Dáil Éireann díospóireacht -
Wednesday, 7 Jul 1948

Vol. 111 No. 17

Committee on Finance. - Adjournment Debate—Foreign Loan Conditions.

Mr. Aiken

The recent London agreement contained the following:—

"The Government of Ireland have undertaken to the British Government to use their utmost endeavours to obtain the maximum amount of aid available under the European Recovery Programme with the object of ensuring as far as practicable that their recourse to the sterling area pool for hard currency will not involve any ultimate drain on that pool."

The Minister for External Affairs, when winding up the debate on the recent American agreement, said:—

"Under this agreement this country will, in effect, over a period of four years, receive a sum ranging from £100,000,000 to £150,000,000."

I put a question to the Minister for Finance to-day asking him whether he would give the Dáil an opportunity of considering the terms and conditions as to repayment of any proposed foreign loan before the Government agrees to accept it. I did that because the Minister for External Affairs indicated that within the coming three months it was likely we would have to borrow from America and I was anxious that the members of the Dáil would be able to discuss the terms and the conditions as to repayment with the Minister for Finance before he would agree with the American Government to accept such a loan. I thought the matter was covered by the Constitution, Article 29, 5, 2º of which says:—

"The State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by Dáil Éireann."

It seems to me that that article of the Constitution would cover any such agreement, which would involve a charge upon the Exchequer here in order to repay it and to pay any interest that might be due upon such loan during its currency. The Minister for Finance, in the course of his reply stated:——

"If any agreement for a foreign loan is such that Article 29, 5, 2º of the Constitution applies to it the proposed agreement will of course be submitted to Dáil Éireann for approval."

He went on to state:

"It is not yet clear whether the loan agreement to be made with the Export-Import Bank of Washington for the purpose of this country's participation in the European Recovery Programme will be of the kind referred to, but in any event I shall be prepared to acquaint the Dáil of the terms and conditions applicable to the proposed loan."

I would like the Minister for Finance to elaborate somewhat upon that reply and to give the Dáil his opinion as to how a loan from the Export-Import Bank would not fall to be dealt with under the terms of Article 29 of the Constitution. It seems to me quite clear that it would, because a loan would impose a charge here upon the public funds. I trust also that the Minister will see fit to go further and to give a clear indication that he will come to the Dáil to discuss with Deputies here any such proposed agreement. It would appear from the statement of the Minister for External Affairs that if we want to get dollars we will have to borrow from America. I do not know why it was that the American Government decided, as the Minister for External Affairs indicated, that any aid out of the European Recovery Fund will be given to us by way of loan rather than by grant. I do not know what decided the officials that he referred to, to advise the American Government to give a grant to Britain, which is still occupying our Six Counties, and to give aid to us by way of loan.

Minister for Finance (Mr. McGilligan)

That does not arise out of the question.

Mr. Aiken

I think it is important that if we are to have a loan the terms and the conditions of repayment should be such that we can carry them out. One of the worst things that could happen would be to accept a loan from America which we cannot see our way clearly to repay. The Minister for External Affairs said that "many of the American officials take the view that repayment depends on convertibility being achieved, that the whole Marshall Plan depends on the achievement of convertibility in the period of four years, that the American people have staked their money on convertibility being achieved within that period." That may be the opinion of the American officials to whom the Minister for External Affairs was speaking, but undoubtedly the American people will expect the Irish people to repay any loan they get in accordance with the terms and conditions of that loan. We would be very foolish indeed if we gamble on the free convertibility of foreign exchanges within four years and I think if we are to enter into an agreement with the American Government to accept a loan from them we should see that that loan is given to us upon such conditions as will enable us to carry out the repayment provisions in full.

It is within the knowledge of most Deputies that, in the early thirties, it became impossible for European countries to repay America sums that were due to her on foot of past loans. It also became impossible for them to buy American goods because America was not giving them dollars by buying a sufficient amount of their goods and services. I think the American people, if it were put to them straightforwardly, would realise that the repayment of future loans depends not only on the goodwill of the debtor but also upon the action of the American Government and the American people in relation to their external trade. I think it is a proposition that they could understand that if they do not buy, and give dollars to the world by buying goods and service, they cannot be paid. The only way that the world can get dollars is by the American people either buying goods from abroad or buying services from abroad by investments or by loans or, in the last analysis, by giving a gift.

Although I believe that the American people are coming to a full realisation that that is the situation—that if they want to trade with the world in future, and sell commodities to the world, they have got to buy—although I believe that they are coming towards conversion to the acceptance of that principle, there are still in international agreements clauses which show that they do not fully realise what is involved.

If you take the clause of one agreement which was negotiated in America a couple of years ago, an agreement between the American Government and the British Government, when the Americans were lending England £2,000,000,000, or 10,000,000,000 dollars, you will see that there was a clause in it which referred to a set of circumstances in which the interest payment on that loan would be waived. But, unfortunately in my opinion, the conditions regarding the waiver referred, not to the American balance of trade but to the British balance of trade, and it is the American balance of trade that would decide whether or not Britain could repay that loan, because if the American balance of trade is such that she is not buying, investing, lending or giving away sufficient dollars to the world, it would be impossible for Britain or any other country to get the full amount of dollars necessary to repay the interest charges on the loan.

There is another document also which indicates that the Americans, officially, do not accept fully the position. It is the agreement regarding Bretton Woods and the International Monetary Fund. The conditions of that fund set out very severe penalties for the debtor nation that does not live up to its commitments to the fund. If it defaults, the interest is stepped up against it. But in relation to the creditor country, the country that has not balanced its international trade by buying as much as it sells, there are very light penalties indeed. All that can be done is that its currency may be declared scarce—that is, closing the stable door after the horse has escaped.

I think if the Minister for Finance is negotiating a loan with the American Government, he should insist on a clause being inserted in the conditions that in any year in which the American nation fails to balance its books with the rest of the world, fails to buy or lend as much as it is entitled to receive on foot of its exports or in respect of its past investments, in that year, seeing that it is impossible for the world fully to repay America, whatever interest or sinking fund is repayable by Ireland should be waived.

I take it that this Dáil or any Dáil elected by the Irish people, if it accepts a loan from America, is quite prepared to repay if it is possible to repay, but if the circumstances are such that America is making that impossible, then I think the American nation should recognise that fact and forego payments in that year. We all know the great generosity of the American people represented by its offer of funds for European recovery. Four thousand million dollars represent 1½ per cent. or more of their national income. It is a very generous gesture indeed and it would be unfortunate if the help given were not given in a way that would effectively carry out the wishes of the American people in making that sacrifice. We can quite realise the magnitude of the gift of $4,000,000,000 a year by America because the £3,000,000 a year which was voted by the Dáil for some years for help in the alleviation of distress in Europe represented about 1 per cent. of our national income. Deputies will realise what we could do here with £3,000,000.

The American people themselves could do a lot with four billion dollars and it is important, if the American people are to be taxed to give this sum, that it should be given and distributed in such a way that it will effect their desires, will help European recovery and help good relations between America and the countries to which it gives either a grant or loan. We want to see in future the good relations between America and Ireland cemented and strengthened. If we are to accept, or are compelled to accept a loan from them in order to get over the dollar shortages, we want that loan to be given to us upon such terms and conditions as will make the repayment of the loan feasible and a clause such as I have suggested would enable us to repay, because in any year in which it was found impossible to repay, then the interest and sinking fund charges would be waived.

Mr. McGilligan

This matter arose out of a question addressed to me to-day as to whether I would give the Dáil an opportunity of considering the terms and conditions of repayment of any proposed foreign loan before the Government agrees to accept it. My reply was that if any agreement for a foreign loan came within the Article of the Constitution to which I referred, the agreement naturally would come before Dáil Éireann for approval. I went on to say that, whether it did or not, I was prepared to acquaint Dáil Éireann of the terms and conditions applicable to the proposed loan. How that answer can be supposed to be unsatisfactory, I do not know. The Deputy has decided to put this matter within the framework of raising the recent agreement made in London, and, dealing with the financial arrangements which reads:

"In addition to the matters covered by the formal arrangement, it was agreed that, pending clarification of the amount of assistance to be received from the U.S.A. under the European Recovery Programme, the Government of Ireland will continue to effect the maximum economy in expenditure of hard currencies and would not exceed the level of expenditure during the first half of 1948. The Government of Ireland will use their utmost endeavours to obtain the maximum amount of aid available under the European Recovery Programme, with the object of ensuring, as far as practicable, that their recourse to the sterling area pool for hard currencies will not involve any ultimate drain on the pool."

I want to go back two steps from that. Last autumn, the Government of which the Deputy was a member signed an agreement and the dollar requirements were stated in this way:

"It was agreed that the Irish Government, with a view to conserving the dollar resources of the sterling area, would effect substantial reductions in their drawings of dollars from the dollar pool for the period 1st October, 1947, to 30th June, 1948, bringing the net requirements to..."

and then certain figures are mentioned Prior to that, in September of last year, the then Minister for Industry and Commerce told a meeting which he addressed that "the London dollar pool is running dry and what is left of it is insufficient to meet the needs of countries like ours who have claims on it, except for a very short time. The net result is that we will have to curtail our purchases from the United States of America and at some stage they may even have to stop". That is the framework into which I want to put this matter.

In that context the Minister for External Affairs, my colleague, recently introduced into this House a Convention for European Co-operation, and, in asking the Dáil to approve of that convention, he said that he at one time had certain doubts whether we could accept a loan, seeing that the repayment terms were set out in terms of dollars. He had some doubt whether we could service the loan and ultimately make the repayment. He indicated that a certain easement of our situation had been brought about and that we had good assurances with regard to the servicing of the loan, and, so far as the rest was concerned, he said that the whole Marshall Plan aimed at the objective of making sterling convertible with dollars, that it was not our gamble so much as the gamble of the Americans, and they believed that sterling would be exchangeable for dollars, or would be interchangeable, at the end of four years. The Deputy will have noticed, since the Minister spoke here on 1st July, that Mr. Hoffman, the administrator, has spoken publicly and announced his belief that there would be convertibility at the end of that period. In any event, the whole plan is based upon that, and to a certain extent our fears with regard to it have been modified because we have found that the American objective is still held to. They believe it will work out and it is hardly for us to say that the complete objective of the Marshall Plan will break down.

As to what I am to do, the relevant Article of the Constitution says that every international agreement to which the State becomes a party shall be laid before Dáil Éireann. I believe that any agreement made with the Export-Import Bank must be regarded as an international agreement and must come before Dáil Éireann, and I said so to-day. I said that there was some doubt about it, but that I had very little doubt myself. The second sub-paragraph of paragraph (5) of Article 29 says that the State shall not be bound by any international agreement involving a charge on public funds unless the terms of the agreement shall have been approved by Dáil Éireann. It does not say: "Shall have been approved beforehand by Dáil Éireann." I have stated here as a public assurance that, in any event, whether I am bound by that Article or not, whether, in other words, the agreement is an international agreement or not, I am prepared to acquaint Dáil Éireann with the terms and conditions applicable to the proposed loan and, if necessary, have a discussion on the matter; but I do say to the Deputy—and I think it is a statement which I should be entitled in reason to make—that if the House is not sitting and it is a question of clinching a loan at a particular time and getting the matter approved of later, I think I am entitled to clinch the loan and to get approval after.

In the matter of the terms and conditions of the loan, nothing much is going to be written into any detailed arrangement likely to be come to that has not already been announced to the Dáil. Let us take it that they will be of the most onerous type—repayment in dollars and servicing of the loan in the meantime. We have certain funds at our disposal and certain assurances with regard to others. We believe that we can carry out our promise in that respect, and, through the Minister for External Affairs, we made clear to the American Government and those administering the Marshall Aid Plan what our position was and they are well acquainted with it.

As to whether there will necessarily be any charge upon public funds, I ask the Deputy to consider that. Some people hold the view—I do not know whether the Deputy shares it—that, because we get a loan, whatever we get by way of loan will be loaned to people here. That is not the situation. We will sell for the equivalent of the dollar value whatever we get to people here. We will have a fund and there will be sufficient funds to repay our obligations to America. There will be a currency but whether that currency will be convertible or not does not depend on us. The Americans are ready to take that gamble. Having modified our fears, as to whether we should take that risk, we have made our position perfectly clear to them, and I think we are on terms of the utmost good faith with the American Administration in that regard.

So far as this House is concerned, I have already stated, and I repeat here, that, whatever the terms and conditions of the loan are, the Dáil will get an opportunity of discussing it, but I cannot bind myself to say, and nobody should ask me to say that that discussion will take place before any agreement is entered into. The terms of the Constitution I will obey, but I will go further than the terms of the Constitution and give the Dáil as much opportunity as it desires, at the proper time, of discussing, either beforehand, it if it is possible, what we intend to do, or, after the event, if we have done something.

The Dáil adjourned at 10.30 p.m. until 3 p.m. on Thursday, 8th July, 1948.