Dáil Éireann díospóireacht -
Thursday, 7 Jun 2012

Vol. 767 No. 2

European Stability Mechanism Bill 2012: Second Stage

Minister for Finance (Deputy Michael Noonan)

I move: "That the Bill be now read a Second Time."

I thank the House for agreeing to discuss the European Stability Mechanism Bill 2012. As Deputies will be aware, the Government published this Bill at the beginning of last month in line with our explicit commitment to make available well in advance of the referendum all legislative proposals which were in any way related to the stability treaty. I look forward to a constructive debate on the ESM treaty and the ESM Bill. The Bill is required to allow Ireland to ratify the ESM treaty, in accordance with the agreement by the euro area Heads of State or Government on 9 December 2011 on the acceleration of the ESM into force by July 2012.

Before I return to the specifics of the ESM treaty and the ESM Bill 2012, I would like to say a few words on recent developments. Ireland has made significant progress in the implementation of its EU-IMF programme of financial support. Our programme is on track, we have met all of our commitments and exceeded many - completing more than 100 actions to date - and we are on track to reduce our deficit to below 3% in 2015. We have also negotiated a number of improvements to the programme since taking office, including the reduction in the interest rate, reversal of the minimum wage cut, the jobs initiative, the deferral of the promissory note payment and most recently the agreement to reinvest at least 50% of the proceeds from the sale of State assets into viable projects. We also negotiated an additional year for the programme, so it is 2015 rather than 2014 as originally intended.

However, significant external challenges remain. Last week, the people voted in favour of the stability treaty - another step on the road towards economic recovery. I welcome that and thank everyone who came out to vote, especially those who voted "Yes". The people have recognised the importance of restoring confidence in a stable euro, ensuring Ireland has the assurance of access to EU funds under the ESM treaty, should they be required, and the importance of good housekeeping for our economy.

Put simply, we cannot continue to spend more than we raise in taxes, increasing our debt levels and draining the resources intended for stimulating economic growth, job creation and public services in order to service our spiralling debt. The "Yes" vote last week recognises that we have to manage our debt and budgets. Ratifying the stability treaty will demonstrate our commitment to do just that. The Government will now begin the process of ratification of the stability treaty. As we have already said, we will also participate proactively in the discussions on a growth strategy agenda for Europe which will be the foremost item for discussion when the European Council meets later this month.

Turning to the ESM, this Government believes the availability to Ireland of a credible funding backup as provided by the ESM treaty will be very important in terms of market re-entry and leaving the EU-IMF programme of support. There is no clear answer to the question as to where else financial assistance could be found were a situation to evolve in which we required further assistance. Enacting the ESM Bill 2012 and ratifying the ESM treaty will ensure that Ireland has access to this funding safety net if our efforts to re-access the market are delayed in any way and we need to resort to further assistance.

The effective lending capacity of the ESM will be €500 billion. Following the euro group meeting held on 30 March 2012, it was decided that the EFSF would remain active until July 2013. The ESM will be the main instrument to finance new programmes as from July 2012.

The EFSF will, as a rule, remain active only in financing programmes that have started before that date. For a transitional period until 2013, the EFSF may engage in new programmes in order to ensure full fresh lending capacity of €500 billion for the ESM. After 2013, the EFSF will continue in an administrative capacity until all outstanding bonds have been repaid. In this context, there is provision that the ESM may assume the rights and responsibilities of the EFSF. Such an event would not, however, affect the existing terms and conditions of our EFSF loans.

Turning to the ESM treaty and its provisions, the treaty set out in the Schedule to this Bill was signed by euro area member states on 2 February 2012. The original version of the treaty was signed on 11 July 2011 but was subsequently modified to incorporate decisions taken by the euro area Heads of State or Government on 21 July and 9 December 2011 aimed at improving the effectiveness of the mechanism.

The ESM will perform the same activities as the European financial stability framework, which it is to replace, namely, issue bonds or other debt instruments on the market to raise the funds needed to provide loans to countries in financial difficulties, intervene in the primary and secondary debt markets, act on the basis of a precautionary programme and finance recapitalisations of financial institutions through loans to governments, including in non-programme countries. All financial assistance to member states will be provided under appropriate conditions, appropriate to the financial instrument chosen. The ESM will use an appropriate funding strategy to ensure access to broad funding sources and enable it to extend financial assistance packages to member states under all market conditions.

As Deputies will be aware, there has been considerable attention paid to the challenges facing the banking sector in Europe in recent weeks. There are increasing numbers of calls for the ESM's tools to be extended to allow the ESM to recapitalise systemically important financial institutions directly rather than recapitalise through loans to ESM members for the specific purpose of recapitalising its financial institutions, thereby not adding to national debt by separating sovereign and banking debt.

As the Taoiseach said last week, the developing circumstances in Europe's banking sector require a comprehensive solution and Ireland's banking debt must form part of that solution. We will continue to monitor closely developments in Spain and elsewhere and we will seek a solution that works for Ireland - through assisting our economic and financial recovery - to ensure that Ireland's bank debt is made more sustainable.

The ESM treaty will enter into force as of the date when instruments of ratification, approval or acceptance have been deposited by signatories whose initial subscriptions represent no less than 90% of the total subscriptions set out in the treaty. To date, France, Greece and Slovenia have ratified the ESM treaty and the remaining euro area member states are on track for ratification and the coming into force of the ESM in July.

As Deputies will be well aware by now, the ESM treaty provides that the granting of financial assistance in the framework of new programmes under the ESM will be conditional, as of 1 March 2013, on the ratification of the stability treaty by the ESM member concerned and on the implementation of the balanced budget rule as specified in the stability treaty within the agreed timeline, that is, one year after the entry into force of the latter. The stability treaty contains a mirroring provision.

As Deputies will also be aware, the linkage of both the ESM and the stability treaty refers to new applications for assistance under the ESM and will not affect the transfer to the ESM of undisbursed amounts under the EFSF to Ireland and other programme countries. Thus, while the ESM will replace the EFSF and may assume the rights and obligations of the EFSF, this will not affect the terms and conditions of any amounts consequently transferred to the ESM and subsequently disbursed to Ireland.

To obtain the highest possible credit rating, the capital structure of the ESM will have total subscribed capital of €700 billion. Of this, €80 billion will be in the form of paid-in capital by the euro area member states, paid in five equal instalments from July 2012. The balance, €620 billion, will be callable capital. The contribution key for each member state is set out in Annex 1 of the treaty and is based on the ECB capital contribution key. For Ireland, the key is 1.592% of the total paid and committed capital.

Ireland's share of the €80 billion in paid-in capital, based on the contribution key, will be just above €1.27 billion. We will pay this into the ESM in five equal instalments of €254 million. Unlike the EFSF, there is no stepping-out facility in the ESM when members enter a programme of support. Every member must, therefore, contribute its paid-in capital.

The ESM is being established as an intergovernmental organisation under public international law. Ireland's contribution will be treated as a financial transaction. This means that while it will impact on Ireland's Exchequer borrowing requirement, it will not impact on its general Government deficit. Ireland's share of the €620 billion callable capital is based on the same key, that is, 1.592% of €620 billion, making the callable capital €9.87 billion, which will be accounted for as a contingent liability on the State.

Following the decision of the euro group on 30 March 2012, the paid-in capital will be made available more quickly than initially foreseen in the original ESM treaty. Two tranches of capital will be paid in 2012, the first in July and the second by October. Another two tranches will be paid in 2013 and a final tranche in the first half of 2014. In line with the ESM treaty, the payment of the capital will be further accelerated if needed to maintain a 15% ratio between the paid-in capital and the outstanding amount of ESM issuances.

Any decision to change the authorised capital stock of the ESM will require a unanimous decision of the ESM's board of governors. I will be governor for Ireland at the board and serve to ensure Ireland's interests are represented and protected.

Before I turn to the Bill itself, I will address specific issues that have arisen in recent weeks. This Government has no intention of trying to the veto the ESM, nor can Ireland prevent the establishment of the ESM. As I have already mentioned the ESM will come into force once the ESM treaty has been ratified by euro area member states representing 90% of the ESM capital commitments. Ireland represents 1.592%.

In addition to the 17 euro countries ratifying the treaty establishing the ESM, all 27 member states are in the process of ratifying an amendment to Article 136 of the EU treaties, which deals with arrangements for the euro, to include a reference to the possibility of a stability mechanism, such as the ESM.

The second issue I want to address concerns calls for a referendum on the ESM treaty. The reason we are not holding a referendum on the ESM is very simple. The ESM is a funding agreement which is fully compatible with the Irish Constitution. Ireland's participation in the ESM does not in any way serve to limit the sovereignty of the State in the exercise of its economic affairs. It merely indicates the State's willingness to participate as an equal sovereign nation in the permanent stability mechanism.

The purpose of this Bill is to facilitate further, in the public interest, the financial stability of the European Union by establishing a permanent stability mechanism to assume the tasks of the EFSF and the EFSM in providing, where needed, financial assistance to euro area member states.

Section 1 provides the definitions to the legislation.

Section 2 provides to the Minister for Finance the authority to make payments to the ESM to cover Ireland's contribution to our share of the authorised capital stock of the ESM in accordance with the treaty.

Section 3 provides for payments to the ESM in respect of Ireland's contribution to the ESM's authorised capital stock to be paid out of the Central Fund. This provision caps payment at €11,145,400,400 being Ireland's share of the authorised capital stock as set out in Annex II of the ESM treaty. That covers both paid-in capital and callable capital. As I have already outlined, paid-in capital will amount to €1.27 billion, with the remainder callable should the need arise.

Section 4 provides that any monies received from the ESM be it in the form of dividends or otherwise be paid into the Exchequer.

Section 5 provides that the ESM be immune from legal proceedings and enjoy inviolability in respect of official papers and documents. Section 6 provides that the ESM shall be exempt from the requirement to be authorised or regulated by the Central Bank of Ireland. Section 7 provides that the ESM be exempt from taxation, income tax, corporation tax, capital gains tax and any other taxation provided for by Article 36 of the ESM treaty.

Section 8 provides that the Minister for Finance shall arrange for six-monthly reports on payments made to the ESM by Ireland and any moneys received by Ireland from the ESM to be laid before Dáil Éireann. Section 9 provides that expenses incurred by the Minister for Finance in the administration of this legislation shall be paid out of moneys provided by the Oireachtas.

Section 10 is a standard section defining the Short Title of the Act.

Schedule 1 contains the text of the ESM treaty in the Irish language. Schedule 2 contains the text of the ESM treaty in the English language.

As Deputies will be aware the ESM treaty itself includes provisions on membership and purpose of the ESM, governance, authorised capital stock, operations and financial management, general provisions and transitional arrangements to apply on the move from the EFSF to the ESM.

I look forward to a constructive debate on this Bill. Now is a time for unity among euro area countries to ensure financial stability within the euro area. The purpose of this Bill is to facilitate the stability of the European Union and the safeguarding of the euro area as a whole. Ireland must play its part and stand in solidarity with our fellow euro area member states. It is in the interests of this country and the euro area. Therefore, I urge Deputies to support the European Stability Mechanism Bill 2012.

I commend the Bill to the House.

Deputy Michael McGrath

I thank the Minister for his Second Stage speech in respect of the European Stability Mechanism Bill 2012.

At the outset, I want to state on behalf of the Fianna Fáil Party that we will be supporting this Bill. We believe that the establishment of the ESM is important for Europe and Ireland. While we were not voting in the ESM, issues pertaining to the establishment and the operation of the ESM and its relevance were very well ventilated over the past number of weeks during the fiscal stability referendum campaign.

Three years into the crisis, Europe still does not have a common agreed framework for winding down insolvent banks and avoiding all costs falling on taxpayers. The permanent bailout mechanism envisaged by the ESM will be a help towards stabilising the eurozone in general but it is only one element of what is needed and its current mandate is quite limited. We, in Ireland, simply cannot go through another round of expensive bank recapitalisations. Indeed, we also need mitigation of the costs incurred to date.

As the Minister stated at the outset, this Bill is required to allow Ireland ratify the ESM treaty. Given where we are in terms of the current EU-IMF programme, which we all hope that Ireland will be in a position to exit towards the end of next year, we are living through extraordinarily turbulent times, in particular throughout Europe. Who knows what the prospects are for Ireland to exit the programme successfully? It is essential that we have the backdrop of access to ESM funding in the event that we need it. When one considers the data today from the CSO in the Quarterly National Household Survey, where unemployment has gone up to 14.8% and where the number at work in Ireland is at its lowest levels since 2003, we face enormous economic challenges as a country in our interaction, not only with Europe but with the domestic economy as well. It is fundamental for this country that we would have access to the ESM in the event that we need it.

There are aspects of the ESM treaty that I do not particularly like. For example, the provision in the legislation which is provided for in the treaty which makes the ESM immune from legal proceedings is one that I do not understand. No individual or institution should be immune from legal proceedings. Every person has a right to initiate proceedings against any other person or against an institution. Having said that, overall, my party believes it is correct to ratify the ESM treaty and to ensure that Ireland is an active member of the ESM.

As part of a comprehensive solution, I suggest we need to do much more. Specifically, we need to expand the mandate of the ESM so it can inject funds directly into failing banks. The Minister referred to this in his opening remarks. He did not state whether the Government is supportive of that but I understand, from recent comments by the Taoiseach and others, that the Government supports a change to the mandate of the ESM in order to allow it directly to recapitalise banks. This would allow collective support for regional banking crises. If we are to operate as a true currency union, this is something that is urgently needed. It would also have the advantage that the recapitalisation aid would not add to any individual country's debt levels. This could increase the Government's chances to continue raising money on financial markets to fund normal day-to-day operations.

Spain is only now going through the painstaking process of conducting an in-depth analysis of its banking sector which we did through the establishment of NAMA and the various PCAR exercises that we went through in this country. From reading various media reports of the estimated cost of bailing out Spanish banks, I have seen figures of between €40 billion and €80 billion, and even suggestions that it could be as high as €200 billion. I only hope that they can get to the bottom of the losses in their banking system as quickly as possible. It took Ireland quite some time to get to the bottom of the losses in the banking system, given the dishonesty and the failure to recognise the reality within the institutions themselves. It is essential for Spain and for the wider eurozone that some certainty is brought to the full extend of their banking crisis as quickly as possible. If our experience in Ireland is anything to go by, as they delve ever deeper into the details of the bad loans associated with their property collapse, they may find the position much worse than originally feared. I note that they have engaged the services of some of the largest accountancy firms to assist them in this regard and the IMF is due to table a report in the coming days as well. Spain has indicated that within the next two weeks it will make a decision regarding the recapitalisation of its banks. I wish them well in their endeavours. It will be a mammoth task to get a handle on the scale of the problem but it is in everyone's interest that this would be done as quickly as possible.

Spain is the fourth largest economy in the eurozone. While I am sure the Minister did not intend to be flippant in his comments about feta cheese in Greece, he fully appreciates the importance of the Spanish economy in the eurozone and in terms of its relationship with Ireland, and the potential impact that any further destabilisation in Spain could have on our prospects for economic recovery. It is in all of our interests that some certainty is brought to their situation as quickly as possible.

The speculation seems to be drifting ever closer to some kind of a bailout for Spain, even if it is ring-fenced for dealing with their banks as opposed to sovereign funding. I understand that Spain as a country is funded for the remainder of this year for its day-to-day operations but that their banks will need access to funding as soon as they face up to the bad loans they are carrying on their books.

Increasingly, it looks like Spain will get some kind of a bailout from Europe and this brings us to the debate as to whether the recapitalisation of its banks will be channelled through the Spanish Government by way of the ESM lending to the Spanish Government and then the Government recapitalising the banks or whether the European countries will agree to change the terms of the treaty to allow the ESM to recapitalise the banks directly. This opens a window of opportunity for us which I will address presently. The expansion of the ESM should go hand-in-hand with pan-European regulation of the banking system such that countries in Europe could collectively take responsibility for banking failures. The Central Bank Governor, Patrick Honohan, has endorsed this approach in recent statements and I agree with him in this regard. His contention is that a centralised regulatory system would not be affected by national blind spots, such as the Irish property bubble, and could, therefore, do a more effective job of supervising banks. This is an interesting idea. He noted that there would be still a role for individual countries in supervision since, as he put it, often they pick up the vibes and the market talk. Clearly such a system should combine local knowledge and expertise with the more critical eye that a pan-European structure would bring.

To date the European Central Bank has repeatedly insisted that it has no role in banking supervision. This may be because national authorities closely guard their right to regulate their banks under the current system but it may also reflect a narrow view on the part of the ECB in respect of its true role. This issue highlights one of the fundamental flaws in the design of monetary union in the first place. The discussion about the possible emergence of a banking union and proper pan-European regulation of banks is timely and we should move in this direction.

We need to establish a Europe-wide deposit protection scheme. At the moment Greek and Spanish savers are moving money out of local banks for fear that their countries will leave the euro and their savings will be re-denominated into new drachma or pesetas. If there were a common deposit insurance scheme, funded appropriately, then this risk would be eliminated. We should put in place a mechanism by which senior bondholders in bust banks take some of the pain in their rescue.

I welcome the draft proposals published in recent days by the European Commission. They open up an important debate in respect of senior bondholders. The European Union should adopt a policy that sees senior bondholders incur losses if equity and subordinated bonds have been wiped out, if the bank has been nationalised and if the State has incurred losses of a certain percentage of GDP to bring the bank back to solvency. The nature of that percentage could be a matter for policy discussion and it could evolve over time. Given the state of euro area public finances, however, there is simply no room for another round of expensive bank bailouts. Therefore, an approach of this sort may help to reduce the perceived riskiness of much of Europe's sovereign debt.

This policy could subject some of the remaining IBRC senior bondholders in Ireland to severe haircuts without any contagion effect for other institutions, apart from those the markets suspect of being severely insolvent and to which states probably should be reluctant to offer blanket liability guarantees. Given the timing involved for these new proposals to become operational, however, I imagine virtually all of the bondholders would be repaid in these circumstances. If we are to make savings in respect of the bank bailout it should focus on some of the other aspects such as the promissory note, an issue to which I will return.

Irish banks lent approximately €200 billion between 2002 and 2007. It is reasonable to suggest that approximately €100 billion of that sum will never be repaid. We have discussed the distribution of losses in the Irish banking system among junior bondholders and the taxpayer, and the fact that senior bondholders are immune as well as the fact that shareholders lost absolutely everything.

It is interesting that every time the issue of reducing the cost of the bank bailout is raised by the Tánaiste in the House, he traces full culpability for the extent of the bailout in Ireland back to the bank guarantee. I contest this assertion. Certainly, it was not a foolproof policy response. It was taken at the time with incomplete and undoubtedly false information supplied by the banks concerned. However, I would welcome an inquiry into the banking guarantee because the more light shed on decisions of that nature, the better. I believe the role of the European Central Bank since the beginning of this crisis should be considered as well. I also hope we do not have to wait for the 30 year rule before some of the correspondence at the time of the bailout in November and December 2010 between the Government and the European Central Bank is released. It is a matter of public interest that such information should be put into the public domain so that we can establish the demands the bank placed on Ireland at the time.

I remind the Tánaiste and his colleagues in the Labour Party of some comments made by the Minister for Finance at the finance committee last September. The Minister was challenged by Deputy Broughan about supporting the bank guarantee, the position taken by the Minister and his party in September 2008. The Minister correctly pointed out that the proposal put forward by the Labour Party at the time would have been worse because the Labour Party sought to nationalise the entire banking system. This would have taken on all the liabilities in full under the remit of the Sovereign on a permanent basis. The Minister correctly pointed out to the Labour Party at the time that its proposal would have been worse.

Ireland has a strong case for seeking a reduction in the burden of its bank-related debt. The situation has changed completely since the promissory note was first signed. That was before the EU-IMF programme, the Greek write-down, the establishment of the ESM and the decision in July last year of the euro area Heads of State and Governments to empower the EFSF to provide lending to countries for the recapitalisation of banks. The draft European Commission paper has proposed that senior bondholders take losses. Clearly, the sands are shifting in the debate in Europe about where banking losses should fall. Ireland has faced up to its losses through the establishment of NAMA. This crystallised the entirety of the banking losses immediately. I have always taken the view that if there are losses, one is better off facing up to them and dealing with them. Ireland may well be punished for going down that road because this course of action forced us to recapitalise the banks and to produce the funding to do so at a time when the European architecture simply was not in place to deal with bank bailouts. Europe is now beginning to put such an architecture in place and the Minister and his colleagues have the job of trying to retrofit it for Ireland. That is not an easy job and I wish them well, but we need to have clarity about where the negotiations on the promissory note are going. Perhaps they simply became caught up in the crisis, which has intensified in recent weeks and which has stalled progress.

I need not remind the Minister of his comments, one year ago this month in the United States, about seeking to impose losses on the remaining Anglo Irish Bank and Irish Nationwide Building Society bondholders, subject to European Central Bank approval. The ECB approval was not forthcoming and the agenda moved on last September to the issue of the promissory note. Negotiations on that issue began last November. In October or November it emerged that there were discussions of a technical paper and technical negotiations. It is now June 2012 but there is no sign of such a paper and we do not know what stage the negotiations have reached. Perhaps it is all taking place in the background or perhaps it has been delayed because of the Spanish situation and the need for certainty on the question of from where Spain will get the money to recapitalise it banks.

My interest in all of this is the outcome. I hope Ireland will get the right outcome and that the burden will be relieved. There is still €28 billion at play in respect of the promissory note. The first €3.06 billion was paid in one of the Government's first acts on coming to office in March last year. The bond replaced the €3.06 billion due last March and the matter has been kicked into touch for 12 months, subject to the Bank of Ireland shareholder approval. There is still €28 billion at play and the promissory note represents the best prospect of getting a deal on bank debt. Nevertheless, I hope the promissory note is not the limit of the Minister's ambition in seeking to get some fairness and equity for Ireland. The promissory notes amount to more than €30 billion but a further €30 billion, approximately, has been invested in the other banks from the National Pensions Reserve Fund, cash reserves and borrowings. I am sure the Minister is placing these issues on the table as it would make a significant difference to the sustainability of the national debt if they were addressed. Our debt sustainability appears increasingly fragile and our prospects of successfully emerging from the current programme and raising money again on the bond markets at competitive interest rates are very much open to question. While I hope we can achieve this objective, a game-changing initiative such as a comprehensive deal on the banking debt would help in no small way to ensure we exit the programme and return to the bond markets.

The Fianna Fáil Party welcomes the Bill and supports the ratification of the European Stability Mechanism treaty. I hope Ireland will not need to avail of ESM funding. The fund which is expected to be established next month will provide an important firewall across Europe and its lending capacity will have to be increased over time. Having made a start, however, it is important to make funding available without further delay.

Certainty is required regarding Spain and Ireland needs to secure an outcome to its ongoing negotiations on the banking debt. It is in the national interest to secure a deal to reduce the burden on Irish taxpayers. This country took a major hit for the European team and it is time to bring some fair play and equity to the issue. I wish the Minister well in his ongoing efforts in that regard.

Deputy Pearse Doherty

Cuirim fáilte roimh an deis labhairt ar an Bhille seo. Is mór an trua, mar a bhí pléite níos luaithe inniu, nach bhfuilimid ag fáil deise scrúdú iomlán a dhéanamh ar an pháirt seo den Bhille nuair atáimíd ag déileáil leis an Dara Chéim di. Is mór an trua go bhfuil bac á chur ar an díospóireacht. Sin ráite, ba mhaith liom cupla thuairim Pháirtí Shinn Féin a chur os comhair na Dála, ó thaobh bhunú an ESM, na lochtanna atá leis agus an gá go mbeadh institiúid ansin i lár na hEorpa atá ábalta airgead práinneach a thabhairt do thíortha atá taobh amuigh des na margaidh idirnáisiúnta.

The crisis in the eurozone is deepening every day. Nobel Prize winning economists inform us that the euro has only a 50-50 chance of survival. Since 2010, the populations of Greece, Ireland and Portugal have been paying the price for an economic crisis we did not create. We are being forced to pay the bills of the bankers, speculators, developers and politicians who ran our economies into the ground. While some of these individuals were home-grown, many were from the stronger economies of the European Union, including France and Germany.

All these national actors were encouraged in their reckless endeavours by a European Commission which was part of the failed policy consensus. The policies of light touch banking regulation, unsustainable tax regimes, cheap money and aggressive lending combined to create an unsustainable boom and a catastrophic crash. It should come as no surprise that the very same politicians and bankers who got us into the crisis have proved themselves unable to get us out of it. How could it be different? For two years political leaders across Europe have been dithering and procrastinating. They have held 18 European Council crisis summits, most of which have been marked by indecision and disagreement. When decisions have been made, they have either been insufficient or counterproductive.

Throughout the entire eurozone crisis our political leaders have been misdiagnosing its causes and, in turn, prescribing the wrong medicine. As a result, they have made the patient sicker by the month. If they are allowed to continue on their current course, they will kill off the patient entirely, with devastating consequences for the economies and societies of the member states of the eurozone.

The crisis in the eurozone is not a fiscal crisis; excessive deficits are a symptom of much more fundamental problems. The crisis was not caused by the profligacy of the periphery. The unsustainable debts of some member states are a symptom of much more systemic problems. The initial crisis in banking led to a debt crisis which, in turn, led to an investment and employment crisis. Focusing on deficit reduction alone, important as it may be, is a mistake. The two most urgent questions facing the eurozone are how to reduce unsustainable levels of debt and how to increase investment in job creation to stimulate economic growth and social regeneration. Unfortunately, our political leaders do not understand this.

The European Council, the European Central Bank, the European Commission and the Fine Gael-Labour Party Government continue to misunderstand the problem and, as a result, are applying the wrong solutions. This is the reason the eurozone crisis is getting worse, Greece is approaching a state of social, economic and political collapse, Spain is in the process of negotiating access to emergency funding, and the Irish and Portuguese Governments will more than likely seek additional emergency funding when the current programmes end.

For two years political leaders across Europe argued that the eurozone crisis was a fiscal crisis confined to the periphery of the eurozone. By this logic, the solution was to impose harsh fiscal discipline on the people of the periphery, while protecting the European banking system with unlimited bailouts. Crippling austerity and unlimited bank bailouts have been the sole focus of Government policy at home and in Brussels. When Fianna Fáil and the Green Party led the State into the troika programme in 2010, Sinn Féin argued the their approach would not work and we were right. When Fine Gael and the Labour Party committed to continuing the failed policies of their predecessors, Sinn Féin argued their approach would not work and we were also right. The policies of crippling austerity and unlimited bank bailouts are not assisting our return to the sovereign bond markets. The consequences of these policies are rising unemployment, declining growth, mortgage distress, emigration, inequality and poverty, in other words, a downward spiral of social, economic and political instability. The policies pursued by European political leaders, including the Government, have failed dramatically. Increasingly, even bodies such as the OECD, the IMF and, most recently, the European Commission are waking up to this failure.

The eurozone's problem is not a lack of fiscal discipline but a famine of investment which is forcing millions of people onto the dole; a decline in living standards that is relentlessly depressing the domestic economy; a crippling banking debt that is being loaded onto the shoulders of taxpayers and freezing country after country out of the sovereign bond markets; and the futile policies of austerity which not only fail to resolve the crisis but make it worse. For two years Sinn Féin has been arguing for a better way. We have put forward solutions aimed at reducing the debt, growing the economy and getting the public finances in order in a way that is fair and assists economic and social recovery. We have argued for a write-down of the portion of the public debt that originated with the banks, of which the promissory note is the most important element, to make our debt more sustainable and assist our return to the markets. We have argued for an EU-wide approach to the banking crisis, demanding a new and rigorous round of stress tests of all European banks to expose the full extent of their toxic assets, to be followed by a write-down of these toxic assets before recapitalisation takes place. We have argued for the European Central Bank to become a lender of last resort, either directly or indirectly, both to banks in need of recapitalisation and states locked out of sovereign bond markets. Crucially, we have argued for massive investment in job creation through national and European Investment Bank funds to get people off the dole and back into meaningful employment.

One cannot balance the books with an unemployment rate of 14%, nor can one cut and tax one's way out of the crisis. Only with real and sustainable investment in job creation can one return to growth and, in so doing, reduce the deficit to the sustainable levels we desire. In the context of this alternative strategy for job creation and growth, Sinn Féin supports the creation of a eurozone emergency fund to provide funds for member states frozen out of the bond markets. Our preference would be for the ECB to fulfil this role, as only it has the firepower required to shore up the euro. It is also the only body capable of providing such funding without exposing ordinary taxpayers and individual member states to the kind of liabilities foisted on the people of this state in recent years. Given the rapidly deteriorating situation in Spain and Greece, a vehicle for providing such emergency funding is urgently required.

The question we must ask during this debate is not whether the eurozone needs an emergency fund because clearly it does, nor is it whether Ireland should have access to such a fund because clearly it should; rather the key question is whether the European Stability Mechanism, as presented, will provide Ireland and the eurozone with the necessary tools to assist in stabilising the currency and allow governments to regain access to the sovereign bond markets. With many others, Sinn Féin rightly criticised the design of the EFSF when it was established. We argued that imposing austerity which was anti-job creation and anti-growth as a condition to receive emergency loans would be counterproductive. We argued that mounting toxic private banking debt onto the shoulders of the State and taxpayers would make our debt burden unsustainable. We argued that such conditions would block a return to growth and reduce the ability of the State to return to the sovereign bond markets. The fact that Ministers are starting to accept that the State is unlikely to re-enter the bond markets in 2014 is evidence that Sinn Féin's analysis has been proved correct. We also argued that the EFSF would not be big enough to cope with the growing debt and investment crisis across the eurozone. The fact that the European Council has come forward with a new permanent emergency funding vehicle in the form of the European Stability Mechanism demonstrates once again that Sinn Féin's analysis was correct. Unfortunately, neither the European Council nor the Government appears to have learned from the mistakes of the very recent past.

The ESM is based on the same flawed policy agenda as its EFSF predecessor. It has many of the same limitations and weaknesses of the EFSF. Sinn Féin has a genuine concern that the fund as proposed will not help to stabilise the Irish or eurozone economies. Just like the EFSF, we fear that it will make matters worse. At the core of the fund are the failed policies of unlimited bank bailouts and crippling austerity. These are the strict conditions referred to in the ESM treaty. The treaty is very clear when it states the conditions attached to future loans will be negotiated by the European Commission and the European Central Bank. What will these conditions be? There will be more austerity in the form of cuts to spending on front-line services in health and education; more tax hikes for low and middle income families; more sales of profitable and strategically valuable State assets; more damage to the fabric of our society; and more damage to the domestic economy. This approach has failed both Ireland and the eurozone.

For an emergency fund to work, it must be part of a strategy aimed at investing in job creation and economic growth. In Sinn Féin's view, the articles of the ESM treaty must be amended to include an explicit commitment to emergency funding being used to stimulate social and economic recovery, primarily in the form of investment in job creation. If the Government is serious about developing a Europe-wide growth agenda and the European Council is serious about developing the same agenda, amending the ESM treaty to transform it into a tool for job creation and growth is essential.

Sinn Féin is also concerned that, once again, taxpayers will be forced to bail out banks to an unlimited extent. The current total fund for the ESM is €700 billion, to which Ireland's contribution is a staggering €11 billion. While the initial call-up figure is just under €1.3 billion, once established the ESM can call on the remainder of the total. The treaty also gives the ESM board the power to increase the total fund at its disposal. This morning the newspapers were reporting that Spanish banks might require funds in the region of €100 billion which might come from ESM funds. Theoretically, such funds would be provided in the form of loans, either to the Spanish Government or directly to the Spanish banks. Does anyone in the House really believe a loan to toxic Spanish banks of around €100 billion would be repaid in full? Just as the Government will never recoup the vast majority of the €64 billion pumped into the Irish banks, the ESM will never fully recoup funds injected into the Spanish banks on the basis of the current ESM funding model.

The articles of the ESM treaty must be changed to reduce the risk of exposure to the taxpayer and the State. This could be achieved by providing an option for direct funding of the ESM by the ECB, either through the issuing of bonds or quantitative easing, depending on which option was more appropriate at a given time. This would also address another weakness of the ESM in its current form - its limited size. Giving an emergency funding vehicle the unlimited firepower of the ECB would send a signal to the aggressive speculative forces in the markets that the European Union would do whatever it took to protect its currency.

Sinn Féin also believes a eurozone emergency fund should be able to lend directly to banks and that such a facility should be retrospectively available to Ireland. However, let us be clear that such a facility should only be made available following rigorous stress tests of the banks in question and a write-down of toxic assets held by them. Only then should they be recapitalised. European political leaders must learn from the mistakes of the mishandling of the Irish banking system. Bondholders and banks must be forced to pay their fair share. This means allowing some banks to fail. It also means forcing heavy losses on bondholders. Only then should recapitalisation occur, ensuring the injected funds benefit the real economy and real people. Failure to do this will mean taxpayer's money will be handed over to European banks which, in turn, will pay bondholders in full.

We are also very concerned that under the current proposals, member states in receipt of funds from the ESM would be contributing to the fund. This raises the prospect of states contributing significant resources to the ESM and then borrowing them back at a cost. This simply makes no sense. If the ESM is to be based in whole or in part on contributions from member states, programme countries must be exempt from making contributions. That was the case for the EFSF; therefore, it should be the case for the ESM also.

The scale of the liabilities for the State and the taxpayer under the current proposals is a source of serious concern. The treaty indicates a potential liability of €11 billion, which figure could be much higher. Given the scale of the eurozone banking crisis, this is tantamount to writing a blank cheque on a scale never seen before. There are also problems with the lack of accountability once the fund is established, as well as with the immunity given to the fund and its board members. An emergency fund of this size must function in an open, transparent and democratically accountable way. Amendments to the treaty must be secured to ensure adequate scrutiny and accountability at the level of the European Parliament and the parliaments of member states. The immunity given to the ESM and its board members must be removed. Nobody should be above the law, especially political leaders making decisions on a fund worth €700 billion.

I repeat Sinn Fein's firm view that Ireland and the eurozone as a whole need an emergency funding mechanism, not only because the Government will need to access it in 2014 but also because such a fund is vital to stabilise the euro. There is no point, however, in agreeing to a fund that is not fit for purpose, will not achieve its stated objectives and will, in all likelihood, make matters worse. The ESM treaty the Government is seeking to ratify through the ESM Bill was negotiated and concluded in 2011. We have to ask ourselves what the Government was doing during these negotiations. Why did it agree to such a poorly designed fund and why in the 12 months that followed did it not seek to make constructive amendments? Fortunately for Ireland and the eurozone, there is still a window of opportunity to amend the ESM treaty and improve the fund. Other member states are actively seeking changes which could well be made at the forthcoming European Council summit at the end of June. The Governments of Spain and France are standing up for their citizens and working to get a better deal. They are arguing, as are Sinn Féin, that further changes to the treaty are required for it to be of assistance in the current crisis.

Next week, when the Bill is debated on Committee Stage, I will, on behalf of Sinn Féin, table a number of amendments to the Bill. They will call on the Government not to lodge the instruments of ratification for either the ESM treaty or the amendment to Article 136 of the Treaty on the Functioning of the European Union until a number of specific changes to the ESM treaty are secured. Sinn Fein believes five key changes are required for the ESM to do what it is being set up to do. First, there should be an explicit option to use ESM funds to invest in job creation and growth measures as part of a credible deficit reduction strategy, rather than maintaining the current focus on austerity. Second, there should be an option for direct ECB funding of the ESM to provide the necessary firewall to stabilise the euro, while limiting the liability to taxpayers and individual member states. Third, there must be a clause ensuring programme countries are not required to contribute to the fund, as is the case with the EFSF. Fourth, there needs to be a requirement to carry out strict stress tests and provide for a write-down of toxic debt as a precondition for ESM funds being used to recapitalise banks, whether directly or indirectly via loans to governments. Fifth, there is a need for greater accountability at EU and member state level and the removal of the immunity granted to the fund and its board members.

In the coming weeks the Government will have a real opportunity to work with our European partners to design an emergency funding mechanism that will help countries to regain access to the sovereign bond markets. This fund will play a meaningful role in defending vulnerable member states from speculative attacks by the markets and assist in creating jobs and promoting economic growth and social regeneration. Such a fund is urgently needed. However, Sinn Fein do not believe the ESM, as it stands, can achieve these objectives. Unless the ESM treaty is amended, Sinn Féin will not be in a position to support the Bill. More important, unless the dtreaty is amended, it will simply not work.

There is still time to improve the fund proposed. The question is whether Fine Gael and the Labour Party have the political courage and the political will to seek the necessary changes, as well as the political ability and skill to secure them. During the last 15 months the Government has demonstrated a remarkable inability to stand up for the interests of Irish citizens at the European Council. Its strategy appears to be one of sitting quietly and passively and waiting to reap the benefits of the hard work done by other governments. It is time for this approach to end. We will never know what can be achieved unless the Government starts making demands that are in the interests of citizens. It is time it became an active participant in European Council negotiations. It is time for Fine Gael and the Labour Party to make demands on behalf of the people, actively participate in the negotiations and come back to the Dáil with something better for Ireland and Europe as whole.

Deputy Richard Boyd Barrett

With the agreement of the House, I will share time with Deputies Joan Collins and Joe Higgins.

It is an absolute disgrace that the Government has imposed a guillotine on the debate on the European Communities (Amendment) Bill 2012. It is particularly disgraceful when the Government has, effectively, admitted that we are heading towards a second so-called bailout when we emerge from the current EU-IMF programme. The reason for the use of the guillotine is that the Government knows that a serious public discussion on the ESM would reveal that it is not, as it claims, some sort of insurance policy, a line of credit or bailout for ordinary citizens but a sinister Trojan horse being driven into the heart of Europe to impose more poisonous austerity on ordinary citizens and further dismantle democracy within the European Union. It is a permanent austerity mechanism, not a stability mechanism. The treaty makes this very clear. Assistance is strictly conditional on the ESM dictating further austerity measures to be imposed on ordinary citizens taking responsibility for the gambling debts of bankers and speculators. Angela Merkel made this absolutely clear in recent days. Calls for direct recapitalisation of casino banks in Spain are being dismissed out of hand by Chancellor Merkel who is making it clear that recapitalisation must occur through the sovereign. In other words, she is demanding that ordinary citizens, working people, the least well-off and the vulnerable, in Ireland and across Europe take responsibility for the gambling debts of bankers and agree to sign up to crippling austerity measures to pay off these gambling debts. An economiccoup d’état has been achieved by the European authorities, taking advantage of the atmosphere of crisis in order to permanently unload the massive gambling debts incurred, the scale of which we still do not know or understand, onto the backs of ordinary working people across Europe and tie them into a straitjacket of austerity to pay off these debts. It is truly extraordinary.

The provisions of the Bill are alarming. First, the Government consistently fails to acknowledge that this so-called insurance policy which is, in fact, a straitjacket of austerity to be imposed on ordinary people could cost us up to €11 billion, a figure which could be even higher. The board of governors of the ESM will have the right to raise the limit to unknown levels in order to bail out European banks. Is it not bad enough that the people of Ireland have been crippled with austerity to bail out the Irish casino banks? We are now signing up to contribute, possibly, €11 billion or more to bail out the casino banks in the rest of Europe. If that is not bad enough, there will be no legal or political accountability for this Trojan horse in the centre of Europe. One could not make this up. It is like something from a James Bond movie. The board of governors, staff and the institution of the ESM will be immune from prosecution. When one considers that what we will set up is one of the most powerful institutions in Europe, which will have major power over governments and the citizens of countries across Europe, the notion that it would be immune from any kind of legal prosecution is simply extraordinary. It is intended that the documents and archives of the ESM will be inviolable so that if this monster which is being created to impose austerity and protect the European banks should ever require investigation that is ruled out in advance. We will never know how decisions are arrived at, what decisions are being made and what is going on inside this enormously powerful institution. Legal protections are being set up and we are being asked to sign up to make the ESM immune from any oversight, investigation or legal prosecution. It is absolutely disgusting. It is part of the ongoing dismantling of democracy across Europe that we have seen in the course of this economic crisis where democratically elected leaders are deposed to put in technocrats and bankers to run countries. Now, having done that in a couple of countries we want to set up an institution that is above the law but will have enormous economic power to dictate the fate of millions of people across Europe. That is shocking in the extreme.

What makes this all the more pathetic is that the Government is trying to push the Bill through this week without proper discussion, to ensure the public does not know what the ESM really is and what its real consequences will be, after it has been yet again humiliated by Angela Merkel. No matter how much the Government pulls the best boy in the class routine to do anything Angela Merkel and the ECB demands, she slaps the Government in the face every time, making it absolutely clear that there will be no deal on banking debt for this country, no write-down of the banking debt - if the Government has even asked for that - but in any event she has pre-empted the Government's possible request for such a write-down because she has made it clear that we are not getting it. No matter how much the Government cuddles up to Angela Merkel, no matter how much it is the swot of the austerity class in Europe she humiliates the Government and slaps it in the face every time yet still it pursues this policy of submitting slavishly to her agenda. It is incredible.

In doing so, the Government is also stabbing in the back the movement that is developing in Europe to challenge Merkel's agenda. Other countries and governments in Europe are beginning to show some backbone and to stand up to Merkel. For example the Spanish Government has said it is not willing to submit slavishly to Merkel's agenda. I hope a Greek Government may emerge soon that is unwilling to swallow any more of the austerity poison and will stand up to her. The people in France elected a government in the hope at least that it will stand up to Merkel and demand an end to the austerity madness and focus on prioritising the need for employment and economic growth. Against that background, instead of joining with the movement, delaying the ratification of the treaty and demanding the write-down of the gambling debt of banks being imposed on ordinary people the Government is rushing the legislation through as fast as it possibly can to prove what good boys and girls they are to Angela Merkel. That is undermining the movement that is challenging her in Europe. It is no accident that Merkel and many of the more conservative German newspapers were jumping for joy at the passing of the fiscal treaty but no reward was given to Ireland for that in terms of a write-down of debt. In spite of that the Government still carries on with this ridiculous, pathetic, humiliating stance it is taking of doing anything that Angela Merkel asks it no matter what the consequences are for Europe or the citizens of this country. It is pathetic in the extreme.

We will most certainly oppose the ESM. I appeal to the Government to wake up and recognise that no matter how much it sucks up to Angela Merkel, the ECB and the merchants of austerity, they are not listening, they are not willing to give a break to ordinary people and what must be done is to resist that agenda and resist a piece of legislation that is about permanently institutionalising the same austerity and the same dictatorial control of financial institutions and technocrats in Europe over the people of this country and the citizens of Europe.

Deputy Joan Collins

If the Government believes it got a resounding endorsement of its policies and approach of austerity to the crisis in the recent referendum, it did not. I represent one of the five constituencies which had a majority "No" vote, Dublin South-Central. It is no coincidence that five of the poorest and most working class constituencies voted "No". The reality is that those sections of the population who have felt the effects of austerity most voted "No". In some areas in my constituency the "No" vote was between 70% and 80%. The "Yes" vote will change nothing in the terms of the deal and the bank debt and re-entry to bond market funding. It is just another pat on the head for the Taoiseach and a brutal "Nein" from Germany in terms of any deal on the bank debt.

The Government is now in a trap of its own making. It claims that austerity and four years of a bailout programme are working but it is now being used by the IMF, the ECB and others to say that we must continue with the programme. If the Government were to change now it would be seen as an admission of the failure of its policies. We cannot put our future into an unaccountable, bureaucratic, unknown ESM entity. We are told that we are not like Greece yet we saw last night the dreadful scene of 1,400 people who queue daily for food parcels at the Capuchin centre in Dublin. That is the level many people have been forced down to at the moment, to queue publicly in the streets to try to get some food for their households on a daily basis.

Despite high levels of mass emigration, 30% of people are jobless. I wish to read into the record the figures that emerged today. The latest unemployment figures reveal that unemployment in this country now stands at 14.8% with 309,000 out of work. The Central Statistics Office found that employment fell by 1% or 18,100 since the same time last year while there has been an increase of 0.3% in the number out of work since the last quarter of 2011. Employment fell by 7,300 between January and March of this year after an increase of 11,100 in the last three months of last year. The number of long-term unemployed, which is even more startling, has risen from 7.8% to 8.9% in the past year. Among the 309,000 out of work the number of men unemployed increased over the year by 1.8% and, startlingly, female unemployment rose by 10.4% to 103,600. That is despite the paltry efforts of the Government to introduce JobBridge and create one job here and eight jobs there that were announced with great triumph in the media in the past few weeks of the campaign on the ESM treaty.

This is a reality check. The economy is not growing. We are still facing a massive mortgage debt crisis with more than 78,000 mortgage holders in arrears for more than 90 days. We have had talk but no action from the Government on the matter. In the debate on Private Members' business we made the point that property is sacrosanct in the Constitution.

That any challenge to property must be constitutionally tested represents a quagmire for the Government. This is not what people facing the pyrite situation, negative equity, job losses or wage cuts want to hear.

A reality check in the eurozone is necessary. It has been four years since the beginning of the crisis and we are nowhere near even a hint of a solution. It looks like another fund is being concocted for the Spanish crisis. With light conditions attaching, Spain will be allowed to access the EU's bailout funds to recapitalise Bankia. The can is being kicked down the road yet again. There is no prospect of the deal benefiting Ireland's bank debt.

I hope the Greek people bring matters to a head in their 17 June elections and that they vote in an anti-austerity majority. The austerity policy, the lack of action in respect of banks and the refusal to mutualise sovereign debt are sustaining the threat of a European depression pulling the world economy down. This is the serious situation we will face.

It is clear that no solution is forthcoming from the European business and political elites. People must take matters into their own hands. Revolt is spreading. There is revolt in Greece, where people are standing up and telling politicians they will not break the social contract made to the public following the Second World War. There is revolt in Spain, where lands are being occupied in response to mortgage debts and evictions. There is revolt in France, where there has been a rejection of Sarkozy's liberal policies. Revolt is developing in Holland. Only two weeks ago in the financial centre and on the streets of Frankfurt, 20,000 Germans came out against austerity.

As a European nation, we must begin deciding on what type of Europe we want. Given the rise of fascism throughout Europe in the 1930s as well as the depression, Leon Trotsky proposed the idea of a socialist united states of Europe, one that was based on solidarity and co-operation between its people and that used its wealth and resources for the benefit of all, not just the financial industrial elite who are today disgracefully bleeding Europeans dry to maintain their profits and elitism. This idea expresses the hopes and aspirations of millions of Europeans and is the only basis for a solution to the crisis.

Deputy Joe Higgins

The European Stability Mechanism Bill 2012 is entitled a Bill to facilitate in the public interest the establishment of a so-called stability mechanism. This is a false claim. The European Stability Mechanism, ESM, is not being set up in the public interest, that is, the interest of the majority of ordinary citizens in the EU's member states. Rather, it is being set up primarily in the interests of the sharks who dominate the financial markets throughout the EU, the major investment banks, the hedge fund operators and the assorted speculators who operate within the financial markets. This fund is to underwrite their speculative loans on the backs of European taxpayers. The players in the financial markets - the speculators - gain from the fund's establishment in every way. Their loans, many of which they provided speculatively, are to be guaranteed by taxpayers, yet the funds that may be used to bail them out in the event of difficulties will be borrowed from the same markets, with governments guaranteeing those funds on the backs of taxpayers who will be bled to meet repayments.

In reflecting on this situation, all I could think of was the great song made well-known by Christy Moore, entitled "Ordinary Man". In the words of a worker referring to the boss who let him go, "the captains of industry won't let him lose ... he'll never lose" and "Well it seems to me to be such a cruel irony, he's richer now than he ever was before". This is exactly the case in that the hedge fund operators and major banks whose speculation and wild gambling in property markets and other ventures around the globe brought the world to the financial ruin that emerged three or four years ago are all now back at the same activity - speculating, profiteering and paying massive bonuses to their top echelons.

In no sense is the ESM a solidarity fund. It is a fund to underwrite the casino capitalist activities of the banks and bondholders, the same casino capitalism that created the economic and financial crisis from which many ordinary people across Europe are grievously suffering. It is the same system, driven by lust for super profits, that drove speculation in the US and Europe, was facilitated by the rating agencies, which set themselves up as arbiters of best practice in the financial affairs of nation states, and was legislated for by governments across the world. The ESM is designed by the markets for themselves and their interests.

The largest party in the European Parliament is the European People's Party, EPP, of which Fine Gael is a component and of which Chancellor Merkel of Germany is a prominent member. Europe's major political parties act as agents for the big players in the financial markets. This has been clear for the past four years. The troika, which represents the combined forces of the EU, the European Central Bank, ECB, and the International Monetary Fund, IMF, also acts as an agent. When the troika arrived in this country in November 2010, it did not do so with the interests of the Irish people at heart. Rather, it did so to salvage the EU's financial institutions and to save them from the consequences of the reckless gambling and speculation in which they indulged during the Irish property boom. Despite all of that, a Fine Gael-Labour Government, supported by Fianna Fáil, is backing the setting up of a fund that will only play the role of a bailout mechanism for the major players in the financial markets.

Ireland and Europe need a solidarity fund for the benefit of the ordinary people, the working class people and the poor. Across the EU, a shameful number of people, some 25 million, are unemployed. In the eurozone itself, approximately 17 million people are unemployed. Youth unemployment in countries like Spain is at crisis level of more than 50%. At the same time, across Europe and the eurozone, big business and the major banks refuse to invest, to bring together and make available the productive forces that could have the unemployed back to work, creating wealth, goods and services and generating taxes to protect and develop public services.

In March,The Wall Street Journal carried an article that makes illuminating reading. It pointed out that the ratio of investment to gross domestic product in Europe is now at a 60 year low while, at the same time, major corporations in the eurozone are hoarding but not investing record amounts of profits to the tune of €2 trillion. In the United Kingdom, they are sitting on £750 billion. Last autumn the European Central Bank, ECB, made €1 trillion available to European banks at miniscule interest rates. Did the banks lend these funds to society, small enterprises, the self-employed, etc, to underwrite the creation of millions of jobs? No, they either lodged it back with the ECB or bought up sovereign bonds. In other words, they put it into the safest option possible to make a profit with no downstream benefit for the majority in society.

Austerity is killing the domestic economics across Europe while at the same time big business-----

An Ceann Comhairle

The Deputy has two minutes remaining.

Deputy Joe Higgins

I have to have more than that, a Cheann Comhairle. I had 12 minutes because my colleague, Deputy Joan Collins, stopped short.

An Ceann Comhairle

The Deputy has two minutes and 23 seconds left. Sorry about that.

Deputy Joe Higgins

I am being short-changed here.

Austerity is killing the domestic economies across Europe while, at the same time, big business is on an investment strike. We need a solidarity fund and we need it urgently. I propose an emergency tax of 50% on that mass of uninvested profits which were created by the labour of working people by hand and by brain. That would make trillions of euro available for a major job creation fund. Such funds should be put into major infrastructural projects in EU member states and public works projects creating necessary and useful infrastructure and services that would create millions of jobs. This would, in turn, regenerate and remake the broke economies of the so-called peripheral states but also generally across the European Union.

The European Stability Mechanism, ESM, will not be used in any sense for this purpose or to resolve the acute economic problems of Europe. It will be used simply to preserve the same rotten system that created the crisis while potentially demanding €11 billion from the Irish people and €700 billion from taxpayers across Europe. In a recent headline, the BritishThe Independent stated, “Capitalism at a crossroads” referring to the major global economic crisis. We see the suffering it has brought about in many countries to millions of workers. These millions of workers and ordinary people are rising up against the fruits of that system and the austerity it is imposing. Workers and ordinary people in Ireland should join this to reject this austerity and the ESM bailout of financial markets. Instead, financial institutions should be in public ownership and under democratic control. There should be a socialist economy where resources are used for the benefit of society not for the greed of the same suspects who landed us in this incredible fiasco that society faces.

An Ceann Comhairle

I call on Deputy Terence Flanagan who is sharing time with Deputies Kyne, Regina Doherty and O'Reilly.

Deputy Terence Flanagan

Last week voters conclusively gave their backing to the stability treaty. We know its passing is a positive step forward for Ireland, ensuring the country can get back on track and remains at the heart of Europe. Despite some deceptive campaigning by the "No" side during the campaign, I am glad the treaty was voted through. In Dublin North-East, there was a positive response of 58% of the electorate who voted in favour of the treaty.

The European Stability Mechanism Bill 2012 is interlinked with the stability treaty. During the referendum campaign, constituents highlighted to me how the ESM is crucial to Ireland and is important to getting on the path to recovery. How else will we get funding in the case of an emergency bailout? The ESM will promote confidence in the eurozone. The positive referendum result last week is good for Ireland's debt ratings and return to the bond markets. It removes any uncertainty about Ireland's capacity to access funding, if the need arises, from the ESM.

Following the debt crisis that resulted in the bailout of some EU member states, there have been efforts to bring about reforms to prevent such crises happening again in the eurozone. Ireland has experienced a bad crisis in the past three years. However, we are now steadily emerging from it and the safety net of the ESM is crucial to ensure we do not find ourselves in a vulnerable position again in the future. Greece, Spain and Portugal are experiencing significant problems too and action is needed to deal with them.

There have been many job announcements in Ireland in recent weeks. I was delighted to join the Taoiseach last month for the announcement of almost 300 jobs at Mylan, a multinational based in my constituency. I commend the Minister of State, Deputy Perry, on the good work he is doing in this area. Every week, international companies continue to invest in Ireland because they believe it has a future. Amazon, Apple, home companies such as Dawn Meats and Rehab are putting money back into the economy which shows confidence in the country. Last week's "Yes" vote will improve this.

The ESM will safeguard the stability of the eurozone, provide an opportunity for non-eurozone countries to contribute to it and provide for funding to be made available to them if the necessity arises. The fund is expected to come into operation next month and will have a lending capacity of €500 billion. Ireland's contribution to the fund will be an upfront sum of €1.27 billion over the next three years. This is a small price to pay to ensure certainty and stability in our economy. The people do not want any more setbacks in trying to get the economy back on track.

Concerns have been expressed about the level of capital, €9.9 billion, that Ireland must guarantee. However, that would arise if countries were in massive default, and we hope that will not happen.

I am delighted the stability treaty referendum was passed last week, as it provides certainty and confidence that Ireland is willing and able to continue funding itself. The European Stability Mechanism, ESM, fund is available to us as a plan B, which could be very important for Ireland in the coming years. We all want to see the country emerging from crisis as soon as possible in order to provide hope and opportunity for our young people in particular. The ESM will certainly help us along that path.

Deputy Seán Kyne

In the early stages of the economic crisis that is affecting almost every nation in Europe and across the world, the EU was criticised for not acting fast enough, and when it did, it was criticised for not tackling the problems effectively. It is now strange to see Europe being criticised by some for putting forward proposals to help tackle the instability afflicting our economies; it seems that no matter what the EU does, it will never be good enough or acceptable to some.

Last week the Irish people accepted the stability treaty, and by doing so they guaranteed Irish access to the European Stability Mechanism if and when it is required. The legislation before the House today gives effect to this democratic decision. Even now, there are Deputies and others who did not support the stability treaty and who are complaining that the treaty has not solved our problems or made a difference. As with all problems, there is no quick fix or a cure-all solution. The stability treaty was never presented as such, and instead it was presented by the Government - honestly and openly - as part of a long-term solution.

As a result of the speed and nature of the financial crisis, the EU and its member states created a short-term solution in the European financial stability facility, EFSF, which was backed by the eurozone countries, as well as Poland and Sweden. It has become clear, however, that a more permanent approach is needed. The ESM, along with the six pack of directives and regulations, forms part of this approach.

Of all the member states in the EU, the establishment of the ESM is of particular importance to us in Ireland, as well as Greece and Portugal. We must recognise that the current gap between national income and spending is filled in no small part by the current EFSF arrangements. We must also recognise that the finance for the EFSF is being provided by other EU nations, including Germany. This support is enabling us to address our deficit, which is only partially due to the banking sector, over a large timeframe, thus affording us time and space that we would not otherwise have.

The importance of growth must also be emphasised, as it has been rightly earmarked as an essential component of any approach to tackling the problems before us. Growth goes hand in hand with stability, and if there is no stability, there can be no growth. A clear result of stability, which this Government has promoted with its policies, is investment. Without stability, the investment which has resulted in over 1,200 jobs in my constituency of Galway West alone over the past year would not have been made. I have listened to other public representatives, economists, academics and journalists, and it is clear that a cohort of people exists that would like nothing more than the euro - if the not the EU itself - to collapse. It saddens and concerns me that people would actively welcome the trauma and strife that a currency collapse would bring.

The euro is our currency and that of the Germans, French, Italians and many others. We have a duty to effect measures to protect and safeguard that collective currency. The ownership we take of our currency must also be matched in our ownership of the solutions required to safeguard it. The effectiveness of the European Stability Mechanism will depend on the support it receives from member states. It is entirely appropriate that Ireland, along with other eurozone countries, makes its contribution to ensure a functioning and feasible safety net. We will contribute 1.6% of the total €700 billion fund, and for that we will be able to rely on a permanent stability mechanism.

I hope the ESM funds will not be needed by any EU member state but its existence will help provide the assurance and confidence required for investment, and in turn, for job creation. By introducing and passing this European Stability Mechanism Bill today, Fine Gael, Labour and Fianna Fáil will not only be respecting the democratic wishes of the Irish people but acting responsibly and practically for the good of our country, currency and the European Union.

Deputy Regina Doherty

The European Stability Mechanism Bill 2012 outlines the legislation that underpins the ratification of the ESM, which will replace the European financial stability mechanism. This will mean there will be a permanent rescue fund for the euro area to replace temporary support mechanisms. The principal stated provision of the ESM is to provide stability and support, which is what this country and the eurozone so badly needs.

The ESM will be initially equipped with €80 billion in cash, and it will also have the provision to call upon another €620 billion in an emergency. This will enable it to lend €500 billion and still maintain a buffer to garner the AAA credit rating it needs when it is set up next month. The ESM is the centrepiece of Europe's firewall to stave off financial contagion from the debt crisis that has wreaked havoc on the markets and pushed Greece, Portugal and our country into a bailout position. When the Bill was published in May, the Minister for Finance, Deputy Noonan, stated that having the ability to access the ESM is essential to Ireland's return to the markets and serves as a backstop, or in the worst case scenario, ESM funds will be available to provide essential public service finances. This will result in monetary certainty while keeping the other instruments of economic policies in national hands. The effect of a division of authority was to create a heightened level of fragility in national member states. Investor concerns about national member states' abilities to repay debts can quickly transform into a liquidity crisis and ultimately degenerate into a fully blown insolvency crisis. The ESM will break this cycle.

The official strategy for resolving the eurozone's debt crisis originally developed in the wake of the Greek crisis in May 2010, and it comprises four key elements. There is the creation of new fiscal oversight and supervisory mechanisms, the formulation of new mechanisms to fund loan facilities, or the ESM, the extension of loan facilities to member states experiencing difficulties accessing the bond markets and the conditionality of policies on those member states in return for receipt of that loan funding. The ESM comes with strict conditions and requirements attached to the assistance. Much of the requisite framework of oversight and supervisory mechanisms have been installed during the past year. The criteria used are intended to limit moral hazard and to ensure the existence of the ESM do not weaken incentives for sound fiscal and macroeconomic policies in member states. Together with best practices in government procedures and a cap set for Ireland at €11.1 billion for capital, all such measures go towards protecting Ireland's maximum exposure to the ESM.

There have been critics of the conditions, such as extending the ESM's extensive powers; some have said it will be completely above the law. Currently, the IMF, which the ESM will largely mirror in many aspects of operation, has similar privileges and immunities. In recent days Mr. Draghi of the European Central Bank has indicated that the outcome of the Irish referendum showed that the Irish people believe that fiscal stability is a basic pillar for growth. Last week's referendum result will certainly go towards speeding up Ireland's return to the financial markets and give us the same benefits as other signatories to the treaty. However, in the current absence of market-based financing, our ability to access the ESM is essential. It is in all our interests that the European Stability Mechanism is established as soon as possible to enable the eurozone sovereign debt crisis to be dealt with through the creation of a permanent mechanism. Today's Bill is a crucial step towards stabilising the crisis.

In recent weeks Sinn Féin has decried the ESM, arguing that it brings about a loss of Irish sovereignty, but the party has missed the point. Regaining financial stability will mean that when we move closer to the day to day concerns of reeling in our nation, there is no silver bullet solution to the crisis. This financial backstop will nonetheless bolster growth and competitiveness. It supports the Government and members of the Opposition in their drive to press ahead with economic reform and recovery for our country and people.

Deputy Joe O’Reilly

I am delighted to welcome this legislation, which will put the European Stability Mechanism in place. It is extremely progressive and I salute our Minister for Finance for introducing it. He also avoided having to pay the €3.1 billion promissory note that would have had extraordinary implications for the country which would have involved the removal of real services for people. Those two achievements are the backdrop to today.

Last week, in passing the treaty, the people acted wisely and prudently and should be congratulated for that. The passing of that treaty was a prerequisite to accessing the ESM. The European Stability Mechanism will establish a fund of initially €80 billion but potentially €700 billion that will be available to member states as a backstop when funding is needed in an emergency, albeit with conditions. It will also provide a safety net for us as we go into the bond markets to borrow. Those are the practical implications for the country but the greater practical implications for Europe are that it is part of the process of recovery and stabilisation of the euro and European finances, restoring confidence internationally in the euro and stability in the market place. That is a crucial element.

This is another stage in the rectification of the difficulties within the euro. Obviously this will involve introducing prudent financial management, as the terms of the treaty dictate, at national level. That will assist in gaining international credibility and involves conditionality for any available funding. Naturally that will encompass achieving proper regulation in the financial area. This is an extra dimension that is equally important. No one disputes the contention by those opposing this today that we need regulation and control of the financial market and banking sector. That is implicit.

This creates the conditions that will allow us to move on to the next stage that is parallel with prudent financial management, namely, investment and stimulus. There must be a job stimulus package within Europe, within the eurozone and, specifically, in Ireland. There is no doubt we must tackle the issue of youth unemployment, which is a problem throughout Europe. I will say to the Minister for Finance and to the Minister of State with responsibility for small business, Deputy Perry, who is doing extraordinary work in this area, that it is vital that we put in place a jobs stimulus package to address youth unemployment and that we get investment in necessary infrastructure, thereby creating jobs. Implicit in the prudent vote of the Irish people is a belief this should happen now.

That must be done in parallel with the addressing of the personal debt crisis. If we can bring that to manageable proportions and create structures that will create confidence, it will increase consumer demand and get the economy to move in a more normal way again.

The European Stability Mechanism is a critical tool in stabilising the euro internationally, the eurozone countries and in providing a backstop. It creates the conditions whereby the jobs stimulus package can be put in place across Europe. The two are in no way mutually exclusive, the contrary is the case, the two work together. The question of personal debt can be also tackled now.

This is another stage in dealing with the crisis. It is by no means the end of the road but it is a critical stageen route to a solution. It must be done in parallel with spending policies that will result in job creation and consumer demand. It is unquestionably the case that austerity cannot work on its own and that the two must be done in tandem. It is also unquestionably the case that those from the Technical Group who oppose this Bill have not posited an alternative to the ESM. What they say is beautiful rhetoric with a great populist quality but the truth is that they have not come up with any alternative.

It is good that we are progressing this legislation quickly and I am glad to support it.

Deputy Timmy Dooley

I welcome the opportunity to contribute on this Bill. It is the second part of a two part process and we had the opportunity yesterday to deal with some of the technical aspects of the underpinning and enactment of the legislation as part of the Treaty on the Functioning of the European Union. Today is an opportunity to concentrate on the provisions in the legislation that establishes the ESM and how we might examine the impact of its development and capacity to play a major role in dealing with the economic crisis that has bedevilled Europe for the past three and a half years.

There is little doubt the establishment and creation of the ESM was a fundamental reason for the people to give such a resounding positive vote for the fiscal treaty. It was right and appropriate that the treaty that set out the necessity for the delivery of discipline in the way we manage our budgetary process was juxtaposed against the question that if we were prepared to take the pain to recalibrate the Irish economy from a debt and deficit perspective, at the same time we will receive the support of our partners in Europe to assist in the event of our not attaining the growth levels that will be such a fundamental part of our economic recovery. It was right the two were put together. As others have pointed out, the "No" side wanted to separate the two; they wanted the ESM to be set up without being prepared to take the necessary medicine in the recalibration of our economy to meet the needs of a much changed world economy.

It is an important insurance policy and a vital tool to deal with the crisis but we must be careful. The current model seeks to address the crisis that has evolved to date but I am not sure the ESM as it is currently proposed looks far enough ahead to the potential pitfalls and crises that still lie ahead. That is one of my criticisms generally of the way Europe has responded to the economic crisis. We tend to arrive late with the solution to the problem as we envisage it at any particular time, not realising that in many cases, by the time we put in place a solution, the problem has shifted and expanded to a greater extent.

That applies to an Irish perspective. At the time, the then Minister for Finance, the late Brian Lenihan, would say, as he said in an interview with the BBC, that he was bounced into a bailout to protect the euro, recognising that Ireland was well funded for the foreseeable future and did not have an immediate requirement to go to the markets. Notwithstanding that, in an effort to show solidarity with our European partners, he put in place a programme to prevent the contagion that was rapidly emerging. Regardless of what Ireland did at the time, the contagion has continued to this day. Spain is in a similar position, although it presents a greater problem to the eurozone and Europe generally. Notwithstanding that, the solution, which was to put Ireland into a programme for a number of years, did not manage to contain the crisis and not everything is being done now to address where the problem will emerge next. We are fighting a rearguard action rather than being progressive, taking a leap of faith and putting in place the necessary solutions and mechanism to deal with the scale of the problem.

I refer to whether the ESM facility will have adequate capacity to deal with the needs that have the potential to be placed on it. How often have we heard the phrase, "The euro is back from the brink", only to find ourselves back at the same crisis point? That happens almost on a daily basis. This highlights that the Union and eurozone are operating with a flawed infrastructure. In designing the ESM as a permanent rescue mechanism, there is an opportunity once and for all to deal with the design flaws in the euro that have become evident during the crisis. Yesterday's comments by Mario Draghi where he set out his views to investors not to underestimate the resolve of EU authorities to defend the single currency were welcome. The currency has increased in value since his statements and markets have stabilised. My concern is this will be short-lived. Market sentiment is based on the latest rumour circulating. These fine words and strong commitments are not enough in themselves to address the crisis adequately.

To stabilise Spain and Italy, the eurozone should make it clear it will do whatever it takes to quell the self-fulfilling debt crisis and, therefore, consideration needs to be given to whether the proposed availability of €500 billion in lending capacity to the eurozone will be sufficient. I am not sure it will be adequate to take on the additional responsibilities the ESM might be tasked with if the situation in Spain or Italy becomes serious. The intention is that the fund will be able to raise €700 billion on the basis of initial seed capital of €80 billion while retaining €200 billion to secure its triple A rating. That is welcome but if pressure is applied I wonder if the ESM will have the capacity to deal with it. What eventualities could the ESM be called on to fund? Will it only be in place to aid Greece, Ireland and Portugal or should consideration be given to it undertaking the massive bond purchases that would be required to stabilise the market should Spain or Italy need funds for their banks, which is the focus of consideration in Spain currently or to meet their day to day requirements? These issues need to be addressed.

The ESM should be granted a banking licence and the right to borrow directly from the ECB. This could supplement its normal bond purchasing activities. Suggestions have been elsewhere that if the size of the fund was increased to €2 trillion, it would have the firepower it needs to deal with what might be considered to be a worst case scenario of Spain and Italy being shut out of the sovereign bond markets. I recall the US Secretary of the Treasury, Timothy Geithner, referring to this last year. Europe listened to him in the past when the then Government sought to address the banking crisis here by issuing haircuts to senior bondholders. He expressed a view at the time, which became the prevailing view across Europe. I would welcome it if some of our Union partners were as quick to accept his views when they might have a positive impact on the Union generally.

If the ESM can be strengthened to meet most eventualities, it will only be required as a backstop or insurance policy. That would provide the security the markets need. In the event of a crisis, they will not be left without, which is the current position, and that is why bond spreads are where they are. If Mr. Draghi believes that the Union will do whatever it takes to defend the currency, then the ESM, as the centrepiece of the strategy in that regard, needs to be fit for purpose. I recall him saying over the past number of days that this is an issue for eurozone leaders and politicians to take charge and control of and not one for him, the ECB or its governors. Reference is often made during these debates to the democratic deficit. Much noise was made during the recent referendum campaign about the Government ceding responsibility to unelected bureaucrats. This represents an opportunity to take back the mantle of governance. It is an opportunity for political leaders across Europe to clearly give direction to the mandarins. Mr. Draghi is crying out for that.

I call on the Minister of State to have a direct conversation with the Taoiseach. Over the past few days, we found it difficult to extract from him what position he has put to Chancellor Merkel and what her response has been. I accept that in a negotiation, one does not need or want to make public what one is looking for. However, in this instance, the people deserve to know what the Government is seeking in negotiations. By doing so, it would show respect to them on the basis that the Government sought their support to allow it and the Parliament, by extension, to negotiate on their behalf with our European leaders. It is a fair trade off to have a more open and frank conversation with the people to let them know what the Government is trading. This is not a game of poker. The other 26 member states clearly know Ireland's position. Why not let the people know what the Government is seeking?

Deputy John Perry

That will all become apparent.

Deputy Timmy Dooley

This should not be about the Government hiding and refusing to set out its position because it might not achieve it and it does not want to look bad in front of the public. The people should be shown the trust and respect they need and deserve and the Government should let them know what it is looking for.

Deputy John Perry

The best deal possible.

Deputy Timmy Dooley

If the Government does not achieve 100% of what it wants, they will accept that. The Government parties should show the maturity to say what they want and that they will accept whatever comes out of the negotiation process.

Deputy John Perry

The Taoiseach outlined what we wanted.

Deputy Timmy Dooley

I wish them well in that effort and they will have my support and that of my party. They should be up-front with the people.

Deputy Billy Kelleher

I welcome the opportunity to contribute to the debate. I may sound repetitive because I expressed some of my views on the ESM last night during the debate on the European Communities (Amendment) Bill. However, while those comments were worth making last night, they are equally worth repeating in this debate. I welcome without equivocation the result of the referendum last week when the people put their faith in the institutions of Europe to deal with a serious crisis domestically and in Europe and to deal with the challenges in the global economy. There is a great deal of confusion about the messages emanating from the Government. Prior to the referendum campaign, it was stated clearly that the treaty was separate from the resolution of the bank debt issue but they became inextricably linked during the campaign. I am a little confused and if that is the case, I am sure many others are equally unsure of the Government message about what it is trying to do about the issue of private bank debt being saddled on the people.

Reference has been made many times to the decision on the bank guarantee and how the previous Government dealt with the banks. Clearly, at the time there was huge pressure on because Ireland stood alone in that no mechanism was available to assist a state with difficulties not only with its budget deficit but also with its banking system. The Union, together with the ECB and the political leaders of the major member states, have accepted there is a need to establish a fund, the ESM, to deal with the difficulties in Europe's banks and the pressures on the currency. However, Ireland stood alone and made huge efforts to ensure there would not be contagion. The previous Minister, the late Brian Lenihan, told me that they were brow beaten and intimidated by the ECB to accept a bailout. This remains the case. There has been no major change in policy by the ECB or the European Commission. As I stated during last night's debate, the Commission has reneged on and failed in its fundamental duty, which is to uphold the treaties that established the Union. It has failed on a continual basis to protect smaller member states. It has been castrated as an organisation and it is ineffectual. It is left to the leaders of the larger member states to set the agenda, which is unacceptable. We have reached a situation where the European Commission is essentially a passive observer, with the Germans now running the show in terms of policy. The European Union institutions were established to protect small nations, with the Commission acting as guarantor of the treaties. However, it seems to have absolved itself wholly of responsibility in this regard. The Minister should not be alone in making the case for Ireland; that is also the role of the Commission on behalf of all weaker member states.

Spain is facing enormous difficulties, with an ongoing trawl of its banks and an assessment of the difficulties in that regard. Nobody knows the full extent of the problems that may emerge in the Spanish banks. However, we cannot operate on the basis that Spain's difficulty is Ireland's opportunity - that cannot be the basis of our appeals to our European colleagues. Ireland's case stands alone, regardless of the outcome of the Spanish banking review and the assessment of its broader economy. The bottom line is that Irish people are saddled with too much private banking debt, with €62 billion of taxpayers' money having already been put into the banking system. The exorbitant interest rates imposed on the State were only belatedly and even reluctantly reduced. The Government will take credit for that reduction, but we all know the impetus in that instance was the situation in Portugal at the time. Whatever the reason for the change, it did alleviate certain budgetary difficulties, but the reality remains that the exorbitant debt that has been imposed on the people is immoral, unfair and unsustainable. The Minister knows this as well as I do. Nor is there any point in us continually applauding the European Union and the European Central Bank for establishing the European Stability Mechanism. The fund should have been set up much sooner. The ECB has been charged with ensuring there is stability in the eurozone and addressing the issue of inflation, but it has never seemed to take on board what should be its broader remit of protecting the euro, rather than always being concerned solely with inflation in the German economy.

There are several issues that must be included in the political agenda for this month's Council summit and beyond. First and foremost, Ireland must make a case, regardless of the outcome of the review of the Spanish banking system, that there is simply too much private debt saddled on the people and that there is an obligation and a duty on others to take their fair share of the burden. Action in this regard was promised by the Government parties prior to the general election. The Minister did not make such promises, but many of his colleagues did with wild abandon throughout the State. There was talk of not one cent more being paid over and, from the Tánaiste, an invitation to choose Labour's way or Frankfurt's way. The reality is that the Government did not need a referendum on the establishment of the ESM in order to secure a mandate to seek a resolution of the bank debt burden. It received that mandate from the people last year, but progress has been slow and reluctant and there has been a notable lack of diplomatic activity in advocating on the issue.

As I said, we obtained a small interest rate reduction when the crisis arose in Portugal which, irrespective of the reasons it was granted, was a positive development which alleviated, in a very small measure, the burden on the people. We then had the crisis in Greece, followed by the crisis in Italy, with the ensuing few weeks of stability succeeded by the crisis in Spain. This shows there is a fundamental flaw in the machinery and apparatus of the eurozone, the ECB and the Commission. We will have to revisit the question of how to ensure there is a regulated banking system across the eurozone that will prevent a situation where, within one currency area, we have capital flight from one country to another. Pressure on the Irish banking system, for example, has led to large transfers of deposits to other parts of the eurozone. This simply does not make sense and, if it is allowed to continue, will consistently undermine the peripheral countries. In a situation where the sovereign is the guarantor, while the ECB washes its hands of any such guarantee, it is inevitable that the weaker states will always be under pressure in seeking to retain deposits and attract capital. This is a fundamental flaw that must be addressed.

The issue of private debt must be put at the top of the agenda, but we have not had a good start in this regard. The Taoiseach told us last week from the steps of Government Buildings that he had enjoyed a great chat with the German Chancellor, Ms Angela Merkel. He has yet to tell us, however, what type of chat it was and what issues were discussed. Despite what some would claim, it is fundamentally important that we know what he has requested of the Chancellor. After all, it is she who is running the show in respect of the ECB and the Commission. What is discussed between the Taoiseach and the Chancellor is critical in determining whether we have success in dealing with the legacy issues. I will accept, on behalf of my party, all of the political responsibility for where we are, but the Government has been in office for 14 months. Its mandate was clear, based on its promise to secure a renegotiation of the bank debt. Action must be taken to ensure we can return to the markets and, more importantly, that we can provide jobs, attract investment and stand on our own two feet as a country in the years ahead. It is incumbent on the Minister to operate according to the mandate he and his colleagues sought last year. The endorsement of the fiscal stability treaty in the referendum last week, which we endorsed, is fundamentally separate from the issue of banking debt.

Deputy Tom Hayes

I propose to share time with Deputies Patrick O'Donovan, Joe McHugh and Pat Breen.

An Ceann Comhairle

That is agreed.

Deputy Tom Hayes

I am pleased to have the opportunity to contribute to the debate on the Bill, particularly in the wake of the referendum last week on the stability treaty. One of the most frequently debated aspects of the treaty was the question of Ireland having access to the European Stability Mechanism. I congratulate the people, including those in my constituency, on their endorsement of the treaty. Their resounding endorsement shows that voters took heed of the arguments in favour of a "Yes" vote.

The ESM will act as a permanent rescue fund for the euro area and soon replace the temporary fund, the European financial stability facility. Establishing a permanent rescue fund for eurozone members is seen as key to safeguarding the future of the currency, with the ESM designed to act as a lender of last resort should members find themselves cut off from market-based financing. The ability to access this fund which is essentially an insurance policy could prove crucial to many countries and will allow them to fund public services such as pensions, social welfare payments, and health and education services, even in times of financial distress. It will also protect participating countries against interest rate hikes in the private markets, as investors become more confident in the financial stability of the eurozone.

This initiative is an example of eurozone members working together to secure and protect the future of the European project. However, of itself it will be insufficient for that purpose. We must have more examples of such co-operation from and proactive rather than reactive efforts by our colleagues in Europe. In this regard, I welcome the increased focus on the growth agenda, particularly in the wake of the French presidential election and the Irish referendum. For too long Brussels has been trying to catch up with this crisis instead of taking the lead, but there is now an opportunity to change this. Member states cannot and should not be forced to carry the burden of crippling bank debts - that approach is no longer sustainable. Ireland knows only too well that the current method of recapitalising financial institutions through state lending is not the way forward.

Instead bank debts should be dealt with directly at a European level, and I support the Government in this approach. Allowing the ESM to recapitalise banks directly would help break the link between sovereign debt and banking debt. The current agreement on Ireland's banking debt must be revisited. Our colleagues in Berlin, Paris, Brussels and elsewhere cannot continue to turn a blind eye to this issue simply because Ireland is not on the brink of collapse. Again, we need to take a proactive approach rather than a reactive one.

There is also a strong case to be made for a Europe-wide stimulus package to be implemented. This is not a new idea but one Europe has failed to consider properly in reaction to this crisis. One of the strongest cases that can be made for the benefits of a growth orientated approach rather than simply spending cuts is the United States. Since the initial stimulus package was introduced in the United States at the end of 2008-beginning of 2009, the American economy has returned to positive growth. Since the end of 2009, the American economy has remained in positive growth with the latest figures showing a 1.9% growth rate in the first quarter of 2012. Contrast that to Europe where the eurozone area is expected to fall back into negative growth this year.

Obviously, the Government has been talking about the need for a stimulus package for some time and has been successful in renegotiating with the troika to allow us to use funds from the sale of State assets for this very purpose. However, the sale of these assets cannot be rushed and as such our hands are tied in the short term.

Ultimately, we need a European response to what is a European problem. I wish the Taoiseach, the Minister for Finance and the Government the best of luck in pursuing these issues with their European partners. The importance of fostering a more proactive approach to this European crisis cannot be overstated. Establishing the ESM fund is only a small step on that road to recovery and I can only hope that other European leaders will see sense in some of the proposals mentioned today.

Deputy Patrick O’Donovan

I welcome the opportunity to speak on the Bill but before I do, I refer to a comment made by Deputy Kelleher. He said there was a flaw in the machinery of the Government in negotiating a better deal for Ireland. The only flaw I see is his credibility. He talks about the immoral, unfair and unsustainable debt that has been placed on the shoulders of the people by the banking institutions. It is a pity he did not wail about the immoral, unfair and unsustainable banking debt placed on the shoulders of the people when I am sure it came up for discussion at a meeting of his parliamentary party in the recent past but, to borrow a phrase from one of his colleagues, we are where we are.

I agree with the sentiments expressed by the previous speaker. Contrary to what some of the commentators might like to believe, the result of the referendum proved that the electorate went out of its way to be informed and to make a decision in the best interest of the State, itself and future generations. It was not taken down a blind alley by a side show of erroneous and other issues which had absolutely nothing to do with the referendum. It distilled it down into a very simple question. Where would Ireland or any country requiring assistance in the future access the money? Not only did the "No" side not have any credibility, it had no solution or answer. One of its main spokespersons went on "Prime Time" one night and when she was asked where Ireland would access the money in future, she said what Sinn Féin normally says and trumpeted out that we would borrow a bit out of the National Pensions Reserve Fund. Given the number of times the National Pensions Reserve Fund has been mentioned in this House as a source of funding, there would want to be a couple of trillion euro in it. She wound up being short a few billion in the course of her remarks. I wondered as I watched the television if should would root around in her handbag to try to see if it was in it. The people who watched that said to themselves these people are just not credible. They did not have a solution and they were cynical in their exploitation of a referendum in the national interest to advance their own warped political ideology. The people in general saw through that and voted "Yes" in large numbers.

By doing that, the Irish people have given the Government a mandate to get a much better deal for the country in respect of what was saddled on it by the previous Government. This Government, unlike those in every other EU member state, has the moral authority and the backing of the people to go to Europe to say that this unsustainable debt must be managed in a different way. As Deputy Tom Hayes said, the ESM may very well prove to be a mechanism in which that can be looked at if, for arguments sake, banks can access it directly rather than having to go through the sovereign. The debt would then be taken off the shoulders of the people. In that type of situation, the stability of the currency not only relates to how the State performs, but to how the banking institutions in the European Union perform. This is not only an Irish issue but one which threatens contagion throughout the EU and it needs to be contained. The fact that there is a €500 billion fund available without a ceiling being placed on it for individual member states gives an element of security which, to be honest, one would want rocks in one's head not to support.

Those in the Opposition who say we should go to Brussels and renegotiate it are the same people who up to last week said we could access funding through the EFSF knowing the EFSF will run out in three years time. When one asks them from where we will borrow when it runs out, they scratch their heads and talk about something one might find on the back of a Weetabix box. They have no solution as to where this country will find the resources needed to fund the public finances.

I wish the Minister for Finance, the Taoiseach, the Minister for Public Expenditure and Reform and the Tánaiste well in this regard. There is no doubt the biggest issue which will confront this State probably in a generation is finding a mechanism which will allow growth and recovery. This is one part of a jigsaw. As the Taoiseach and everybody else said last week, by voting "Yes", things would not get better overnight but by voting "No", they would get an awful lot worse. We have taken one gigantic step forward on the road to recovery. I wish the Minister well and know he is committed to getting a better deal for Ireland and pursuing a growth agenda which is in everybody's interest. I support the Bill.

Deputy Joe McHugh

I welcome the opportunity to speak on the Bill. It is important to acknowledge the vote of the people in the recent referendum which was an indirect endorsement of the ESM. To boil it down into a very simple formula, the people decided that should we need money, it would be in our national interest to have access to that money. People were aware that the EFSF would run out in 2013, so a €500 billion fire wall makes sense.

I wish to digress from the national trend to that in my own county. I had a conversation with the Minister for Finance about this last night and mentioned that the "No" vote did not have it all its own way in County Donegal. In the Fanad peninsula, 50% voted "Yes" and 50% voted "No". On the evening of the vote, I met a couple of farmers along the road in Fanad who were certainly not supporters of mine or my party. One of the farmers said that rather than vote against the interests of the country and vote "No", they decided to stay at home instead. There was an element of that, especially in light of the 42% turnout. The general reaction of the people in Donegal, which must be recorded in this national Parliament, was that they were glad it was passed nationally. That is important to note.

In regard to the €500 billion fire wall, there is a danger countries will lapse back into bad habits in the expectation that if they get into bother again, money will be available. We must sound a note of caution in regard to the availability of such funding. We need a system for obtaining access to funding. We do not have powers to replicate what occurs in the United States or the United Kingdom in regard to quantitative easing; we must have something that works in the interest of the eurozone members. We must and will aspire to having the good housekeeping rules of countries such as Austria, Finland and the Netherlands, which have small deficits and low unemployment rates. It is part of the process of learning by doing. What we are doing has not been done before. We are learning by doing but we must work in co-operation to ensure our economy recovers.

When canvassing on the doorsteps throughout my constituency and among representatives of small and medium-sized enterprises, the concept of the domestic economy continued to arise. Members on each side of the House have stated we need a parallel growth strategy at EU level. That is a given and it must continue to be so. With deficit reductions and cutbacks in expenditure, be it current or capital, we need to invest money in the real economy. There is unbelievable resilience among the business community, including small and medium-sized enterprises. In Donegal, 90% of all businesses are small to medium in size. The resilience is second to none.

The overall aspiration and philosophy in business at present is to survive. There is an altruistic element whereby employers want to hold onto as many staff as possible. They want to work in partnership with their staff to ensure they stay in business. The business philosophy or model is one of survival; it is certainly not a question of profit or reinvesting money in various schemes. With that in mind, I endorse the Taoiseach's commitment, which is also that of the European Union, including the eurozone, to have a parallel growth strategy. Without it, everything else does not make sense.

Deputy Pat Breen

I am delighted to have an opportunity to speak this afternoon on the European Stability Mechanism Bill 2012. Last night, I spoke on the European Communities (Amendment) Bill. I acknowledge the turnout in my constituency for the successful referendum on the stability treaty. The turnout was the sixth highest in the country.

This morning, I attended an investment conference in Croke Park with a number of other Deputies. It was organised by the US embassy. I listened to two very prominent speakers, namely, the Taoiseach and Mr. Bill Johnson, president of the H. J. Heinz Company, one of the top ten companies in the world. One began to wonder about the whereabouts of all the "No" voters who were so prominent during the referendum campaign. The empty benches across from me show the real interest they have in the future of the country.

At the conference this morning, the Taoiseach said a "Yes" vote created stability and certainty for foreign companies that want to invest in Ireland. Mr. Bill Johnson said Ireland continues to be a very attractive place in which to do business. The vote last week was an endorsement by the Irish people of the important role that foreign direct investment plays in job creation. The people wanted to ensure no damage would be inflicted on Ireland's international credibility now that international confidence is at an all-time high. I chair the Oireachtas Committee on Foreign Affairs and Trade and note that anywhere I travel, particularly the United States, people approach me and credit Ireland for what it has done in the past 12 months. Much of this is because of the work of the Government, and this is extremely important, particularly for foreign direct investment. Last week's vote gave a clear indication of that confidence. People do not want it to diminish. If we had voted "No" last week, it would have damaged Ireland's credibility abroad and foreign direct investment would decrease.

There are more than 600 US companies operating in Ireland and they have invested more than €190 billion and employ more than 100,000 people here. Last year, the IDA and Enterprise Ireland created more than 13,000 jobs through foreign direct investment. Approximately 60 companies came here. Recent announcements by PayPal, Microsoft, Apple, Coca-Cola and Facebook, to name but a few multinationals, signal the importance of Ireland as a base for future development and as a hub for Europe. Ireland has nine of the top ten pharmaceutical companies which, in itself, speaks volumes. More than 50% of the world's financial services companies are based here. The top ten born-on-the-Internet companies are here also. They are here because Ireland is a favourable place in which to invest and because we have a favourable corporation tax rate. This morning, at the conference, the Taoiseach stated the corporation tax rate will remain the same. This is extremely important to ensure the continuation of foreign direct investment.

I welcome the comments made yesterday by Mr. Mario Draghi, chairman of the European Central Bank. He stated that if Ireland continues with its efforts, the return to the markets will not be a very distant prospect, and could be much sooner than expected. This expresses confidence in what we have been doing in the past 12 months. The Government is certainly working hard to achieve this. However, external factors, such as the ongoing problems in eurozone countries such as Spain and Greece, could have an influence on our objective of returning to the markets.

Having access to the ESM will assist Ireland in returning to the markets. It would boost confidence among the international financial markets. I am sorry I do not have more time because I could speak all day on this subject. I am delighted to have had an opportunity to speak on the Bill. It is a safety net to provide an insurance policy for the future if we need funding.

Deputy Peadar Tóibín

Um thráthnóna, léirigh mo chomhghleacaí, an Teachta Pearse Doherty, tuairimí Shinn Féin ar an Bhille atá mar bhunús an chonartha. Ba mhaith le Sinn Féin go mbeadh meicníocht airgeadais phráinneach ag an eurozone. Tá sé riachtannach. Sinn Féin wants the eurozone to have an emergency funding mechanism. We want such a fund because the disastrous policies of the previous and current Governments are such that the State will not be able to return to the sovereign bond markets in 2014 and will be in need of a second round of emergency funding. We also believe emergency funding is necessary to assist in stabilising the eurozone and protecting vulnerable member states from speculative market attack. However, it is important when establishing a permanent emergency funding mechanism that we learn from the mistakes of the past and ensure the new fund is fit for purpose and that it will do what it says on the tin, assist member states in regaining access to the sovereign bond markets and stabilise the euro.

Unfortunately, the Government and its partners in the European Council have not learned the very simple lesson of the past two years of the crisis, namely, that the policy they have been pursuing is failing. It is worth mentioning that, after 450 days of Fine Gael and Labour in government, the unemployment rate is still increasing in the State. Clearly, they have not learned the lesson that the EFSF, as a tool for assisting states to regain access to the sovereign bond markets, has also failed. When former Deputy Arthur Morgan was Sinn Féin's spokesperson on finance, he rightly predicted that the EFSF would be a failure and opposed the original Euro Area Loan Facility Bill in May 2010. He stated then that the EU facility and the loans it would provide to Greece were not an act of solidarity to assist a beleaguered fellow member state. He told this House that it would be a massive bailout for toxic banks, the cost of which would be paid by taxpayers across Europe.

Events over the past 12 months in Greece, Portugal and Ireland confirm beyond doubt that former Deputy Morgan was right. Greece is now in a second program and Portugal is on course for a second programme. What greater admission of failure could there be than the recent pronouncements by Ministers that Ireland, in all probability, will need a second round of emergency funding in 2014?

In September last, when the EFSF returned to the Dáil as part of the agreement of a second programme for Greece, my colleague, Deputy Pearse Doherty, warned the Government again that it was pursuing the wrong policies. Sinn Féin opposed the Euro Area Loan Facility (Amendment) Bill because it did not present any comprehensive solution to the crises gripping the eurozone. It also introduced, in the most underhand way, the European Stability Mechanism, which, as Deputy Pearse Doherty outlined earlier, contains many problems for Ireland and the eurozone.

Almost a year on, the Government is repeating the same mistakes. It still believes an emergency fund based on policies of crippling austerity and unlimited bank bailouts will be good for Ireland and for the eurozone as a whole. Sinn Féin's firm view is that Ireland and the eurozone need an emergency funding mechanism, not only because Ireland will have to access it by 2014 but also because it is vital to stabilise the euro. This is why we supported the proposed amendment to Article 136 of the European treaty.

However, there is no point in agreeing to a fund that is not fit for purpose, that will not achieve its stated objectives and that in all likelihood will make matters worse. The ESM, in its current form, will not solve the problem. It is based, like the EFSF, on the failed policies of crippling austerity and unlimited bank bailouts. Unless the ESM treaty is amended, Sinn Féin will not be in a position to support this Bill.

Fortunately for Ireland and for the eurozone, a window of opportunity exists to amend the ESM treaty and improve the funds that are available. Other EU member states are actively seeking changes to the treaty as well. These changes could be made well before the upcoming European Council summit at the end of June. The Government should do likewise.

Next week, on Committee Stage, Sinn Féin will table amendments to the European Stability Mechanism Bill. The amendments will be based on five key changes that we believe are required for the ESM to do what it is being set up to do. They are: an explicit option of ESM funds being used to invest in jobs and growth as part of a credible deficit reduction strategy rather than the current focus on austerity; an option for direct ECB funding of the ESM to provide the necessary firewall to stabilise the euro while limiting the liability to taxpayers and individual member states; a clause ensuring that countries already in a programme are not required to contribute to the fund; a requirement for strict stress tests and write-down of toxic debt as a precondition for any ESM funds being used to recapitalise the banks, whether directly or indirectly via loans to government; and greater accountability at EU and member state levels and the removal of the immunity granted to the fund and its board members.

It is time for the Government to stand up for the interests of Irish citizens, just as the Government of Spain has been doing for its citizens. Ensuring Ireland has access to an emergency fund that works for Ireland is the best way of doing this. Ní réitóidh an ESM mar atá sé na fadhbanna sa eurozone nó sa Stát seo. Táim ag impí ar an Rialtas dúiseacht as a chodladh, bheith cróga agus seasamh suas ar son mhuintir na hÉireann.

An Leas-Cheann Comhairle

Is Deputy Lyons sharing time?

Deputy John Lyons

I believe I am sharing time with Deputy White. I note matters seem to be running a little faster and I assume he will pop in at some stage. I thank the Leas-Cheann Comhairle for the opportunity to speak.

I want to speak about this ESM Bill in the context of three matters: the "Yes" vote that was received last week; a better deal on our bank debt, which a number of Members have mentioned; and moving on from crisis management to taking more proactive steps to tackle the unemployment crisis in Europe, particularly in Ireland.

First, I am pleased we voted "Yes" on Thursday last for the fiscal compact treaty. It was an important vote for the country and one that gives us a platform on which to build our recovery. Financial stability is very important and the rules that have been laid down on debts and deficits will enhance confidence in the country, and I am pleased that voters endorsed these proposals.

In saying that, I spent a great deal of time on the doorsteps over the past five weeks or thereabouts and we must take on the views we heard. Among those who voted "Yes" and those who voted "No", there are genuine concerns and we, as a Government, need to see what we can do about some of those concerns. They are real and there is an obligation on us to do something about that.

Much has been said in recent weeks about the European Stability Mechanism and the limitations of the eurozone, but what we need to remember is that nothing like the ESM existed before for the eurozone. Up to now, the euro did not have a permanent bailout fund to back up the currency. We now will have such a fund. The European Central Bank has also evolved over recent years to take up a role far broader that was ever imagined in the first place. These are important developments.

We use a shared currency but it is also a global reserve currency and the crisis of recent years has exposed some of its limitations. These limitations have created uncertainty about how certain eurozone countries could continue to finance themselves independently. This uncertainty persists in this country and in other countries, and countries may need this fund. The fund also is a backstop for countries. It will be there if we need it and if others need it.

It was a huge mistake to suggest, as some on the "No" side did over recent weeks, that vetoing or attempting to veto this fund would in any way advance the interests of the Irish people. What was never explained by the "No" side was how, if we did vote "No", we would ever finance ourselves or get rid of our deficit.

On the doorsteps, Sinn Féin members were exceptionally disingenuous in what they said to people and on the reasons to vote "No". They encouraged people in my area, an area which relies heavily on State supports and where people rely heavily on family income supports to meet their daily needs, to vote "No". They went and knocked on those doors and encouraged people to vote "No". One story I heard was they went to the house of a person was a carer and stated that if the carer voted "Yes", the carer's allowance would be cut even further. That is being disingenuous with people and I believe that is morally wrong.

Sinn Féin needs to stop being involved in political opportunism. I am disappointed Deputy Tóibín has left the Chamber. The party's members need to stop putting the political advancement of their party ahead of the people who have elected them here. It was morally wrong to do what they did during the referendum campaign and they need to stop doing so. This was not the first time. They have been doing it endlessly and they need to stop it if they want to be taken seriously.

I, for one, do not take Sinn Féin seriously. I hope anybody who is watching this, or watches it repeated on Facebook, etc., understands the need to question whether he or she should take them seriously. If Sinn Féin wants to be in real democratic politics down here, it must start playing ball fairly and the way to start is by being honest and genuine with those who elected its members.

I stood on those doorsteps and because I was on the "Yes" side, I was limited in what I could say because I could only speak the truth. When one is on the "No" side, it is easy to say what one likes. The "No" side were unlimited in what they could say because they did not have to speak the truth alone. One need only look to the North. I am compelled to refer to this because we have referred to it endlessly but people simply do not appear to be listening. Those in Sinn Féin say certain things and give out about certain things down here. They called on people to vote "No" down here. I cannot understand why people take them seriously. I refer to one quote in particular. An advertisement appeared in theBelfast Telegraph. Pat Kenny referred to it during his one-to-one interview with Deputy Pearse Doherty. He asked why Deputy Doherty was talking about pay caps down here and rural schools being encouraged to amalgamate while they were doing the same in the North. There is one frightening piece of evidence which shows that they do not mean what they say. Sinn Féin issued an advertisement in the Belfast Telegraph seeking an adviser to the Deputy First Minister, Martin McGuinness, with a salary of up to £205,000, approximately €250,000.

If those in Sinn Féin are serious about politics here they need to start playing ball. They could start by being honest. If honesty means loosing one seat, I would rather that than maintain my seat and use it for political advancement. I offer one word of advice to those in Sinn Féin before I proceed: they should stop leading people up the garden path, stop being disingenuous and stop their auction politics.

We should bear in mind that we have a common cause in this area. We have shared responsibilities as part of a common currency area. We depend on our currency. It is the money in our pocket and the money that pays our bills and mortgages. Speculation about its future directly impacts on our economy and the lives of the people. Attempting to veto a fund designed to help countries in distress, as suggested by the "No" side, would have served no one's interests. I believe we voted for the stability of a shared currency last week and we have played our part in this regard. We are in uncertain times and the situation in Spain and other countries and the unknown losses in their banks has considerable potential consequences for us.

The lesson of how the banking crisis was handled here is that we must separate the banking losses from the State. In this regard, we now need a deal on our debt to reduce the burden we have taken on. This point was raised many times on the doorsteps. If this can be done through the ESM or by some means of sharing the liabilities we took on, it would help the State.

I welcome the comments of the Tánaiste, Deputy Eamon Gilmore, this week to the effect that the "Yes" vote strengthened our hand in negotiations on the bank debt and also on the growth agenda in Europe. We are not privy to what form these negotiations on the bank debt are taking. However, I appreciate that in negotiations one does not disclose one's strategy or broadcast one's every move. Anyway, I sincerely hope we see progress on this issue for the people. Whatever the outcome, the solution to Europe's banking debt will be a political solution and, therefore, we need to be at the heart of policy responses to the crisis. I believe the "Yes" vote has put us in that position.

It is also important to recognise the importance of the "Yes" vote in terms of our influence in Europe and on the future growth agenda, in which Fine Gael and the Labour Party believe. Political developments in Europe recently, including the French election results, have given added impetus to the growth agenda. There have been welcome soundings at European level about country specific jobs plans, better use of Structural Funds for job creation and, in particular, youth unemployment, an area of considerable interest to me. The political dialogue is changing to address these situations. There has been no sign to date of additional funds at European level to tackle the problems in individual countries, including the problem of youth unemployment in Ireland.

The unemployment problem in Europe, in particular the problem of youth unemployment, is critical. A recent OECD report stated that the proportion of European youths not in employment, education or training ranges from between 5% and 6% in countries such as Sweden and Austria up to between 16% and 17% in Ireland and Italy. This emerging divide in Europe should not be allowed to continue. A Europe with such a clear opportunities divide would shatter the idea of common cause or solidarity. New policies based on solidarity between European countries should be adopted to take these considerable challenges on board. This is why influence matters and why our "Yes" vote last week mattered. The result provides for Irish involvement in Europe to operate at full capacity, fighting for our recovery, jobs and growth.

Deputy Alex White

The normal parliamentary niceties do not usually extend to colleagues commenting on the progress of the debate and how long people have spoken for. Nevertheless, it is somewhat striking, if not nauseating, to recall that on the Order of Business this morning there were several war dances on the other side of the Chamber because of the amount of time afforded to the debate, because it was not long enough, because it was to be wrapped up today and that it was being rammed through and so on. Many of those due to speak on the other side of the Chamber this afternoon fell short of the time allocated to them. They are entitled to do so and I am unsure whether I will get through ten minutes. I may do so or I may wish I had longer to speak. However, it is somewhat hard to take.

Deputy Lyons referred to the requirement of honesty and basic straightforwardness. Perhaps it is too much to ask for when people come to the House on the Order of Business and call for extended time for debate but when that opportunity is not taken up subsequently. Deputy Doherty make a substantial contribution earlier. Deputy Tóibín spoke some minutes ago and said more or less what Deputy Doherty said earlier and then went off about his business. It is simply not credible for Deputy McDonald to engage in a song and dance about it. It is not honest. People may take the view that the public will not notice but people notice such things. Deputy Lyons suggested there must be a requirement of honesty and fair play but that is not happening in this debate.

This dishonesty is precisely what occurred and what was at the heart of the "No" campaign throughout the four weeks. The campaign was littered with misrepresentations. There is always a margin of appreciation in political debate. A given set of events can be interpreted in various ways by people with different political perspectives. This is understood since we live in a democracy. I can maintain that a certain course of events will ensue and another could say that is not the case and that something else will occur. However, certain facts arise in most debates, for example, what treaties actually state on the face of them.

Time and again during the past four weeks Sinn Féin made claims about the stability treaty and what it contained or otherwise in the teeth of what it actually reads. This was the case, for example, in respect of issues such as conditionality. The "No" side told the people that the fiscal rules were being placed in the Constitution at one stage. They are not. Over and over, Sinn Féin told the people that the Court of Justice of the European Union could fine countries for failing to keep to the rules. That is not true. The court has a role in respect of supervising the transposition of the rules but not in respect of compliance. These may sound like technical issues that may not be of interest to most people but they were misrepresentations of the truth by Sinn Féin.

I understand and accept that we may have different perspectives but I do not accept and I will never accept a misrepresentation or straightforward lying to the people in respect of what was put before them. It calls into question the credibility of any political party if that is the trade they engage in. On the first day of the campaign Sinn Féin cheerfully and willfully misquoted three professional economists. I never heard a word of apology about it. The party lifted half of what these people stated and put it forward as an argument to vote "No". There is a margin of appreciation in our arguments and I have often argued with Deputy Doherty on these matters. To misrepresent people, however, is fundamentally intellectual dishonesty and amounts to crossing the line for any political party to seek to do so, to do so and to try to get away with it. Thankfully, Sinn Féin did not get away with it. These actions have reduced the party's credibility, at least in my eyes and as a Member who perhaps was more willing to listen to and engage with Sinn Féin representatives than others. Perhaps that is understandable given other people's experiences with Sinn Féin in the past. I am open to Sinn Féin and all political parties and Members and I am happy to engage in free and honest debate. However, what they did during the past four weeks was anything but honest. It was profoundly dishonest and has changed my perspective and view on that party's willingness, ability and preparedness to engage honestly in the debate. It colours my view of them and ultimately, in time, I believe it will colour the views of the people in respect of that organisation and party. Of that there is no question in my mind.

What is the role of any parliamentarian, whether he is in government or opposition, when presented with a Bill introduced by the Government? It is to examine the Bill, read it, assess it and determine whether it is in the interests of the people who elected us to the House.

I have not heard any argument in this debate to suggest that making available a back-up fund in the eurozone, one which I hope will not be required by Ireland although that may be the case at some point, could run counter to the interests of Irish people. I accept that one could quibble with aspects of the European Stability Mechanism. I agree with the Government's decision to support the position articulated by the new French Finance Minister and others in recent days that the fund should be able to provide direct funding support to banks in circumstances which would, I presume, be circumscribed.

The Sinn Féin position is that it agrees to the amendment to Article 136 of the treaties and accepts in principle the idea of an emergency fund but wants five different things to be done to change the fund. It is foraging around to try to find a reason to oppose the ESM in what is another example of dishonesty. This is a case of Sinn Féin deciding first how it wants to vote and asking how it will reach a position where it can half credibly state to people that there is a reason to vote against the European Stability Mechanism. Its position is devoid of credibility, realism and honesty.

I will focus on a few issues. Sinn Féin believes an emergency fund should be established provided five conditions are met. When it makes proposals, such as one to provide direct funding for banks, it does so as if it thought them up. When one listens to speeches made by its spokespersons, one always hears the party has argued for this position or proposed that measure as if it had suddenly thought up these proposals or as if the Minister and Government had not been arguing and pressing for concessions during every waking hour.

Deputy Jonathan O’Brien

That is not the case.

Deputy Alex White

Deputy O'Brien does not have any idea what is taking place and his party has rendered irrelevant by its actions in the past four weeks-----

Deputy Jonathan O’Brien

The Deputy should not judge my party by his own low standards.

Deputy Alex White

-----in circumstances in which it is no longer - if it ever was - willing to engage in honest debate with other parliamentarians. It crossed a line in recent weeks and that will not be forgotten by many people. If it wants to engage in politics in an honest manner, it will have to stop telling lies, which it appears fundamentally incapable of doing.

Deputy Jonathan O’Brien

My party will not take lectures on honesty from Deputy White.

An Leas-Cheann Comhairle

Please allow Deputy White to continue without interruption. He has the floor.

Deputy Alex White

We listen to lectures from the Opposition benches all the time and normally we do not interrupt. I do not mind being interrupted if it is done to raise an issue to which I could respond. What is the alternative to making funding available under the European Stability Mechanism? Deputy Boyd Barrett is clear that his approach would be to default, refuse to pay and walk away. We know what credibility that proposal contains. Why does Sinn Féin not state that its position is also that we should default because that is what it amounts to? Deputies should note the language it uses. It states it argues for a write-down but never states what will happen if we do not secure a write-down. Would it simply continue arguing in favour of a write-down? What would it do if one is not provided? It throws in the phrase that it will burn one or two bondholders. Its position, in truth, is to call for a default. At least Deputies from the MLA have the honesty to say that.

Deputy Mattie McGrath

Who are they?

Deputy Alex White

I beg the Deputy's pardon, I did not mean to misrepresent the acronym. At least the ULA or United Left Alliance has the honesty to put forward its position on default. What is the Sinn Féin position? As I stated, it is to forage around as it tries to find a couple of excuses, all of which are devoid of credibility, to vote against the legislation because, by God, its Deputies want to vote against the Bill and will do so by hook or by crook.

Deputy Jonathan O’Brien

The Labour Party should support our amendments.

Deputy Alex White

That is pathetic.

Deputy Seamus Healy

I am pleased to have an opportunity to contribute to the debate on this Bill which we have been informed is in the public interest. It is odd that Second Stage of such important legislation is being forced through the House by means of a guillotine. This reckless decision is unfair to Deputies and members of the public. If the Tánaiste and leader of the Labour Party, Deputy Eamon Gilmore, were on the Opposition benches, the decision to use the guillotine would have given rise to an almighty row in the House. The Tánaiste, while in opposition, specialised in dealing in a very forceful manner with matters such as the use of the guillotine. However, he had a completely different tale to tell on the Order of Business. If I had listened to him with my eyes closed this morning, I could easily have mistaken him for a Fianna Fáil or Green Party Minister in the previous Government. Additional time should be provided to discuss this important Bill. This is a further example of the Government breaking a promise and reneging on a commitment.

It is important to set the Bill in context and one could not find a better or, more accurately, worse context than the figures provided in today's report by the Central Statistics Office on the 12 months to the end of the first quarter of 2012. Unfortunately, the report shows that this is a Government engaged in jobs destruction. In the past year, there has been a net elimination of 18,100 jobs in the economy. Government austerity is destroying jobs and despite the so-called jobs budget, jobs initiative and tourism initiative, it has managed to reduce the number of people employed in the economy by 18,100 in the past 12 months.

The CSO report also shows that the long-term unemployment rate increased from 7.8% to 8.9% in the year to the end of the first quarter of 2012 and the long-term unemployed accounted for 60.6% of total unemployment in the first quarter. Further, the seasonally adjusted unemployment rate has increased from 14.5% to 14.8%. Emigration is also significant and one third of young people are unemployed. Austerity has destroyed employment and will continue to do so because this Government and the preceding Administration extracted huge amounts of money from the economy, thereby ensuring that places of employment, including small businesses and high street shops, continue to close down. Austerity is not working and we now find the Government proposing more austerity measures with this Bill. It is not a bailout for the public in general or for lower and middle income families. This is another austerity measure whereby moneys can be accessed to pay bondholders, investment banks and the like. It is not a stability or a solidarity measure, but an austerity measure. Low income and middle income families will have to bail out the bondholders and the speculators, while very wealthy people will freeload on the backs of those families.

The ESM will have a board in place that will not be answerable to anybody. It will not be answerable to legal redress, to the public or to any political scrutiny. There is a possibility that it may cost us anything up to €11 billion. This measure is a method of ensuring the bondholders and the bankers are paid. The suggestion that ordinary people are being bailed out and will now have a facility to be bailed out is untenable. It is clear that when the EU and this Government refer to bailouts in general and under the ESM, we are bailing out bondholders and speculators. These bailouts involve a good Samaritan helping out a neighbour in trouble. Low and middle income families are being forced to pay the gambling debts of bankers and speculators. The very rich are freeloading on their backs.

There are alternatives and we put them forward in our budget submission last year. The super rich in this country have assets worth €239 billion. They pay no wealth tax and no asset tax of any kind. As the Christy Moore song goes, they are now richer than they ever were before. The Central Statistics Office has shown us that. In 2009 and 2010, the wealthiest 5% in this country earned additional wealth worth €46 billion. They have done well, but they are on an investment strike across Europe. There is €2 trillion uninvested in the EU and £750 billion uninvested in Britain, as well as significant figures in Ireland. Many of these people and their accountants and solicitors are now being thanked by effectively being employed and paid by NAMA.

I will finish on those few words. I will certainly not support the Bill.

Deputy Mattie McGrath

I am delighted to be able to speak on this Bill today. I am disappointed that it is being guillotined as I do not believe the guillotine is a proper implement to use on so much legislation. I was on the other side of the House for four years and I heard objections every day from the then Opposition to the use of the guillotine. I thought they were so disgusted with it that when they entered government, they would dispose of it or use it in very limited circumstances, but unfortunately almost every Bill has been guillotined.

While I do not have a problem with Deputy White's challenges to Sinn Féin policies, he claimed the Deputies of the Technical Group were hypocrites for opposing the guillotine this morning while not taking up their full time slots during the debate. I was not watching the debate so I do not know, but anybody can come in and speak for as long as he or she wants. I always try to fill my time slot and I often do not have enough time, but the Deputy was being high handed. He may not have been here during the last Dáil, but he was in the other House and he should know. A Member cannot just be black one day and be white the next. He is not in a position to lecture anybody, because the Government parties have broken every promise they made. The fire burning from the bondholders was going to be hotter than hell according to the Tánaiste, yet we now see the bondholders being protected and encouraged to engage in all kinds of practices and rewarded for it.

I came out for a reluctant "Yes" in the latter days of the debate on the treaty. Deputy White attacked people on the "No" side, but there were many disingenuous comments and bully boy tactics on the "No" side too. Somebody said to me that the ballot paper should have contained a "Yes", "No" or "Maybe". The Minister for Finance, who I am glad to see sitting here, said the budget would be much harder to frame if we did not pass it. He later said that we would have an easier budget if it were passed, so we look forward to that. There was innuendo and political spin right throughout the campaign and it was very hard for me to make up my mind. I have never voted "No" to a treaty so far, but I have learned to my cost that when the ink is dry on the treaties, they have not been much good to Ireland. As one who supported the Lisbon treaty the first and second time, I feel our fingers were burned. The Irish people are embittered by this Government because its parties promised so much. They did not need to make one promise during the lifetime of the last Government, of which I was a member for a long time, because people were sick of that Government as it had become arrogant in its third term. Unfortunately, the feeling out there is that this Government is as arrogant after only 15 months.

I asked the Taoiseach to keep Ministers like Deputies Hogan and Shatter away from the debate so that we would not lose it. I note that he did, but the Minister - big Phil as I call him - could not resist coming out on "RTE News" on Thursday night to show he had not gone away. He did this even though he still has not published the guidelines for the wastewater treatment systems, and even though he announced a consultation period of three months, yet people could not engage with him. The website was wrong and when my daughter had a problem with it, she called a number and was told she should not have called that number and was asked who gave it to her. The whole thing was a mess and the website had to be taken down. We now find the Minister is offering registration from April Fools' Day to June for €5.

I am now getting calls to my office from constituents, because big Phil is back and roaming the land like a Celtic tiger. People are being told they cannot register. The site for registration has been abandoned and is not functioning. People are being codded all the way to the bank.

Once again, I will vote, reluctantly, for the Bill. Throughout the referendum campaign, the Tánaiste, the Ministers for Finance and Transport, Tourism and Sport and many others said the treaty had nothing to do with banking. Deputy Alex White corrected Deputies and accused them of speaking about things that were not in the treaty. We were told repeatedly that the treaty had nothing to do with banking. When the campaign was over the line, and I commend the Government members on their hard work and on achieving a "Yes" vote, those members of the Government were full of glee and excitement. They got carried away and did a phone around. They did a telephone blitz of their friends to tell them what good Europeans we are and that we wanted a better banking deal. When they phoned around, however, they found they had very few friends, if any.

What happened in the Dáil yesterday morning was an outrage. The Taoiseach stonewalled all requests to divulge the substance of his phone call to Chancellor Merkel. Did Angela sing the Jim Reeve's song and say "Put your sweet lips a little closer to the phone, Enda", or whatever she calls him? Is that what he did? The Taoiseach once told us he and Chancellor Merkel had each other on speed-dial. Does he have her on M for Merkel and does she have him on NG for nice guy, because he is the best boy in the class? Did she pat him on the head and thank him for winning the referendum vote? Does she know about our referendum or is she even interested in what we are doing in Ireland?

There have been several mentions of the previous bank bailout. I spoke to the former Minister, the late Brian Lenihan, twice on the day the deal was signed. Tomorrow will be the first anniversary of his death, God rest him. I asked him to come home and leave it to them, because what he was signing was not a bailout but a clean out. We were forced to clean out our pension fund to the tune of €23 billion before we got a shilling, and our European friends charged us interest at nearly 3% more than the IMF.

I am worried about the lack of accountability of the ESM. It cannot be brought before any parliament or independent body. It will be another out-of-control quango. Ordinary people, small businesses, small farmers and working people are being crucified with banking debt while speculators and bondholders are getting away. The people are hurting and are very cross over this. It is not fair, just or proper.

Spain seems to be edging ever closer to getting ESM funding, and I hope it does. We should also get what we are entitled to because we voted for the bank guarantee and took the so-called bailout, although we should not have done so. I voted for the bank guarantee and I have regretted it every day since, because we were told lies by the banks. We are still being told lies by them.

I was glad to hear Mr. John Trethowan of the Credit Review Office say yesterday the banks are not lending. We had a discussion with him a couple of months ago when he said they were lending. They are not doing so. They are codding us all the way to the bank.

I was delighted to hear the Minister for Finance say last night that we would be back in the bond markets in three weeks time. I certainly hope we will, in whatever limited capacity, and I look forward to that. I compliment the Minister on his efforts. He has a difficult job. However, we cannot have austerity followed by more austerity. Our people are weary from it. Our businesses have flown from the land and the spirit of enterprise has been buried or kicked around. Law-abiding people who pay their taxes, pay their VAT on time and pay PRSI, insurance and pension contributions cannot get a shilling of credit. Their overdrafts are being withdrawn or they are being forced to convert them to term loans. Banks call this lending and report as much to the Minister and his officials.

There is a problem in the Department of Finance. Too many officials in the Department do not understand business or the real world. This is equally true of the current and previous Governments, because these officials are the permanent government. When I asked the late Minister who was with him on the fateful day of the so-called bailout, he named the three senior officials. I told him none of them had ever stood behind a counter or had ever had to set up and run a business. They were all career civil servants. I am not knocking all career civil servants, but we need business people in the Civil Service and in the Department of Finance to show us how to get out of this quagmire and to stand up to Chancellor Merkelet al. They know the value of a pound and of a euro, unlike those who can write cheques but have no accountability and can make an accounting error of €3 billion with no fear of reprimand.

Deputy Bernard J. Durkan

With the agreement of the House, I will share my time with Deputy Paschal Donohoe.

I am delighted to have an opportunity to speak on this Bill. Unlike other Deputies, whom I have listened to for the past two days, I believe the country has achieved a great deal in a very short space of time. We have achieved credibility, internationally and nationally. Our people have achieved a sense of resilience and have stood up and made decisions in recent times in very difficult circumstances. They made those decisions on the basis that they were the right as opposed to the convenient decisions, and that they were in the interests of themselves and their country. We have also stood up internationally and shown the way to many others.

For those reasons, the people expect certain things to follow. I do not agree with the analysis from those on the other side of the House that austerity, misery and continuous depression are the order of the day. The word "austerity" occurs in their every conversation. If it does not occur, it is invented.

At this stage, it does not matter how we got to where we are, but we are here. Given the position we are in, we must do certain things. The previous speaker referred to the former Minister for Finance, the late Brian Lenihan. He was in an appallingly difficult situation. He might have spoken to anyone, but the eventual decision was his. We must not forget that. He took a courageous and difficult decision at the time. He accepted responsibility for private, public and all kinds of debts. He gave sovereign approval to debts that had not been incurred on behalf of the State.

In everything that happened during the boom time, borrowing and lending criteria were laid down and they carried theimprimatur of the institutions of the State. They carried the guaranteed Irish symbol and an implied approval. I do not want to go into who did or did not do what and when. Things happened. Some Deputies on the other side of the House spend their time telling us these things were not done on their behalf. Unfortunately, they were. The people also gave approval. They did so three times in three general elections, the last one in 2007.

However we look at things, we were in a difficult situation and we had to work our way out of it. I knew the Minister well, as did other Members of the House at the time. He was in a difficult situation and he took a decision. That is what he had to do. Whichever decision he took, whether it was right or wrong, there would have been consequences. If we had defaulted, there would have been consequences downstream for our national and international credibility. If we did not, as was the case, there are consequences. We must accept responsibility, as we are doing, and move on from there.

What worries me most at this stage is that I listen every morning to a tirade of misery, negativity, ullagone and more of it. I hear that we are broke, that we are going nowhere, we have austerity and that there is an international conspiracy to do us down. I worry about the impact that is having on society. The voting public took a decision last week. Its decision was not based on fear. It was based on a value judgment. The public did not like to do the job it did. It does not like it, and we do not like having to do the job that is now thrust upon us, but the public did it and did it in the knowledge that we are not in an easy or risk-free situation. We are at a crossroads. We have a great opportunity to influence what happens in the European arena. As a country we have a great opportunity to focus on the issue that should be focused on throughout the European Union, both within the eurozone and without. The whole European project is weakened without the renewal of that focus.

I recall the meetings I had back in the early 1980s when I visited Brussels and met what remained of the then founding fathers of the European project and the degree to which and the passion with which they acclaimed their vision of Europe. That has changed. As my colleague, Deputy Donohoe, is aware, we spoke earlier today in the Joint Committee on European Affairs about how that focus has gone and things have changed. Renationalisation has emerged. I predict without any doubt that if the various European countries both in the eurozone area and without revert to individualisation and each one fends for itself we will end up in a serious position. By the same token, if we pretend we are not Europeans, that we can demand from Europe at will and expect a response on the basis that we are a small, poor country – we were the richest country in the world a couple of years ago – and we pretend to go down that road, our bluff will be called because every other European country will do the likewise. Never more so than at times of economic stress is it important for people to recognise the global position, the bigger picture and to cease to focus on their own small backyard patch. This is not the time for parochialism.

In the two minutes remaining, you will be pleased to know, a Leas-Cheann Comhairle, I will not go into all the debate which we discussed in the past three months because I do not think it is necessary. The issue has been debatedad nauseam. What we need to do now is to work with what we have, continue to put our shoulders to the wheel, stop whingeing and moaning about it and acknowledge that our people are carrying a heavy burden. It is important to them that we do that. We cannot, however, be portrayed nationally and internationally in the manner in which some Members - who will remain nameless but who are essentially on the opposite side of the House - have done so, whereby we are deemed to be incapable of recognising business reality and putting in place the measures necessary to ensure our recovery. Far from that, we should set out the grounds on which we can assist and motivate other countries throughout the European Union towards the kind of recovery that is needed.

Deputy Paschal Donohoe

I will focus on three themes in my contribution, the first being the stance taken by some Members of the Opposition on legislation due to be passed by the Oireachtas, whereby if they are not happy with the view of the people or of the Oireachtas, they believe the appropriate course of action is to challenge it in the courts. A dangerous precedent is being set in that if Members of the Oireachtas, who are deeply privileged in the first instance to be among of a small number who influence the development of law and vote on it, are not happy with the outcome of the process or where they perceive the will of the people to be, they take it upon themselves to march to the High Court and beyond to challenge the process of which they are a member, funded by the taxpayer. We have seen this in regard to the Bill before the House and in the recent action taken by Sinn Féin on the role of the Referendum Commission. If these Members are not happy with the outcome of a decision taken by a democratic institution of which they are Members, they then challenge it in the courts. It is a privilege to be a Member of this Chamber or of the Seanad. Everyone who is in the Houses has worked hard to attain membership but if one is not happy with the outcome or with where the debate is going we are elected to put forward our views. It is not a healthy precedent or correct to march into the courts to legally challenge decisions taken by the Houses of the Oireachtas because one fails to win the argument in the Chamber.

My second point relates to views I regularly hear from some Members of the Opposition on the element of conditionality laid down in the ESM. I refer to the idea that it is wrong that conditions would be laid down for accessing the European Stability Mechanism in the future. I say to those speakers, as I did during the campaign, that some of the money going into the ESM is from Irish taxpayers raised through taxes in the country, some of which we will have borrowed. The idea, therefore, that we would be happy to have our money spent elsewhere without conditions is not something we could reasonably expect the Irish taxpayer to accept or tolerate. If it is not acceptable to the Irish taxpayer why would it be acceptable to taxpayers in any other country? It is in our interest, as a country that is paying into this fund, to ensure there are terms and conditions on how the money is spent.

The final point I wish to emphasise relates to the use of the ESM fund in the future. Colleagues have referred to the fact that we are at a crossroads within the eurozone and the European Union. We are at a point I hoped we would never reach, where one country may well find itself with a banking system that is too big to be allowed to fail but is also too big to save by itself. We are also at a point where some European leaders who should know better by now are openly talking about the prospect of another country leaving the eurozone. All of that has got us to a point where the certainties of the past in terms of what could happen are out the window and, equally, the certainty of what the policy response should be has to be revised. If we do not do so the cost of the uncertainty and of being unwilling to examine new ideas in response to a radically new situation would be great not only for the European economy but for the huge political solidarity that still exists within the European Union. The ESM on which we are voting offers a vehicle for that new thinking to be embraced.

During the summer, allowing the ESM to lend directly to banking systems across Europe, including Ireland, will be essential. If we do not break the links between sovereign and national banking systems, we will break the links that bind the euro together. The euro breaking apart is a real prospect. Even with the full amount the ESM could have, it might not be large enough to save some of the sovereign economies affected by the crisis. However, it will have the capacity to support their banking systems. It will also have the capacity to ensure the mistake made in Ireland is not made elsewhere and allow the Irish situation to be fixed.

Other actions need to be taken in terms of the fund. It should have a banking licence in order that it might have the ability to act quickly in the banking crisis brewing in other countries.

I will conclude by emphasising some of the points I made during the debate on the European Communities (Amendment) Bill 2012 yesterday. Certain ideas were unthinkable 12 months ago because they were unnecessary. However, we have reached the point at which they are thinkable and necessary. For example, how might a banking union be put in place? The ESM will form a corner piece of that union and the time has arrived to consider such ideas. We must discuss and evaluate new ideas. For example, what might a fiscal union mean for this country and would we want to be inside it? This discussion will raise uncomfortable prospects for us. It will raise the need to examine the treaties to determine whether they provide the ideas and architecture to complete the euro project. There is one certainty - if we do not complete it and finally put in place the ideas and systems it requires, it will not weather the storm in its current form, given the challenges that lie ahead. We must face this certainty and act. I hope the ESM offers the lever that will allow European politics to move ahead of European and global economics. This will occur soon. If it does not, the cost will be too great for any of us to contemplate.

Deputy Dara Calleary

I welcome the opportunity to contribute to the debate on the Bill. I agree with much of Deputy Paschal Donohoe said. That the ideas under discussion were unthinkable one year ago is the reason we are in this crisis. Had the nettle been grasped long before now, we might not be at the precipice. In the past few hours Chancellor Merkel and Prime Minister Cameron held a joint conference. According to Reuters, Chancellor Merkel stated she was ready to act. The crisis has been ongoing since 2008 and one gets the sense from her remarks and the response to same that it is "Groundhog Day", in that people are always ready to act, yet there is a lack of decisiveness. I hope the establishment of the fund and all that goes with it, including the rules, is a start, but events will overtake it. Consider the evolving situation in Spain, in particular. The theme of the debate has been whether the fund will be large enough. This matter should be considered.

I welcome the "Yes" vote in last week's referendum and congratulate everyone involved in the campaign. Despite people's differences, some of which have been restated in this debate, the campaign was civilised and mature. We cannot escape the fact, however, that there was a low turnout. Regardless of the topic, as the country's Parliament, we cannot run away from the fact that just over 50% of the electorate believed voting on the issue to be worthwhile. This matter needs further consideration. In the aftermath of the Lisbon treaty referendum, there was a great deal of research into why people had voted or acted in a certain way. Will the Government conduct similar research on this occasion? In fairness, the referendum commission did a good job and provided accessible and understandable information. However, in the last few days of campaigning it was clear that many still believed they did not have a sufficiently proper understanding of the issues to enable them to vote. As representatives of democracy and regardless of the topic or the sides taken during the campaign, it would be worth the Government's while to conduct further research in people's lack of engagement in the campaign.

On a side issue, it is time to give up on voting on a Thursday. It belongs to a different era. We are now mature enough to vote at the weekend, be it on a Saturday or a Sunday. This would enable people to engage in the democratic process more easily than is the case.

The aftermath of the referendum has left a strange taste in my mouth. I campaigned on the basis that it was a fiscal treaty, separate from anything to do with our banking debt issues. This was the mantra of the Government and my party. Even though we were laughed and jeered at, we knew the mantra was that there was no link. However, within minutes of the "Yes" vote becoming apparent last Friday, the Government line as expressed by its most senior members - I am not referring to a Minister of State or a Government backbencher - was that it would help us to get a deal on the banking debt. They were like greyhounds out of the traps. The Ministers directly involved in the matter, Deputies Michael Noonan and Brendan Howlin, did not take that line, but a number of Ministers and others who should have known better did. Clearly, they lost the run of themselves following what was a positive result.

Like a contestant on "Who Wants to be a Millionaire", the Taoiseach telephoned all of his friends on Friday. From his inability to tell us what Chancellor Merkel said to him, it is clear she was not impressed. This point has since been stated by the German authorities. As of now, they do not believe there will be any movement on our banking debt. Regardless of on which side of the House Members are, everyone agrees it is the issue that is hanging over our heads the most.

Linking the two issues was disingenuous of those members of the Government. Unfortunately, this has been typical of some members of the Government, in that they constantly oversell their ability to deliver a deal and keep building expectations of a deal. On Friday there were soundings to the effect that a deal could be indicated as early as the next summit, but that suggestion crashed immediately. We were told there would be a deal when the promissory note was paid at the end of last October. We are still waiting for the troika's paper on our bank debt which was promised months ago. Whenever one tries to make a deal, one does not show one's cards. In managing people's expectations and building confidence the Government needs to apply the reins and be careful in its public pronouncements on a deal on our banking debt. Official pronouncements should be left to the Minister for Finance, Deputy Michael Noonan, and the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, as the Ministers dealing with the issue. They should be allowed to do the talking in public. It seems that whenever a Minister not involved in the process discusses it, he or she undermines our ability to get a deal, the context of which is changing.

The serious problem in Spain eased somewhat this morning, given that country's ability to sell bonds. However, there will be developments. If Spain does reach a deal, regardless of the type, we must be entitled to the same terms. If not, we are not in a European Union.

That has been the difficulty in this entire process since it erupted in 2008. The European Central Bank is running one process, while the political side of the European Union is running a completely separate one. The ECB is calling all the shots for those in the eurozone. Are we in a European Union or not? The ECB does not perceive the Union in the same way. This must change. If action is to be taken for one euro member state, the same entitlements should be available to another member state. One presumes that in a fiscal union the same rules apply to all members. Bluntly, if Spain gets a deal that is more lenient than the process we are going through, we are entitled to the same deal. If not, this is not a fiscal union, never mind a political one.

It seems there will be a date with destiny in two weeks when the health check of the Spanish banking system will be completed. There have been so many health checks of European banks that it is very hard to believe them at this stage. Bank stress tests in the European Union are like the boy who cried wolf. Fortunately, the BlackRock stress test of Irish banks finally came good. If this is a proper co-ordinated response, as we are led to believe, why are waiting for the Spanish banks to be stress-tested?

The mandate of the European Stability Mechanism must be expanded. We need to be ambitious and realistic from the start. We cannot set it on the seas, only to pull it back into harbour shortly afterwards to change it. We have to allow it to inject funds directly into failing banks instead of putting that cost on the back of the taxpayer, as we have done here. This would allow collective European-wide support in dealing with regional banking crises. If this is a currency and fiscal union, a proper functioning banking system is an essential part of it. The fact that we had to recapitalise our own banks and fund their losses for the sake of the euro means the State is paying down the debt. This is wrong. A proper currency union should ensure its member states share the burden.

We have to examine regulation on a pan-European basis. The European Union needs to take collective responsibility to ensure this does not happen again. The Governor of the Central Bank, Professor Patrick Honohan, recently contended that a centralised European banking regulatory system would not be affected by national blind spots such as property bubbles, as we have had here and in Spain, and would do a more effective job of supervising banks. However, he also said there was still a role for national monitoring and supervision to take account of national circumstances. National bank regulators will pick up the vibes and be in touch with what is happening in the local market. We need to have that local knowledge and presence, with a dispassionate European eye. An amalgam of these two elements, with sufficient regulation, should prevent a recurrence of recent banking crises. The ECB claims it has nothing to do with a regulatory role in bank supervision because the national central bodies fulfil this role. However, the ECB also told us we could not recapitalise our banks or burn the bondholders. It will not take responsibility for how we got to a certain point, but it will tell us how we should deal with it. If we are to learn properly from this, we need to enhance the regulatory system on a European-wide basis.

We need to revisit the need for a deposit protection policy across the eurozone. With bank runs occurring in Greece and, to a lesser extent, in Spain, deposits need to be protected by a European-wide guarantee in the same way borrowings are. The risk of contagion from a bank run would be sufficiently eliminated by such a move.

We must ensure senior bondholders in banks which go down take some of the hit. This obsession with ensuring they do not take a hit, instead putting the burden on the shareholders and the taxpayer as happened here, is morally and commercially wrong. It is like someone putting money on a horse and the ECB insisting he or she get his or her money back, even if the horse is still running one week later. One takes a bet; one hopes the odds go with-----

Deputy Róisín Shortall

Does the Deputy agree with that?

Deputy Dara Calleary

No, I am not proposing this in a partisan way, but the bondholders need to take a hit.

Deputy Róisín Shortall

It is a pity the Deputy did not say that at the time when the previous Government reached agreement with the ECB.

Deputy Dara Calleary

I was hoping to discuss this issue in a non-partisan way and we were doing so until the Minister of State came into the Chamber. If she wants to continue in that way, so be it, but that is my view three years down the road. This was the first country to enter a bailout programme, but we did not have the experience we are now having. The Labour Party parades itself and claims the last Fianna Fáil Government did not do anything. This is the party which told us during the general election that it would be Frankfurt's way or Labour's way. In the 15 months it has been in government it has been very much Frankfurt's way. We need to see it being Labour's way a little more and to see it putting on the green jersey that it tells us to put on. Is that what the Labour Party really believes or was it just a cheap election slogan to get into power at any cost?

Deputy Róisín Shortall

Hindsight is great.

Deputy Dara Calleary

Yes.

Deputy Róisín Shortall

The Deputy should not hide behind it then.

Deputy Dara Calleary

We are not hiding behind it. We are offering it as a suggestion for discussion in a constructive debate. That is what I always try to do.

Deputy Róisín Shortall

The Deputy should accept his responsibility.

Acting Chairman (Deputy Joanna Tuffy)

One speaker only, please.

Deputy Dara Calleary

We have not done what the Minister of State's party did, which was to run down the country at every opportunity it got. In the last Dáil the Labour Party took every opportunity, come hell or high water and in particular every Thursday, to claim the country was bust. It did not give a damn what damage was done to Ireland's reputation in order that it could move to the Government side of the House.

Deputy Róisín Shortall

Was it all the fault of the then Opposition?

Deputy Dara Calleary

The ESM has been debated sufficiently and in a united fashion for several weeks. Will it be large enough? We will not know until it is established. We are much better off having the fund and access to it. Whether we will need access to it in 2014 is probably beyond our control, given events elsewhere. It can be in our control only if the ECB and the European Union stand up to the markets and take some of the decisive actions needed. On the pain the people are enduring, there may be an end in sight if we can return to the markets in 2014. Otherwise, issues outside Ireland's control in other countries may affect our ability to return to the markets independently. Some of the suggestions we have shared with the Government could help us to achieve this and normality would return to the State finances as soon as was possible.

Deputy Peter Mathews

I wish to share time with Deputy Seán Conlan.

Acting Chairman (Deputy Joanna Tuffy)

Is that agreed? Agreed.

Deputy Peter Mathews

I, too, welcome the opportunity to speak to the European Stability Mechanism Bill 2012. There have been several legal challenges to the ESM. Deputy Thomas Pringle in Ireland has challenged its legality on constitutional grounds, arguing that it should be subject to a referendum.

In Germany, the challenge was brought by a former justice Minister on the grounds that it violates the budget control rights of the German Parliament. The Estonian challenge is based on the case of qualified majority voting in the European Stability Mechanism, ESM, decision-making processes, as it is argued that it violates the rights of smaller member states. There are three areas of challenge from three different countries, all dealing with the quasi-constitutional aspects of passing this.

The ESM is a fund that is behind the reality of what has occurred. Politicians will naturally tend to discuss and debate the areas where they have inputs on expenditures and revenue collection. For the past number of years, since the collapse of Lehman Brothers in America and the consequences through the financial system, they did not understand the imperative of considering all the various banks in the eurozone and the European Union, as well as the interconnection with America. As long as 15 months ago there was a credit freeze between the payments systems in the dollar currency and the euro. The United States Federal Reserve made arrangements with the ECB to provide hundreds of billions of dollars liquidity to enable payment flows between European and American banks, as well as European and American suppliers and exporters across the globe. This was a symptom of the total credit contraction that began as a result of the super credit expansion through the banking system, starting in the 1990s.

The size of the banking liabilities in the eurozone is massive; recent estimates are that there is over €60 trillion of liabilities in eurozone banks, which is about the size of world GDP. Those liabilities are matched by assets and the collectability and recoverability of those assets is now becoming increasingly doubtful. That is the problem. Investment banks, advisers in the creation of all this credit and inventors of derivatives in a world that became increasingly deregulated, had a free hand in a financial jungle. The impairment and collapse of certain banks has caused the problems for the sovereigns.

The scale of the problem emerging is huge. There are well informed and articulate commentators who have analysed the construction of the financial world over the past 20 years or more who are increasingly alarmed at the issue going out of control. As recently as yesterday, Mr. Martin Wolf was quoted as stating:

Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events. Perhaps the panic will vanish but investors who are buying bonds at current rates are indicating a deep aversion to the downside risks. Policy makers must eliminate this panic, not stoke it.

The politicians coming from the larger countries in the eurozone have been far too timid and ineffective while wringing their hands. That applies to their thoughts and actions. I have already noted how Mr. Helmut Kohl five months ago spoke about how the dark spirits of the past were not entirely dead. That is the individualisation that was mentioned by Deputy Durkan, with the attitude of competitive nationalism within the so-called community. Mr. Kohl argued that the ineffective behaviour of politicians in Europe could fail the 500 million European people, which is suffering varying degrees of youth unemployment across different countries.

If a small country like us has the ability to diagnose the disease, describe it, give a prognosis and bring about a method of financial management, we should stand up and not wait for reactions to bilateral conversations. Where there are fora, we should do what Khrushchev did many years ago and take off a shoe to bang the table and make the points. Otherwise, it will be like Korean Air, which had a higher than average rate of accidents because the culture demanded that pilots in training should defer to their seniors. When mistakes were being made in the cockpit, an assistant pilot would have been too scared - because of a deferential culture - to say that a senior pilot had made a mistake. The airline changed the culture so that assistant pilots could stand up with courage when a mistake was made by a superior, and the accident rate declined. We need politicians in the smaller countries not to be afraid and deferential to so-called senior people. We must step up to the microphone and make the points.

We had four visitors from the Bundestag recently before the finance committee. They were members of the German Parliament, and one was a former Minister responsible for the economy and technology. They made a presentation and took questions but I found it predictable and boring. They congratulated us on the result of last Thursday and indicated that we have shown a good example to the remaining countries which must ratify the treaty. They argued that there was a firm platform for moving forward and that Ireland was making great progress. They did not see much of our hardship, such as the increasing mortgage distress from the mortgage book implosion. They did not note the lack of questions to figure out what went on in the banking audits from the five years leading to the crash. These are tough but straightforward questions.

These visitors did not realise that €75 billion as a proportion of our GDP - the amount of private bank sector losses going on to our citizens - would equate to €1.2 trillion or €1.3 trillion going on the shoulders of German citizens. They did not understand that sovereign debt is not our problem but rather household and non-financial corporate debt. When those three components are added and compared with national income, which is more relevant to us, it is the highest rate in the world. They did not see that we are only at the start of a marathon of recovery. They did not know because we have not really got the message across.

Acting Chairman (Deputy Joanna Tuffy)

The Deputy has used half the time in the slot.

We are at a fork in the crossroads. Niall Ferguson, the contemporary economic historian, has said either we are courageous and articulate on how to make up the democratic and political deficit and get on with moving towards a banking union with a federal union of countries or the whole thing will unravel. The consequences of that could be the modern equivalent of what Creditanstalt did in Austria, even notwithstanding the gold standard, and the euro is the modern equivalent of the gold standard. Everything could go awry and astray.

Deputy Seán Conlan

Passing this Bill is the culmination of a process the Government has engaged in with the Irish people in an open and of frank discussion on the benefits and drawbacks of giving the green light to Ireland's participation in and being a signatory to both the fiscal treaty and the ESM treaty. After weeks of debate, the nation gave a decisive vote to proceed with the plan to restore this country to a state of economic prosperity and that we engage with our fellow members of the EU to build a stable Europe for our children, that we ratify the ESM treaty to ensure the stability of the euro is secured and, by extension, that the availability of funding at affordable interest rates is a certainty instead of an aspiration.

The ratification of this treaty and its implementation, which will hopefully take place in January, will lay the foundations for a European economy free from the budgetary mayhem that has caused so much pain and hurt to families in Ireland and across the European Union. It will remove the concept of less fiscally responsible member states visiting recession upon the entire euro area. It will, in time, deliver a European economy capable of providing the economic stability essential to encourage the growth and prosperity required to ensure that future generations can live peacefully in the knowledge their homes and jobs will not disappear overnight in another economic meltdown such as we have experienced.

In ratifying this treaty, we are putting in place an access route to affordable finance, should it be required. The very fact this support mechanism is in place should provide the international confidence to launch us successfully back on to the market in 2013 or 2014. The importance of international confidence in our ability to act rationally and responsibly is a major help to those institutions charged with the task of attracting inward investment and to those who have sustained their fragile growth figures through these harrowing times by excelling in the international marketing and the export of quality goods to the four corners of the world. To these people, who are the cornerstone of our recovery, it is important we lend every assistance and support and what better way to encourage them on to greater things than to provide the economic climate conducive to their successful endeavours?

In ratifying this treaty, Ireland is restoring its integrity and securing its position as a respected and proud nation willing to play its part in solving the economic problems facing the euro area and participating in the establishment of a fiscal policy capable of ensuring the European economy is never again subjected to such self-inflicted chaos. While offering my unequivocal support for this Bill, it is incumbent upon me to call for a broadening of article 15 to make provision for direct financial assistance towards the recapitalisation of the banks, whereby the arrangement would be directly between the bank in question and the fund, with no Government involvement and no laying of the burden of bank debt of an innocent population who are neither responsible for the banking excesses nor the banking collapse. These are the people to whom the banks have closed their doors and they should not bear sovereign responsibility for the recklessness of the financiers among us who took part in the orgy of great and self-enrichment. Let the banks borrow the money to replenish their funds and let the banks pay it back. These institutions offer no benevolence to those who fall on hard times, often incurred through the recklessness of the banking sector. It is morally wrong to inflict responsibility for banking debt on the public.

I understand the fiscal treaty and the ESM were not intended to deal with bank debt but we have heard calls for that since last week, and I call on everyone in the House to support the Taoiseach and Ministers in their endeavours to secure this policy change. This single measure would make a huge contribution to removing banking debt from a repayments budget and would be a huge boost financially and morally to a compliant people eager to restore their economic integrity and prosperity.

I listened to the tail end of Deputy Calleary's contribution and to Deputy Mathews's contribution. Deputy Calleary mentioned the concept of fiscal union but he was mistaken. We are not in a fiscal union; that is the problem with the eurozone. A monetary union was created in response to the political will to achieve that but those involved did not have the courage of their convictions to go down the route of the fiscal unity which is necessary to have any stable currency. I agree with Deputy Mathews that it is self-evident that if we want to solve the crisis at the heart of euro project, we need the ECB to act like a Central Bank and be a lender of last resort, to be the bank of default. We must ensure the debts incurred in the banking sector are transferred from people to the ECB. To achieve that we must have further centralisation of financial control. This is crunch time for the euro project. Do we believe as a people that fiscal union should be the end result of this project? There would be a problem with our corporate tax rate and other areas but it is time for politicians across Europe to have some courage and to spell out clearly what they want. For the euro project to survive in the long term, we need greater fiscal union. It is will be interesting to see if the politicians across Europe have the ability to make this possible or whether project will unravel in the near future.

Deputy Kieran O’Donnell

I welcome that people passed the treaty. It provides an absolute guarantee of access to the ESM fund.

The current situation in Europe revolves around Spain. From media reports, it appears that any rescue fund for Spain is being done as a banking rescue package as distinct from a sovereign rescue package. I would expect if such decoupling happens with Spain, any such solution should be retrofitted to Ireland, which has been the best boy in the class. We have made the targets.

Our sovereign banking debt of €63 billion is 40% of our GDP, seven times the education budget, four times the health budget and three times the social welfare budget. If we break it down, there is €20 billion with the National Pensions Reserve Fund and €43 billion of sovereign debt. The promissory note for IBRC, formerly Anglo Irish Bank, makes up 72% of that €43 billion. It is now around €30 billion. If we can find a situation where any solution is retrofitted to Ireland and we can decouple the sovereign debt and the banking debt, particularly the Anglo Irish Bank promissory note, we will bring our general Government debt to GDP ratio to the order of 90%. That ensures we become more sustainable and it will be easier to get back into the bond markets. For me, our sovereignty is absolutely critical and I want to see us back in the bond markets. For that, a key element is the level of debt of the sovereign in respect of the banks, none more so than IBRC. Anything that happens for Spain should be retrofitted for Ireland to ensure we can get back into the bond markets as quickly as possible and that we can retain our independent sovereignty and say "goodbye" to the troika.

I welcome the Bill and the vote of the people on the treaty. That provides an absolute guarantee, although many things are happening externally. Whatever is done for Spain, Ireland should receive the same benefit for banking debt.

Deputy Mary Lou McDonald

I have followed most of the debate and perhaps we should be flattered by the fact the Labour Party is more concerned with attacking us than dealing with the substance of the ESM. However, it is a mistake to guillotine the debate. Had more time been provided, perhaps we would have moved beyond some of that posturing and discussed the substance of the proposition.

Previous speakers welcomed the result of last week's referendum. It is from their point of view a positive expression of our further integration within the European project and lays the foundation for stability. Obviously, that is not a view I share. I believe it sent out precisely the wrong message at this critical time. It is no surprise the German Finance Minister, Mr. Schäuble, interpreted the result as a validation of European policies. That was always going to be the case. A bull-headed decision to stick with the politics and policies of austerity, which have so clearly and manifestly failed, is an even bigger mistake. Following the result, the Government, in the person of no less than the Taoiseach, suggested it opened up a window of opportunity in respect of a deal on our bank debt. Cold water, as I said earlier in the Chamber, has been poured on that but we are faced with the evolving situation in Spain. It is incumbent on the Government and on our public administration at every level to ensure this situation is used, leveraged and seized in every way to work to the advantage of this State. When an interest rate reduction was secured, it was on the coat tails of Greece, and it is not too far fetched to suggest any deal that might be struck with Spain will likely provide similar opportunity, but the Government must be proactive in this. It is not sufficient to be almost the wallflower of the piece and to hope it will come right and Spain will save our bacon.

We, in Sinn Féin, have made clear all along that we absolutely recognise the need for and support the creation of a permanent bailout fund. For this to happen legally, the Article 136 amendment to the European treaties is necessary. Last night, we voted in support of that amendment. For those whoad nauseam lay the charge at the feet of my party that we are against everything and for nothing and we will not support anything emanating from Europe, I point to the fact we have explicitly supported a change to the treaties to make legally possible that permanent fund. We did so even though the method of ratification of that amendment using the simplified revision procedure is not one we favour. We also took that decision mindful of the fact a court challenge taken by Deputy Thomas Pringle will be heard later in the month, but such is the necessity for this fund to be established that we supported the amendment, despite the circumstantial factors and misgivings.

We do not believe the ESM in its current form is fit for purpose. Many outside the Chamber have questioned, for instance, whether the size of the fund, at €500 billion or €700 billion, is sufficient to deal with the impending banking crises. However, leaving that significant issue aside, the main reason we are not prepared to support the ESM is it is posited on policies that have not just been failures but have been deeply damaging to the people and the economy of this State. I refer to the failed policies of austerity coupled with unlimited banking bailouts. Even a cursory glance at the state of the domestic economy, the low level of economic activity, the unemployment rate, forced emigration and the other issues with which we are familiar bears testimony to the fact so far the State and Europe have gotten it wrong. There are flaws in the ESM but a window of opportunity remains to put things right and to secure amendments to the treaty.

The Spanish Government and the Spanish system are asserting themselves proactively. They are not behind the door in stating categorically the needs of their system, economy and people. Our Government should follow suit. We want the Government to table amendments at the forthcoming European Council aimed at improving the design of the fund. I understand that yesterday the Taoiseach, while being evasive, conceded during Leaders' Questions there was the possibility of changes to the ESM treaty and we want the Government, on the people's behalf, to capitalise on that opportunity. We want explicitly stated in the treaty the option of ESM funds being used for investment in jobs and growth. This is very much in line with a broader and parallel debate that has unfolded since the French presidential election campaign, which in some respects was given a high profile by Francois Hollande who, along with others, made clear that austerity is not enough and a credible growth and investment strategy is needed. Everyone seems to have come on board in this regard since the French election. It is logical, not only from the narrow perspective of this State but also taking into account the rhythm at which the European debate has unfolded, that our Government can credibly seek to have this option of using ESM funds for growth and investment in jobs explicitly stated.

There needs to be an option for direct ECB funding of the ESM to provide the necessary firewall to stabilise the euro and, crucially, to limit the liability of taxpayers and individual member states. During the many years of crisis we have been in, a great deal has been said about the ECB and, at times, the bank has had a great deal to say. There is a common understanding the role it has played during the crisis has not only been inadequate but, in some cases, very damaging. We want the Government to address this matter head on and to argue in favour of the funding option from the ECB into the ESM. We also want a clause ensuring the programme countries such as Ireland are not required to contribute to the fund while in a programme. It seems bizarre that states in receipt of funding under a bailout programme or from this fund, when established, should also be asked to be contributors to the fund. By a simple exercise of logic and common sense, one can see that this does not add up. The capital liability of the State to the fund stands at €11 billion, with the expectation that more than €1 billion of this will be front-loaded this year, while we continue in bailout territory. It is something to which the Government of one of the programme countries should never have agreed under any circumstance.

Our fourth proposal is that a requirement for very strict stress tests and a write-down of toxic debt be a precondition for the use of ESM funds for the purposes of recapitalising banks, whether by way of direct recapitalisation or indirectly via loans to governments. Our experience of pumping endless billions of euro into toxic institutions has not only been damaging to the broader economy and society but also has not, after all, solved the problems in the banking system. The issue of toxic debt and the imperative of clearing the balance sheets must be met head on. It is wholly unacceptable to my party that the ESM should be used, either directly or indirectly, to pump hundreds of billions more into clapped out banking institutions.

Our final proposal is that the ESM treaty must provide for greater accountability both at European Union and member state level. We are also calling for the removal of the immunity granted to the fund and its board members.

These five proposals - the five deciding factors for my party - will form the substance of the amendments my colleagues and I intend to bring forward on Committee Stage. At this point we cannot support the treaty or the Bill. However, if these issues were to be resolved, we would revise our position accordingly. The treaty is not a done deal; on the contrary, it is very much open to renegotiation and the Government has a duty to secure a permanent funding mechanism that is fit for purpose. The objective of all of the exercises and efforts on the part of the Government and all of the hardship borne by citizens is, as we are told repeatedly, to balance the books and get the State match fit to return to the sovereign bond markets. We are all aware that there is a strong likelihood that we will be looking to a second bailout in due course and that the source of that bailout funding will the ESM, as and when it comes to pass. In that context, the question we must ask ourselves is whether there is any sense in sleepwalking from one bailout mechanism which keeps us in the doldrums, our bond yields high, our people out of work and so on into a second scenario which is essentially the same. That does not add up.

Every Member of the House and every person in the country wants us to be in a position, as Deputy Kieran O'Donnell said, to reclaim our economic sovereignty and re-enter the bond markets. The question is how that can be done. The evidence of recent years is that aggressive austerity and endless bank bailouts are not the remedy. We need something different. In establishing this permanent bailout mechanism we must be sure we get the diagnosis of our problem right and that the medicine, as contained within the ESM, will actually work. It is Sinn Féin's view that the Bill is deeply flawed. To reiterate, we absolutely support the need for an emergency fund, but we must get it right. Therein lies the challenge for the Government.

Minister for Finance (Deputy Michael Noonan)

I thank all of the Deputies who contributed to what has been a very constructive debate on the importance of this legislation and Ireland's ratification of the European Stability Mechanism treaty. The treaty is essential not only to facilitate in the public interest the financial stability of the European Union by establishing the ESM but also to ensure Ireland will have access to a credible funding backdrop should it ever be needed. That will be very important in terms of Ireland's re-entering the markets and leaving the EU-IMF programme of support. However, this is most definitely not to say, as some Deputies suggested, that the Government is effectively accepting that Ireland is heading towards a second bailout. Ensuring we have access to emergency funding as a safety net, were it to be required, is simply prudent management of the country's economy and aimed at creating stability in it.

The debate has raised a number of issues, proposals and queries to which I will attempt to respond, beginning with Deputy Pearse Doherty's comments on the negotiations of the ESM treaty. As I pointed out, the treaty set out in the Schedule to the Bill was signed by euro area member states on 2 February. The original version of the treaty was signed on 11 July 2011 but was subsequently modified to incorporate decisions taken by the euro area Heads of State and Government on 21 July and 9 December 2011. These changes are aimed at improving the effectiveness of the mechanism. Ireland actively participated in the negotiations on the treaty at Euro Group, senior official and technical level right up to the time of the treaty's signature. Moreover, we are actively participating in discussions on the guidelines for implementation of the treaty's provisions in order to ensure Ireland's best interests are represented and protected, as well as those of the euro area in its entirety.

Several Deputies raised the question of direct recapitalisation of the banks. We support proposals to allow European funds to recapitalise banks directly and will ensure that any such proposal advanced at EU level is in the best interests of the taxpayer. It is too early to make an assessment as to what mechanism will ultimately be arrived at in regard to the potential recapitalisation of the Spanish banking sector or to speculate on how such mechanisms could, if implemented, be retrospectively utilised in Ireland. It should be borne in mind that the recent concerns in the eurozone underpin the fact that the solutions to address the Spanish situation, as with the Irish situation, should be seen as part of an overall eurozone solution. We will continue to review the proposals that emerge in regard to the recapitalisation of the Spanish banks in order to ascertain whether any of the proposed measures would be favourable for Ireland. This would include potential alleviation of the cost to date of the recapitalisation of the Irish banks. However, the ESM treaty does not provide for the direct recapitalisation of banks, rather it provides for sovereigns to acquire loans which may be used for that purpose.

Ireland's share of the €80 billion of paid-in capital based on the contribution key will be just above €1.27 billion which we will pay in five equal instalments of €253 million. Unlike the European financial stability facility, there is no stepping-out facility under the ESM when members enter a programme of support and there is no question of such being introduced at this stage. Every member must, therefore, contribute its paid-in capital and there is no provision for exemptions. A number of Deputies suggested that programme countries should be allowed to step out but this is a demand which needs to be examined very carefully because if one steps out, one loses voting rights on any decision to use the facility. If one stays in as a full contributor, one has a full say on any use of funds used in Spain or elsewhere.

In regard to the capital structure, I wish to state the following which should be clear to all. The capital structure of the ESM has been put in place to support the borrowing and lending activities. If or when the ESM engages in programme funding, it will borrow money on the international financial markets and lend it to the beneficiary ESM member state. This is how the EFSF operates currently. The capital of the ESM will not be paid out directly to programme countries but will only fall to be called upon in the event that member states borrowing from the ESM default or that the ESM incurs losses in ESM operations.

I would like to pick up a number of other points, one of which was a kind of general demand by many Deputies in respect of growth and jobs. The House is aware that since coming into office, the Government has been working on a range of measures to boost employment and help stimulate economic growth. The first such measure announced by the Government was the jobs initiative launched in May 2011 which comprised a range of taxation and expenditure measures designed to help get people back to work. Most recently, my colleague, the Minister for Jobs, Enterprise and Innovation, launched the action plan for jobs 2012, a plan to rebuild the economy and create jobs through improving supports for job creation and businesses and removing barriers to employment creation across the economy. Further work to stimulate economic growth and create employment is ongoing. I would be happy to receive any proposals Deputies wish to submit in this regard.

It should be noted that public infrastructure is funded primarily in two ways - Exchequer financing, which is the bulk of the funding and which will amount to approximately €17 billion over the next four years, and public private partnership funding for particular projects which are suited to the public private partnership approach and which provide value for money for the State.

I am very keen that we look at how private sector funding to supplement our Exchequer investment could be attracted. PPPs have been used in Ireland for more than a decade, mostly in schools and roads projects where they give value for money and are affordable. The global credit crunch has had a significant impact on the PPP funding market which has, in turn, had significant negative consequences for the delivery of PPPs. The Department of Public Expenditure and Reform is actively exploring the potential to unlock additional moneys to supplement bank funding. That Department under the Minister, Deputy Howlin, is also examining, in conjunction with other Departments, how new financial instruments and other EU support mechanisms could help us to access private funding to support investment, growth and job creation.

A number of points have been made about the accountability of the ESM. The ESM will have a board of governors consisting of the Finance Ministers of euro area member states with the Commissioner for Economic and Monetary Affairs and the ECB president as observers. The ESM will also have a board of directors. Each euro area country will appoint one director and one alternate director. The board of governors will appoint a managing director responsible for the day-to-day management of the ESM. The managing director will chair the board of directors. The treaty includes provisions in Articles 28, 29 and 30 on internal-external audit and for a board of auditors which will also ensure accountability of the ESM.

A number of Deputies, including Deputies Michael McGrath and Pearse Doherty, spoke against the immunity provisions in the ESM treaty. The privilege and immunities contained in the ESM treaty are similar to those in, for example, the treaties underpinning the United Nations and the IMF. The purpose of diplomatic privileges and immunities is not to benefit individuals or, indeed, in this case the ESM but to ensure the effective performance of the functions of the ESM. In the case of the ESM, we believe the immunities are justified in the same way they are justified in the IMF or the UN.

I reiterate my earlier words that it is now time for unity among euro area countries to ensure financial stability within the euro area. Ireland must play its part and stand in solidarity with its fellow euro member states in the interests of this country and the stability of the euro area as a whole. I thank Deputy Michael McGrath for indicating his party's support for the Bill and for Ireland's ratification of the ESM treaty. The Government equally shares Deputy McGrath's hope that we will not have to avail of the ESM but it is important that we have that safety net or insurance policy in place to give certainty to the markets if required. I would like Deputies to support the Bill.

Sinn Féin's position is not logical. Several Deputies, including Deputy Mary Lou McDonald, assured the House that they are very much in favour of a bailout fund and that they would like to see such a fund put in place but said they are not happy with some of the provisions in the Bill and that they will seek to amend them on Committee Stage. They support the principle of the Bill, which is about establishing a bailout fund and which we have discussed on Second Stage but they will vote against it on Second Stage. If one was to follow the logic of their position, they should support the Bill on Second Stage and seek to amend it on Committee Stage and call votes then.

Question put:

The Dáil divided: Tá, 91; Níl, 25.

Tá

• Bannon, James.
• Barry, Tom.
• Breen, Pat.
• Broughan, Thomas P.
• Browne, John.
• Bruton, Richard.
• Burton, Joan.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Calleary, Dara.
• Carey, Joe.
• Coffey, Paudie.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Creighton, Lucinda.
• Deasy, John.
• Deering, Pat.
• Doherty, Regina.
• Donnelly, Stephen S.
• Donohoe, Paschal.
• Dooley, Timmy.
• Dowds, Robert.
• Durkan, Bernard J.
• Farrell, Alan.
• Feighan, Frank.
• Ferris, Anne.
• Fitzpatrick, Peter.
• Flanagan, Charles.
• Flanagan, Terence.
• Fleming, Sean.
• Griffin, Brendan.
• Harrington, Noel.
• Harris, Simon.
• Hayes, Tom.
• Heydon, Martin.
• Humphreys, Heather.
• Humphreys, Kevin.
• Keating, Derek.
• Keaveney, Colm.
• Kelleher, Billy.
• Kenny, Seán.
• Kirk, Seamus.
• Kitt, Michael P.
• Kyne, Seán.
• Lawlor, Anthony.
• Lyons, John.
• McConalogue, Charlie.
• McEntee, Shane.
• McGinley, Dinny.
• McGrath, Mattie.
• McGrath, Michael.
• McHugh, Joe.
• McLoughlin, Tony.
• McNamara, Michael.
• Maloney, Eamonn.
• Mathews, Peter.
• Mitchell O’Connor, Mary.
• Mulherin, Michelle.
• Murphy, Eoghan.
• Nash, Gerald.
• Neville, Dan.
• Nolan, Derek.
• Noonan, Michael.
• Nulty, Patrick.
• Ó Cuív, Éamon.
• Ó Fearghaíl, Seán.
• Ó Ríordáin, Aodhán.
• O’Dea, Willie.
• O’Donnell, Kieran.
• O’Donovan, Patrick.
• O’Dowd, Fergus.
• O’Mahony, John.
• O’Reilly, Joe.
• O’Sullivan, Jan.
• Perry, John.
• Reilly, James.
• Ryan, Brendan.
• Sherlock, Sean.
• Shortall, Róisín.
• Smith, Brendan.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Timmins, Billy.
• Troy, Robert.
• Tuffy, Joanna.
• Twomey, Liam.
• White, Alex.

Níl

• Adams, Gerry.
• Boyd Barrett, Richard.
• Collins, Joan.
• Colreavy, Michael.
• Daly, Clare.
• Doherty, Pearse.
• Ellis, Dessie.
• Ferris, Martin.
• Flanagan, Luke ‘Ming’.
• Fleming, Tom.
• Healy, Seamus.
• Higgins, Joe.
• Mac Lochlainn, Pádraig.
• McDonald, Mary Lou.
• McGrath, Finian.
• McLellan, Sandra.
• Murphy, Catherine.
• Ó Caoláin, Caoimhghín.
• Ó Snodaigh, Aengus.
• O’Brien, Jonathan.
• O’Sullivan, Maureen.
• Pringle, Thomas.
• Ross, Shane.
• Stanley, Brian.
• Tóibín, Peadar.

Tellers: Tá, Deputies Emmet Stagg and Joe Carey; Níl, Deputies Aengus Ó Snodaigh and Richard Boyd Barrett.

Question declared carried.