I welcome the Minister of State, Deputy Brian Hayes. He slipped in under the radar and I did not notice him for a couple of seconds. Tá fáilte romhat.
European Stability Mechanism Bill 2012: Committee and Remaining Stages
Section 1 agreed to.
Question proposed: "That section 2 stand part of the Bill."
I welcome the Minister of State back to the House. As I understand it section 2 provides the Minister for Finance with the authority to make payments to the ESM to cover this country's contribution to our share of the authorised capital stock. The amount involved is extraordinary. Section 3 sets out the amount but I am dealing with section 2 which gives the Minister power to do so. The sum is €11,145,400,000. It is an incredible amount of money that the State, which is essentially bankrupt, will put into the ESM.
I made the point yesterday in the course of my Second Stage speech that a positive option that must be considered is for the ECB to consider directly funding the ESM. Many politicians not just in this country but across Europe have pushed for such an option as a better way to resolve the issues that exist and to provide the necessary firewall to stabilise the euro. We wish to ensure that the integrity of the euro is protected and, more importantly, the lives and livelihoods of citizens of Europe. I also echo a point made yesterday by others that countries that are in a bailout situation, as is the case with the European Financial Stability Facility, EFSF, should not have to make a contribution yet the ground rules are changing with the ESM treaty. The situation that will arise is we will borrow money from the troika, the IMF and the European Central Bank to put into the fund. Whatever way one looks at it, we will have to borrow money to cover State expenditure, for day-to-day spending, paying back bondholders or putting money into the ESM. That is money the taxpayer will have to spend and the State does not have the money which means we will have to borrow it. We will borrow the €11 billion over a period of time. I accept the amount is capped.
The Minister of State might indicate that we might not have to make the full contribution but we might have to pay even more in time because of what is happening in Greece, Spain and potentially Italy. It does not make sense for countries that must make a contribution to borrow money to put into a fund to get the money back. I will oppose the section to give the Minister for Finance the authority to be able to use borrowed money on which we are paying interest to give to the ESM and then for us as a nation that is in a bailout programme to pay more interest when we receive money. That does not make sense. There is a better way of doing it. We suggest the better way is the European Central Bank to fund the ESM. That makes far more sense.
I heard the Senator's remarks yesterday on Second Stage. He basically put forward the proposition that the better way of doing it is for the direct recapitalisation of the banking system through the European authorities. I do not fundamentally disagree. I would wish that to be the case. The Taoiseach made a remark that appeared this morning on the front page of The Irish Times agreeing with Senator Cullinane as well. We all agree with that but others do not agree with us on the issue.
One could ask what are the two key objectives we face at the moment in their broadest terms. First, we must get back to the markets if they can lend to us at reasonable rates. Otherwise we have access to rates of interest of a little less than 3%, which is not a bad situation in which to be in the circumstances, for a programme country. Our No. 1 objective is to get back to the markets. The No. 2 objective is to get money back into our banks so at some point in the future we can sell off the shares we own and thereby get money back for the Irish taxpayer. Senator Cullinane has put forward a view, which is shared by many, that the recapitalisation of the banks should occur from the centre. Many of us agree with him on that but that is not where we are at the moment. Of course I wish it were different but that is not the case.
Until such a time as the Germans, the Finns, the Dutch and the Austrians change their view on this issue, we are where we are.
The Senator said we were putting €11 billion into the fund. As I said yesterday in my reply to the points he made — I am not sure whether he was here at the time — what we are putting in at the moment is €1.27 billion in tranches of €254 million, two this year, two next year and one in the first six months of 2014. Our €1.2 billion is a small percentage of the overall €80 billion which the member states that have agreed to the treaty will put into the capital fund. That money is then leveraged for private sector borrowings across the world. The €80 billion is never touched; it is the essential leverage upon which borrowings can be made for this new fund.
I made the point yesterday that we could describe this as some kind of gigantic credit union in which, in order to obtain funds, one must have money on deposit. The Senator is right in saying this rule did not apply in the previous European stability mechanism. One could make the case that this is part of the commitment that all member states make as a firewall to protect the euro and also to protect individual member states that may need to access the fund from time to time. The €9.4 billion which makes up part of the €11 billion can technically be called upon, but there is no anticipation that it will be called upon, given the fact that the €80 billion will be provided by all member states together. We contribute our share of that. As I said yesterday, when 90% of it is in place, the fund comes into being. Progress is being made towards the ratification of the treaty across Europe.
Do we continue to work for a better pan-European solution? Yes, we do. Do we believe that requires far greater integration of our financial system? Yes, we do. Do we believe that ultimately what is required on bank recapitalisation is a much stronger resolve to shore up the banks rather than putting all of that debt on the sovereign? Yes, we do. Is that going to happen in the future? I cannot answer that question, as I am sure the Senator cannot, despite the fact that we might wish it to happen. I want to be honest. We need to deal with this as we see it. As I said yesterday in my reply to Second Stage, the entire objective of the last six months of last year was a firewall to support the euro. This is it, effectively. This is the support that underlies our currency.
We will continue to negotiate as best we can. If there are substantial changes to the ESM treaty, it will require primary legislation in this and the other House. No one can preclude that possibility for the future. However, in terms of where we are at the moment, it is important that this firewall is in place, not just for the euro but also for us. The reason is the difficult situation we face in terms of our national finances. In addition, the fund is important for us not only because it would allow us to obtain money if we did not return to the markets at the end of next year — which is the firm resolve and ambition of the Government — but also because it sends a strong signal to the international money markets that Ireland has this support behind it, which it has signed up for by adopting the treaty. That in itself is the kind of support that the private markets want to see. Were that not there, one could argue that the cost of Irish money would spiral even further. This is an important backstop of support behind our programme and behind our ambition to get us back to the money markets. That is why we think it is important to ratify the treaty.
I welcome the Minister of State back to the House. He is in fine form and is being honest and clear. However, his honesty and clarity just underline to me how dangerous the situation is and how absolutely futile our efforts are — how impotent we are in the face of the bullying that is going on. I did not hear terribly well. I thought I heard the Minister of State say that this undermines our currency. Perhaps he said it underlined it.
Yes.
Well, it undermines it, in my opinion. As for the firewall, a firewall made out of firelighters is not an awful lot of use. It is madness. Half of the countries that are supposed to be contributing are bankrupt. We know they are bankrupt. Where are they borrowing the money from? Senator Marie Louise O'Donnell told me the other day that she had seen a performance by the comedian Tommy Tiernan in which he said that Ireland owed a hundred billion million, Greece owed a hundred trillion squillion, and so on; everyone seemed to be borrowing, and his conclusion was that we should find the person we have borrowed the money from and shoot him. That was a comic way of looking at things.
That is not very helpful.
No, but it shows that the thing has become grotesque and surrealistic. This notion of borrowing in order to put money into a fund that is going to save us is bizarre economics, and is precisely the kind of thing the other House is screwing Deputy Mick Wallace over. The Government's behaviour, at international level, is the same behaviour it has criticised in an individual. It is dishonest. It is perpetrating a fraud on the people. We are not allowed to discuss half of the stuff that is here. I tabled amendments because, as I have discussed with the Minister, the body that controls all of this money is inviolable and unaccountable to the Judiciary, the Legislature, the Executive or anything else. It is a kind of mafia. Suppose Mr. Berlusconi were in charge. That would be great. His strings would be pulled from Sicily. What kind of nonsense is this?
I intend to vote against this Bill. I wish we had the opportunity to revise the entire——
When we get to that section, the Senator can raise the issue.
I will certainly do that. I take it we will get to that section. It is part of the treaty.
We are on section 2 at the moment.
I will certainly raise that, and I thank the Minister for his suggestion. However, I am concerned about the way things are run. We started discussing this just before noon. I received notice at 11.45 a.m. that my amendments were not allowed.
The rest of Europe will wait for the Senator.
I hardly think that, but perhaps if some of the ideas that I clearly, consistently and cogently argued in this House had been listened to by previous Governments — and I would be happy to make whatever little groatsworth of wit I have available to the rest of Europe — we would not be in this mess. The Minister of State may look back and see what I said, and he may check to see whether I was right. I was a lone voice here. The headlines in the newspapers went to the colleagues who were screaming for the heads of named individuals, because that was sexy news, but one cannot afford to have ideas in this country, apparently, because they are trashed. Nobody wants to report them.
We are on section 2, Senator.
I will leave it at that. I am not exaggerating myself and saying I am the great panjandrum who can solve the whole thing. I am not making that claim. I am just saying that if one looks back at the record of the House, one will find something very interesting. Perhaps it would have been useful if we had been allowed, not by the Parliament or by the parties but by the media, to discuss these ideas publicly. Then maybe we would not be in quite the mess we are in. I do not like saying "I told you so", but I am unapologetic in saying that I have been cogent and consistent and, lamentably, I have been proved right.
This is my final point, and then I will sit down. I received able assistance from one of the Minister of State's valued colleagues in the other House. I am not sure if I am allowed to name him, but his first name is Peter. He contacted me to say that he thought my ideas were right, but there were no figures attached. I said that was because I am not good at figures. He supplied them to me, and on every occasion those figures have proved accurate. The Government has the wisdom and resources it needs within the Minister of State's own party. I would certainly support it. Obviously, his feeling is similar to that of myself and Senator Cullinane — that we are in a mess, we are being forced to do things that may well be dangerous, and we hope they will not explode in our face. We hope it is a developing situation and that we may achieve an easement. We have gone along with everything required of us by the EU, yet we are being treated worse than any other country.
It is important to say from the outset that this is not an abstract debate. In canteens and households up and down this State, and presumably across Europe, families and individuals are discussing the future of the euro and the implications for them of events in Europe and Ireland. We attended a presentation in the AV room today concerning people in receipt of rent supplement and the difficulties experienced by some because of rent threshold caps. We could discuss a raft of issues that are affecting people. This debate is not academic. It is about the real economics affecting people across Europe.
As Senator Norris stated, the Minister of State's honesty is refreshing. We welcome the honesty and clarity he brings to his role and to his contributions in the Seanad. Sometimes, laying matters before us honestly reinforces our concerns. When the Minister of State posed the question of where was the firewall, I was concerned to learn the European Stability Mechanism, ESM, treaty is that firewall. Given the size of the countries seeking bailouts —€100 billion for Spain alone — many people believe the pot of money might not be enough.
Not maybe; it will not be.
That is my point. We are constantly told the goal posts are moving. The pot is enough now, but something else will occur. For example, Cyprus is looking towards the pot. Italy may eventually do the same. What happens if France needs a bailout? This process is madness.
Direct recapitalisation makes sense. The Minister of State does not disagree. The Government and many others want direct recapitalisation. The Minister of State referred to the Taoiseach's remarks in a newspaper today. I agree with almost all of the Taoiseach's comments regarding what he wants, but words are cheap and we have been listening for God knows how long. The Taoiseach's crucial comment was that, although direct recapitalisation might be discussed, there would be no solution at the upcoming summit. When will there be a solution? As far as the real solution is concerned, the can is always being kicked down the road. This is part of the problem.
The Minister of State mentioned that we want to return to the bond markets. Sinn Féin has consistently cited that as our aspiration for the State, but it is a question of how to create the requisite conditions. Taking ownership of zombie, defunct and non-existent banks — Anglo Irish Bank does not exist — placed a liability on the taxpayer. This week, we will pay €1.17 billion to bondholders in Irish Nationwide and Anglo Irish Bank. No one likes this, but it is the reality.
It has been stated that, although many people in Europe do not want the ESM, we must go along with it. I will not put words in the Minister of State's mouth, but there is a better solution, namely, direct recapitalisation. However, some countries do not want direct recapitalisation and we must go along with their plan, even if it is a bad one and will not work.
As long as it rescues the German banks.
It does not make sense. We must convince people that there is a better way. I hope this work is ongoing at EU level. There is nothing wrong with Ireland saying "No". One of Europe's main problems, be it in terms of this treaty or a major question, is its claim that, although a solution is not the best one, it is the only one on the table and people cannot say "No". We can say "No". Sinn Féin says "No" because the treaty will not work. Government representatives tend to attack my party during debates and may do so during the course of this——
In fairness, we attack the Senator's argument, not his party.
They might on this issue, but we are normally asked about what we know about the economy. We were right when we consistently stated these plans would not work. We consistently stated that the previous Government's solution for the economy would not work. We have been proven right. The plans are not working in Europe or Ireland. This is not just my party's view. Senator Norris and many other Independents and economists believe Europe is not taking the right course of action.
I will stick to debating the section under discussion, as it asks us to provide the Minister for Finance with the power to be able to make the contributions required of the State. The Minister of State clarified the figure for this year as being €1.27 billion, with further instalments during the course of——
It will be €1.27 billion between now and 2014 in five tranches of €254 million each twice this year, twice next year and once in the first six months of 2014.
I cannot agree with such daftness, given the option of direct recapitalisation. That option should be available. We are asking states that are essentially bankrupt to borrow money to invest in a fund from which they will take back that money. I have not been reassured by the Minister of State's response. If anything, it has reinforced my opinion that the treaty will not work.
It is interesting that we are being primed for another treaty. We must understand that some people are following a different agenda, that is, a completely federal Europe and an ever closer union. Those people are using Ireland's economic problems as an opportunity for another power grab in Europe and further centralisation of power. We will discuss this issue further in terms of Senator Norris's points on the inviolability of the people who will manage the treaty. They will seek additional powers.
None of this is a solution to the problems facing Europe and this country. On that basis, we will push this section to a vote.
If Sinn Féin does not, I will.
I acknowledge Senator Cullinane's comments. While we differ in our analysis of and approach to the situation, his party is acting in what it believes are the country's best interests. He will concede that the Government is doing likewise. We might differ on how to work it out, but we are on the same side and want to do the best for Ireland.
There has been criticism of this deal. It might not be ideal, but it contributes to an overall settlement. It is not the finished product, only a step in the right direction. Negotiations must occur in the context of the total problem facing us. There is no question of it being Labour's way or Frankfurt's way and no giant leap will finish the job in one step. A multitude of small steps will be required.
I will draw a genuine analogy between negotiating a solution for Ireland's problems in Europe and Sinn Féin's work in Northern Ireland. From 1969 until 1994, that party pursued a particular strategy towards achieving its aims. That strategy did not work and was changed to one of negotiating in 1994. We do not yet have a united Ireland, which is Sinn Féin's ultimate aim, but since 1969 we have gone a long way towards achieving it. Incremental negotiation will change the European picture, although I hope it will not take 45 years. Senator Cullinane takes my point that there will be no bombshell cure in the morning because the EU, Ireland, a Minister or a Senator did something or other. Change does not work that way and we must appreciate that it will be incremental and slow. Everyone realises that calling for a major resolution overnight is not realistic. Section 2 proposes to give power to the Minister to do exactly what I have outlined, which cannot be very contentious. There may be more contentious sections further down the line but if we oppose this section and throw it out, we may as well throw out the entire Bill. We should not get ahead of ourselves.
I acknowledge the comments of my colleague. I have always been one for a direct hit to do the job. For example, if there was a blocked pipe in my home, I would not get the garden hose but rather a power hose. I have found piecemeal solutions irritating but I now recognise why they came about. It was impossible to deal with this issue in one fell swoop. It could not be done in such fashion and I do not know if we are finished yet.
This Bill is trying to achieve stability in Europe, and the word "stability" is being lost in our conversation. In Germany people are saving and they are getting a low interest rate, so it costs money for them to save. They must also deal with a service charge. The German economy is getting money for nothing. We would love to be in such a position but it will take time to get to there, and as Senator Gilroy mentioned, we must take small steps rather than giant strides. I have always been a firm believer that the running of a country is similar to running a business, and when a firm is spending beyond its means and borrowing on a weekly basis, it cannot continue.
This Government has made cutbacks but, as in business, it has loans to repay. There is a fine balance between the budget deficit, the repayment of loans and, effectively, cutting one's cloth to measure by finding savings. The Minister of State should be complimented on his effort in this regard, with one shining light being the changes to procurement. It needed to be done and, in fairness to the Minister of State, he carried out the task effectively. I heard him say recently he is not finished with the process yet, and I wish him the best of luck with it. As I noted, it irritates me that we cannot get the power hose, as it were, and do this in one giant leap, that we must instead take a series of small steps. I wish the Minister of State the best and I have the utmost confidence in his actions.
Like other speakers I wish to comment briefly on our position and the national debt in particular. I have read the record of the discussion in the select committee, and the amount of discussion on irrelevant portions of this Bill was astonishing. That is annoying as we must stay with the point or else we will be here for days, weeks and months. The great theories being espoused amazed me.
The Minister of State made the point yesterday that the banking portion on the sovereign debt is less than 25%. We would all prefer if it was not there and we hope that at some stage it may be accounted for somewhere else. For two years the deficit we run will be the equivalent of what Anglo Irish Bank cost us. We can, rightly, go nuts about that. We are obliged to get our deficit under control and we will do so. When that happens, we can go in a different direction, which will make it easier. Nevertheless, it is not easy at this time. The markets are very clear, as they want countries to go in Germany's direction rather than that followed by the peripheral countries. Money is being offered to Germany and France at knock-down rates, so it costs some people to save money. At the same time, peripheral countries are being charged 6% or 7% in interest. The markets are clear on the way they want governments to go.
A national debt is not repaid. The national debt in the UK started with a war between Britain and France in the 1600s and it has not been repaid fully since. It is constantly turned over. A country keeps it under control by making repayments so when a bond or other amount becomes due, it can be paid. This is done by the markets allocating funding in a process that has existed for hundreds of years. I listened to a presentation which noted that Bolshevik Russia reneged on its national debt after the revolution in the early part of the 20th century, and when the country went back to the markets in the 1990s, it repaid an amount for the moneys reneged on. That is how long debts stand and how the structures operate.
We will probably never fully repay our national debt, which may increase to more than €200 billion and 118% of GDP, but we must be able to keep track of it and repay the interest as it becomes due. As society expands and develops, we must keep up. Otherwise, if we repaid it in full we would all be looking out over half-doors in thatched homes and going to the crossroads for a set dance. This is the advancement of society.
I look forward to the debate we will have on this. I put some issues to the Minister of State yesterday which I am sure we will touch on again today.
We support this Bill as it is necessary, although it is not perfect. My main concern is that I do not know whether our Government and other governments are doing enough to advance solutions to finally resolve this matter. There have been suggestions involving eurobonds, common banking regulation and a common fiscal set-up within the European Union, or at least the eurozone. These are not being pushed enough and the people who need to be persuaded are not being convinced. A job could be done in this respect with the aim of solving this crisis.
Even if eurobonds were introduced, I suspect the legislation would be similar and Sinn Féin would argue the Irish people should not pay German or Spanish debts. The reality of such bonds is that we would all be liable for the debts of everyone else. There may be a net benefit to us but I am certain of the opinions of Sinn Féin and those who have consistently opposed the European project. The Labour Party initially opposed Europe but came on board, and the Green Party did likewise. There is no doubt Sinn Féin will come on board, just as it did with Mr. McGuinness shaking the Queen's hand. The party was a year late in that respect.
As somebody who was sentenced to death by the IRA 30 years ago, I find these consistent historical attacks on Sinn Féin boring beyond belief.
Senator Byrne, without interruption. We are on section 2. Matters pertaining to Northern Ireland are not on the agenda today.
Senator Norris can be entertaining at times but he is also boring on occasion.
Fianna Fáil is very sensitive when it comes to Sinn Féin. We just ignore such comments at this stage.
I am not sensitive.
We should concentrate on section 2.
This is not perfect and much more needs to be done by the Government. Nevertheless, it is worthy of support. The last referendum result indicated that many people who oppose Europe are doing so for short-term political gain rather than the interests of the country. It seems this Bill deals with an insurance policy for the country, and although it is not perfect, no policy provides a complete guarantee. The Minister and the Government could do a lot more to persuade their colleagues, especially given that Fine Gael boasted before the election about its influence in the European People's Party. A lot of work could be done in that regard but it is not being done at present.
I do not want to stifle debate, and on Committee Stage people can contribute as often as they want, but both Senator Cullinane and Senator Norris have complimented the frankness and straightforwardness of the Minister of State's contribution so rather than go in circles, I will let the Minister of State contribute. Senator Cullinane says he will put this to a vote, as he is entitled to do, but I do not want too much repetition. Otherwise we will be going round in circles.
I did not know the Queen's visit was part of section 2.
I agree, and I ruled that comment out of order.
Senator Cullinane raised the issue of rent allowance and that was not ruled out of order.
That was relevant.
I interjected.
This is a public debate on the issues we face. We need more of this. I want to take up one of the points raised by Senator Michael D'Arcy on the question of the national debt and speak honestly about what the national debt is. The last time I asked the Department of Finance how much we owe as a country, from recollection it is about €186 billion, and about 23% of that relates to the banks. A total of €63 billion was put into the banks. The previous Government put in €21 billion of our money from the National Pensions Reserve Fund. The other €42 billion that is outstanding concerns the ongoing recapitalisation of the banks and the promissory note. So less than a quarter of everything we owe relates to the banking problem.
Three quarters of the money we owe relates to the fundamental difference between tax and expenditure. The major part of the deficit problem is that we are spending too much and not taking in that money. To bridge that deficit requires a number of things. We must increase taxes and reduce expenditure, but for every 1% of GDP growth, there is €1.6 billion the following year. Growth of 3% would generate €4.8 billion, making up the adjustments on the tax and expenditure side. From recollection, this year 20% of all of the tax we gather goes to pay interest on the national debt. Senator D'Arcy is right. We never paid off the national debt, even in good times. In 1991 it was 39% of GDP and then stayed roughly the same, although as a percentage of the total size of the economy it was much smaller. There was an argument at the time that we should pay the national debt.
I made that argument in this House.
I should be more closely attentive to the Senator's speeches in this House. From now on I will write down everything he says.
I appreciate the Minister of State's sense of irony.
We are, however, heading in the wrong direction on the debt; we know that. It will reach a maximum of 118% next year, and the only way it will come down is for the economy to grow. The more growth we have, the smaller the liability as a percentage of the total size of the economy. That is the crisis we face. Inflation is the other way of doing it but we must get those numbers down.
I hear a critique in this House about what is happening in Europe at present but no alternative is being offered, other than one that requires other people to pay the bill. I do not disagree with Senator Cullinane. I would love tomorrow if the European authorities, the ESM, or anyone else decided to fund the banks, although this would require a change in legislation at the least. We would all love that, but who pays for it? The suggestion from Senator Cullinane is that Ireland plc will have this amazing new fund to recapitalise our banks, we will get some of the €43 billion back and everything will be hunky dory. We are not, however, going to contribute to this new fund. Is that really living in the real world? What planet is the Senator living on? I did not mean to say it like that but that is fundamentally dishonest. The notion that a country as indebted as we are can obtain funds from another source without contributing to that source is not living in the real world. The world does not work like that. People must be honest about that.
We can say until the cows come home that we are paying back the German debt, but that does not stack up with the facts of the case. The major part of our debt is nothing to do with banks. It is to do with the collapse in the economy and the transactional taxes disappearing. This hole emerged and someone is funding it. At the moment, broadly speaking, the German authorities are funding our deficit because if we came into immediate deficit, heaven knows the Armageddon that would face this country.
We must be honest about this. Blaming the Germans and other European countries for our current predicament is an interesting narrative but it is fundamentally dishonest and panders to the worst kind of neo-nationalism and politics. I believe the German authorities are grappling with this issue because they must sell this ultimately to their domestic audience, which has become increasingly hostile and eurosceptic.
This is part of a wider project. I know the European way is slow, dreadfully slow. Europe can rightly be criticised for the failure on its part to implement the kind of reforms to which we have all agreed but which have not been implemented. We are a small country and we do not have huge leverage.
After the referendum campaign, I was with my children in Marlay Park on the Saturday. A constituent came up to me and told me he voted "Yes" to stay in the game. I saw that as interesting, that people see this as a gigantic match we are not at the end of but in which we are coming to the end of the beginning, as Churchill famously said. If we are going to get the country to a better place, we must box clever and stay at this. We must also demand, as the Minister for Finance said publicly at the end of the conference call with other eurozone colleagues, that if there are better terms and conditions, we will get them. He made that remark in the course of the eurozone meeting, and told the Irish people that on the "Six One News". I am repeating that today. If terms and conditions improve, we will demand those improved terms and conditions for us, too. I know it is frustrating.
That is the point I wanted to make. Senator Cullinane is also being honest in this debate. I recognise that the Sinn Féin position has also changed on this issue. Before the last election, the Sinn Féin spokesman on finance, Deputy Doherty, and the party president, Deputy Adams, spoke about saying "goodbye" to the troika and that we would fund ourselves, that we do not need international money. Since the election, on a quiet news day, that position was changed. The position now is that we will work with the troika to get a better deal. Where did we hear that before? Sinn Féin is not that far away from us, despite the amateur dramatics and the smoke and mirrors, if the truth be told. Once Sinn Féin accepts the troika is here, of course it wants to negotiate a better deal and do the devil and all, but once it is here, it is here on condition. It is here on condition based on conditionality. It will keep giving us the money on a quarterly basis, predicated on our achieving certain objectives. I do not think if we drill through the Sinn Féin position there is that much difference between us.
I know the party opposes section 2 and the Bill and we have the speeches accordingly. If, however, we tease out the Sinn Féin stance on this, the party has moved its battleships, accepting implicitly that if the lender of last resort is in the country, it is here on the basis of conditions to which we and the troika must agree.
I reject the contention that there has been no improvement in the circumstances we face. Our current circumstances are totally different from those of 18 months ago. The reputation of the country, as a small open economy, has been restored. We have a programme that is difficult for our people but we are working through it. Our economy is growing, and will do so ten times faster if the eurozone is restabilised.
Ireland, as a small programme country, has proven that it can secure changes. The Government renegotiated the minimum wage deal agreed by the previous Government for the lowest-paid workers. That happened under the regime of the troika. The Government was able to demonstrate that we could exempt over 330,000 people from the dreaded universal social charge as a result of the programme we are undertaking. It was able to achieve a better deal on the sale of State assets. Previously, in respect of such sales, 100% was sought but we now have a deal in respect of which 50% is sought. We can use the funding available for investment in job creation, which has been negotiated by the Minister for Public Expenditure and Reform, Deputy Howlin.
We will continue to work our way through this. The result of the referendum on the treaty, which was backed by the Government parties and Fianna Fáil, which played a very important role in putting the country first in the campaign, shows that people want to be at the heart of the eurozone because they realise the enormous benefits for the country of being there. They want to remain in the game to ensure we can continue to negotiate a solution to the problem. I believe passionately that people will stick with the programme if they see the country moving towards a better position.
It is the long-standing ambition of the Government to re-engineer the promissory note arrangement, and that work remains. We have had some success this year, including in March through our not having to make the payment and putting it off. The long-standing ambition and first priority of the Government in its negotiations is to ensure that the €28 billion on the Anglo Irish Bank side can be re-engineered so our debt will become more sustainable in the long run. We believe we can secure this deal but it will require other developments. If and when we secure the deal, our position on re-entry to the market will be inordinately better than it is at present. We remain absolutely committed to this goal. I assure Senator Byrne that the negotiations are ongoing. He may not read about them in the paper or see footage of them on the news every day but they are taking place nevertheless in a quiet, deliberate and diplomatic way, and will take place until the country is in a better place.
I can tell from the Minister of State's expansive response and body language that the option of more debate is being explored. We are on section 2. I will allow Senators Cullinane and Norris to contribute as it is their prerogative.
I thank the Minister of State for his response. He has incited my response to some of his comments. Senator Byrne mentioned a potential historic occurrence that might take place today. An even bigger historic occurrence was when the Minister of State, Deputy Brian Hayes, stated there is not much difference now between Sinn Féin and Fine Gael on these issues. I will remind him of that the next time he writes one of his columns and attacks my party on the economy. I must write down the date and time.
That is somewhat orbiter dicta where section 2 is concerned.
It is very relevant.
The Minister of State made the point that those of us who oppose the Bill, including section 2, and the treaty are not living in the real world, as we ought to. Those of us who do not believe the current policies are working are told this continuously. The Minister of State was in opposition when a former Taoiseach said people who did not agree with his analysis of the Celtic tiger were negative, did not live in the real world and should commit suicide. The Celtic tiger involved light-touch regulation of the banks and an undermining of our public finances such that they were built on sand, and there was a property bubble that we could see was going to burst. We have been proven right about our commentary at the time. Comments such as those made by the then Taoiseach are always made about people simply because they do not agree with the proposition put forward by the Government, yet we live in a real world that is very different from the bubble in Leinster House. It is a world in which 440,000 people are out of work and where businesses are closing every day of the week. If one walks down the high street in Waterford, my area, one will see shops closed with "For sale" and "To let" signs. This is the case in every town, city, rural area and village. Most of our banks are defunct and some no longer exist. Some are in State ownership for the wrong reasons, and this is coupled with the crisis in Europe. This is the real world in which we live.
I made the point yesterday, perhaps flippantly because it was raised by somebody else, that the empire has no clothes in that the European——
The emperor.
——project itself is in the midst of a very real crisis that we all want to see solved in a way that makes life better for citizens, not just banks and bondholders. We want a better solution, a solution that will work. We simply do not believe the solution proposed will work.
The Minister of State is referring to real-world solutions. The need for direct recapitalisation is one. I will get to the point where the Minister of State said we shifted our policy.
If this Bill is passed, the ESM mechanism will apply to us. If it is the case that the Government is to put such an arrangement in place, one must try to change it as much as one can to make the organisation more accountable and better, even if one does not agree with it in its entirety. If the ESM is in place and there are funds available, we should be able to use them to invest in jobs in the economy, not just to recapitalise banks and bail out countries.
We are not just talking about bailing out countries, however. In many circumstances, we are not talking about bailing out individuals but about taking money from a pot to which we contribute, bearing in mind that the Minister of State said we are not living in the real world if we do not make a contribution. In the real world, we do not have money. Therefore, how can we put money into a fund when we do not have it? We must borrow it to get it back.
If banks need to be recapitalised, as in Spain where the recapitalisation figure is approximately €100 billion, the Government must go to the ESM and borrow the money required. The taxpayer is then liable. Essentially, taxpayers are being asked to recapitalise private banks and institutions. That they are asked to do this is morally, economically and socially wrong. It demonstrates that we are not really dealing with the problems in the banks. Are we really asking ourselves why they are occurring and why the banks are in need of recapitalisation? During the course of the campaign before the recent referendum on the fiscal treaty, which was passed, I made the point that one of the failings was that the treaty did not deal with how banks should operate. It forced restrictions on states and did not deal with the restrictions that should be on banks.
There is no discussion whatsoever on how we can regulate the banks properly and ensure that what happened in the past will not recur. There has been no discussion at European Union level; it is all a question of imposing restrictions and brakes on Governments. There is no doubt that some Governments acted very irresponsibly. We need mechanisms that act as checks and balances in respect of what states do. These are real-world issues that are affecting us all. The banks were primarily the organisations that behaved in a most reckless fashion. In this regard, the example of Anglo Irish Bank is the best. It simply engaged in a race to the bottom, borrowed money from the bond markets and used it to give to the golden circle to speculate on land. It all went belly up and we are paying the price. There was no regulation of the banks. All we are doing is setting up a new fund which can be used by member states to put more money into banks, if necessary.
The Minister of State raised the issue of the shift in positions. Everybody's position is changing because things are happening so fast. We did not want the troika arrangement, as we did not want Ireland to lose its sovereignty and a situation where we would end up in a bailout programme. However, we were signed up to it. It is one thing to try to stop something when it is happening, but when one is part of a troika arrangement, there is no way to escape. I am sure the Minister of State will accept that is why our position on this issue has changed. It is a little like how we do not like the ESM, but, if it is in place, we must work within it, as one must be pragmatic and constructive. The only way we can get out of this situation, which the Government states it is trying to do, is by getting back into the bond markets. My party does not believe we will get back into them if the State continues to shoulder more debt.
The Minister of State mentioned a figure of €170 million in respect of the national debt. The Government will borrow more money and put it into the ESM fund. It will pay out more money on bonds. We are not really reducing the deficit as quickly as we want because of the policies which are being pursued which my party believes are counterproductive. It wants Ireland to return to the bond markets and reclaim sovereignty, but we accept that the troika is here and that we cannot wish it away, although both we and the Government did not want it. Unfortunately, it was Fianna Fáil which brought it upon us through the failure of its policies and those of the Green Party. The reality is we are in a bailout programme and the only way we can get out of it is by getting back into the bond markets. My party does not believe in the totality of what is being put before us in terms of what the Government is trying to do in its fiscal and budgetary policies and also the European response to the treaty. While there is some good work being done, we do not believe the totality of what is being put in place by the Government will get us back into the bond markets. We believe strongly — we will see who is proved correct — that we will end up in a second bailout programme.
The Minister spoke about the conditionality being imposed on us as a consequence of the arrangements of which we are part, but he can bet his bottom dollar that if there is a bailout Mark II, the conditionality will be even worse and that those who will suffer and have to pay the price will be the citizens of the State through further tough budgets. We are facing four more tough budgets under the Government. If we do end up in a second bailout programme, no doubt whoever lends us the money — most likely the ESM — will attach conditionality to it and that it will not be good for citizens.
I remind Senators that we are on section 2 because all kinds of issues are being covered.
I will try to be brief by way of a series of bullet points.
The Minister of State is persuasive, but I remember his former colleague from Fianna Fáil, the late Deputy Brian Lenihan, who was an old friend of mine, sitting in the Minister's seat and being equally persuasive and brilliant. I disagreed with him because I had analysed his language and want to do the same with the Minister of State. The words the Minister of State is using, "confidence", "game" and "reputation", tell me that perhaps the debate should be moved from this Chamber because we are dealing with politics, not substantial ideas. What we need is a radical reappraisal of the system in which we put the welfare of the people first. One needs to start by looking at the definition of money which has moved from being attached to reality. It is now merely a symbolic representation of energy. It is obscene that multi-billionaire bondholders are paid off. Yesterday I met a woman outside Leinster House who told me she had not eaten for two days. She is by no means unique. That is the impact of these policies and the refusal to take a radical view.
I accept the Minister of State's position that we cannot do it on our own. However, we need to spark a debate. So what if it is intellectual and academic? What are the universities doing? Why are they not tackling these issues? Why are we, at a political level, not taking on the bond markets? Even Sinn Féin wants to go back to them. I would like to abolish them. We are bond slaves or bondsmen. The markets are not serving the interests of the people.
The Government side has stated the markets are investing in Germany because they approve of its Government. That is rubbish, absolute tripe. They are doing so because they know Germany can pay them back and because they will get money out it. They know we cannot pay. In section 2 we are promising we will put in €11 billion, money we do not have because we are bust. The reason I do not like this and the reason I have been voting against it is I like the truth. I do not like fantasy.
Exactly.
I live in the real world, which is not one where one who has no money promises to pay.
As I stated yesterday, when the guarantee which has got us into the mess in which we find ourselves was before the House, I asked what the ultimate figure would be and was told it was €400 million. When I asked what was our gross national product, the officials did not know. They had to go out and make a telephone call to find that it was €200 billion. The position is the same on the issue of insurance. Against what is one insuring? I am considering my insurance policy because it is difficult to pay on a house with the furniture I have and I do not know I can afford it.
Former Deputy Pádraig Flynn is back.
It strikes me as absurd if the insurance premium one has to pay exceeds the value of the items one is insuring. That is what we are in danger of doing. It is common sense.
I encouraged the former Minister Charlie McCreevy when he said he was putting a little aside for a rainy day. It was nowhere near enough.
It was a good idea.
However, the process was not continued. At that stage I asked why we could not pay off the whole lot. I have never understood how countries can live eternally in each other's debt.
(Interruptions).
It may not have been right, but at least it was popular.
Unfortunately, for the Senator, it is approximately eight months too late.
It is not appropriate that there be applause from the Visitors Gallery. Those present should be aware of the protocol followed in the House.
The Minister of State has opened up a range of issues to which I feel duty bound to respond and I will do so as quickly as possible. I say this with all due respect to the Minister of State who has made a persuasive case to the House and who will rebut points made by some of the Senators on this section, but there are a number of issues that I must address.
What the Government gave through the exemption of the lowest paid in respect of the USC it took away through the reduction of the dole for part-time workers.
Is this relevant to the section?
The Minister of State raised this issue and I am responding to what he said.
The sale of State assets is an invention of the Government, it has nothing to do with the troika agreement. The Government has told the troika that it wants to sell State assets and the troika has stated it can put so much of the proceeds towards investment. I wish the economy was growing. The Minister of State is saying it has returned to growth. There was growth following budget 2010 that the Minister of State's party opposed.
I am not sure this is relevant to the section.
I am responding to points the Minister of State made.
Everybody is wandering through the section.
If others were allowed to raise the issues of rent allowance and house insurance, I will refer to issues that the Minister of State raised on the section.
In fairness, the Senator is correct.
There was growth after budget 2010 which the Minister of State's party opposed. Fine Gael constantly makes claims on junior bondholders, but that measure was put in place by legislation which Fine Gael opposed just before the general election.
On the bond markets, Sinn Féin should be careful what it wishes for. Senator David Norris was correct on that point. Much of the talk about Sinn Féin's desire to return to the bond markets will come back to haunt it.
There were many PR mistakes made by the Fianna Fáil-led Administration and one of the biggest was encouraging a fear of the IMF. We kept saying that if we did not do this or that, the IMF would come here. It did. From a PR point of view, all of what we had said came back to haunt us. We should have been portraying it as a safe harbour in the event that we were denied access to the bond markets, which is exactly what happened. It was portrayed initially as a dangerous course to follow, whereas I say thank God for it and the troika.
They gave us money to continue to provide public services, pay public service salaries and pensions, make social welfare payments and keep the country running. People were encouraged, instead, to fear them. Similarly, we must view the European Stability Mechanism as another safety net which we will access if we are unable to return to the bond markets. Contrary to Sinn Féin's description of the bond markets as some kind of refuge, they are full of sharks who will do everything possible to make a few quid.
Hear, hear.
I am not sure if Sinn Féin fully understands the way in which the bond markets work but they have never done this country any favours.
I remind Senators that we are on section 2 of ten sections. While it was not intended to use the guillotine, it appears it will be imposed.
I share the Leas-Chathaoirleach's suspicion that Senators are not focusing on the relevant section. I will not break the tradition of discussing extraneous issues.
In fairness to Senator Gilroy, he is not a regular offender. I have warned and cautioned a couple of times without wishing to stymie debate. With due respect to the Minister of State, he has also been somewhat expansive and has encouraged political responses that are not relevant to the section.
Senator Norris came close to P. Flynn territory when he complained about being unable to run a household on one or perhaps two salaries. I hope he will quickly backtrack from that remark.
I inherited furniture which was made by a great Irish craftsman as part of my family tradition and I will not apologise to Senator Gilroy or anyone else. I remember the days when people wanted to pull down and level every Georgian house in the country. They have changed their tune.
Senator Norris's household circumstances and furniture have nothing to do with the section. I ask Senator Gilroy to refrain from commenting on them.
I examined the subsection and the Leas-Chathaoirleach is correct——
I am afraid of another expansive response.
I would like to be the only Member present to discuss the relevant section. It is difficult to see how one could make an argument for voting against the section if we all share the belief that we must access funding from some source. The only likely source of funding available to us at present is the European Stability Mechanism. If we vote against the section, we are stating we do not want the ESM. It strikes me as particularly ironic — I touched on this issue on Second Stage yesterday — that those who oppose the section ask the reason we should put our money at risk by contributing to the fund. This is precisely the same argument as is used by the more belligerent members of the German commentariat who ask the reason Germany should contribute to the mechanism from which Ireland is drawing funds. We cannot argue, on the one hand, that we do not want to contribute €1.27 billion to the ESM——
We do not have the money.
One cannot contribute to something and then take it back. It does not make sense to give to oneself.
There is no point in codding ourselves. There is a great deal of irresponsible lending and many financial transactions taking place. We cannot accuse German taxpayers of being irresponsible. Germany is reaping the benefits of a series of reforms it introduced in the aftermath of the fall of the Berlin Wall. German taxpayers are frugal savers who will contribute 27% of the total of the fund. It has been argued that they should continue to contribute and bail us out.
If they do not agree with the real solution, that is their problem.
German taxpayers are bailing us out with their money and we demand that they continue to provide us with funding while refusing to make our own contribution. That is a fantastic idea but it is also laughable and unrealistic. While there is nothing that grieves us more than borrowing money in our current economic circumstances to contribute to the ESM fund, it must be done. The very people Senator Cullinane claims to seek to protect, namely, the owners of businesses which are closing down and the unemployed, have most to benefit or lose from our decision on whether to join the ESM.
That makes perfect sense.
Either Senators do not understand what they are saying or their proposals are disingenuous. As the Minister noted, three quarters of the money we are borrowing is to fund public services. The largest item of Government expenditure is the social welfare programme. Senators argue that we should not contribute €1.27 billion to access the money we need to have a guaranteed funding stream. This would place those who most need State services at greatest risk. We will be fine because we have grand salaries. Those who are on social welfare, use our hospitals and attend our schools will be most disadvantaged if we do not pass this legislation. One can say what one likes about the bond market and other matters but we need funding to finance our public services. If we vote against this section, we may as well tear up the Bill.
I am being consistent.
It is lovely to be able to say that from inside the hallowed walls of the Seanad Chamber. How will we make social welfare payments or pay disability allowances if we do not have access to ESM funding after 2013? We face a funding cliff in 2014 when a sovereign bond of €11 billion must be restructured. Where will we get the funding to meet this cost if we reject the section? What will happen if we cannot secure funding in the markets or through the ESM? Senators may say I am scaremongering but the prospect of closing the deficit in one year is extremely scary. We will have to find, from public expenditure, €11 billion to restructure our bond and approximately €9 billion to finance the public service at its current level. This year, we will reduce public expenditure by €3.6 billion, which will be extraordinarily painful and, in many cases, unfair. What would happen if we had to reduce public expenditure by €20 billion?
The Senator clearly did not listen to a word we said. I will repeat my comments when we discuss the section.
I have no doubt Senator Cullinane will repeat them but I cannot understand his position. We can play politics as much as we want but Sinn Féin was unable to respond on the many occasions we asked that party during the campaign on the stability treaty to show us the money. According to Sinn Féin, we will go to the IMF and elsewhere, veto this, that and the other and still be in a position to fund public services. That is a crazy proposition. If we cannot return to the markets, where will we get the money? Sinn Féin has had six months to answer that question.
It has been pointed out that we do not have money. That is incorrect as we have €33 billion in revenue from taxation every year. However, we also have obligations, of which the payment into the ESM is one. To whom do we owe our first obligation? Is it State employees and those who have retired from public service? Should we pay their pay and pensions before we make social welfare payments? People on social welfare are given money from the State based on the decisions of the Oireachtas and the social conscience of its Members. Of the €33 billion the State receives in revenue, €19 billion is allocated towards the salaries of those who work in the public service, with a further €21 billion spent on social welfare payments. The very people to whom Senator Norris and Sinn Féin Senators refer are those who would be most affected were we to fail to pass this legislation.
Explaining the position to an older person who receives a pension, I stated that I did not want to have to explain the reason the Government and Oireachtas would be required to cut expenditure by €10 billion, €12 billion or €14 billion in one year. Irrespective of the ultimate figure, the result would be the impoverishment of the very people the Senators opposite believe they are protecting. I do not believe they believe their own arguments.
If people wish to oppose this measure, they must put forward an alternative. It appears the only alternative is a default position where one effectively defaults on the commitments one has made. In our case, the consequence of owning the main banks, apart from Bank of Ireland which is in 50% State ownership, is that their liabilities and assets belong to the State. One may agree or disagree with how that came about but it is the de facto position. The train has left the station.
Let us consider the default option. At a eurozone meeting I attended in February, it was agreed to provide for an organised default by Greece of €170 billion. It could be argued that this default, which involved the public and private sectors, was the largest ever default. In other words, countries that held Greek debt were obliged to pony up the interest and hand it back. That was a big commitment for them and, thankfully, Ireland was not exposed enormously in that regard. However, for private sector involvement, they were also obliged to pony up a huge amount of money. While that was an example of default, has it worked? For those who suggest default offers an option and alternative, please show me where it has worked. Do they mean Argentina, where, to take up the hunger analogy used by Senator David Norris in respect of the woman he met outside Leinster House the other day, one quarter of the population went hungry? What do they mean? Will they, please, show me where the alternative has worked?
We are part of a eurozone with 16 other countries and defaulting would take us out of it. As for whether it would be immediate, Members should run the following numbers. There are 110,000 direct US multinational jobs here, with a further 120,000 indirect jobs, and they would go overnight because once one introduces capital controls to stop people from taking money out of the country, there is no longer a Single Market. As for what happened in Iceland which has its own currency, the reason it could do this was the authorities there stopped people from taking money out of the country via capital controls. Consequently, were that to happen in Ireland from 1 January 2013, it would be goodbye to all foreign direct investment. Such investors would be out of here within one day. Members should run the numbers and explain to me the impact an additional 200,000 on the dole would have.
Another point which I believe Senator John Gilroy has made concerns what is happening in Greece. It is not the poor or those in receipt of unemployment benefit who are leaving but the rich who always go first. They take their posh houses or multiple posh houses and liquidate.
And their furniture.
They take their bank accounts and get out. Who is left? It is the person in receipt of unemployment benefit, the carer and the pensioner who will see their living standards slashed repeatedly. If Members oppose section 2 because they say they have an alternative, I want to hear what it is. I want to hear about circumstances in which Ireland can gain access to money at a rate of 3%. No one is putting up his or her hand and telling me where Ireland can get money at 3%. Section 2, in putting in this capital, will allow the country, in a scenario which I hope will not arise, to get money at some point in the future. If Ireland puts this money into this credit union, as I describe it, at some point in the future the fund will borrow on Ireland's behalf in the international money markets. Moreover, what Ireland will be charged on is the tiny additional margin for obtaining these funds. At present, it gets funds at 3%, while the money markets would charge 7%. If Members can tell me where Ireland can get money at rates of 2%, 2.5% or 3%, I will be all ears, but I have not heard it yet.
If one is honest about this, the European Stability Mechanism does two things. Were Ireland to need this emergency fund, it would be available at very cheap rates in comparison with those at which the country could borrow in the money markets. Second, however, it is in place as a confidence boost towards getting Ireland back into the money markets. People talk about borrowing and money markets as though they were faceless bureaucrats and people with all this money piled up behind them. However, they represent pension funds and other ordinary people. They represent all kinds of individuals——
Insurance companies.
Credit unions.
Everyone. As I understand it, some of the credit unions in this country are included among those dreadful people, the bondholders.
I make the point that I was the person who named the bondholders in this House when the Government did not have the guts to do it.
I will conclude on this point.
The Minister of State should let Members have this information. He should let Members know how many of the credit unions are involved. He is trailing around red herrings. What proportion is held by Irish bondholders?
It is very small.
I will conclude by noting that this mechanism, through section 2, allows Ireland access to that emergency fund, if needed, which I hope it will not. Second, it gives Ireland additional confidence in trying to get back into the markets, an objective with which everyone agrees. It is welcome that Sinn Féin wants Ireland to return to the bond markets. It did not want us there before the election, but it does now.
Sinn Féin always wanted to go to the bond markets.
If that can happen, Ireland will be in a much better place. In accepting section 2 Members are accepting that while Ireland may need this fund, more importantly, it is in place as a substantial backstop towards the support the country will need in the future.
Question put.
Senators
Votáil.
Will the Senators claiming a division please rise?
Senators Trevor Ó Clochartaigh, David Cullinane and David Norris rose.
As fewer than five Members have risen I declare the question carried. The names of the Senators dissenting will be recorded in the Official Report and the Journal of the Proceedings of the Seanad.
Question declared carried.
SECTION 3
Question proposed: "That section 3 stand part of the Bill."
Logic dictates that if one opposed section 2, one would also oppose section 3, unless one was convinced by the Minister of State's arguments, which we were not. I will make some general points on the ESM and respond to the Minister of State's contribution in which he asked for an alternative. It is important to spell out the alternative, or at least the proposition Sinn Féin is putting forward. First, we must look at what is before us. The ESM is being presented as a firewall. We will take money from countries that are broke and put it into the ESM. That mechanism will provide cash, first, to states that need it because they are in a deficit situation and, second, to banks because they need to be recapitalised. The State will then become a conduit for that. The backdrop to all of this is the continuation of the issues I mentioned previously, which are massive unemployment, the difficulties families are experiencing and the pressures on banks.
Sinn Féin advocates the adoption of a different deficit reduction strategy. I think the Minister of State would accept that Sinn Féin, consistently over a number of years, has put forward a set of budgetary proposals that are different from his own. What we want is a different way of reducing the deficit. We accept the need to reduce our deficit in an appropriate fashion that does not have a deflationary impact on our economy. The previous Government put in place a four year strategy that became a five year deficit reduction strategy. That is the current bailout situation we are in. For starters, we wanted it over a longer time period but we would also have gone about it in a different way in that we would not have targeted low income families and people on welfare. We would have tried to get revenue in from higher earners, introduced a third rate of tax, abolished tax exemptions and shelters, capped pay at €100,000 and all of the proposals we put forward ad nauseam in this House whenever we are asked for an alternative. We would introduce a different deficit reduction strategy and budgetary strategy from that followed by the Government. From the outset we have consistently said we need to grow the economy. If the difference between what one takes in and what one spends is a specific amount, let us say €14 billion or €15 billion, and the economy does not grow, the only way to reduce that is through cuts and austerity.
What about inflation?
Of course, we could borrow. However, it makes perfect sense that one would try to grow the economy, which in turn would grow revenue. Growing the economy, revenue and finance is the easiest way to heal the difference between what one takes in and what one spends. That is why we have called for a jobs strategy and a growth strategy that would underpin a different deficit reduction strategy as well.
We have also called on bondholders to take a haircut. We do not make any apologies for that. I know the Minister of State's party made such a call before the election, perhaps not to the same extent, but certainly as regards junior bondholders, we made commitments.
It is in the manifesto.
The Minister of State asked for responses and he said that no response had been made. We are talking about the ESM treaty, which in some respects is convoluted.
The other strategy would be to devise a different way to deal with the banks. The Government has said it wants to deal with the problem by means of promissory notes, yet what we are seeing is the most convoluted system I have ever seen. Essentially, the Irish Central Bank was allowed to print more than €30 billion to give to Anglo Irish Bank. That could be written off but the Germans do not want us to do that. They want us to give the money back. The first or second instalment of €3 billion that was to be paid back recently was taken from NAMA which was given a Government bond on the strength of that. NAMA gave the money to the Central Bank which burned the money and it was left with the bond. Bank of Ireland was to take over the bond and it had to get the agreement of its shareholders, which was provided. Bank of Ireland now has the bond and at some point we will pay it back and the same will happen for the next round. It is complicated and convoluted but ultimately it means that we have to keep paying back the money. There is no real deal. Reference was made to smoke and mirrors. That is it. We would do it differently. We do not see why we should pay any of the money back. In our view it would not be inflationary and it would be easy were the money to printed and written off as part of an overall debt reduction strategy.
It is not right to say that there is not a solution. We have said what is required is to strengthen the ECB and its ability to act as a lender of last resort. That is what we want.
One does not pay into it.
That would be the best way to do it. One option that could be examined would be for the ECB to print money. It would be different if we had to make a contribution to a different scheme but we will not support a contribution to the scheme that is before the House. We want a genuine mechanism of solidarity. We do not believe this mechanism is such. That is why we do not want to provide the €11 billion which we are asked to do in section 2. We are putting forward alternatives. The Minister of State might not agree with the alternatives presented but one should not state that no alternative has been put forward.
They are not realistic.
I contend that what we are dealing with is not realistic.
Sinn Féin voted for it.
I clearly remember in the 2007 general election my party was described as economic illiterates by a party which then went on to devastate the economy. I do not know whether the Minister of State will agree but it was the very policies we warned against——
Sinn Féin voted for it.
——that created the sheer disaster we have in the economy at the moment. It is interesting to note that what keeps coming up over and over again is that somehow Sinn Féin's policies would wreck the economy. The economy is wrecked. It is the policies we warned against that were at fault. There are genuine alternatives. Some of the proposals we advocated were about having proper regulation of the banks and not diluting the taxation system, which we did, especially for those at the top who were given generous tax reductions. The tax base was hollowed out during the Celtic tiger years. We are in the current situation because of the big gap in our public finances. That is because the bubble burst and our public finances were not sustainable and we have to try to improve them again. The reality is we are not asking the higher earners to pay. We are asking the lower earners and people at the bottom.
We have always said that what we want is not a permanent bailout situation but that we would eventually get back to the bond markets, which is where we need to be. In an ideal situation we would not have to borrow at all but the reality is that sometimes one needs to borrow and at the moment we have to borrow. One must ask why the bond markets locked this country out of the markets altogether. Why will they not lend to us at reasonable rates?
They think they will not get their money back.
The reason for that is because they think the policies that were pursued previously and are being pursued now are wrong. Senator Norris made the point that the reason bondholders invest in Germany and are still investing in France and elsewhere is because they believe those countries can pay the money back. They do not believe we can pay the money back because they see us continuously taking on debt which is not ours. They do not see any solution to the bank situation. They see the perceived solutions to be all talk, hollow words, smoke and mirrors and they do not see the real solutions. If the solutions were in place, the bond markets would be much more inclined to lend money to this country. I refer to different deficit reduction policies being in place that are not deflationary and do not make the situation worse, which is what is happening. The domestic economy is floundering because of the policies that are being put in place. I have given the Minister of State a comprehensive view of Sinn Féin's analysis. He will obviously disagree with the Sinn Féin position——
Let us not pre-empt what the Minister of State will say.
——but the reality is that we can have all the debates we like and they can involve banter and humour but the serious question we must examine is whether we are on the right road.
My question is whether we are on the right section. We are on section 3.
We are not on section 3.
That is what I am talking about: whether we are on the right road, if the policies will work, if the ESM will work and if it will be a firewall. I do not believe it will be. I will finish on this point. Every single time Europe presents a solution, we end up with a new crisis. This week's summit is another crisis summit. I am sure there will be discussion of more steps that must be taken because we are not dealing with the real problems and putting forward the real solutions. Sticking plaster, or should I say "stickie" plaster, solutions — the Minister of State should pardon the pun given his partners in Government — will not solve the problems.
A party that ruined the country told Sinn Féin it was economically illiterate. The party that ruined the country is still the party that ruined the country and Sinn Féin is still economically illiterate. I wish to point out three things about Sinn Féin's comprehensive position as outlined by Senator Cullinane. He said we can deal with the exceptional liquidity assistance, ELA, and the promissory notes in a different way, that we can somehow unilaterally rewrite the promissory notes to take care of the ELA. However, he does not answer the question of how that would then fit into the TARGET2 system. He might not have heard that term before. It would undermine the entire system of euro transactions if we unilaterally interfered with the ELA. It would also undermine the rules of monetary policy if we did that. What is more important is that while we could do that economically, it would destroy the reputation of the country. Of course, politics is about relationships — in this case, relationships with our partners in Europe and trying to find a common way forward. Although we said while discussing the previous section that progress was slower than we had hoped, it is working. Before we came into Government, the interest rate Ireland was paying on the secondary bond markets was more than 15% and was actually coming close to 16%; it is now less than 7%.
I do not think those figures are right. The Senator needs a calculator.
They are right. If the Senator goes back to August of the year before last, he will find the secondary bond markets were charging Ireland interest of around 16%. That is true; the Senator can check it. Now the rate is 7%. The bond markets are clearly saying Ireland is doing something in the direction of——
It has gone up in recent weeks, as the Senator might have noticed.
Senator Gilroy, without interruption.
Indeed it did, in a particular context. This is another example of the illiteracy of Sinn Féin in this regard. It sneaked up because of the instability that was introduced by Sinn Féin's position on the stability treaty——
After the referendum.
——as well as the circumstances in Greece and the uncertainty about Spain. Yes, the rate did go up, but it now remains steady at 7%. That is a reduction of more than 100% compared to the rate two years ago, so we are doing something right.
Sinn Féin has said it wants us to reach a position in which we do not have to borrow. Did the last three months not exist, or what? Was that not exactly the reason Sinn Féin was arguing against the stability treaty — because we would not be allowed to borrow?
That is not what I said. The Senator should not misrepresent what I said.
Senator Gilroy without interruption, please, on section 3.
That is exactly what Sinn Féin said.
It is not an ideal situation. There are times when one needs to borrow. The Senator should have listened to what I said.
I am talking about what the Senator said.
Incorrectly.
The so-called realistic and comprehensive solutions that Sinn Féin is putting forward are fairly comprehensive, but they are not one bit realistic. Section 3 is the same as section 2. If we reject section 2, we reject section 3. The House has shown that we are not in favour of rejecting section 2, so it is unlikely we will reject section 3, although I suspect there will be a vote on it. The Minister of State asked for a realistic alternative, but we still have not heard it.
I am not sure I have an awful lot more to add. I very much agree with Senator Gilroy's comments. Section 3 follows section 2 as night follows day, and the House has divided on section 2 already. I am not convinced about Senator Cullinane's view that some kind of quantitative easing in the ECB would solve our problem. The reason wealth is behind a currency is that it provides a guarantee. If one starts printing money, as he describes it, one immediately undermines the wealth that exists within that currency. That is not a solution. One could argue that the three-year money at 1% that the ECB lent to the banks before Mr. Draghi's considerable initiative in December was a kind of quantitative easing. The real problem is that there is no inter-bank lending at the moment. It is not just Ireland that is locked out of the money markets; the money markets themselves are locked out. If we take out the emergency liquidity funding provided by the ECB, there is very little activity going on. That is why it is so important that we resolve the problem with the euro once and for all. Our growth is hugely dependent on stability within the eurozone. When the Minister for Finance, Deputy Noonan, was in France some weeks ago, he made the point that we could come back like a rocket if such stability could be achieved because, more than any other country in Europe, we produce many goods and services that we cannot consume. We must get them off the aisle, and as a consequence we need to be part of a hard trading currency so that we can sell our goods and services at a price that is to our benefit. We are like a cork bobbing up and down on the ocean; as the euro moves towards a stable position, we will recover more quickly. Our growth rates are twice those of other eurozone countries. Our economy is primed and we are ready to come back if we can achieve stability. On a broader level, the purpose of the European Stability Mechanism is to provide such stability and, on an individual level, to give us the backstop about which we have spoken in the past.
The Senator is suggesting, if I am interpreting him correctly, that we take some unilateral position on this. I refer him back to our party's manifesto in advance of the general election, in which we warned against this strategy. We said what we wanted to do in terms of senior debt, but we made it absolutely clear that we would not take some unilateral position and that we would work in the context of Europe to produce what we describe as a pan-European solution. It is important that a country whose economy is the same size as that of greater Manchester does not start telling bigger countries what it will or will not do. If we go down the road of taking a unilateral position on these matters, we will find ourselves very exposed very quickly. It will affect not only our reputation but also our economy and our ability to negotiate. Small countries such as Ireland have always punched above their weight in negotiations. We have a number of attractions and advantages, and taking up some unilateral position, for which the Senator has argued, would be dangerous. We would find ourselves out in the cold very quickly, and then where would we get the funds to make sure pensioners and carers and the unemployed were paid so they could stay in this country?
I will make one last point. The Senator has suggested a number of alternatives within the budgetary position of his party, but they are based on bogus figures. It would be a really good idea if all parties' submissions were sent to the Irish Fiscal Advisory Council in advance of the budget. Here is one fact for Senator Cullinane: 75% of all income earners in this country earn €50,000 or less, and they contribute 19% of the tax take. We have a very progressive tax system in that the more one earns, the more one pays. The OECD has referred to that. The real problem, traditionally, has been the number of people who do not pay income tax at the bottom. Up to 36% of all people who are working do not pay any tax. The numbers are not there to implement the Senator's budgetary solution for closing the deficit by taxing the wealthy, whoever they are. Who are the wealthy? That is an important question. They are the people with mobile capital and assets they can remove, as I said in my previous contribution.
Our position is to avoid levying huge taxes on work while there are around 440,000 people unemployed. We must create an incentive for people to move from benefits to work. However, we must also broaden our tax system, and the challenge for the Senator and his party, as we go into the budgetary process and in view of the Government's commitment to introduce a new property tax, is to tell us how Sinn Féin would do it. The Government has already said that next year we will have to find €3.5 billion; broadly speaking, this equates to €1.25 billion in additional taxes and €2.25 billion in expenditure cuts. Let us take the €1.25 billion on the tax side. A property tax will take in, at best, €0.5 billion. Thus, we still have to find €750 million on the tax side for next year. That is a lot to ask in the context of the last number of budgets. The challenge for the Senator's party is not to oppose everything. It is living in a fantasy world in which it goes after the rich — a group it does not define — and leaves everyone else alone, with no cutbacks on the expenditure side, no tax increases for those on middle and lower incomes and just the small percentage of people at the top providing all the money that is needed. The numbers are not there to justify that. Sinn Féin's proposal is a fantasy that can be presented as an alternative in five minutes on RTE, but when one looks at it properly, one can see it is not an alternative. Yes, of course we can do more in the area of taxation, and we must weigh up the impact this would have on work. I am not suggesting it cannot be done, but to say it is the solution is just fantasy, and anyone with any credibility from an independent economic organisation would come to the same conclusion.
Senator Cullinane, on section 3.
The Minister of State was given plenty of latitude. He raised a number of points which I will take the opportunity to reply to. Will he take the oppoprtunity to revert to me?
In fairness, Senator, you had 15 minutes to speak on section 3, so you were given fair latitude yourself.
I will stick to the section. We are on Committee Stage and the Acting Chairman should relax. There is no panic. We have until 2.30 p.m.
Do not tell the Chair to relax.
(Interruptions).
Senator Cullinane on section 3, as briefly as possible, please. We must conclude by 2.30 p.m.
The Minister of State mentioned fantasy economics. The provision in section 3, to the effect that we must put €11 billion of borrowed money into a fund when we will probably need to draw down more than that amount, is fantasy economics. For many years and possibly since before 2007, the parties that share an economic consensus — Fianna Fáil, Fine Gael and the Labour Party — have called Sinn Féin's economic policies the stuff of fantasy.
Everyone said that.
With respect, Labour's leader, the Tánaiste, made the same point in the Dáil recently. Is it not interesting that these three parties, which have been in government for God knows how many years, including the Fianna Fáil-Green Party Government, started the economic crash and are sustaining this situation?
Senator Cullinane should refer to section 3, not give history lessons.
None of that had to do with my party or our policies.
The history of the Senator's party is very different from our economic history.
Senator Cullinane without interruption, please. We must conclude by 2.30 p.m., yet we have been discussing this section for 24 minutes. I would appreciate it if Senators would stick to the section and be as brief as possible.
(Interruptions).
Senator Gilroy and the Minister of State should do the same.
The Minister of State made a point about high earners and asked about where the money would come from. Recently, a Central Statistics Office, CSO, report showed that the disposable income of the top 10% of earners in this State increased last year whereas everyone else's decreased. This tells me that there is scope for people at the top to pay more. The mobility of wealthy people's capital was mentioned, but the people who are moving are the young unemployed. They are leaving this country because there is no leadership or employment thanks to the Government's policies.
Senator, please. On the section.
When the Minister of State makes accusations, I take the opportunity to respond.
The Senator should ignore them. That is what I do.
The Minister of State referred to progressive taxation. The Government is moving away from direct taxation towards indirect taxation. It will introduce property and water taxes, neither of which will be progressive.
The bigger the house, the more one must pay.
The more one uses services, the more one pays.
I will repeat my point. It will be my last contribution on this section, as our debate on the next section will be important. The only question of relevance or significance is whether the European Stability Mechanism, ESM, will work and whether the road we are on is the right one. We can attack political parties' policies and describe them as fantasies because that is what the Minister of State likes to do ideologically. Sinn Féin was proven right when we stated that the measures being taken in 2007 and Fine Gael and Labour's pre-election promises last year would not work. This treaty, in particular section 3 about which the Acting Chairman is precious, will not work.
The Senator was given latitude and his comment was not a fair one.
He should withdraw it.
Appropriation Bills pass through the Dáil — I presume they appear in the Seanad as well — whereby sums of money are appropriated every year for the provision of services and the payment of wages, yet we never debate them. This section enables us to have such a debate. Regardless of which side of the argument one is on, the sum of €11.1454 billion is staggering. The section authorises the Government to pay that amount. We are in favour of it, as the sum must be provided in the overall context, but the significance of the section is worth noting and we must consider it carefully. Although some of us disagree on the topic, this debate is worthwhile. The section calls to mind the Appropriation Acts which have been passed without any debate whatsoever for a long time. In opposition, Fine Gael criticised our Government for that process. No one denies that is what we did every year. Given the starkness of the figures, genuine debates would be worthwhile.
Question put and declared carried.
Section 4 agreed to.
SECTION 5
Question proposed: "That section 5 stand part of the Bill."
This is the provision about which I feel strongest, as it is the most undemocratic element of the Bill. I am glad it has been included, as it brings into the local arena all of the conceptual arrangements that are made and, curiously enough, immunised in the main article. I received a message from the Cathaoirleach to the effect that my amendments were ruled out of order because agreements scheduled to Bills were not subject to amendment by the Parliament and, as such, we do not have the power. A large section of this text is immune from debate, scrutiny or amendment. That is regrettable, but I must accept the legal position.
Luckily, the principle is enshrined. We have an opportunity to debate and vote against section 5, as I shall. The Minister of State must be committed to it because he is committed to the entire package and I will not expect him to accept my opinion.
The section incorporates the series of immunities and inviolabilities that are rehearsed in this article of the international agreement. They are matters of concern. Section 5 reads, "The ESM shall have within the State the legal status, privileges and immunities referred to in Article 32 of the Treaty". Let us consider the article, which reads, "The ESM, its property, funding and assets, wherever located and by whomsoever held, shall enjoy immunity from every form of judicial process except to the extent that the ESM expressly waives its immunity". It also reads:
4. The property, funding and assets of the ESM shall, wherever located and by whomsoever held, be immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.
5. The archives of the ESM and all documents belonging to the ESM or held by it, shall be inviolable.
Its premises shall be inviolable. In other words, no one, from lawyers, accountants, politicians to police, need have access to the ESM. Where is the accountability and transparency? We are creating a sealed unit, the "Euro Slush fund Microwave oven"— the ESM — because we will use it to cook the books. No one can open the door to see how it is doing or what is happening. Speaking as an academic and former chairman of the Friends of the Library in Trinity, how can we understand what mistakes have been or will be made unless people have access to its archives? Although it is fantasy money, it is still ours. This provision will land us in our individualised island pool of manure. We are entitled to access to information.
I am unsure about whether I made my next comment in this Chamber, but I certainly made it somewhere. Imagine Mr. Berlusconi as one of the ESM's board members. It could have happened and still could. One never knows; politics is strange.
We are giving away a great deal under this section. I do not know what damage would be done by removing that provision. I shall vote against the section. I did not contribute on the previous two sections because they were identical to the immediately preceding section.
As I had made all the arguments, there was no point in making any more. I will contribute again when I know the response of the Minister of State, but I will not delay the House long.
With a number of provisos, I do not really share the concerns of Senator David Norris. Having immunity is commonplace in international organisations in foreign countries. If a terrorist is appointed as an ambassador or to the diplomatic staff of a particular country, in general, that person will have immunity from criminal prosecution. I presume the ESM will have its own disciplinary procedures. If it does not and there are no procedures at the European level, I will be concerned. Perhaps this makes the case for having a federal union. I can certainly understand why an organisation such as this should not be subject to the criminal or civil laws of individual member states of the European Union, provided there is a sanction at a supranational level for breaches. I do not believe there is a criminal law applicable to the European Union or eurozone, but I assume the matter has been dealt with. I am interested in hearing the Minister of State's reply.
I share the concerns of Senator David Norris regarding the immunity of persons mentioned in section 5, as it could involve a grave issue. However, I have read the section and noted the words "in their official capacity". As Senator Thomas Byrne noted, it makes perfect that people acting in their official capacity under the section enjoy immunity. Those acting outside their official capacity will not enjoy such immunity; therefore, there is not much to concern us.
Is that when they play golf?
As Senator Thomas Byrne outlined, there are numerous examples where there is immunity for persons across all levels of international organisations, with the key term being acting in their "official capacity". If we were to drop that term, Senator David Norris would be exactly right in that people would enjoy immunity in doing whatever they wanted.
I would be exactly wrong.
When the section applies to persons acting in an official capacity, it makes the workings of the ESM all the more efficient.
Senators John Gilroy and Thomas Byrne have made the point exactly. It relates to persons acting in an official capacity in so far as he or she is a board member of the ESM. If the former Italian Prime Minister, Mr. Berlusconi, was a member of the board, he would have immunity only for his actions as a board member. It would not apply to anything else, which is the essential point. Senator Thomas Byrne is also correct in that the procedures in this respect are no different from those applicable in any other international organisation such as the IMF or the United Nations. In Europe there is the European Investment Bank and the European Bank for Reconstruction and Development, and the Asian banks are also no different.
The board of the fund will be a separate legal entity and in our case the Minister for Finance will be a member of it. My understanding is that the Minister for Finance in each of the countries that is a signatory to the treaty will be a board member. The Minister for Finance is a public entity and answers questions in the Dáil and the Seanad. It is not a nameless individual. I do not, therefore, have the same concerns as Senator David Norris on the issue.
Section 5 provides that the ESM shall have within the State the legal status, privileges and immunities set out in Article 32 of the treaty and the chairperson of the ESM board of governors, the governors, the alternate governors, directors, alternate directors, the managing director and other staff shall be immune from legal proceedings with respect to acts performed by them in their official capacity and enjoy inviolability in respect of official papers and documents. Article 32 of the treaty sets out that the ESM shall have full legal personality and capacity to acquire and dispose of movable and immovable property, contract, be a party to legal proceedings and enter into a headquarters agreement or protocols, as necessary, for ensuring that its legal status, privileges and immunities are recognised and enforced. It further sets out that the ESM, its property, funding and assets, wherever located and by whomsoever held, shall enjoy immunity from every form of judicial process, except to the extent that the ESM expressly waives its immunity for the purposes of proceedings or by the terms of any contract, including the documentation of the funding instrument. It also provides that the property, funding and assets of the ESM shall, wherever located and by whomsoever held, be immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action. The archives of the ESM and all documents belonging to or held by it shall be inviolable. The premises of the ESM shall be inviolable and its official communications shall be accorded by each ESM member and each state which has recognised the legal status and the privileges and immunities of the ESM the same treatment as it accords to the official communications of an ESM member. To the extent necessary to carry out the activities provided for in the treaty, all property, funding and assets of the ESM shall be free from restrictions, regulations, controls and moratoria of any nature. The ESM shall be exempted from any requirement to be authorised or licensed as a credit institution, investment services provider or other authorised licensed or regulated entity under the laws of each ESM member .
As the ESM is an international financial institution, euro area member states agreed to give the ESM and those working for it — the governors, directors etc. — diplomatic privileges and immunities in line with other international financial institutions set up by international treaty. The privileges and immunities mainly relate to diplomatic immunity, taxation and exemption from any requirement to be authorised or licensed as a credit institution, investment services provider or other authorised, licensed or regulated entity under the laws of each ESM member. A Government order under the Diplomatic Relations and Immunities Act 1967 could not address in full the privileges and immunities provided for in the treaty. Therefore, they are provided for in the Bill.
I thank the Minister of State for a most interesting and informative statement. It gets worse by the minute. I may be out on a limb, perhaps with my colleagues from Sinn Féin, but I have a couple of points to make. There has been a comparison with diplomatic immunity etc., and terrorists were brought into the debate. I do not know how al-Qaeda was brought into it. No legal instrument will protect against that group as if somebody wants to blow something up, it could be done. However, that is not relevant to this debate.
Senator Thomas Byrne has made the interesting comment that he assumes there is some kind of disciplinary procedure in place. Perhaps the Minister of State might let us know if there is. I have said the following on a number of occasions, but I am unsure if I have done so in the presence of the Minister of State. There should be an international court to try individuals and organisations for economic crimes against humanity. It happened at Nuremberg with IG Farben, Thyssen, Krupp and others. One hopes the ESM will work all right, but I would like to think the idea would eventually be taken up, with people being held accountable, as appropriate.
I wonder what is meant by the archives being inviolable. As I would not want to see them being destroyed, they should be inviolable in the sense that they should be immune from attack or destruction. Will the Minister of State reassure me that they will be accessible to scholars?
The most farcical element is that immunity extends only to personnel acting in an official capacity. I gave the example of Mr. Berlusconi and was perhaps a little unfair to him. However, I am not interested in his bunga bunga. I am not interested in any of them. I simply could not care less, they do not interest me. I cared about Donie Cassidy's golfing holidays because I thought they brought the Seanad into disrepute but I do not care about private lives. I do not care. It is exactly their official capacity that concerns me. If they make mistakes with my money, I am worried; if they pick their noses at mass, I do not care. It is their official capacity that interests me and that should be central so I do not understand why the Minister of State is saying this.
The Minister of State then gave a couple of examples. I am glad he cited the United Nations; as it is a classic example. The utter lack of democracy and accountability in the United Nations is precisely why it is standing idly by again while people are being murdered in Syria. The reason is that a small group of nations, five in number, the permanent members of the Security Council, each have a veto. Like this, it is undemocratic. That is not a good example from the Minister of State. I have always strongly supported the United Nations but I remember the late Erskine Childers, who was either the son or the nephew of our distinguished former President and he was a senior United Nations official. He gave a series of very interesting lectures on RTE radio. He was passionate about his commitment to the United Nations but he highlighted the democratic deficit in the body and I fear the democratic deficit allowed under this Bill.
In this case, with the ESM, we have a hermetically sealed unit with these enormous sums of money at its disposal but it is accountable to no one, not to the legislature, the judiciary or the police. There should be some protection for any country that has a grouse against it. I was also concerned about something that was let slip, that this is to do with diplomatic immunity in terms of the personnel involved, including their tax. I would hate to think people given charge of this enormous amount of imaginary Monopoly money so they can cook the books would not pay tax for the privilege of doing it.
If we give this total, comprehensive immunity and lack of accountability, the staff of the ESM are not answerable to the police. We are not necessarily talking about An Garda Síochána, there is Interpol. I am not expecting the gardaí to raid the offices of the ESM or for the fraud squad in Harcourt Street to do an audit but I do not think putting in place blanket inviolability and making them immune is a good idea. No thanks, I want answers and I want people to be accountable. I want to know what they are doing and I do not want them to do it behind closed doors because that always leads to trouble.
The example of the United Nations is a very good one and I thank the Minister of State for handing it to me. Let us reform the United Nations, make it accountable, remove the veto from the five permanent members and make it something decent. We should make the ESM decent by establishing an international court to try people for economic crimes. I will supply a list of them, including Goldman Sachs and all the ratings agencies. They are still around and no one is bothered about taking them on. The Government is too scared to take on the ratings agencies. The reply always comes back that there must be confidence. Finance is not poetry, it is not Coleridge, it is not the willing suspension of disbelief, there should be reality behind the money and I want to know what is happening in that little sealed bunker, whether it is in Berlin, Frankfurt or Ballybough. I want to poke my nose into it and find out what is going on.
It is difficult to follow the previous contribution.
I should have warned the Senator but he was in full flow. We should stick to the amendment.
The United Nations is mentioned in section 5?
The Minister of State raised the United Nations and I pointed out how useful an example it was.
The Minister of State wandered a little from the topic.
It was all relevant but what Senator Norris said is correct. The context of this discussion, and the way in which we are being presented with this treaty, and inviolability that goes with it for the fund itself and the members of the board, is that people are fearful of a lack of democracy, scrutiny and oversight in Europe. They know these concepts created some of the problems we have and at a time when there is a greater call for proper accountability. The explanatory memorandum on section 5 states that the section provides that the ESM will be immune from legal proceedings and enjoy inviolability in respect of officials and documents. The Minister of State spoke about the board being free from regulation and control. The Minister of State can appreciate why there are concerns when we are setting up a fund involving massive amounts of money, all of which come from the taxpayer. We disagreed about whether to put money in, although we will be putting money in if this Bill is passed but the board and the fund itself enjoys inviolability.
I agree with Senator Norris's sentiments. At a time when there is a need for more accountability and oversight, we need to see the removal of the immunity granted to the fund itself and its board members. I have not been persuaded at all by the Minister of State's response. When he read the list of things the board is exempt from, it reinforced that this should not be supported.
Senator Norris should read the European directive document on the recovery and resolution of credit institutions because the very point he is making about credit rating agencies is being addressed in that, although it is only a draft document.
I took some time out to listen to the debate on Committee Stage with the Minister for Finance on section 5 and it was very informative. The taxation issue, from what I am told, is double taxation. If someone is working here and then goes to wherever the ESM will be based, he or she should not be taxed on the double, similar to those who work in the European Parliament and other areas.
They should be taxed where they work.
That is a choice they can make.
It should not be a choice, they should be taxed where they work. They are using our services, we are collecting their bins.
It is in line with the other institutions.
That should be changed too.
From what I gather from the conversation about immunity from legal proceedings on Committee Stage, a person who wants to take a case for political purposes in the Irish Supreme Court will not be allowed to advance the case. That is a good thing because we have seen people take cases to the Supreme Court for political purposes and the taxpayer ends up paying for it. During the fiscal stability treaty referendum campaign, the day before the moratorium, another court case was brought to the Supreme Court for political purposes, for more coverage that cost the taxpayer.
So Fine Gael would do away with court cases and the right to challenge decisions? The Senator has answered the question for us.
That is an accusation that is unsustainable and I respectfully ask the Senator to withdraw it, particularly in light of the comments of the distinguished judge in the case, who was grateful to the appellant in the case, Deputy Pearse Doherty, for opening up an important constitutional point.
Senator D'Arcy is wandering beyond the ambit of the Bill.
Everyone else has been doing it all day.
In about six or seven minutes time this Bill will be guillotined and there will be a hoo-ha about that. People have been making circular arguments.
I am making the circular argument about section 5(1)(a) because the reasoning for it is very clear. As I stated, if somebody wants to take a case to the Supreme Court, that is fine, but he or she should pay for it himself or herself and not ask the taxpayer to do so.
Rubbish.
That is what happened before.
If it illuminates the Constitution, why should it not be taken?
I ask the Senator not to be so ill mannered.
According to Fine Gael, only millionaires and billionaires may take cases.
Senators, please respect the Chair.
Senators would have noted a lot of information on the Oireachtas website if they had chosen to inform themselves before the debate.
I hope I will have an opportunity to say something.
After the Minister of State.
Article 37 concerns a dispute resolution process within the treaty. It is comforting that the European Court of Justice has jurisdiction in that area. It is not as if the ESM can operate on its own and do what it likes.
Members of the Oireachtas have inviolability or potential inviolability with respect to their private papers according to the Constitution. We have immunity from suit in respect of what we say in this and the other Chamber. We have immunity from detention on and when travelling to and from the premises.
We are elected, or some of us are.
I gave examples of embassies. There have been problems with diplomatic immunity during the years when bad people, including drug traffickers and terrorists, claimed immunity. The system does not always work perfectly. Immunity in the context in question, however, is relatively common. The purpose is to allow people to get on with their jobs. The reality is that if an individual country could decide to pit its police force or civil service against the ESM, it could wreck the whole system. It would be a way of breaching one's obligations. The arrangement is sensible, although I would prefer if there were a criminal law mechanism at a super-national level to cover people. There is a gap in this regard if there is no such mechanism.
We are reduced to conspiracy theories in this debate. The provision in question is commonplace and not new in regard to the ESM. There are far more important matters to be debated.
This issue was dealt with on Committee Stage in the other House. Article 28 of the treaty states an internal audit function shall be established according to international standards. That is pro forma, as Senator Thomas Byrne stated. Article 29 refers to an external audit. It is clear in the legislation we are adopting that the accounts of the ESM shall be audited by an independent external auditor approved by the board of governors and responsible for certifying the annual financial statements. The external auditors shall have full powers to examine all books and accounts of the ESM and obtain full information on its transactions.
As I understand it, the staff of the ESM who will be from Ireland and other nations are negotiating at official level the internal rules of the organisation. As with any organisation that must be set up from scratch, there ought to be internal controls and rules. The staff will come to an agreement on the matter shortly. The official agreement will be brought to the board which is to be representative of all the signatory countries. In our case, the Minister for Finance will be the representative. A person with a public personality will be questioned. The board's job will be to ensure the proper functioning of the ESM such that it will carry out its mandate as set out in the treaty. The rules will be in place and involve all staff members. As with any organisation, it will take a while to have the staff members established.
There are to be by-laws of governance for the board of directors. These will be put in place and ready for board approval when the ESM enters into force. Of course, it is not yet in force because we require the 90% rule to apply before its establishment. It is expected this will happen shortly.
On the question of accountability, I have stated the ESM will have a board of governors comprising the Minister for Finance of each of the euro area member states, with the European Commissioner for Economic and Monetary Affairs and the Euro, Commissioner Rehn, who is known to this country, and the President of the European Central Bank, Mr. Draghi, as observers. The ESM will also have a board of directors. Each euro area country will appoint one director, with one alternate director. The board of governors will appoint a managing director responsible for the day-to-day management of the ESM and the managing director will chair the board of directors.
While I hear what colleagues are saying, I would admit it if the treaty were a radical departure regarding existing international treaties to which we are a signatory and international bodies of which Ireland is a member. It is not such a departure.
Senator Thomas Byrne made a good point on our status as elected Members of the Oireachtas. There are privileges Members enjoy and they are set out under the Constitution. The immunities and privileges for the ESM relate only to people who are carrying out their official functions; they do not relate to any other aspect of their lives. While I understand Members' concerns, they are being over-egged in respect of the establishment of a body such as the ESM.
The Minister of State is being helpful. When he states there is nothing radical or no new departure, I acknowledge his point. However, he has implied we should follow defective models instead of correcting the mistakes that have been made clear in the models for other international organisations.
Senator Thomas Byrne has stated there is immunity in the Oireachtas. It is partial immunity. On committees, for example, it extends only partially. Questions have been asked about this. I remember when Members of the Oireachtas were held before the courts for various reasons when they tried to test this aspect. Included among them was a distinguished member of the Minister of State's party.
The difference is that we are elected. For that reason, there is privilege to allow freedom of discussion, but that discussion is reported in the newspapers and it is open. We are immune from libel proceedings, but we are not immune from reportage; that is the difference, even though we are elected. Therefore, the argument is false.
What worries me very much — I am sure it was just a mistake of judgment or expression — is Senator Michael D'Arcy challenging the right of a citizen to go to the Supreme Court. That is lamentable.
For political purposes.
How does one know what the purpose is? One is now into the question of mens rea——
For political purposes.
Senator David Norris to continue, without interruption.
It is an extraordinary intrusion. The example Senator Michael D'Arcy gave was one that affected his own argument disastrously.
The Senator should not try to choose——
Senator David Norris to continue, without interruption.
In the case taken by Deputy Pearse Doherty the judge found he had actually done the State a service. Senator Michael D'Arcy should note I am one who has risked taking a constitutional action.
With all due respect, the case taken by the Sinn Féin Deputy Pearse Doherty is irrelevant to the Bill. I chastise Senator Michael D'Arcy for raising it. Senator David Norris was doubly wrong——
Yes, but there is a very important principle, on which I intend to finish.
The Senator is the father of the House and I expect top quality from him.
This is a very important point. The judge will decide whether the matter is of constitutional significance. If it is not, there will be no discharge of fees——
The case was taken for political purposes, for coverage in the treaty referendum debate.
It is very dangerous when a Government party states it is not enough that we have immunity in the Oireachtas and that we are now not allowed to use the courts. The Senator wants to abrogate the Constitution.
The Senator is not capable of listening.
That is one of the most outrageous things I have ever heard in my life.
The Senator was completely incapable of listening to what I said.
The Senator should allow Senator David Norris to finish.
He was not and is not capable of listening.
The Senator should allow Senator David Norris to finish.
All I am saying is that it would be a very poor day for Seanad Éireann and this Republic if citizens were not allowed to challenge.
The father of the House is incapable of listening.
The Senator impugned their motivation.
I am saying they may challenge, but that they should pay for it themselves.
The judge found a service had been done.
I ask the Senators to, please, respect the Chair. As it is now 2.30 p.m., I am required to put the following question in accordance with the order of the Seanad of this day: "That section 5 is hereby agreed to in Committee, that the sections undisposed of, the Schedule and the Title are hereby agreed to in Committee, that the Bill is hereby reported to the House without amendment, that the Bill is hereby received for final consideration and that the Bill is hereby passed."
Question put.
Senators
Vótáil.
Will the Senators who are claiming a division please rise?
Senators David Cullinane, Trevor Ó Clochartaigh and David Norris rose.
As fewer than five Members have risen, I declare the question carried. In accordance with Standing Order 70, the names of the Senators dissenting will be recorded in the Journal of the Proceedings of the Seanad.
Question declared carried.