on the IBRC account is wrong. Last week at a meeting of the committee dealing with finance, I stated to the Governor of the Central Bank, Professor Honohan, that he should not tinker with extending the debt and reducing interest rates. The only acceptable alternative to a write-down is an extension in perpetuity at zero interest, which is technically a write-off. If people want to fool themselves with financial engineering, let the process be called what they want but it should be nothing more or less than a write-off. I am prepared to go on behalf of the people of this country or on my own to Frankfurt and tell this as the truth. They should not mess around with us.
This is a ticking time-bomb, as it is coming down the tracks to Portugal and Spain. The euro problem is in remission and it is being tackled with an inadequate antibiotic, to use an analogy. Such treatment is inappropriate and somehow manages to keep the temperature down for a little bit but it will not excise the problem.
It is a symptom of the failure by the authorities to accept the problem is bigger than has been admitted is the decision to extend Basel III arrangements from 2015 to 2019. Solving this problem requires that we deal with the scale of the potential losses on bank balance sheets and their off balance sheet exposures, some of which are massive in the case of the large institutions. This will require the creation of a fund for provisions and potential losses that should be mutual, probably in perpetuity, should offer a very low interest rate and should be of a scale of approximately €3 trillion. A single supervisory mechanism should be advanced in a manner that ensures it is accountable to the democratic parliaments of Europe. The process for doing so has commenced. This mechanism should be a sentinel over the supervisory central bank mechanism, as proposed in the recently published book, Guardians of Finance.
Last Wednesday's meeting between the Joint Committee on Finance, Public Expenditure and Reform and the Governor of the Central Bank was instructive. We have started to recognise that we have a major mortgage problem. The banks have constrained themselves by not being honest about the provisions they need to make against loan losses, nor have they dealt with the restructuring of their client loans, namely, the household and business loans that are strangling the economy. If the banks had sufficient capital, they would restructure these loans and the release of this tension and strain on households and businesses would create the correct level of consumer demand to revive the economy. That they need more capital is a view that is consistent with that of one of the ratings agencies. The only way the banks can get capital is through creditor capitalisation, which is the way they should have got it the first time around. Who are the creditors of our banks? They are the Central Bank of Ireland and European Central Bank, in other words, two elements of the euro system. However, instead of securing the funding from creditor capitalisation, we raided the after tax savings of the individuals of this country and took approximately €20 billion to pour into the banks. This was a mistake and it is one of the reasons for insisting on a writedown or extension in perpetuity and at zero interest of the IBRC and Irish Nationwide promissory note liability. Such a decision would enable the emergency liquidity assistance, ELA, to be written off.
The survivor banks also need capitalisation, albeit not in the way the financial engineers of the ECB and euro system would like it to be done. A radical departure is needed to ensure fairness and justice. This will require bold, brave decisions to be taken with the big picture in mind. What is being done in Europe is inadequate and does not meet requirements as it involves tinkering with symptoms rather than addressing the root cause of the problem, the explosion in credit and financial instruments such as derivatives to the point that they spun out of control.
Unfortunately, today marks the start of the Davos summit, at which leaders of financial institutions, countries and intelligence institutions such as universities - in layman's language, the most powerful, the richest and ostensibly the most intelligent people in the world - gather to congratulate each other on how rich, powerful and intelligent they are and tell us how they think the world should be run. The way they have been running the world for the past ten years has resulted in a growing divide between the powerful and well resourced, that is, the wealthy of this world, and the poor and unemployed. We learned today, for example, that the number of people who are unemployed in Europe now exceeds 20 million, which is a staggering figure.
I will make another book recommendation for every Deputy and Senator. Written in 2004, Confessions of an Economic Hitman by John Perkins is an instructive book which explains and illuminates the arrival of a corporatocracy that replaced the empires of old when mercantilism was conducted through the power of commonwealth entities. Corporatocracy has, like an ivy, wound itself around governments and their civil services to the point that it has ensnared nations in debts that are not repayable. This country has been ensnared in this type of vice grip of debt.
One year ago I recommended a paper on the effects of debt on economies, which noted that when the three elements of debt - private household, non-financial corporate and sovereign debt - reach a combined level that approaches or exceeds 300% of GDP, an economy's potential for growth is suffocated. Depending on how one measures these three headings, Ireland's combined debt has reached a level of approximately 450% of GDP. When such facts and figures were presented truthfully and honestly to a Bundestag committee in January 2012 Deputy Donnelly and I saw its members visibly startle. They had not thought along these lines and were not aware that the transfer of €65 billion of losses from a private banking system onto a country with a population of 4.5 million and gross national income of approximately €140 billion would equate to transferring losses of €1.3 trillion from the German banking system onto German citizens. Their eyes opened and jaws dropped when they heard this analysis. That is the scale of the problem.
Doing the grunt work with Lever Arch files and simultaneous translation in 16 or 17 languages at bleary-eyed meetings lasting into the early morning or discussing this issue in empty parliamentary chambers both here and abroad does not amount to a real discussion. When do we have an opportunity to make presentations to the representatives of the country? In what forum is this possible? The absence of such a forum is the reason the message is not getting through and the diagnosis has not been correct. A microcosm of the failure to arrive at the correct diagnosis of the scale of the problem was the unwillingness shown by our establishment in 2008, by which I mean the accounting and law firms, business consultancies, politicians and Department of Finance, to face up to the scale of the €100 billion in losses coming down the tracks. This took place after the party, when the music had stopped and we have been tinkering with all sorts of other distractions ever since.
Let us get to the nub of the issue. This legislation, the Euro Area Loan Facility (Amendment) Bill 2013, provides, in legalese, the mechanisms of the loan that was agreed for Greece. This is not enough. Greece is only one part of the jigsaw of countries that are either in a programme or about to enter one. As I noted, some six weeks ago, the US Securities and Exchange Commission discovered that former high level employees of Deutsche Bank may have engaged in a €12 billion accounting fraud. This is only one bank's balance sheet. Let us get tough.
If this Bill is to trundle through, every Deputy should say that it does so under protest. Let us table an amendment to that effect so that we put the spotlights onto the absolute justification of a proper, honest deal for us without any messing. It could be announced this week and let the bureaucrats follow with the paperwork.
I call Deputy Donnelly, who is sharing time with Deputy Clare Daly.
The Bill before the House seeks to reduce the interest rate on a portion of Greece's debt to 0.5% and to lengthen the repayment schedule by up to 15 years. I support the Bill in the hope that it will go some way towards helping the Greek state and people to tackle the painful social and economic crises with which they are dealing.
These changes are the latest in a set of financial supports that have been offered to Greece by Europe and the IMF, including a €110 billion loan in 2010, a €130 billion loan last year and a further €30 billion loan last year, to help Greece with its budget deficit from 2015 to 2017. There have also been several reductions in Greece's borrowing rate, one of which we benefited from and was claimed by our Government as its greatest success in lowering our debt burden.
In exchange for this Bill, Greece has agreed to three measures. First, it has agreed to an austerity-only approach to correcting its budget deficit. We know what this entails. Second, it has agreed to the large-scale selling off of its public assets. We are all too well aware of some of the pain incurred through such a measure, for example, selling off the national forests. Third, it has agreed to comprehensive structural reforms that, while welcome, are complex and will take time.
Critically and unlike in the Irish case, private investors have played their part. They agreed to a 54% reduction in the face value of the Greek public debt that they held. It was the Greek people and not speculators who benefited.
How is the work going so far? As anyone in the world would, the Greek people are struggling to achieve all of these changes simultaneously. There have been reports of hospitals running out of important drugs. Unemployment was recorded as being 25% last year and youth unemployment is at 50%. Greece is being set up for decades of intergenerational poverty and social problems. Many people's public and private pensions have been wiped out. The people of Greece are dealing with a level of pain that, thankfully, we have not yet needed to deal with en masse.
There is hope for Greece in the medium to long term. If significant structural reforms can be made, they will drive economic growth and increase living standards and employment levels. In this light, I can understand why the troika might have set an ambitious reform plan for Greece. However, the troika and Europe are making the same mistake in their dealings with Greece that the IMF has made in similar situations for decades. The IMF enters a country that is in considerable trouble and suffering all sorts of social and economic crises and demands that it upgrade its capacity, economy and national institutions to meet levels of international best practice in a few years. As we in Ireland know, it takes decades to do that. We have been at it for decades and still have a long way to go, yet countries like Greece are asked to make these changes and to become Germany in the space of approximately five years. One reason this approach does not work is that it cannot be done.
What will occur during the next few years? A new Greek Government has been elected and a raft of reforms that will be painful for the Greek people have been introduced. Those reforms were only politically possible when the troika threatened to turn off the tap, which would essentially have closed schools and hospitals.
Regardless of Greece's efforts and successes, it will probably need significant additional support over and above what is contained in this Bill. This year, Greece's national debt will hit 190% of GDP. Without the haircut taken by private investors, it would have been 220%. In recent years, debt sustainability has been discussed a great deal in the Oireachtas. Debt becomes unsustainable somewhere between 80% and 120%, depending on a country's tolerance for it. Ireland could probably deal with a higher debt level than Greece could. We are at 120%, which is unsustainable. Greece is at 190%. I can see no situation in which Greece will not need a significant write-down of its debt. However, there is a problem with how the eurozone will deal with the issue. It will give Greece a little bit next year, a little bit the following year and so on and so forth. This sounds familiar. Greece's debt level will remain unsustainable. It will just about keep the lights on and the schools open, but it is looking at decades of stagnation.
What can the Government and Oireachtas of the Republic of Ireland do? Immediately, we can vote this Bill through, which I imagine we will do. In the coming months, we can promote an understanding across Europe that no country can be expected to reinvent itself in a small number of years, particularly when it is dealing with multiple crises simultaneously and when the model it is being asked to adopt is someone else's idea of what a modern society and a modern economy should be. We can also argue that Greece's debt is unsustainable and that it needs one or two serious write-downs. It should not be done in pieces of 5% here and 5% there so that it stays on the never-never for the next few decades. Those write-downs need to be made in tandem with some structural reforms, but we need to be smart, compassionate and understanding about what is asked of Greece in return for a substantial further write-down in its debt to make it sustainable.
While we are doing that, we should be seeking the same for Ireland. Rather than stating that we will repay all moneys owed, we should be insisting on a significant write-down in the total burden of debt that this country has taken on in order to prop up the eurozone's financial system. Rather than accepting a few more years to pay back money at 3.5%, we should be making the same case as that for Greece. We are about to vote through a package for Greece at 0.5%, yet we are meant to be happy about being allowed to borrow at seven times that rate for another few years. A reduction in our rate to 0.5% or, ideally, to Deputy Mathews's rate of 0% would constitute real burden sharing. It is important that we not accept the scraps from the table of Europe.
I listened with interest to Deputy Olivia Mitchell's criticisms of my reaction to the Minister for Finance, Deputy Noonan's announcement this week that we could still borrow for a few more years at 3.5%. Apparently, I was being churlish and - that old chestnut - talking down the economy. How quickly the new guard takes on the rhetoric of the old. Rather than swallowing the Government's prozac, as Deputy Mitchell would appear to have done, let us examine the facts attached to this deal about which we are meant to be so happy.
First, there will be no cash benefit for at least three years. Second and on conservative assumptions, it will on average be worth between €50 million and €100 million per year to Ireland for the next decade. This amounts to a fraction of the increase in public sector increments this year alone. It is not to be sneezed at, but it is nothing to be getting excited about either.
The deal allows us to continue borrowing at 3.5% when Greece will get a deal for 0.5% and, lest we forget, the European Central Bank, ECB, is lending long-term money to European banks at 0.75%. Let us be clear, in that we are meant to be happy with a deal that charges us for money at seven times Greece's rate and at more than four and a half times the rate charged by the ECB.
The other aspect announced by the Minister, Deputy Noonan, which was not picked up and did not make the headlines is that we would still bear the risk for the ESM recapitalising the banks. That is significant. In fact, this blows last July’s announcement completely out of the water, and it is a victory for Chancellor Merkel and Germany. What did the German Finance Minister do? The morning after the July announcement at 4 a.m. he said it was nonsense, that every sovereign would still be on the hook for the risk of its banks. In other words, there will not be any burden sharing. The Minister, Deputy Noonan, conceded that on the same day that we were told to be happy about the 3.5%.
I do not like coming to the House and calling the Government out. I would very much like the Government to come to the House with good news, but it is part of my role in opposition to call it out. The facts say that yesterday’s announcement was a victory for spin over substance. If we are to recover we must get a substantial write-down in the total debt burden. I support the Bill because it goes some way to doing that for Greece. It is high time that the Government achieved the same for this country.
Deputy Mathews suggested that Members should vote for the Bill under protest. A far more effective protest would be to vote against it. It is clear that the hierarchy throughout Europe is not listening to the damage and devastation the continuation of its policies continues to mete out to ordinary people on whose shoulders the burden rests. We refer to the loan facility as the bailout for Greece, but as other Deputies have pointed out, this is about the continuation of bailouts for banks and a process that has seen Greece stripped, raped and pillaged in a manner slightly different but where the effect is the same in this country. It takes the biscuit to dress it up, as some Deputies have done, as a benevolent act to help the Greeks. It adds insult to injury. What is at issue in the debate is the ratification of a continuation of policies that have brought Greece to its knees but have done enormous damage throughout the economies in the rest of the eurozone as well.
We must take time to examine in detail where such policies have already brought Greece. At the end of last year the Greek economy had experienced five years of recession and three years of unprecedented austerity meted out to its people. One could ask what it was all for, and whether the policies succeeded in transforming the Greek economy. One could say, yes they certainly did, if one’s definition of transformation is throwing a society backwards, pauperising a generation and leaving young people with the prospect of being poorer than their parents for the first time in decades.
Official statistics reveal that one in every three Greek people live below the poverty line. That is a phenomenal figure. Deputy Donnelly referred to the unemployment figures, which officially indicate a quarter of the population is unemployed. However, in truth it is nearer to being 30% to 35% unemployment. Youth unemployment is significantly more than that, at in excess of 50%. Unemployment among women is 30%. What an indictment of neoliberal policies that the talent and creativity of ordinary people, especially young people, is being left to rot while many necessary and important social functions and tasks that could be undertaken are not being done because they are being sacrificed on the altar of deregulation, privatisation and a conscious rowing back of the gains in the welfare state that had become the norm in post-war Europe.
What the Bill offers as a solution is more of the same. The Greek Government passed a budget with another austerity cutback of €9.4 billion to be taken out of the economy this year in return for €44 billion of a so-called bailout. That is not money for nothing. The terms of the bailout might be slightly reduced in the Bill but the money will not benefit any ordinary person or public services in Greece. The money is being borrowed to repay existing debts. Let us examine the scale of the con that is being undertaken. Further borrowings are being put on the shoulders of the Greek people to pay existing debts. In return for getting the money to pay a debt that was not generated by ordinary people the Greek people have to pay in further austerity. That sounds familiar, as we are used to it in this country as well
The adjustment this year and next year to which the government has signed up will mean further cuts in public sector wages and pensions and in health and education. In some sectors of the health service workers have not been paid for six months. They have not received a wage in six months but they are still going into work in the hope that the situation might turn around or they might be taken on by a private hospital. Sick people, including pensioners, cannot get basic medication. It is a cataclysmic collapse of the economy. There are stories in all of the international newspapers about the devastation people are experiencing. One could ask what is the logic of such economics. In the final quarter of last year, GDP in Greece fell by more than 7%. The decline is not halting either; it is getting worse. Whatever about enduring such conditions if one thought it would result in things getting better, the idea of doing it and paying such a price in order to enrich those at the top who caused the problem in the first place is lunacy.
I salute the Greek population in its struggle against that type of madness where we have seen the cumulative shrinkage and collapse of the economy by more than 25% in recent years. The proposition before the House is about a society going backwards. Sometimes one must call a halt. Austerity is not working. There cannot be an economic recovery for the people of Greece or those in the rest of Europe if we continue with those policies. We could be in the House all night describing what is going on in Greece. Homelessness has rocketed. A total of 40,000 people are currently homeless in Athens. The figures are unbelievable and are multiplying. We have referred to the increase in suicide and to people putting their children in orphanages because they cannot look after them. The Greek Government’s solution is to impose further punitive taxation on its population. It is clear that there is a link somewhere and that the Government must have sat in and took a few notes. It should take further notes as well. The property tax in Greece has caused enormous hardship. One power company has disconnected the electricity of 30,000 homes per day as a result of enormous bills, a large part of which was due to the fact that the property tax is collected by the electricity company. What a draconian scenario. Many of those who were cut off have stayed disconnected because people do not have the money. The Government should draw the conclusion that one cannot get blood from a stone. One can bring in any amount of draconian legislation but if people do not have money, they cannot pay. The Government should take note.
The briefing paper for the Bill suggests that its purpose is to facilitate in the public interest the financial stability of the EU. That is rubbish. It is not for that purpose at all. Its purpose is to back up the private interest of big business and the banking system throughout the EU. Let us call a spade, a spade. That is what it is about. A total of 17 countries in the eurozone ended up in a double-dip recession last year. The Bill has nothing to do with benefiting ordinary people; it is about the continuation of neoliberal capitalism, which is not benefiting the common good but is about backing up the interests of a minority.
I do not have time to deal with the Irish debt situation to which other Deputies have referred, but the fact that we too are shouldering such a massive burden of bank debt, far in excess of any other country in Europe, must be taken on board by the Government. It is clear that is not the case. The problem will continue as long as we look at things the wrong way around. There cannot be any recovery based on the type of policies being put forward in the Bill for this country or for Greece. We should start the other way around. Rather than reducing the terms of the debt we must focus on walking away from repaying debts that will not be repaid.
If countries can borrow to repay debt for private banks, why can they not borrow to invest in jobs, job creation and a programme of public works? The only way the situation will be turned around is through stimulus, investment and putting people back to work. There cannot be a turnaround without a break of the existing system, not only in Greece but throughout Europe. It is clear from the catastrophe in Greece that the circumstances unfolding in Ireland and in many countries in southern Europe are not very different. The only way we will get out of this situation is by banding together across national frontiers to put the interests of ordinary people ahead of those of the private banks and big business.
I am pleased to have the opportunity to speak on the Euro Area Loan Facility (Amendment) Bill. This amendment benefits Greece, and in so doing benefits the wider European Union. As a member state of the European Union, Ireland will also benefit in the long term.
The amendments we are considering were agreed by the euro area finance Ministers in December 2012 but are subject to national procedures and approvals. These changes include an extension of the term of the loan under the facility from 15 to 30 years. Also included is a further reduction of 1% in the interest rates. On a more technical level, a feature of the Bill is the proposal to deal with these types of amendment to the Greek loan facility by resolution of the Dáil, without engaging the full legislative process, to deal in a timely fashion with important issues affecting a fellow member state. Ireland has loaned €345 million as part of the Greek loan facility. Under the provisions of the Bill, Ireland will receive a lower interest rate over a longer period. The principal of the debt, which is due to be repaid during 2020 to 2026, will now be repaid between 2020 and 2041. This will significantly reduce the risk that Greece will default on its repayments. It is in all our interests that we reduce this risk. Ireland also hopes to avail of lower interest rates over a prolonged period of repaying the debt we owe.
I have read and listened for months as experts have written in newspapers and spoken in the media, in the Dáil or elsewhere in the country on how we should renege on our debt. They say we should not pay the debt but walk away from it. I accept that when we entered into this process, it was partly a knee-jerk reaction to the situation in which we found ourselves. I remember the night the bank guarantee was put in place. That decision was taken on the basis of the best advice available. Since then, many people, particularly Opposition politicians, have said we can walk away from the debt. If we do that, we will turn our back on Europe and on democracy.
Ireland joined the European movement in the 1970s. At the time, Ireland was not a well-off country. The standard of education was low, there was a huge amount of unemployment, people were leaving the country and people in rural areas were poor. Huge strides and changes have been made due to our membership of the European Union. I recall attending a rally in Tralee in late 1969 or early 1970 prior to our joining the EU. The then Commissioner for Agriculture, Sicco Mansholt, was present. There were people on the streets at the time saying that Europe was bad for Ireland. There was huge interest throughout the country in the benefits, but there was also huge anxiety about whether we would get them. Having lived through those years I can state that we live in a different and far better country now than it was in those days. Look at the houses in rural Ireland and the prosperity evident in our roads and rail network. It applies to every aspect of life.
With regard to education, people of my generation left school at 14 and 15 years of age. Are they leaving school at that age now? No, they are leaving when they are in their 20s and well educated. There are third level colleges in every second and third county in the country. They are in Dublin, Cork, Galway, Letterkenny, Tralee, Thurles and Waterford. Throughout the country there are facilities where people can be educated. Regardless of whether our people stay in Ireland or go to Australia or Canada, they are educated. That is one result of the prosperity generated by our involvement in Europe. It has made for a better place and a better people. We forget all this when we speak here about burning the bondholders and turning our back on Europe. How dare people say that? I challenge them to say it when the Irish people, on several occasions, have made decisions about Europe. We made a very strong commitment when we first joined the EU, and in every referendum and election relating to Europe since then, the Irish people have fully supported what we have gained from Europe.
I had not intended to participate in this debate but I feel passionate about where this country has come from. People are forgetting what the situation was in the 1960s and 1970s. We are a far better off nation, one of which one can be proud. It is the best place to be. I have confidence in the Taoiseach and Minister for Finance and in their efforts to seek a better deal. This is about getting a better deal for Ireland. Yes, we can negotiate, and we will continue to negotiate, but one does not turn one's back on one's debts. One pays one's bills and pays one's way. It is nonsense to say one should turn one's back on them. One can make a better deal, secure low interest rates and fight to have to repay it over a long period of time. If a person borrows €100 tomorrow and has no money after paying it back, it is impossible to manage. It is different if it is being paid off over 50 or 100 years.
Ultimately, this Bill is about finance and cash. We can strike a better deal. We have been good Europeans, even if we have blotted our copy book in a few ways. Overall, however, we are very committed to the European project and I believe that the Europeans will eventually row in behind us. We have too much invested in it. The people who politicise this by talking daily about burning bondholders in order to grab headlines should stop and think of the people who are unemployed and of the young 17 and 18 year olds who will be leaving college in a few years. The way to proceed is to have guts, stand and fight a good fight in Europe and make a good deal for the people. I have no doubt that we will be in a far better place in a few years time.
The discussion on this Bill offers us an opportunity to discuss the concerns raised by Members such as Deputy Donnelly about bailouts and how they work. It also offers us a brief opportunity to reflect on the announcement made this morning in the United Kingdom and what that means for the future of Europe and of Ireland. It is worth reflecting on what happened this morning before we address some of the issues colleagues have with this Bill.
If today marks a significant and historic change for Britain and its relationship with the European Union, we should be clear that the same could be true for us. In 1961 and 1973 the prospects for our membership of the European Union were profoundly intertwined with what was happening with our neighbour. Since then, if the UK is our neighbour as determined by geography, it has also become our nearest ally in many cases. That has been determined by common policy positions that in turn have been driven by a confluence of national interests. The speech by Prime Minister David Cameron today is the latest and potentially one of the most historic consequences of the global economic crisis. Let us consider what he said.
Earlier Mr. Cameron stated that a referendum verdict leading to a UK exit would be a "one-way ticket, not a return". His core argument can be summed up with one sentence: "And when we have negotiated that new settlement, we will give the British people a referendum with a very simple in-or-out choice to stay in the EU on these new terms or come out altogether. It will be an in-out referendum." We must recognise, therefore, that while the announcement marked the end of a debate about when the speech would be given and what would be in it, it was also the start of a much more significant and historical journey for the UK, which will have strategically significant consequences for our State. It is greatly ironic that just as the idea of a "Grexit", or the exit of Greece from the EU, recedes from the horizon, a "Brexit", or the exit of Britain from the Union, takes its place. The only thing that is certain about the journey that started today is the prolonged uncertainty it will engender on a number of levels.
What is the prospect for the opening of treaty negotiations, which the UK fundamentally needs to commence its resettlement? Does the announcement not make the commencement of negotiations and a new treaty less rather than more likely? What is Prime Minister Cameron looking for? The UK is not in the eurozone or the Schengen area but it wants to remain in the Common Market and a party to the common security, foreign and defence policy arrangements. Will concessions in the areas of working time and the common justice policy be enough to salve the elements of British society, media and politics that are looking for either an exit or a new settlement? These are all major questions, which do not have clear answers. However, it is certain that the efforts to provide those answers will require significant energy and commitment. The simple reason for that is for a member state to secure a change in treaty or policy area, it must be approved by every member state.
While simplicity is absent from potential answers to the questions raised earlier, we can have simplicity in the principles of an Irish response. I am struck by three initially. First, we must make clear to those looking on that there is no equivocation in our membership of the Union now nor will there be in the future. Second, many of the questions raised by the Prime Minister require an answer. Questions relating to democratic legitimacy, a lasting solution to the eurozone crisis and competitiveness are in our national interest to have answered. Third, for outside investors and buyers of government debt, Ireland can offer certainty about crucial areas that the UK cannot such as continued access to the Single Market, access to a banking union and a role in future policy formation within the EU.
We should examine where the Union and the eurozone stand now compared with the worst fears articulated over recent years. Recent and reasonable fears that have pervaded public debate include whether the euro would break up; whether nation states, both small and large, could fund themselves and avoid the spectre of an unplanned sovereign default; and whether Greece would stay in the eurozone and Ireland could avoid a nightmarish Pandora's box if an unplanned exit took place. Where are we now? Interest rates on government debt are falling, particularly on that of so-called peripheral states; the exit or ejection of any country from the eurozone is currently off the agenda; and the ECB's commitment to play a more active role in government debt markets, the passage of the stability treaty and the foundation of a banking union all show early but firm movement towards a more stable economic union. Many figures, both in this Chamber and elsewhere, have denied that any of this would happen and they are, curiously but understandably, silent now.
However, we must also be clear that despite these achievements, much remains to be done and we cannot be complacent about that. First, there must be a resolution to the debt crisis. The reminder today that debt to European income levels are stuck at almost 90% of national income shows the vast amount that remains to be done. Second, there must be a rekindling of economic growth without which everything becomes impossible to achieve. All we can see is that the worst fears of the past have not materialised for now and they appear unlikely to materialise tomorrow. That is a very important claim but it is also a fragile one, which should encourage us to do more, not less. That is why this Bill is important and should be supported. Initiatives such as this play a vital role in putting in place the foundations for a more stable and robust currency and economy in the future, capable of meeting the needs of the people it serves. Vicky Pryce, in her recent book, Greekonomics, writes of the absence of such systems when she notes: "We ended up with a monetary union as a preamble to a political union that consisted of countries that simply did not form an optimal currency area." She concludes: "The no- bail-out clause, now of course breached repeatedly was the axis on which the euro deal rested. The euro would never have got started if there hadn't been agreement on a no bail out clause."
Bailouts are in place in three countries. People who oppose mechanisms such as this must answer a simple question. If they are opposed, where will struggling states find the money to fund their public services if they cannot borrow on the financial markets? Is opposition to bailouts not a recipe for greater austerity? This is not the same as saying that previous or current bailouts were well done, fair or well implemented. The lack of burden sharing among all creditors and the lack of market access for some bailout countries, including our own, were either mistakes or injustices. However, the basic question remains. In the absence of bailouts or aid programmes, how can countries unable to borrow fund their public services? Bailout programmes pose major political and ethical challenges. Countries in them do not want to be in them, while countries outside them do not want to pay for them. Whatever about the economics of bailouts, the politics could strangle Europe.
It is a stark reality that if the Union is seen as a debt collection agency for amoral and parasitic banks by one group of citizens in European society and seen by a different group as a mechanism by which a group of hard working, productive and financially sensible citizens pay for the feckless, easygoing and partying lifestyles of another group, then the failure of European institutions is almost certain. As those perceptions collide, I struggle to see how the spirit we will need to depend on throughout Europe is capable of flourishing. These sharp rocks of public and political opinion may be ephemeral and less stark than the immediate and visible reaction of financial markers, but they are no less lethal and no less capable of sundering the project of European integration. Ireland will play a part in avoiding this fate by becoming the first European country to exit a programme. While we accept the need for these programmes, Ireland must be determined to avoid becoming trapped in one.
With the agreement of the House, I will share my time with Deputy Mattie McGrath.
Is that agreed? Agreed.
It is interesting to hear the different takes on what is happening. It is not surprising that we see things differently. The world would be a boring place if we all thought the same. The Greeks must be confused, however, as to who their friends are. Before last year's election in Greece, the unelected President of the European Commission, José Manuel Barroso, declared that Greece must respect its commitments. By commitments he meant the package of pulverising privatisations, tax rises and cuts in jobs, pay and services demanded by the EU and IMF in exchange for loans that cannot be repaid and are reducing the country to beggary. Knowing most Greeks rejected spiralling austerity but wanted to stay in the euro, Europe's political class ratcheted up the fear of forced exit meltdown.
The eurozone problems are not only the result of a cock-eyed one-size-fits-all currency structure which was always going to buckle and fracture under pressure. They are also the product of the wider crisis of neoliberal capitalism which first erupted in the banking system about five years ago and has since caused massive problems for public finances, jobs, services and living standards throughout the western world.
The Greek Government predicted a 25% fall in GDP by 2014. Recently, the Greek Finance Minister, Mr. Yannis Stournaras, said:
A decline in tax revenues and rising unemployment is deepening the recession. The economy is being undermined by the draconian austerity programme, early debt repayments and high interest rates on its loans. There is a great risk of prolonging the negative consequences for the economy and society. There is too much emphasis on short-term austerity and not enough on improving the country's long-term prospects. If the economy misses targets more austerity is applied which causes a continued fall in GDP followed by another failure to meets its target.
As a member of the troika in Greece the IMF is a part of this self-defeating approach, yet it said recently the first lesson is that fiscal consolidation efforts need to be complemented by measures that support growth. That is not what is happening there.
It is also upsetting to see that the Greeks are still spending too much money on arms. The former MEP, Dimitrios Papadimoulis, has said that well after the economic crisis had begun, Germany and France were still trying to seal lucrative weapons deals, even as they were pushing the Greeks to make deep cuts in areas like health. Some 15% of German and 10% of French arms exports go to Greece. Even though there has been a reduction of late, in 2012 the Greek military budget accounted for almost 4% of national output. This compares with the eurozone average of 2%. This defies logic.
A Greek writer, Maria Margaronis, recently wrote about Greece staring into the abyss. She says Europe must choose. She writes:
The misery to which Athenians have been reduced, the soup kitchens, the homelessness, the depression, the suicides, the rising tide of poverty that is swallowing the middle class and the feeling of disorientation and lost identity that comes with the collapse of the assumptions people live by is all adding to serious disillusionment.
When you ask people in the street if they would rather Greece went bankrupt than submit to further measures many now point out that it is already bankrupt, that the public sector workers have gone unpaid for months, hospitals are short on supplies and the poor are being wrung dry in order to pay the banks. Many say, "Let us get it over with", knowing it is impossible to know what a default might bring.
Maria Margaronis argues that is it not just Greece's identity that is at stake but Europe's. She says:
All eyes are fixed on Athens, but the way out of the crisis requires a choice of what kind of Europe we want. The one we have now, with its deep structural inequalities and its rigid adherence to a failed economic ideology coming from neoliberalism protects neither democracy nor human rights. Stiff necked and punitive, it prefers to eat its children.
Some people say there is no alternative. I do not agree. When an economy is struggling to breathe while the Government says there is only plan A, we should not accept that. There is always an alternative. Cutting the deficit is vital and it has to be done, but at the right time and in the right way. Otherwise it will make things worse. Austerity squeezes the life out of an economy at the very moment it needs more oxygen. Only growth puts money into the national coffers. If that means short-term borrowing, so be it. After all, we are borrowing plenty and so is every other country in Europe.
The troika assumed the Greek economy would shrink by 4.3% in 2012, hold steady in 2013 and grow at 2% per year thereafter. It is hard to credit where those figures came from. The Greek economy actually contracted by 6.5% in 2012, which was not a big surprise. Is it holding steady in 2013? I do not think so.
Austerity, as we know, has an ideology behind it. It is not just about balancing budgets. It means reducing wages, deregulation of the labour market, low public spending and tax exemptions for capital. It is not necessarily the way to go.
Bank bailouts are strange things. I was looking at the words of the then Minister for Finance, the late Brian Lenihan, on the night of 30 September 2008, when he said:
The Government's purpose and the objective of this legislation is to reinforce the strength of the Irish economy, the financial sector and especially to protect the long-term interests of the taxpayer. Maintaining a stable banking system is at the heart of the functioning of our economy and the daily lives of everyone living in our country. This legislation is not about protecting the interest of the banks. It is about the safeguarding of the economy and everyone who lives and works in this country.
He went on to say:
I stress that the provisions we are asking the House to approve are in no way a bailout for the financial system. The granting of guarantees to individual institutions will be subject to specific terms and conditions for each institution, including appropriate remuneration of the benefits of the guarantee. This is important to ensure the implementation conforms to EU state-aid and competition law requirements. The guarantee provided by the State is not intended to insulate the shareholders of these financial institutions from the risks attached to the investments they have made, as much as they may have benefited from significant rewards over the years.
In that context, I want to make two crucial points. The guarantee is not free and the taxpayer who ultimately underwrites this support will be remunerated for the value of the support provided. The terms and conditions on which the guarantee is provided will ensure the taxpayer gets value for money.
A very good article by Matt Taibbi, was recently published in the United States. It is called Secrets and Lies of the Bailout: One Broker's Story. He says:
It has been four long winters since the federal government, [through] Treasury Secretary, Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you'd think the bailout was the best thing to hit the American economy since the invention of the assembly line.
It was all a lie - one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in - only temporarily, mind you - to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. [...]
But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in official feature of the financial rescue. Money was not the only thing the government gave Wall Street - it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. [...]
Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it.
Today, what few remember about the bailouts is that they had to approve them. It wasn't like Paulson could just go and unilaterally commit trillions of public dollars to rescue Goldman Sachs and Citigroup from their own stupidity and bad management ... At one meeting to discuss the original bailout bill - at 11 a.m. on September 18th, 2008 - Paulson ... told members of Congress that $5.5 trillion in wealth would disappear by 2 p.m. that day unless the government took immediate action and the world economy would collapse "within 24 hours". [...]
The White House and leaders of both parties actually agreed to this preposterous document but it died in the House when 95 Democrats lined up against it. For an all-too-rare moment during the Bush administration, something resembling sanity prevailed in Washington.
So Paulson came up with a more convincing lie. On paper, the Emergency Economic Stabilization Act of 2008 was simple: Treasury would buy $700 million of troubled mortgages from the banks and modify them to help struggling homeowners. Section 109 of the act ... specifically empowered the Treasury secretary to "facilitate loan modifications to prevent avoidable foreclosures." With that promise on the table [the Act was passed].
But within days of its passage, the Fed and the Treasury unilaterally decided to abandon the planned purchase of toxic assets in favour of the direct injection of billions in cash into companies like Goldman and Citigroup. [...]
[In January 2009] Larry Summers, the senior economic adviser to ... Obama ... who had been forced out as Harvard president for suggesting women lack a natural appetite for math and science [...] laid out a five point plan in which the bailout was pitched as a ... giant populist programme to help ordinary Americans. Obama, Summers vowed, would use the money to stimulate bank lending to put people back to work. He went so far as to say the banks would be denied funding unless they agreed to "increase lending above baseline levels." He promised that "tough and transparent conditions" would be imposed on bailout recipients, who would not be allowed to use bailout funds [to enrich shareholders or executives]. As in the original TARP bill, he pledged that bailout money would be used to aid homeowners in foreclosure [and] promised that the bailouts would be temporary - with a "plan for exit of government intervention" implemented "as quickly as possible."
Sadly, from originally giving $700 billion towards looking after those with distressed mortgages, the figure was reduced to $50 billion, then $30 billion and by November 2012, the total figure that had been allocated to helping people struggling with distressed mortgages was $4 billion, less than 1% of the $700 million. The article continues:
But even before Summers promised Congress the banks would be required to increase lending as a condition for receiving bailout funds, officials had already decided not to even ask the banks to use the money to increase lending. In fact, they'd decided not to even ask banks to monitor what they did with the bailout money. Barofsky, the TARP inspector, asked Treasury to include a requirement forcing recipients to explain what they did with the taxpayer money. He was stunned when the TARP administrator Kashkari rejected his proposal, telling him lenders would walk away from the program if they had to deal with too many conditions. [...]
In the end, there was no lending requirement attached to any aspect of the bailout, and there never would be. Banks used the hundreds of billions of dollars for almost every purpose under the sun [except] lending to homeowners and small businesses in the cities they had destroyed. [...]
Moreover, instead of using the bailout money as promised - to jump-start the economy - Wall Street used the funds to make the economy more dangerous. From the start, taxpayer money was used to subsidize a string of financial mergers, from the Chase-Bear Stearns deal to the Wells Fargo Wachovia merger to Bank of America's acquisition of Merrill Lynch. Aided by bailout funds, being Too Big to Bail was suddenly Too Good to Pass Up. [...]
They Lied About The Health Of The Banks.
The main reason banks didn't lend out bailout funds [was] simple: [they] needed the money ... to survive. [That led] to another ... broken promise - that taxpayer money would only be handed out to "viable" banks. [...]
Congress had approved the $700 billion to buy up toxic mortgages but $250 billion was now shifted to direct capital injections for banks. This new ... portion of the bailout was called the Capital Purchase Program ... [In announcing this] Paulson ... promised that they would be stuffing cash into "healthy and viable" banks. This ... was the entire justification for the bailout: That the huge infusion of taxpayer cash would not be used to rescue individual banks, but to kick-start the economy by helping healthy banks start lending again.
This did not happen. It turned out that nine of the major banks that got most of the money were in serious trouble at the time and would not have survived without Government money, which in some cases they got for as little as 0.01% interest. The Government did conduct regular stress tests on some of these banks but that was a joke. If the wrong results came in, the figures were changed. The article goes on to state:
This episode underscores a key feature of the bailout: the government's decision to use lies as a form of monetary aid. State hands over taxpayer money to functionally insolvent bank; state gives regulatory thumbs up to said bank; bank uses that to ... sell stock; bank pays cash back to state. [There are too many similarities between what happened in America, Europe and here.] This is a virtual repeat of the financial crisis, in which a wave of greed caused bankers to ... chase yields everywhere, to the point where lowering lending standards became the norm. Now the government, with its Implicit Guarantee, is causing exactly the same behavior - meaning the bailouts have brought us back to where we started. [There has never been a better time to be too big to fail.]
[W]hat ... did the bailout accomplish? It built a banking system that discriminates against community banks, makes Too Big to Fail banks even [bigger], increases risk, discourages sound business lending and punishes savings by making it easier and more profitable to chase high-yield investments than to compete for small depositors. [...]
Other than that, the bailout was a smashing success.
I often disagree with Deputy Wallace on various issues but I could not disagree with a syllable of what he said this evening. We have seen what happened in Greece, with penury being forced on people. There were two different scenarios where some people rose up and protested while others accepted austerity. At least Greece fought and gained concessions through fighting austerity and the powers that be, while others were forced into penury and public servants and others are not being paid as they should be. The same scenario exists here. Austerity is not working.
I have run a small business for the past 30 years and if I ran my business like that, I would not have lasted in business for five years. We cannot endure dose after dose of austerity and expect bright results. It might suit a certain type of person to say Ireland is doing great, that it is doing what it is being asked to do and dosing the people with austerity. I do not believe that. The Taoiseach is only person I know who believes that but I disagree with him fundamentally about growth.
The bank bailout was based entirely on lies. I voted for it and I have regretted it every day since. We were told we were staring into the abyss if we did not do this. That was outright lies. The former Minister, Brian Lenihan, God rest him, and his officials were told naked lies. It continued when they said the so-called pillar banks were to lend €3 billion each year. They did not give €300,000 but told more lies. The shenanigans that have gone on in the banks have been deplorable. People have been arraigned and charges brought against them but no one has been found guilty of anything yet, and after so many years, that is shocking. If I was to transfer funds from one account to another before they were due and the accountant signed off on them, it would be fraud regardless of whether it was €50, €500 or €1,000, never mind the billions of funny money that was moved in out.
This beggars belief. A greater power is involved here than democracy and I am concerned about it. There is a corrupt chain of money and events that means these people cannot fail. The last Government and this Government have piled misery after misery on the people to save these scoundrel banks.
We hear stories, and if we want to go down to the courts, we will see.
Any of us who are honest with ourselves, in our clinics and in our constituencies, meet constituents all the time, whether they be ordinary householders who are in debt with a mortgage, business persons or what we call speculators, with appalling stories of how loans were pushed at them and how they were forced into taking out loans. I accept they signed on the dotted line. A businessman was with me last weekend who is 50 years of age and has four children. He is now unemployed. Thankfully, all the staff he had are getting social welfare. He is not getting a penny. He went into his bank one day six or seven years ago to buy a house in a town in Tipperary. He was asked why he wanted to purchase one building and was advised to buy the whole block, and within four days he had borrowed €3.3 million. The man probably should not have got €300,000, but that is how reckless the banks were because there was commission and greed. The same occurred in Greece as occurred with ourselves. When our banks ran dry, the French and German banks shovelled funding in here by the load for speculation and they are being bailed out. They are laughing all the way to the bank. They are being bailed out at the expense of the ordinary taxpayers here and the ordinary people are being forced out of business.
God forbid one must deal with NAMA, the most dastardly unit that was ever set up. When it was set up I described it as a wild animal in the woods and stated that we had no idea where it would end up, and I have proved right.
We spoke earlier on a Topical Issue debate about the level of suicide. It is frightening the level of financially driven suicide in this country thanks to this banking crisis. In my county, there was a case quite recently. The blackguarding that decent businessmen of all persuasions - merely persons who wanted to work, create businesses, employ, invest and be somewhat speculative, but who certainly had good track records in business - are getting from NAMA, the courts and the system is nothing short of outrageous. I do not know how people are putting up with this in this so-called modern democracy of ours that was fought so hard for. They are being blackguarded and driven to suicide because of bullying, intimidation, threats and chicanery. They are making efforts to repay and the offers they come up with will not be accepted, yet the property can be sold three days later for a fraction of the price to those in an inner cycle. It is outrageous and scandalous. I ask the Minister of State, Deputy O'Dowd - I do not know who I will ask anymore because I have been asking for four years - that someone look at this. It is still going on. A merry dance is being danced and they are laughing all the way to the bank.
I understand Deputy O'Donnell proposes to share his time.
With Deputy John Paul Phelan.
Is that agreed? Agreed.
I support this Bill. I want to put it in an Irish context. There is a great deal of theoretical talk about debt sustainability in the Irish context and there has been considerable debate on the impact various measures will have. It is a little disingenuous that the Opposition states continually that this will not work and that will not work. Anyone who has been involved in business will be aware that it is not about one measure; it is about a range of measures. On debt sustainability, outside of one's capacity to repay, any business loan encompasses three key elements: the amount of the loan, the interest rate on the loan and the repayment terms. Those are all elements to it.
First, I want to deal with the restructuring of the European financial stability fund, EFSF, that is currently under way, as announced by the Government yesterday. I welcome that measure. To put it in context, if one can defer repayment of a loan, it increases the sustainability of that loan. Furthermore, if one extends the term of a loan by a number of years, by the time that loan comes to be repaid, the value of the loan in real terms will have fallen due to inflation, and that is often overlooked. It would be akin to someone taking out a loan of £40,000 in the late 1980s to buy a house and, effectively, repaying the loan now. A sum of £40,000 back then would have been worth a significant amount more than £40,000 today. I very much welcome that measure, but I see it as part of a range of measures.
The Government previously negotiated a reduction in the interest rate on these particular loans, the EFSF and the European Commission loans, which is to be welcomed. The second element of it is the repayment.
There has been much debate about the promissory note. In layman's terms, effectively, there was no, or very little, interest charged to the State for the first three years of the promissory note. That had no impact on the current account of the budgetary system or on the ordinary citizen. The difference is that for 2013, 2014 and 2015, it will have a significant impact. For 2013, it will have an impact just short of €1.9 billion on the general Government deficit. For 2014, it will have an impact just short of €1.8 billion, and for 2015, it will have an impact just short of €1.7 billion. For those three years combined, one is talking about an impact of over €5 billion on the Government's budgetary position. Any relief we get on the interest in respect of the promissory note has a considerable beneficial knock-on effect on reaching our budgetary targets, on our debt-to-GDP ratio and on ordinary people's lives. That is why I wish the Government success in the negotiations. It is not merely about the amount. The interest is a key factor in the promissory note because of the way it was constructed. The previous Government arranged that no interest would hit the budgetary position for the first three years. For want of a term, it squeezed the interest over a shorter period of time. The interest was approximately 5.9% over the length of the promissory note. It ended up being nearly 9% because they squeezed it into these particular years.
Equally, lengthening the repayment term of the promissory note has almost the impact of reducing the loan. If one pushes the loan down the road, over time the real value of it drops. What I am looking at here is that we must get it to the position where, if we get a reduction in the promissory note interest, it will make our debt significantly more sustainable and make a considerable improvement in our budgetary position which will have an impact on the lives of ordinary people who we all represent in this House.
This is business. This is not about show-boating. There is a great deal of show-boating on this particular issue. This is about euro and cent. With the promissory note, we are looking at getting the interest rate down so that instead of having payments in the order of €1.9 billion in 2013, €1.8 billion in 2014 and €1.7 billion in 2015, those sums would be reduced. In 2013, the promissory note will make up 20% of the interest charges on our debt. In 2014, it will make up 18% and in 2015, it will make up 17%.
On the issue of the contingent capital, CoCo, notes in the banks and weighing it up, the Government, like any business, must de-risk the balance sheet of the State. There is a risk attached to having those contingency funds in the banks.
Furthermore, our debt-to-GDP ratio in 2013 will be 121%. We need to try to bring that down. Selling those contingency funds going directly to reducing our debt levels also has an impact on our debt sustainability. We must also operate in an environment whereby Ireland pays its way. We are seeking a raft of practical measures to improve our debt sustainability significantly. It has a positive impact on ordinary people's lives.
Reducing the interest rate on the promissory note will have a very significant influence, which has been overlooked. I would like to see what I would regard as a measured, knowledgeable and constructive debate on how our debt operates and how effectively we can get it back with a suite of measures. I am looking for a matrix of tools within debt sustainability through selling the CoCo notes and putting that towards reducing our debt levels and expanding the repayment terms in regard to the EFSF. It is often overlooked that funds we have drawn down in more recent times from the EU programme are over a far longer period of time, which is to our benefit. By the time they come to be repaid with inflation, they will have effectively reduced in real terms.
The significance of the interest charge on the promissory note on the ordinary citizen has been overlooked. If we get the reduction in the interest rate on that note, it will have a significant effect on reaching our deficit-GDP target and have an impact on the ordinary person through the various current balance budgetary measures that need to be introduced. It will ensure the markets respond more favourably and, when we exit bailout programme, which I have no doubt we will, it will ensure the cost of borrowings are sustainable in the future. In the coming months we should have an informed and robust debate on the impact. Rather than the headline seeking and clichéd attacks, let us have a reasoned and measured debate on our debt.
I am glad to have the opportunity to speak on the Bill and support its objective, which is to alter the arrangement for the European Union and the IMF to provide funding to Greece. Anything that could ease the interest rates and extend the term and therefore reduce the impact is to be welcomed from a Greek point of view. It is a country that has gone through dreadful upheaval in the past four or five years and the impact on ordinary Greek families and individuals has been horrific. This legislation is about easing, albeit marginally, the burden that the Greek people will have to face, which is why I will be supporting it. It is also an opportunity to follow up on announcements made in recent days with regard to examining Ireland's debt position following the Eurogroup finance Ministers and ECOFIN meetings over the previous two days. Therefore, this discussion comes at an opportune time.
Many figures have been bandied about tonight. I was a Member of the other House on the fateful night of the bank guarantee. During the debate on the guarantee I got my chance to speak at approximately 5 a.m. and the then Minister, the late Mr. Brian Lenihan, God rest him, gave an impassioned speech as to why it was necessary. Most people would agree that perhaps some of the advice he was being given at the time was inaccurate, to be generous. I have no doubt as to his bona fides in proposing that legislation, but I believe he was misled and others were misled as a result of that. Following the bank guarantee, the most shocking political decision of the previous Government was the subsequent decision to nationalise Anglo Irish Bank, which officially effectively meant that its debts were the country's debts. The promissory note to which the previous Government signed up meant it would be treated effectively like national debt. Of course, it did so in a very cynical manner whereby interest would only be charged from 2013 - in other words, after the general election would have taken place.
I remember putting questions to the then Taoiseach, Mr. Brian Cowen, and others and never got any satisfactory answers as to why the then Government took those decisions. We have never got those answers. I am pleased the Government's legislation programme for this term includes on the A list an amendment to the rules allowing Oireachtas committees additional powers of investigation. It is important that the Oireachtas Joint Committee on Finance, Public Expenditure and Reform would get those extra powers with regard to not just the decisions made around the bank guarantee but ultimately the decision to nationalise Anglo Irish Bank. No real information has ever been ascertained as to why that took place.
On the need to change the terms of the promissory note, there is considerable misunderstanding about what national debt is. Many people who comment and profess to understand national debt fail to understand that national debt is rarely paid off. It is turned over when the debt falls due and a new bond is issued resulting in a new debt being taken on in its stead. That is the nature of national debt.
Deputy O'Donnell was correct in pointing out that between €5.5 billion and €6 billion of current budget expenditure for the next three years is involved in funding the promissory note as established by the previous Fianna Fáil-led Government. Any positive change would have a very good economic impact for the country. Any change to the term or the rate of interest being charged would have a significant positive impact. That is why this week's news, while small in nature, is none the less a step in the right direction. There have been a number of similar steps in recent months. The job the Minister for Finance and his officials have to do on the promissory note before it falls due at the end of March is crucial for the country. They are moving in the right direction. Clearly, I am not a party to the negotiations.
It is important they are brought to a successful conclusion. Almost half of our total debt liability is in respect of the recapitalisation of Allied Irish Banks and Bank of Ireland. I have not yet heard much national discussion on, as mentioned by Deputy Kieran O'Donnell, the possibility of the European Stability Mechanism purchasing some of our debt. I have heard some commentators say this might not be beneficial for us in that while State shares in the banks are currently at a low value, they could ultimately be worth more to us and, having already recapitalised the banks to the tune of billions of euro, we would be making a second error in selling those interests at a greatly reduced value. The Minister might respond to that issue when replying to the debate. While I have not heard too much discussion on that issue during the past couple of months, I am sure we will hear more about it during the course of the next few months.
I agree with Deputy Stephen Donnelly's comments in relation to the sustainability of debt and that the Greek debt-to-GDP ratio of 190% is clearly unsustainable. The European average in this regard is approximately 90%. Ireland's debt-to-GDP ratio is at 120% and is perceived to be at the upper end of what is sustainable. If there is to be significant economic growth in this country, that figure must be reduced. The mechanism by which it is reduced, whether through the European Stability Mechanism purchasing our interests in the pillar banks or a write-down, is arguable but important. Deputy Donnelly is correct that a piecemeal approach to the Greek problem by way of a little write-down here and there will only keep it alive rather than inject it with the medicine necessary to ensure its economic recovery. It would be imperative, if a significant write-down for Greece were achieved, that Ireland would be in a position to benefit from that particular arrangement as well.
I support the provisions contained in this legislation. When we signed the original European agreement in respect of the bailout for Greece, we did not anticipate our being in a similar situation a number of months later. The mechanism by which that was established means unanimity among member states is required. Measures that would ease the burden on the Greek people should be supported by members on all sides of the House.
While listening to the debate earlier I heard my constituency colleague, Deputy Tom Hayes, take issue with and criticise those calling for the burning of bondholders. I have to assume that Deputy Hayes was criticising the Taoiseach, Deputy Kenny, and the Fine Gael Party who called during the general election of 2011 for bondholders to be burned and for not another cent to be paid to the banks. Fine Gael has since reneged on its promises in this regard, resulting in this country being in a serious social and economic crisis. Fine Gael Members were elected on those promises, on which they have since reneged, which is a common story in this country.
I am opposed to this legislation which seeks to impose more austerity, to fleece low and middle income families by way of cuts in services and increases in taxation, to pay banks and bondholders and reward those who created the crisis in which we now find ourselves. Austerity has not, is not and will not work. It has not worked in Greece and will not work in Ireland. As I stated earlier, this country is in social and economic crisis, with 430,000 people unemployed - more than half of whom are long-term unemployed - massive emigration, and increased taxation by way of the property tax, a proposed water tax and various other forms of taxation. There have been huge cuts to services in the areas of education, health and social welfare. We also have a mortgage crisis, with many homes in negative equity and, sadly, a large number of children in this State living in poverty.
It is time we stopped paying other people's bills, which is what we have been doing. We must also cease rescuing the failed investments of international financiers. We must, as once stated by James Connolly, start the reconquest of Ireland and the restoration of our economic sovereignty. This can only be done by the neutralisation of Ireland's bank related debt. We must stand up for ourselves in Europe and must make clear to other European countries that we will do so. To do so requires that we cease repaying outstanding bonds, cease paying interest on the portion of the national debt which arises from bank related borrowings, cease paying the promissory notes to Anglo Irish Bank-IBRC and cease, as we did last year, procuring other banks to pay them at a cost to the State. We must also cease paying all future tranches of Ireland's contribution to the European Stability Mechanism, ESM. If the ESM cannot be used to retrospectively pay for the recapitalisation of the Irish banks, why is Ireland contributing to it? We must halt all sales of State holdings in financial institutions.
This State, which put €5 billion into Bank of Ireland, now owns a mere 15% of that bank while an American venture capitalist purchased 37% of it for €1.1 billion. Allied Irish Banks and Permanent TSB must not be sold to the ESM. They should be fully nationalised and absorbed into the public service. The State can then ensure an adequate level of lending to small businesses and end the paying of exorbitant salaries and pensions to senior executives. In the meantime, the public service directors of these banks should be made answerable to the Government and Oireachtas. These measures would represent a real move towards restoration of Irish sovereignty and would send a message to Europe that this is what we want. The notion that a formal exiting of the bailout programme will amount to the recovery of our economic sovereignty is nonsense. A combination of the ESM treaty and subservience to the market for borrowings will mean a continuation and almost certainly a further diminution of our economic sovereignty.
While Greece got a significant deal, it is only on what might be termed a life support machine.
It is a significantly better deal than Ireland received. Not only has the interest rate on the country's loans been scaled back to 0.5%, which is virtually nothing, it also received a ten year deferral of interest payments which will save approximately €44 billion. It can buy back its debt from market investors below face value and eurozone countries will be able to forgo their profits on Greek bonds held by national central banks. The Greek rescue loan maturity has been doubled to 30 years and this is another significant aspect. The question of write-downs is still in play for Greece which almost certainly means they will happen.
The claim made yesterday by the Minister for Finance that we will save billions on this new deal is nonsense. It is expected the maturity dates on a fraction of State borrowings will be put back for an unspecified number of years. The Minister has admitted there will be no write-down of debt. The State will not save a single cent overall. The total to be repaid, including interest, over the longer period will be greater. Like lengthening the period of a mortgage one pays less money annually but more in the longer term. Even Dan O'Brien in The Irish Times claimed the deal will be less beneficial than the deal in 2011 because there is no interest rate reduction on this occasion.
The original deal was achieved not by Ireland but by Greece, while the deal yesterday was proposed and achieved by Portugal. The Irish situation is much worse than extending a mortgage on a house. The support given by the Government to the ESM treaty will mean huge capital repayments beginning in 2015. Ireland's debt to GDP ratio is likely to be approximately 120% in 2015 and reducing the debt to GDP ratio by one 20th of the excess per year in accordance with the treaty will mean reducing it by 3% of GDP per year. Without significant economic growth it means we will pay back €4.5 billion per year in principal on top of the already €9 billion per year in debt servicing. This debt will only be paid back on the basis of yet more savage austerity imposed on working people which in turn will mean a worsening of the Irish economic crisis. I will oppose the Bill, which is a continuation of austerity which has not worked and will not work.
The Euro Area Loan Facility (Amendment) Bill 2013 changes the arrangement for the bailout of Greek capitalism from its deep crisis and from the crisis of the European financial market system in general. This bailout and the vicious austerity agenda that is contingent on it has been an unmitigated disaster for the people of Greece. This amendment to the bailout terms does nothing whatsoever to alleviate this disaster. The arrangement proposed in the Bill, to be passed by all parliaments of the eurozone, is merely a rearrangement of the crude instruments of torture to try to keep the victims alive for a further period so their economic lifeblood can continue to drain away to the financial markets and the bankers of Europe.
Last year during the second general election campaign in Greece, the leader of the left-wing party Syriza, Alexis Tsipras, called for the repudiation of the unbearable debts foisted on the Greek people, including the massive troika loans used to bail out the Greek banks. Alexis Tsipras stated Greece was a social hell and demanded an end to the austerity package of the troika which is crushing workers in large swathes of the former middle strata of society. In these demands comrade Tsipras was absolutely right and represented the genuine interests of the Greek working class, the middle layers of society and the poor.
Some speakers here have outlined the extent of the crisis in Greece and its manifestations, the devastating effects of austerity and of the dictatorship of the European financial markets. In October 2012 unemployment rose to 26.8% officially. This had rocketed by a stunning 368,102 people since October 2011. In one year unemployment saw an increase of one third of 1 million and, shamefully, youth unemployment, was at 56.6% in October 2012, again at official figures which are no doubt understated. Wages have collapsed by up to 40% from 2010 to the present. Poverty and outright destitution are now rampant in Greek society. Public services are being dismantled, degraded and cut to the bone. Hospitals are starved of funds. In one shocking anecdote in Sismanogleio Hospital in Athens there was a reported instance of low paid workers suffering the cuts of austerity making a collection to buy the ingredients for soup for the patients. This is the European Union in 2013.
Small enterprises have closed by the thousands as the effects of austerity destroy the ability of ordinary people to purchase goods and services, exactly as is happening in Ireland. What has changed fundamentally in this euro area loan facility? It simply maintains the crushing burden of debt on the Greek people but agrees to spread it out somewhat further, for twice as long, and re-adjusts interest rates. Hence we have Annex 2 of the Bill, a table which shows the final payment will be made on 15 September 2041, so the children born this week will be in their 28th year when the last of the debts in this schedule are supposed to be paid. Children yet unborn will carry the burden of the crisis of Greek capitalism, of the European market system and of the bailout foisted on the Greek people to save the European market system.
The German bank tasked with administering the debts which are the subject of this Bill is KfW, or in English, the Reconstruction Credit Institute, misnamed one would have to say in this instance since this particular credit arrangement brings only destruction in its wake and not reconstruction. Crucially, this reordering of the Greek bailout will not lay a basis for the recovery of the Greek economy; the opposite will be the case. Unfortunately Greek debt is simply unsustainable and this does not change that.
The Minister for Finance stated yesterday with regard to the Irish debt that the possible new deal on Irish bank debt and general debt would be to extend the period of payments and adjust the interest rates.
The Minister for Finance said that lengthening the payments period for bank debt with reduced interest, however, is "not a game changer". This begs the question, what is the point in togging out and running on to the field if one has no prospect of being a game changer? In my view, the Minister meant that the proposal with regard to Irish debt, of spinning it out, does not alter the fundamental elements of the crisis, which are an unsustainable level of debt, the destruction of austerity, a crisis in the domestic economy driven down by austerity, and a catastrophic collapse in investment.
It is similar, if not exactly the same, for the Greek people. They need a fundamental change of policy, as do the Spanish, Portuguese, Italians, Irish and many other communities and peoples within the EU. However, crisis-plagued European capitalism will not provide the necessary radical changes or solutions. The sharks in European financial markets are only interested in feeding on their own profits and profiting from the misery of the Greeks, the Irish and others.
The Greek people are not the cause of this euro crisis, they are its victims. From the start, it was economic insanity to force weak capitalist economies like Greece - and like Ireland, despite the delusions of grandeur that existed at the time we entered the euro - into a common currency where it was quite clear they could not measure up to powerhouses of European capitalism, such as Germany, for example. At the time, the left pointed out that the euro straitjacket would inevitably bring about a crisis situation.
The paralysis in European capitalist economies is clear from the investment strike currently in place. Last year, the Financial Times and the Wall Street Journal published significant articles outlining how €3 trillion in accumulated profits by big European countries remained uninvested and lying in European banks, while 26 million people languished in unemployment. That is because European big business is not confident that against the current background it would make further profits by investing in productive capacity.
This increasingly shows the parasitic nature of European capitalism. The historic justification for capitalism was its development of productive forces, that it could unleash the productive capacity of humanity and transform many areas of life, even if it often did so by means of ruthless exploitation. For 20 years now, the tendency within world capitalism has been to become increasingly parasitic in its quest for profits. It has gone from productive investment to financial products, speculation, derivatives and gambling of all kinds, against a background of deregulation and privatisation which right-wing governments provided for it, inevitably giving rise to the financial crash. That is the reality of the situation.
How can working people in Europe put any faith in this system, and in the governments that supervise it, to secure their future? In recent times across Europe, tens of millions of working people and the poor have been mobilising massively against austerity. They seek an alternative to the dead end that is this market system.
A socialist economy is the alternative, where major institutions would be liberated from the hands of speculators and parasites. Those institutions would be put under democratic control, management and ownership, and then tasked with investing in productive areas of society and in the creation of crucial infrastructure and services, thereby putting millions of people to work. They would regenerate the broken economies of many European countries at the present time, thus instituting a system that provides a decent future for youth, as well as developing services for the sick and elderly. That is the only alternative to this disaster that is merely being carried on by the Bill currently before the House.
Ba mhaith liom cúpla focal breise a rá maidir leis an mBille um Shaoráid Iasachta an Limistéir Euro (Leasú) 2013. Baineann an reachtaíocht seo le tarrtháil an chaipitileachas Ghréagach atá curtha i bhfeidhm. Faraor, tá an clár seo tubaisteach amach is amach do ghnáth-mhuintir na Gréige - lucht oibre na Gréige agus daoine óga na Gréige - atá ag fulaingt torthaí na déine go dian le ceithre nó cúig bliana anuas. Tá siad ag fulaingt ón tubaiste eacnamaíochta atá an polasaí déine tar éis cur i bhfeidhm, nuair a cuireadh i gcroí an pholasaí go dtarrtháilfear na bainc agus córas caipitileach na Gréige ar ghlúine gnáthmhuintir na tíre sin. Ní chuireann an Bille seo aon athrú bunúsach i bhfeidhm maidir leis an bpolasaí seo agus maidir leis an déine. I ndáiríre, níl i gceist sa reachtaíocht seo ach tréimhse aisíocaíochta na fiacha a dhéanamh níos faide agus athrú a dhéanamh ar an ráta úis. Cuirtear an t-am amach go dtí 2041, rud a chiallaíonn go mbeidh daoine atá fós le breith freagrach as an t-ualach seo a thagann ón ngéarchéim. Dá bhrí sin, ní athraíonn sé seo aon rud bunúsach maidir leis an tubaiste atá ar mhuintir na Gréige i láthair na huaire. Is de bharr sin go raibh an ceart ar fad ag Ceannaire an Pháirtí SYRIZA, an t-Uasal Tsipras, nuair a dúirt sé nach ceart na fiacha seo a íoc, gur ceart go gcuirfí ar ceal iad agus go gcaithfí deireadh a chur leis an bpolasaí déine atá ag déanamh creiche ar a mhuintir. Bhí an ceart ar fad aige.
Dá bhrí sin, ní dhéanann an Bille seo aon ní chun saol níos fearr dáiríre a chur i bhfeidhm do mhuintir na Gréige. Coinníonn sé ar aghaidh an polasaí céanna atá ag cur an oiread sin fulaingthe ar na gnáth daoine. Tá sé sin soiléir ón ráta dífhostaíochta mar shampla, atá anois, nach mór, 27%. Tá an dífhostaíocht i measc an óige tubaisteach, beagnach 57%, tá seirbhísí poiblí faoi bhrú agus á thógáil as a chéile, agus tá ioncam gnáth daoine creachta de bharr an pholasaí seo.
Tá lucht beag ghnó i gcruachás amach is amach.
Dá bhrí sin, in ionad Bille den sórt seo, is é atá ag teastáil ná athraithe bunúsacha maidir leis an polasaí gur cheart a chur i bhfeidhm. Is é is ceart a tharlú ná go dtiocfadh muintir na tíre, muintir na Gréige agus gnáth lucht oibre na Spáinne agus na Portaingéile le chéile agus go ndéarfaidís nach bhfuil siad toilteanach a thuilleadh fulaingthe nó a thuilleadh creíche a thógáil d'fhonn an córas caipitleach agus airgeadais agus na boic mhóra a shábháil, ach a mhalairt.
Ba chóir dóibh teacht le chéile chun malairt eacnamaíochta agus polaitíochta a chur chun cinn. Chiallódh sé sin go mbeadh na hinstitiúidí móra airgeadais agus comhlachtaí móra eile in úinéireacht phoiblí, faoi stiúradh phoiblí, faoi stiúradh dhaonlathach na ndaoine agus ag cur chun maitheasa an tsochaí. Bhéadh siad ag cur chun cinn straitéise chun infheistíochta, chun na milliúin a chur ar ais ag obair, chun infrastruchtúr riachtanach a fhorbairt agus a chur i bhfeidhm, chun seirbhísí poiblí a fhorbairt agus chun aire a thabhairt do dhaoine atá breoite, do sheandaoine agus a leithéid. D'fhéadfaí é sin a dhéanamh le malairt córais ina mbeadh an córas airgeadais ann ar mhaithe le tromlach na ndaoine seachas faoi dheachtóireacht mhionlaigh bhig agus faoi na boic mhóra, faoi chomhlachtaí móra bainc agus a leithéid, nach bhfuil uathu ach brabús agus níos mó brabúis.
Dá bhrí sin, ní dhéanann an Bille tada. Táimidne ar an eite chlé ag cur ina aghaidh. Táimid chun vótáil ina aghaidh agus leanfaimid orainn ag troid ar son na malairte, is é sin, athrú i bpolasaí na déine, deireadh leis an déine agus leis na fiacha, agus polasaí sóisialach a chur ina áit chun eacnamaíocht na tíre agus na hEorpa a fhorbairt ar mhaithe le tromlach mhór mhuintir na hEorpa seachas an polasaí atá ag cur na milliúin i gcruachás, i bhfulaingt agus i dtruamhéileachas faoi mar atá i láthair na huaire.
I call Deputy Durkan. I understand the debate will conclude at 7.30 p.m.
I understand. I thank the Cathaoirleach and am glad to have an opportunity to speak on what I consider to be an important Bill from a different perspective to that of the previous speaker. I am sure that while we respect each other's views, we are not necessarily obliged to agree. For whatever reason this nation has found itself in its present plight, the blame game is of no consequence at this stage. Everyone knows what has happened in the past and there is not much sense in dwelling on it now other than to note that despite the claims of Opposition Members and despite their continuous rants about austerity, which in fact is good housekeeping, the policies pursued by the present Government are actually working.
Everyone is aware that a huge burden has been placed on taxpayers. It is highly burdensome that everyone is obliged to carry the burden that was foisted on us for whatever reasons. However, one certain point is the policies pursued by the Government are working. The so-called austerity is working and is bringing about results. Members should recall the difference between the present position and that which obtained two years ago when, were we to go into the marketplace to borrow, we would pay through the nose for it. Moreover, we did and the offers made to us were colossal. The position has changed dramatically since for a variety of reasons but one of the biggest single factors in bringing about that change is confidence. I refer to confidence in the destination to which one must go to borrow money. From where do Opposition Members expect the money to come that the Government must borrow to meet its budgetary requirements in the current year or for last year? Does anyone in this House really think someone will be sufficiently charitable to thank us for having been very good and then, while noting we do not intend to repay it, to hand over the money to us anyway? It does not work that way. International businesses, economies and financial services do not work that way. Nothing I have ever known works that way. Moreover, and I am sure the Acting Chairman, Deputy Mathews, has similar experience, I have never known of a lending institution that was prepared to lend money on the basis that although one did not really intend to pay back what one had got on the previous occasion, one now wanted more. It does not work that way.
We must become a little realistic. A huge burden is being shouldered by the Irish people and piling more misery on their heads by telling them they are going down and there is no hope is not the right message to give. Members must be more positive now and I was sorry to hear the linking of the economic situation with the levels of suicide. While there may well be a link, suicide is a serious issue in Ireland and has been for several years. It did not come about today or yesterday but, sadly and tragically, has been with us for a long time. There are various reasons that suicides continue to occur. I have never spoken about that subject in this House previously but I am familiar with and have dealt directly with people who have been in that difficult situation. At this difficult and vulnerable time for all our people, Members must be supportive of those who find themselves under pressure. Members must reassure those who find themselves unable to meet the consequences of the kind of situation in which we are at present. It would be poor of Opposition Members, were they to use such a tragic subject to advance their cause for political purposes. While that is not their intention, there is a grave danger this could happen. In respect of linking the economic situation with suicide, Members must be able to tell clearly those people who are under pressure at present that all is not lost. They must be able to tell them that we are recovering and it will be a short time before we see the light that is getting brighter in that tunnel. Members must build on that to support our people. They must stand together with them and leave no one floating in our society. Increasingly, Members must be the shoulder on which people wish to lean. They should hold out the hand of friendship to those who find themselves in difficulty and should do something economically about it, which is what the Government is doing.
In debate last week the Governor of the Central Bank spelled out clearly to all and sundry what would happen were we to behave irresponsibly. Were we to so do, there would be consequences and the Governor of the Central Bank pointed that out several times. He is not exactly known for making this point so emphatically but effectively, he made the point that were we to decide to do something ridiculous, such as defaulting on that to which we already have committed, for whatever reason and regardless of whether the reason was right or wrong------
I apologise for interrupting Deputy Durkan but there has been a technical hitch and I must clarify something. The Bill will be guillotined at 7.30 p.m. and with the Deputy's gracious approval and agreement, the Minister of State will now be invited to make a concluding reply before the guillotine takes effect at 7.30 p.m. I apologise.
I always defer to a guillotine and this will be no exception.
We have the wrong kind of guillotine here.
If the Minister of State wishes to be brief this evening, he can follow through on Committee Stage tomorrow.
I will follow through on Committee Stage tomorrow. That probably suits everyone.
Consequently, a few minutes remain to Deputy Durkan before 7.30 p.m.
Even the guillotine does not come automatically.
Let us get the guillotine.
Notwithstanding the encouragement from my colleagues on the other side of the House, who would have easy answers to offer the people, I note utopia does not exist.
Deputy Durkan's neck is too hard for the guillotine. He would break it.
They can call as much as they like, they can cry and rant at the moon or even at the sun but one point is certain, namely, we are recovering from where we were and the position is much better than many Members had thought. I had expected that we would be in a much worse position financially and internationally by now but thankfully, we are in a better situation.
Whatever happens from now, I ask that those in the Opposition unite with the Government parties in pursuing what is in the best interests of this country. At the same time there should be an acknowledgement that there is a significant burden being carried by the Irish people, and as a result, we must work together. We must reassure each other and our colleagues in Europe. We must put our shoulders to the wheel, as we have done in the past two years, and continue to work for the good of the country.
I appreciate Deputy Durkan's gracious agreement.
If not the Deputy's blind optimism.
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