Skip to main content
Normal View

Dáil Éireann debate -
Wednesday, 20 Nov 2013

Vol. 821 No. 3

Government Decision on Exiting Programme of Financial Support: Motion

I move:

That Dáil Éireann endorses the Government’s decision to exit the EU-IMF programme of financial support in December without applying for a precautionary credit line.

I am delighted to give Deputies on all sides of the House the opportunity now to vote to exit the EU and IMF programme of financial support. Voting in favour of exiting the programme indicates we have the confidence to take control of the decisions that will determine our future as a State. When Ireland originally entered into the EU and IMF programme in late 2010, the country was facing significant challenges on several fronts. The banks were in crisis, unemployment was on the rise and our overall competitiveness had declined dramatically. Added to this, our reputation within the EU and the wider world was at an all-time low, tax revenues had fallen sharply and public expenditure had accelerated. This combination of events, in tandem with the impact of the global economic crisis, brought the State to its lowest point in decades and forced the previous Government to request a programme of financial assistance from the EU and the IMF.

Now, three years on, as we approach the conclusion of our programme we are beginning to reap the rewards of the sustained efforts of the Irish public. Market confidence in Ireland is high, the public finances are under control, we are reducing our deficit and debt levels and economic conditions and sentiment are improving. We are over 95% of the way towards meeting our target of reducing the deficit to less than 3% by 2015 and the Government is rigidly sticking to its fiscal objectives. The 2014 budget will continue this effort and targets a deficit of 4.8%, which will deliver a primary balance or a small primary surplus. The Government remains firmly committed to reducing the deficit to less than 3% by 2015 and to putting the debt ratio on a downward path.

The financial sector has also undergone significant restructuring and has been stabilised. This restructuring included deleveraging undertaken as part of the financial measures programme and the merger of Allied Irish Banks with the EBS. Exceptional liquidity assistance has been removed from the system following the liquidation of IBRC. NAMA has maintained a strong financial position, generating considerable cash, leaving it on track to redeem €7.5 billion of bonds by the end of this year. Private capital has been brought into the banking system by the sale of Bank of Ireland equity in 2011 and contingent capital notes this year, and also by the sale of Irish Life this year. Confidence in the Irish banks is beginning to return and this has helped reduce their reliance on eurosystem funding, which is now a fraction of what it was at the beginning of the programme.

Most significantly, we have also returned successfully to the financial markets. We now have substantial cash reserves estimated to be in excess of €20 billion by the end of the year and this will act as a domestic backstop. Domestic and international economic conditions are improving, monetary policy decisions are conducive to exit and confidence and sentiment towards Ireland has improved considerably in recent months. We have demonstrated our commitment to getting our country back on track and to successfully regaining sustainable market access. We have delivered over 260 actions under the programme, undergone 12 quarterly reviews and upon conclusion we will have drawn down €67.5 billion in funds. This successful implementation of our programme is what has paved the way to exit in mid December. Exiting our programme is an important milestone in Ireland's recovery and will send a further signal that Ireland as a country is recovering, returning to normal market funding and building for a sustainable future.

As Deputies are aware, the Government decided on 14 November that Ireland is now in the best position to exit the EU-IMF programme of financial assistance on 15 December without the need to pre-arrange a new precautionary credit line from our EU and IMF partners. This decision followed a careful and thorough assessment of all available options, and various consultations with the European Commission, the ECB, the IMF, the President and members of the Eurogroup, the Governor of the Central Bank of Ireland and the NTMA. As the Taoiseach mentioned last week, he had held discussions with Chancellor Merkel on Germany's offer to help. The discussions included a specific focus on finding ways to reinforce Ireland's economic recovery by improving funding mechanisms for the real economy, including access to finance for Irish small and medium enterprises. In that context the German Government has asked KfW, the German development bank, to work with the German and Irish authorities. Officials of my Department have already exchanged working papers on this subject with KfW and the German Ministry of Finance, and discussions between my officials and officials of the German Ministry were held in Berlin yesterday. Further work on this will continue with KfW and other key stakeholders over the coming weeks both here and in Germany.

There has been some suggestion that we should take a precautionary facility to address some potential risk associated with the stress test to be conducted in advance of the establishment of the single supervisory mechanism, SSM, in the second half of next year. There is no evidence that either this test, which is to take place next year, or the current asset quality review being conducted by our own Central Bank, will generate any additional capital requirements for our banks. The Irish banks have, as at the end of June, strong capital ratios compared to the European average and are making good progress in returning to profitability, which is a necessity if they are to meet the new higher capital standards under CRD IV. Our banks were stress tested in 2011 and they were substantially recapitalised on foot of those tests. It is worth reiterating here that €64 billion in total has been provided by the State to the domestic banking sector over the past five years, or some 40% of GDP, to ensure a stable capital base. When account is taken of the private sector contribution the figure rises to over €86bn.

I should point out that the minimum core tier one capital requirement at the time our banks were recapitalised was 10.5%. The stress tests for Spain and Cyprus were conducted on a 9% ratio and the SSM test will be conducted on an 8% ratio, although the exact details of what this new ratio will consist of have yet to be confirmed. In addition to this, one should bear in mind that there has been some recovery in the economy and particularly in property prices since the previous stress tests were carried out, and interest rates are also substantially lower than was modelled.

As I have mentioned, the ECB is undertaking a comprehensive assessment of European banks, the results of which are expected to be published in November 2014. The Irish banks will be included in those tests. Before those tests are finalised there is an amount of negotiation that has to take place at the Eurogroup to agree the terms of a European backstop for bank resolution and recapitalisation. We are contributing fully to these negotiations and bring the perspectives and practical experience that we have gained over the past three years to the table to support a comprehensive solution to a eurozone-wide issue.

With regard to any capital shortfalls may arise under the European stress tests for any EU banks, there is a premise in some quarters that taxpayers should be the first port of call. This is not the case and European banks have a number of options open to them if they need to raise capital in the future. Access to capital markets, be it debt or equity for banks, is far better now than it has been for a number of years, as evidenced by a number of recent significant transactions. Banks can also generate capital internally by becoming more efficient and more profitable. The ESM, admittedly funded by European taxpayers, is another potential source of capital for banks and there is still negotiation to take place at Eurogroup to agree the terms of that facility, which will be available after the single supervisory mechanism has been put in place. The final point I would make is that applying for a precautionary credit line would not actually cover the risk should a wider problem emerge in the euro area, for example arising from the stress tests in late 2014, although I am not suggesting that such a risk might materialise.

Since we announced our decision last week the issue of eligibility for the ECB's outright monetary transactions, OMTs, has been raised. In this context, I would like to set out the facts regarding OMT. The governing council of the ECB made a decision to establish OMT in August 2012 and issued a press statement in September 2012 which outlined its technical features. According to this the purpose of OMT is: "Safeguarding an appropriate monetary policy transmission and the singleness of the monetary policy". It is therefore aimed at addressing systemic risks for the euro as a whole and is not country specific. Having a credit line does not of itself guarantee access to OMT, and it is a necessary but not sufficient condition. In that respect, in the absence of systemic risk, the position of Ireland is not fundamentally changed by the Government's decision last week not to seek a precautionary credit line.

The ECB press statement also notes that the ECB's governing council will decide on the start, continuation and suspension of outright monetary transactions, OMT, following a thorough assessment, in full discretion and acting in accordance with its monetary policy mandate.

I wish to say a word about post-programme surveillance. Once we exit the programme next month we will be subject to post-programme surveillance and a different form of monitoring by the EU and the IMF than when we were in the programme. There will be reviews every six months. That has been a long-standing feature of IMF programmes, and is also now a feature under the new EU governance rules. It is quite normal and is part of the wider governance changes that have been put in place at EU level for all member states to improve the way the euro area functions. In fact, the new governance arrangements for all eurozone member states help deal with some of the major problems that faced the euro area in the past and they will help avoid such problems emerging in the future. The new governance arrangements provide reassurance to the markets. They provide an early warning system if problems begin to emerge. They reduce the risk of contagion spreading from one member state to another, and they increase peer review pressure to help ensure responsible policies are pursued by all member states in the euro area.

The new governance arrangements are important for small member states with very open economies such as Ireland as it ensures that large member states pursue policies that are in the interests of the euro. Of course, it works both ways and we must act responsibly too. The post-programme surveillance arrangements must be seen in that context. Already, in the past two weeks we can see how these enhanced surveillance and governance arrangements will operate with the Commission giving warnings on a number of large member states.

All along I indicated that the decision on a precautionary credit line was finely balanced and since the announcement of the decision many commentators have also acknowledged that to be the case. That said, taking all factors into account, I am of the view that exiting our EU-IMF programme of financial assistance without a pre-arranged precautionary facility or backstop is the right decision for Ireland and now is the right time to make the decision.

I believe this is an assessment that is widely held both in Ireland and abroad, especially based on the generally positive reaction to our decision. The complete lack of financial market reaction, in terms of no change in yields or market liquidity, illustrates the market's view that the Government's decision was both correct and timely. Exit without a prearranged precautionary credit line represents greater normalisation, with Ireland now subject to EU economic co-ordination, fiscal surveillance, and governance rules that apply to other EU and euro area member states that are not in a programme of assistance.

The Government decision is the latest in a series of steps to return Ireland to sustainable growth and job creation. Confidence in Ireland has improved considerably in recent months and interest rates on Government bonds are now at record lows. Like most other sovereign eurozone countries, from 2014 we will be in a position to fund ourselves normally on the markets. Interestingly, our yields are now lower than the yields for some of the eurozone countries that would have had to approve a precautionary credit line for us.

Following exit from our programme we will also have a clear strategy in place. The next steps will be to continue on the path that we have been pursuing for some time - an economic strategy that is growth enhancing and managed within strict fiscal frameworks while reinforcing programmes supporting employment and opportunity. We are preparing a medium-term economic strategy that will articulate the key principles that will underpin economic policy for the period to 2020. This strategy will address the key policy areas such as education and training, labour market activation, industrial innovation, access to credit, competition and budgetary policy, and will complement the more short-term focus of other related policy efforts such as the Action Plan for Jobs.

We have lived up to our programme commitments. We have stabilised public finances and introduced frameworks for economic management supported by independent oversight. Recent indicators show the continuation of the recovery with higher employment, renewed growth, lower household debt and an underpinning of residential and commercial property values. While there are challenges and risks, we are confident that over the past three years we have demonstrated a strong track record of managing the programme and ensuring that we are now normalising the economic and financial situation into the future.

The decision the Government took is the right decision at the right time for Ireland. As a result of the commitment and determination of the Irish people to get the job done, we will be exiting the bailout in a strong position. I hope Deputies will put on record where they stand on exiting the programme and show their faith in the Irish people to make our own decisions.

I very much welcome the opportunity to speak on behalf of Fianna Fáil in this important debate. I understand from the Minister’s introductory remarks that the motion will form the basis of a vote later this evening. Is that correct?

Yes, there will be a vote on the motion.

The motion is not about whether we will exit the programme because we are exiting the programme as a matter of fact on 15 December this year. The question that is being put to the House by the Government is whether the Government has made the right decision not to apply for a precautionary credit line. That is the essence of what we are debating.

I very much welcome the fact that Ireland is on course to exit the programme. It is a significant and positive milestone for the country. Entering into a formal troika programme three years ago was a dark chapter in Irish history. The Irish people have made tremendous sacrifices both in the couple of years prior to entering the programme and in the three years since to ensure we can come out of the programme and in a sense stand on our own two feet as an independent country subject to all of the normal and extensive oversight provisions that currently exist.

The issue we are debating this morning is whether the Government has taken the right decision to exit the programme without having a precautionary credit line or insurance policy in place. That is the issue I will seek to address specifically. As I said during Question Time, the conditions are very benign at the moment. I very much hope they prevail, because if they do then the Minister’s decision will have been the right one and Ireland will not under any circumstances need a precautionary credit line. We live in a very uncertain world and significant risks face Ireland, as we exit the programme, and other countries. The real test of the sustainability of our exit will be when the National Treasury Management Agency, NTMA, goes back into the markets probably in the first quarter of next year to issue long-term Government bonds and whether it can dispose of them at the kind of interest rates we currently see in the secondary markets - in the region of 3.5% for ten year money, which is quite a low cost of borrowing. If that continues, then the NTMA will quite easily be able to borrow and meet our funding needs in the future.

However, we know that the international markets are volatile. They are responsive not just to events in this country but to events outside of this jurisdiction in the eurozone and the wider world. My essential position is that we do not know the cost of what the insurance policy would be. The Minister has not addressed the matter in his speech, perhaps because he does not know what conditions would have applied. Ireland did not formally apply for a precautionary credit line so there was no formal discussion on the type of conditionality that would have applied in this case. I am sure that in the course of his discussions with the various stakeholders the Minister would have teased out the type of conditionality that would have applied to Ireland. Let us considers the very extensive measures to which we will already be subject - the formal post-programme monitoring, the excessive deficit procedure of which we are part, the fiscal compact requirements in terms of debt-to-GDP reduction and deficit reduction. The fact that we have already had an extension of the loan maturities means we would be subject to more intensive scrutiny by the troika until 75% of the loans we owe them have been repaid. It is my job to ask a question of the Minister about any additional conditionality to which we might have been subject in order to avail of a precautionary credit line. We have not got an answer to that question.

The fundamental point I make to the Minister regarding his decision on a precautionary credit line is that we should be having a discussion on what type of conditions would have been attaching to such a credit line. Perhaps the Minister does not know what those conditions would be but I suspect he has a good idea. However, he does not know the finer detail of any such conditions because the Government never formally applied for a credit line. I heard the Minister for Public Expenditure and Reform, Deputy Howlin, on the radio last week making the point that because we did not apply, there was no detailed discussion on the issue of the conditions. Therefore, we are turning down an insurance policy without knowing the cost of that policy. I believe, as does my party, that this is a mistake. It is a mistake which may not cost us anything if current conditions prevail but if they do not, then we could be facing very significant costs because we would have to sign up to a detailed programme with specific conditionality from a position of weakness if the markets turn against us. We should know from experience that when the markets turn against one, they turn against one. We can look back at the history of events three years ago to see that. At the end of September 2010, the NTMA was borrowing long-term money at about 4.5% which, in terms of the spread between that and German bonds then and where we are now, at 3.5% and the spread with German bonds, is quite proportionate. That was two months before the bailout. When the markets turn, they turn completely against one and they would not think twice about putting Ireland into such a situation. That is a key concern.

It is only two months since the Minister and the Taoiseach spoke openly about applying for a precautionary credit line and about the need for a safety net. A figure of €10 billion was put on that and the Minister said we would be entering discussions. He certainly gave the clear impression that he was favourably disposed at that stage to making such an application, albeit without any formal decision being made. He was absolutely right to explore that option. I have the residual feeling that the situation in Europe and the lack of a new German Government is significant. I know the Minister has said that Wolfgang Schäuble asserts that there is a German Government and that it has the authority and mandate to make decisions, which of course it does. However, it certainly would have been a complication for the Germans to have to go into the Bundestag and seek parliamentary approval for a new programme for Ireland, a precautionary credit line with some level of conditionality attached. It would have been a complication at a time when the CDU's prospective coalition partner, the SPD, is raising the issue of Ireland's corporation tax rate. There is no doubt it was far more convenient and politically suitable for them to avoid such a scenario and they have avoided it.

It is a statement about Europe's lack of preparedness for countries exiting a programme that there was no clear road map for putting in place a precautionary credit line. There was no clear road map for the type of negotiations that would prevail and, more importantly, the type of conditionality that would apply. I believe, even though the Minister will not want to admit it, that this was certainly a factor in the Irish Government's position. There was an absolute lack of clarity from Europe as to how this would work, the type of programme to which we would be required to sign up and, most importantly of all, the conditionality that would apply and, in particular, the interest that would apply to a €10 billion credit line. The troika funds of which we have been availing for the past few years have come in at a blended rate of a little more than 3%, which is quite a good rate. The rate dropped from the original figure of 5.8% on the back of a reduction in the interest rate secured by the Greek Government some time ago and we also availed of that.

Deputy Doherty raised the issue of the retroactive recapitalisation of Irish banks earlier. Our debt to GDP ratio this year is approaching 125% but without a deal on that and if growth conditions are weaker than expected, our debt sustainability will get into very real difficulty quickly and the markets will see that. I must say that while we warmly welcome the fact that Ireland is exiting the programme, as planned, on 15 December, I believe the Minister has got it wrong in not applying for a precautionary credit line. We are facing very significant risks as a country and it would have been prudent to take out an insurance policy against those risks. The Minister has decided not to take out such a policy and he has not told this House what the price of such a policy would have been. I believe that is a mistake and I regret the manner in which he has worded the motion before us because it forces us, as an Opposition party, while welcoming our exit from the bailout, to vote against it. The question he has put is whether the right decision has been made on the insurance policy but I believe it has not.

Deputy Creed mentioned corporation tax. From our point of view, it would be a step too far if an increase in this tax were laid down as a condition. There is no suggestion that a change in our corporation tax rate would have been a condition of any programme. The European partners would have had no legal basis whatsoever for seeking to impose a condition of that nature.
The Minister outlined a couple of key issues concerning the basis for his decision not to apply for a precautionary credit line. He addressed the issue of the ECB's outright monetary transactions, OMTs, which comprise the new policy initiative announced approximately 14 months ago by the current ECB president, Mr. Mario Draghi. That statement was unquestionably transformative. It certainly calmed the markets and resulted in a significant reduction in the cost of borrowing for many of the peripheral member states of the eurozone, in particular. The OMT tool has never had to be deployed since because the markets accept that it exists in the background as the ultimate backstop. The ECB has the power to step in and buy bonds of governments if conditions require it.
Page 4 of the Minister's speech outlines the conditions. First, there must be a systemic risk to the euro in order for the ECB to invoke the OMT provisions. Second, the Minister stated it is a necessary, but not sufficient, condition that a country would have a precautionary credit line. However, one should consider the actual statement the ECB issued, the press release of 6 September 2012, as referred to by the Minister. It is important to tease this out. It states:
A necessary condition for Outright Monetary Transactions is strict and effective conditionality attached to an appropriate European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) programme. Such programmes can take the form of a full EFSF/ESM macroeconomic adjustment programme or a precautionary programme [or a precautionary credit line].
In other words, there is one condition dealing with systemic risk - we accept it is in place - and another that there be a precautionary credit line in place or else the state must enter a full programme. That is the nub of the issue and my clear interpretation of the measure. Ireland should negotiate now from a position of strength to put a precautionary credit line in place. If over the course of the next year we need to invoke the OMT with the support of the ECB, which would have the ultimate decision, having the precautionary credit line in place would tick the right box. If we do not have it in place, we will face a full macroeconomic adjustment programme under the EFSF-ESM. I ask the Minister to address that when wrapping up because it is clearly what the press release from the ECB states.
My key concern is that we now negotiate a precautionary credit line from a position of some strength. The backdrop is certainly very benign and sentiment towards Ireland is positive. All of the fiscal targets are being met. We are exiting the programme. I am confident that we could negotiate a credit line with acceptable conditions. The alternative is taking the risk now and eventually having to avail of the ECB's OMT policy. A condition of access would be signing up to a full macroeconomic adjustment programme which, I presume, would be akin to the one covered by the memorandum of understanding with the troika, whose programme we are about to exit. That is a fundamental issue. I have yet to hear it properly addressed. I hope the Minister will do so this evening. There is firm evidence that the precautionary course of action would be to put in place the insurance policy at this point in time.
The second issue concerns the stress tests and the banks. It is a potential risk factor that we face. The Minister made the point quite reasonably in his speech that there is no evidence that this test or the ongoing balance sheet quality review will generate any additional capital requirements for our banks. I have no such evidence either. The truth is that neither the Minister nor I knows whether the stress test next year will identify additional capital requirements for the Irish banks. What we do know very clearly is that if a hole is identified in the balance sheets of the banks, the hierarchy pertaining to how it is to be filled will have been agreed at European level. The first to be affected are the private markets and investors or shareholders, followed by junior bondholders that might be left and national authorities and, finally, the ESM. The junior bondholders in the Irish banks have already been burned, and burden-sharing has been imposed on them. Bank of Ireland will probably stand quite a good chance of raising some capital on the markets, if required, given the fact that it is mainly privately owned. It is fair to assume that if AIB and Permanent TSB, in particular, are found next year to require additional capital, the buck will stop at national level. In other words, the Government, on behalf of the Irish people, will be required to inject additional capital ahead of the ESM. That is what was agreed last Friday in the absence of an overall agreement on how the ESM is being invoked. It is a potential risk for the country because there is no doubt but that if the results of the stress tests next year identify that there is a hole in the balance sheet of any of the banks, it will have adverse consequences for yields in respect of Irish Government bonds. This is unquestionable. The risk factor is one that we need to take into account seriously when making a decision in addition to the risk factor associated with the banks' balance sheets and whether they are recognising the losses there carrying.
There are serious questions to be asked as to whether the banks have fully faced up to the extent of the losses they are carrying on their SME loan books and mortgage books. One reason the banks have not fully dealt with the mortgage arrears crisis is that they are concerned that if they face up to the scale of their potential losses, it will have serious negative consequences for their capital positions. The Minister outlined the figures in his response. On the face of it, the banks are now very well capitalised and there should be little likelihood of their needing additional capital in the foreseeable future, but that is on the assumption that they have properly recognised and provided in their accounts for the losses they are carrying on their balance sheets. I am not at all convinced that they have done so. It is not for me to reach firm conclusions on that; it is a matter for the Central Bank and the ECB next year. We look forward to hearing what they have to say.
There are significant risks to economic growth. The Minister had an exchange earlier with Deputy Boyd Barrett on the centrality of growth in respect of Ireland meeting its requirements under the fiscal treaty, in particular. I refer to the deficit reduction and the lowering of the debt-GDP ratio to 60%. We have made growth forecasts of 2% next year in real GDP, 2.3% the following year and 2.8% in 2016. These levels should be achievable but the reality is that we simply do not know whether they are. The achievement of these growth levels is largely outside our control as a small, open trading economy that is exporting 80% to 90% of the goods and services it produces. The latest economic data from Europe are not encouraging. The quarter 3 data are particularly weak. France is sliding back into a contraction and German growth is weaker than expected. Nobody hopes more than me that the eurozone economy will experience a strong recovery because that will, unquestionably, drive the Irish economy up with it. However, there are major concerns that if the eurozone economy does not recover it will have a knock-on impact on our growth that will compromise our capacity to achieve the deficit targets and debt-GDP targets.
Even in the past 24 hours, the OECD projected that the 2015 deficit will be 3.1% and that we will miss the 3% target by a whisker. We will not argue about 0.1% because it all comes down to whatever assumptions one uses in one’s economic model, but it brings home the point that the margins between achieving and missing the targets are very fine. It is not all within our control by any means, and that is a point we need to bear in mind.

It is interesting to note that in the past three years, a new narrative has evolved. Many people have become experts in economics and terms like OMT are bandied about at kitchen tables nowadays.

I would not go that far.

Terms such as "bailout" and "precautionary credit line" have entered into our everyday vocabulary. We all welcome the fact that Irish people pay more attention to economic matters and perhaps if we had done so in this House and elsewhere in days gone by, we would not be in the position we are in currently. However, we need to get back to a point where we are talking about the weather again instead of OMTs and all the rest. The most commonly used term in our new vocabulary is probably bailout although it does not appear in any official documents or in the troika's programme. The term "troika" is a relatively new addition to our vocabulary.

When one talks about a precautionary credit line, one must elaborate on what it actually means. The credit line that was extended to us by the troika has been called a bailout, which begs the question: what is a bailout? A bailout is when somebody lends one money and does not just ask for the money to be returned with interest but also with political conditions. Every sovereign goes to the markets and gets money from those markets at a certain interest rate but with no other conditions attached. A bailout, on the other hand, is money from a specific source with an interest rate attached, a demand for full repayment within a certain period and with political conditions attached. A precautionary credit line is exactly the same. It is a €10 billion fund that would be made available by sources which would ask for it to be paid in full over a period of time, with interest, so that the sources benefit from extending the credit to us. However, the sources would also attach political and economic conditions, forcing this State to do certain things to be able to avail of that credit. On top of that, they would put in place a surveillance and supervision mechanism, in terms of site visits to this State, to ensure that Departments and the national Parliament are adhering to the programme as agreed. Therefore, a precautionary credit line is a bailout which could have been negotiated which would be sitting there, in the background, that we could have entered into if required.

Sinn Féin believes we should not have entered into a second bailout voluntarily. We believe we should not have applied for a precautionary credit line or a renewal of the bailout. We celebrate the fact that the programme is ending next month. However, we are not celebrating the fact that while the troika is leaving Ireland, the troika's mind set remains here in Government buildings. Troika or no troika, this Government is pledged to continue to implement the policies of austerity, as it has done to date. The pursuit of austerity is why we have seen our growth forecasts decrease time and time again. It is also why unemployment, particularly for our young people, is disastrously high and our emigration figures are so shameful. The Government's policy of putting the banks first, as I said earlier, means that 118,000 mortgage holders are in arrears of 90 days or more. The troika has been a failure in my view. When I last met representatives of the troika I gave them a score card. I said to them very clearly that in terms of reducing the deficit, not only did they pass, but they passed with honours because the deficit has been reduced. However, it has been reduced by placing the burden on the shoulders of ordinary Irish people.

Unemployment has gone out of control since, while 250,000 people have emigrated under the troika's watch and the mortgage arrears crisis has spiralled out of control, with 118,000 mortgage holders in arrears for 90 days or more. In addition, the number of banks in the State has reduced by six, while additional taxes and burdens have been placed on ordinary people under the troika's watch. The banks are still not lending properly more than five years into the crisis. It is clear that the troika has failed the people, as has the Government.

Sinn Féin has demonstrated consistently to the troika and the Government the need for growth and a fair deficit reduction to begin on a road to prosperity and equality. The alternative for which republicans have argued is only strengthened by the exit of the troika. The decision not to apply for a credit line is the right one, but because the Minister reached the right decision does not mean that we should not ask how he came to that conclusion. He appeared before the finance committee last Wednesday when he said of ECOFIN, "There will be no discussion of Ireland's exit at ECOFIN," and of the Eurogroup, "On this occasion, because of the imminence of the Irish exit, I will be speaking to many people on the margins, particularly those I have not met in my round of talks over the past couple of weeks." The next morning Ministers were pulled from the floor of the Dáil to attend an emergency Cabinet meeting and we were all told to expect statements on the exit. What happened between the end of the finance committee meeting at noon on Wednesday and the panic last Thursday morning? Clearly, pressure came from somewhere because given what the Minister stated to the committee, it was not his intention to inform ECOFIN or the Eurogroup that Ireland would not take a precautionary credit line. He went further and said he would use the opportunity to speak to colleagues on the margins to whom he had not spoken so far. Was there a late night call from a European country about this issue and what the Government should do? In his five minute statement to the House the Taoiseach mentioned that country, Germany, twice. German officials have agreed to use their development bank, KFW, to help our SME sector. Any step that will help SMEs is welcome, but the timing seems odd. In a five minute scripted speech about exiting the bailout and not seeking a precautionary credit line, the Taoiseach mentioned Germany twice. One wonders when the Minister speaks of a benign time to leave the programme, if the prospect of the Labour Party's sister party being in power in Germany was part of his calculation. There is a genuine question as to why this happened. We all know this issue was causing difficulties in Germany, given the demands of the Social Democratic Party and the difficulty this would create for its members, as Deputy Michael McGrath said, in having to vote in favour of a credit line at this time. Was the Minister pushed in this regard?

The Minister for Public Expenditure and Reform said the calculations and the assessment of the different options provided for the Cabinet would be published. I pushed the Taoiseach on this issue yesterday and he said the Minister could publish whatever he wanted, which is bizarre. The Minister can do so and said on national television when asked that he would. We should have an informed debate in the House. I support not opting for a precautionary credit line, but I have my own reasons for doing so. My party has its own analysis and views on what we think would have been on offer, but I would love to see the Government's analysis. A commitment was made by a senior Minister that it would be published. It should have been laid before the Houses yesterday in order that we could have an informed debate on this motion which we are debating in a vacuum.

My party does not believe the possibility of a second bailout or a precautionary line of credit was not fully investigated. It is simply not credible for the Minister to say this. I believe him when he says the Government did not apply for a credit line. Therefore, there were no formal documents stating what the programme would be, but his trips to Washington and Brussels and talks with various serious partners in Europe led him to believe what the conditionality would be. He is not that naive or incapable that he would talk to all of these individuals without discussing the conditionality that would be attached to such a proposal. He was not conversing about whether the Government should seek a credit line or a second bailout without talking about the elephant in the room - the conditionality attached, cost, politics and supervision. All of this was discussed on the fringes and it is disappointing that the Minister is unwilling to impart that information to Members of this Parliament because it is critical for us to know what conditionality would have attached to a precautionary credit line.

We are discussing an important decision which my party supports, but we need a debate on what it means for the country and its people. A good start to that discussion would be an honest telling of the story of Wednesday afternoon and Thursday morning and how the Minister went from telling me and other members of the finance committee that "There will be no discussion of Ireland's exit at ECOFIN" to the Taoiseach standing before us a number of hours later to tell us a decision had been made and that the Minister was to inform ECOFIN and the Eurogroup of same. The Minister should do the House and the country the courtesy of telling us the entire story of what happened in between.

Next year stress tests begin on the banks. That should be a concern for the people, not out of love for the banks but because they are still tied to the sovereign. The greatest opportunity the Government had to separate banking debt from sovereign debt was not taken. The retroactive recapitalisation of the pillar banks through the ESM to the benefit of the people must continue to be pursued, even if the Labour Party’s and Fine Gael’s allies in Germany disapprove. The €64 billion plus sunk into bad banks must not weigh down another generation. The Government parties erred badly in accepting the toxic Anglo Irish Bank debt as formal sovereign debt. They must deliver on the recouping of the rest of the banking debt. The primary issue is how they are pursuing this issue.

We would not be discussing a €10 billion credit line if the guarantee given 17 months ago to retroactively recapitalise the banks had borne fruit. Even if the State got back half the money pumped into the pillar banks - that would not be acceptable - it would exceed the credit line and we would be in a better position to go back to the markets on a sustainable basis. However, the Taoiseach has stated in his letter to EU leaders that it is a requirement that this promise be fulfilled if Ireland is to experience a sustainable exit from the troika programme and a sustainable entry into the markets. I agree with him.

Many people are asking what all the high drama was about last Thursday and what it means for them, but I fear the answer is that as long as the Government is in power, the prospects for our young people and the economy will not change much. I have lost count of how many times I sat down with the members of the troika and they said unambiguously that, ultimately, the Government parties were responsible for the decisions taken. They said this in the most forceful way. We put it to them that they provided a veil for the Government in the context of its actions, but they said clearly the Government had made the decisions, that the Fianna Fáil four year plan was the basis of the troika programme which was voted on by the Parliament and that every decision since had been the Government's. During the last meeting I had with them, they reiterated this, but the problem is they have never said this publicly and have allowed themselves to be used by the Government parties as a way of introducing austerity measures.

Fine Gael and the Labour Party took the decision to carry out the work Fianna Fáil had begun. They decided to place a tax on every private family home in the State, to cut unemployment benefit for the under 26s and the telephone allowance of more than 17,000 people in my home country of Donegal and many others across the State. Now that the troika has gone, the same will apply. Next year the Labour Party and Fine Gael will charge people for water from their taps. The troika's leaving may change little, except to remove an excuse for this pro-austerity Government in doing what it is committed to doing - further austerity.

Sinn Féin was the only Opposition party this year to submit a costed alternative to the Government’s austerity budget. It would have made the same adjustment as was required of the Government but it would have reduced the tax burden on working families, protected our public services and created jobs. We showed how the deficit could have been brought down in a fair way.

I challenge the Labour Party and Fine Gael, now that their troika crutch has been removed, to show they can be fair and capable of taking the right decisions without the excuse of saying the troika made them do it. I hope today marks a change in direction for the Government. I hope it will look at real alternatives, like the ones Sinn Féin and many who work with the poor and marginalised have recommended. This morning I tabled tens of amendments to the Finance Bill. They will be voted on next week by the select finance committee, dominated by Labour and Fine Gael Deputies. It will be their first chance with the troika on the way out to show we are not just austerity junkies. The Government will have the chance to vote down cuts to single parents and to support real alternatives. Troika or no troika, I will not be holding my breath.

No party in this House or in the North of our country cares more about Irish sovereignty than Sinn Féin. That is why we have opposed elements in EU treaties that have reduced Irish sovereignty. The full impact of the decision by the pro-austerity parties here to support not just the fiscal treaty but previous conservative EU treaties is now bearing fruit. Maastricht, Nice, Lisbon and other treaties have culminated in the reduction of the State’s economic sovereignty. Next year’s budget, as well as all subsequent budgets, will have to be signed off in Brussels and Frankfurt. How is that progress towards the re-establishment of Irish economic sovereignty? The European Commission will be here twice a year checking our balance sheets, monitoring our compliance with rules not made in our interest but by which we must abide. We will also be under extra surveillance until we repay 75% of our EU loans. Let us remember, they are loans not grants.

Sinn Féin is glad the Government did what it would have done and not taken out a further bailout facility. It is sad to see Fianna Fáil arguing for a second bailout, however. Has the party learned nothing? Yesterday, Deputy Martin argued that one reason the precautionary credit line should be taken is the stress test of the banks next year. Yet, no one knows whether the banks need additional credit. It is beyond belief that he can argue that this country should go voluntarily into a second bailout in case AIB, Bank of Ireland or any other Irish bank needs additional credit next year, a bailout for which taxpayers will be committed to pay back.

Sinn Féin supports the decision not to take the precautionary credit line. However, certain actions taken in Europe could be masking long-term trouble in the banking sector. Outright monetary transactions, OMT, is a good policy initiative taken by the European Central Bank, ECB, quelling fears in the markets across Europe. This could, however, be masking another problem. We know the ECB has flooded the markets with cheap money, primarily because the United States has withdrawn this type of funding. We need to be vigilant and address these problems. While the ECB’s proposals have given time to financial institutions to repair their balance sheets, there is still a question as to whether the length of time given is sufficient such is their impairment.

There has been much talk about OMT as a reason why we should have taken the second bailout. The Fianna Fáil finance spokesperson, Deputy Michael McGrath, claimed OMT is only available to programme countries or those with a precautionary credit line. He did not read the rest of the ECB press release which stated OMT may be available to countries which were in a programme and are re-entering the bond markets. Although I hope OMT will not be required for the State, will the Minister elaborate on what that sentence in the press release from the ECB means? How long would such a facility be available to this State? Would it be for three, six or 12 months?

I thank the Minister and the Government for the opportunity to debate this motion but it is a bit of a sham debate. Without access to the information of the analysis done by the Department, the information imparted to the Minister in Washington, Brussels and Frankfurt, the information as to what happened between noon last Wednesday at the finance committee and Thursday morning with the hustle and bustle of an emergency Cabinet meeting, then we are just speaking in a vacuum. It is disappointing the Minister has not released all this information. This is a charade debate. Nevertheless, we have had the opportunity to put our views on the record. While I believe the final outcome was the right one, the process of arriving at it must be questioned.

I call on Deputy Richard Boyd Barrett who is sharing time with Deputies Clare Daly, Mick Wallace and Finian McGrath.

On a point of order, can we put down amendments to this motion?

The deadline has passed and it is too late for amendments.

That is quite extraordinary. We got this motion yesterday at 4.50 p.m. and amendments were to be in by 9.30 a.m. this morning. That was before we got to hear what the Minister had to say about the bailout exit. How are we supposed to make an informed response to this motion without actually hearing what the Minister has to say? That is ridiculous.

This is a bogus debate. It is an utter charade, a political trick played by a Government that specialises in pulling the wool over the eyes of the people. We are faced with a false choice which I, and others on this side of the House, reject utterly. We are being asked to make the choice of whether to stay in the frying pan of the troika’s austerity programme or jump into the fire of the international markets to become prey to the vultures, speculators and the bondholders who caused this mess in the first place. To suggest these options are valid and that opting for the latter is a victory for the country is wrong. To put it in simpler terms, the choice is either to borrow tens of billions of euro from the troika to pay off odious debts that belong to the banks but which the Minister will inflict on the backs of our citizens or to borrow tens of billions of euro to pay off odious debts from the very same bankers and bondholders whose debts they are. What a choice.

The issue is why we are paying off debts that are not ours. Why is it that next year we will pay €9 billion, the equivalent of the education budget, on interest on debts that are not ours? No matter which choice we make, we will be dictated to by the lenders. It is only because the Minister has agreed to take on these debts that these guys control us. They can dictate to us through the blackmail and bullying of the international markets which we have been subject to either in or out of the programme. If we choose not to go down that route, we will be subject to the surveillance, monitoring and diktat of the ECB, the IMF and troika which, in any event, dances to the tune of the international markets. This is a complete joke.

Meanwhile, our country is being beggared. This is the real meaning of the motion as the Minister well knows.

The real purpose of this motion is to try to deflect attention away from the vicious, cruel, heartless cuts that are being imposed on some of the most vulnerable people in our society, such as taking medical cards from people who are sick or old and taking social welfare payments from young people who are unemployed through no fault of their own. It is all very amusing in the cynical world that is Dáil Éireann, where everything is a game and a charade, played out for the cameras and the soundbites, presumably to give the Minister some satisfaction and a few laughs as he puts Fianna Fáil into a difficult position because of that party's view on precautionary credit lines, which is an equally opportunistic position and utterly bogus. They talk about it as though there were only two options: either to have conditions rammed down our throat or to become subject to the international markets. The Minister is trying to lure the public and the media into an utterly false debate, played out purely for the cameras. We reject that utterly.

When is the Government going to stand up to these vultures, whether they are the troika representatives of the financial markets or the financial markets themselves, and tell them that our society cannot take this any more and that we cannot afford to pay them €9.1 billion next year? Now that we are close to reaching a primary budget balance, we have the leverage to tell them that. The Minister no longer has the excuse that we have a massive deficit and that we are spending more than we are taking in. We can tell them to get lost, that we are not paying that money back, and see what they have to say to that. Instead, we are just getting down on our knees to be screwed one way or the other.

We should be exiting the programme without a precautionary credit line because we should never have been in the programme in the first place, but that does not mean we are on the verge of a new dawn, that we are regaining our sovereignty, or that the Government's policies are working. The Labour Party in particular would do well to remember the words of its founder when he spoke about how it would not be enough to fly the green flag over Dublin Castle and said that unless we tackled the economic issues at the heart of Ireland, England would still rule us. He said: "She would rule you through her capitalists, through her landlords, through her financiers, through the whole array of commercial and individualist institutions she has planted in this country and watered with the tears of our mothers and the blood of our martyrs." If we replace England with the troika, the story remains much the same. We are conscripted into avoiding excessive deficits forever. We have signed up to everlasting surveillance of our economic affairs through various European treaties. The Minister and his Government have flown the flag for neoliberalism and will continue to do so. There is no regaining of our sovereignty. We do not have it and we will not have it.

We should remind ourselves of what this programme was about, what it achieved and where we are going. At its heart, the IMF bailout was a redistribution of wealth in favour of people who were already wealthy, rewarding them for their mistakes, paying their debts from the public purse, and making the bankers' debt the people's debt. While doing that, it facilitated the standing on its head of the welfare state and all the basic elements of decency that existed previously. It facilitated an acceleration of privatisation and dismantled the welfare state. That agenda of austerity is a political choice. It is a choice that the Government is continuing to make. Its outcome is inequality on a scale we have not seen heretofore. The top 20% of people in this State have an average income that is five times more than that of the lowest 20%, yet the top 10% of householders have an effective rate of taxation of only 25.6%. Many of our multinationals, which we are told give us so much, have an effective taxation rate of only 4% to 6%. The wealthy have not borne the brunt of austerity or the troika bailout. All of the evidence shows that the disproportionate burden of these policies has been put on the shoulders of the most vulnerable in society. Exiting the programme under the Government's policies of neoliberalism will only ensure more of the same.

We are being shackled to years of debt slavery and recession. The Minister has nothing further to offer us in that respect. This decision will leave him somewhat exposed in that he now has nowhere to hide. He is very fond of hiding behind the crimes of his predecessors in Fianna Fáil, and is fond of telling us that it was the troika that made him do things. Now that we are outside the programme, the blame will fall firmly on his shoulders and the Irish electorate will judge him accordingly. There will be nowhere to hide. That is an important lesson, because there are many people who disagree with the Government's agenda. Workers are organising in the ESB to save their pensions, junior doctors are forced to take action, young people are organising around the We're Not Leaving youth campaign, and there is an electorate that is determined to deal with the Government at the next election. These issues will persist because once we are out, the Minister will ensure that neoliberalism prevails. Ordinary people cannot afford to put up with that, so I believe he will be judged accordingly.

Of course it is good that we will be out of the bailout, but anyone who thinks we are regaining sovereignty and that we are in control of our own affairs is living in cloud cuckoo land. A range of measures has been brought in to copper-fasten the neoliberal agenda. This is not the first Government to behave in that manner. I found an article in The Guardian that was published the day after the Budget Statement in 2010. It stated the following:

During the debate in the Dáil Fine Gael's spokesman for finance Michael Noonan accused the Fianna Fáil/Green Party government of being socially blind and said the budget was "soft on the rich and hard on the poor".

Noonan added: "This is the budget of a puppet government, doing what it is told by the International Monetary Fund, the European Union and the European Central Bank.

The Minister was dead right. In fairness to Fine Gael and the Labour Party, which have implemented neoliberalism lock, stock and barrel, so did Fianna Fáil and the Green Party before them, and, sadly, we have seen Sinn Féin do the same in Northern Ireland today. There is not really much difference between them.

An interesting issue today is that of the fishing industry. We have had problems in Kilmore Quay in the last week or so due to the low quotas imposed on the local fishermen. At the moment, the French are allowed to catch six times more whitefish in Irish waters than the Irish. There is no fairness involved here. The notion that all our waters are European waters is a bit hard to take. I am sure the Polish coalfields or the vineyards of Italy are not much good to us. I do not know why other countries are entitled to catch more of our fish than we are. That is a massive problem. I realise that the market has to deal with the fact that overfishing is unhealthy, but we must work towards greater fairness for the Irish.

Anybody who has had the privilege of buying The Irish Times today will find it contains a leaflet from Gay Mitchell, MEP, in which he states that we need to change the vocabulary:

'Austerity' is in fact 'Consolidation'- part of the planned recovery. ... The problem at home [meaning Ireland] is not "austerity", it is lack of solidarity.

One Fine Gael spokesman described Gay Mitchell as "the evil of two lessers". It is incredible that this guy can say that austerity is not our problem, but rather a lack of solidarity. Is cutting medical cards from pensioners his idea of solidarity? The budget for the Traveller community has been cut by 18%.

Debate adjourned.
Top
Share