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Dáil Éireann díospóireacht -
Thursday, 14 Feb 2013

Vol. 792 No. 3

Promissory Notes: Motion (Resumed)

The following motion was moved by the Minister for Finance, Deputy Michael Noonan, on Tuesday, 12 February 2012:
That:
Dáil Éireann welcomes the restructuring of the promissory notes provided for the IBRC, based on the outcome of discussions with the European Central Bank;
— recognises the benefit of the restructured arrangement for the State and its citizens, particularly:
— the removal of the promissory notes which will be exchanged for long-term Government bonds, with an average maturity of 34 to 35 years, as opposed to the promissory notes' seven to eight year average maturity;
— the reduction in the State's general Government deficit of approximately €1 billion, 0.6% of GDP, per annum over the coming years, which will bring us €1 billion closer to attaining our 3% deficit target by 2015;
— the reduction in the State's cash borrowing requirement over the next ten years by €20 billion;
— the significant element of the interest payments on the Government bonds that is expected ultimately to be returned to the Exchequer in the form of Central Bank dividends, while these bonds are retained by the Central Bank;
— the substantial improvement in the State's debt position over time;
— the removal of the remnants of the former Anglo Irish Bank and Irish Nationwide Building Society from the Irish financial system;
— the housing of all "wind down assets" in one entity, the National Asset Management Agency, which should lead to greater efficiency in their workout;
— commends the Government on progressing the commitment "to secure a Programme of Support and solution to the banking crisis that is perceived as more affordable by both the Irish public and international markets, thereby restoring confidence, growth, job creation and the State's access to affordable credit from private lenders"; and
— supports the Government's continuing efforts to foster economic growth and job creation which, in tandem with ongoing discussions on the extended remit of the European Stability Mechanism, will further improve the State's debt sustainability.
Debate resumed on amendment No. 4:
To delete all words after “Dáil Éireann” and substitute the following:
"recognises that the replacement of the promissory notes provided to the Irish Bank Resolution Corporation, IBRC, with long-term Government bonds announced by an Taoiseach on Thursday, 7 February 2013 provides important benefits to the State including:
— a reduction in the general Government deficit of approximately €1 billion per annum over the coming years and will bring the State approximately €1 billion closer to attaining the 3% general Government deficit target by 2015; and
— a reduction in the State’s cash borrowing requirement over the next ten years by €20 billion by virtue of paying interest only on Government bonds rather than capital and interest on the promissory notes;
acknowledges the considerable efforts made in recent months by those who negotiated on Ireland’s behalf including the Minister for Finance, the Governor of the Central Bank and officials from the Department of Finance and the National Treasury Management Agency;
calls on the Government to use the €1 billion gain on the general Government deficit to ease the planned budget adjustments and to invest further in job creation measures without compromising the achievement of the 3% deficit target by 2015;
notes that the Government has not sought or received any write-down whatsoever of the legacy debt associated with the rescue of the former Anglo Irish Bank and Irish Nationwide Building Society;
notes that the Euro Area Summit Statement of 29 June 2012 reaffirming the imperative need to ‘break the vicious circle between the banks and the sovereigns’ has not been implemented in this case;
notes that the conversion of the promissory notes to long-term Government bonds means that there will be no further easement of this debt as a result of evolving European policy;
believes that the Central Bank should be permitted to retain the Government bonds for longer than the period agreed which would yield additional savings to the State;
calls on the Government to publish a detailed analysis of the full impact of the deal on Ireland's debt and deficit figures over the full course of the deal including, for example, sensitivity analysis for varying interest rates on the Government bonds and possible payments to the National Asset Management Agency to cover any shortfall - should one arise - following the sale of IBRC assets by the special liquidator; and
believes that the justice of Ireland's case deserves further relief from the impact of bank-related debt and, in particular, that the Government should be seeking to have the cost of bailing out AIB, Bank of Ireland and Permanent TSB lifted from the shoulders of the State through the European Stability Mechanism."
- (Deputy Michael McGrath).

I ask Members to reduce the noise level. Perhaps they can continue their conversations outside the Chamber.

After the Christmas break, Ministers made it clear that the proposal to pay €3.1 billion was not on, as we simply could not afford such a payment. I acknowledge that many people, including Members of this House, would argue that this note should never have been honoured and paid. Unfortunately, the last Government's solemn undertaking of September 2008 meant we were obliged not to default and thereby ruin Ireland's reputation, which has been carefully enhanced by the Taoiseach and the Tánaiste since this Government came to office in March 2011.

I welcome the reduction of approximately €1 billion in the State's general Government deficit, which will bring us €1 billion closer to attaining our 3% deficit target by 2015. Further cuts and tax increases are still being considered by the Government to further reduce our budget deficit in 2014. It is fair to say that this task will be easier as a result of last week's deal. I hope the Ministers, Deputies Noonan and Howlin, will consider some options that would not have been open to them without this deal. The State continues to spend €1 billion more each month than it takes in, which is a problem even after the agreement of this deal. Many people, including public representatives, are choosing to ignore this state of affairs. This is another leftover from the previous Government, which decided to pay for public services with unsustainable taxes, mainly money generated from the property bubble.

The reduction in wages and the rise in unemployment to over 14% is having an impact on demand for goods and services. As a result, we have poor growth and a very sluggish domestic economy. The cost of our social protection budget - over €40 billion - further complicates this Government's efforts to reduce the budget deficit. This week's positive news from a ratings agency is encouraging for Ireland's economic outlook and vindicates the Government's work. I am sure many Members of this House share my significant concerns about the lack of growth in the economy.

I represent a very mixed constituency. It extends from Sligo, which is a gateway city, to the most rural parts of north Leitrim. The common denominator across the many different issues that arise in such areas is the lack of employment opportunities. The reduction in the spending power of people in the local economy is resulting in a dramatic decrease in the footfall of small commercial businesses, mainly in the services sector. The difference between the revenue receipts and the costs of such businesses is often too much for them to bear.

One can ask what difference this deal on the promissory note will make to this sector given the fact that less tax and fewer cuts are required because of the deal and the consequent savings, which will certainly be a help, although more is required.

I would like the Minister for Finance, alongside the Minister for Jobs, Enterprise and Innovation and the Minister of State with responsibility for small business, to look at ways of boosting the domestic economy. There are many demands on this Government going forward but this is in an area that needs attention. The Minister, Deputy Noonan, has more battles on his hands in terms of our overall banking debt and that will be a battle fought in the same way as the one on the promissory note. Based on this form, the Minister will have the confidence of the House in these negotiations.

I listened to some of my Fianna Fáil colleagues highlighting the issue of the many homeowners in mortgage distress and in fear of losing their homes. I heard the words last weekend of Professor Patrick Honohan, who has put it to the banks to deal with this issue. We need to get a clear picture and grasp the nettle that the banks have serious issues pertaining to a level of bad debt. The Governor believes this will mean that people will not lose their homes but will sit down with the banks and work out a payment plan, and they will make some effort to pay. I welcome this statement. This is a major issue for so many people. I hope to see some injection of reality from the banks when they are dealing with people who feel vulnerable. However, I find it hard to take lectures from the Fianna Fáil party on this issue when, while in government, it dispensed with bank regulation and overheated the economy, which gave us inflated property prices, and it presided over an economy that lost its competitive edge.

Debt write-down is a cry of the Opposition. In my view, its members were being disingenuous by letting some people think we were going to get debt write-down. They knew this was never going to happen because of what the previous Government signed up to. We all know this was a mistake. Reneging on this would have serious implications for the cost of borrowing and we are now in the final lap towards getting out of the bailout and back to the markets, which a goal all of us in this House long to achieve.

I welcome the opportunity to speak. I compliment in particular the Minister for Finance, a fellow Limerick man, on his negotiating skills, which have brought us to this stage. I know members of the Opposition are trying to find something wrong with this, as they have to, given that that is their job. However, up to now, what they have found is what they would have read in the back of The Beano or The Dandy. To be honest, this proves it is opposition for opposition's sake - the same old story.

Looking at this in the immediate aftermath of last week, a member of the ECB governing council who sat down to watch the Oireachtas debating the deal which the ECB had noted might have been surprised. After the Taoiseach and Tánaiste had sat down, the next speaker was the leader of the party that had foisted this on top of us, looking for something to hang his hat on. Then, a group of people drew a name out of a hat to find someone to find fault with this. It would not have inspired much confidence in people looking in from the outside, although they would have said that at least we had a stable Government negotiating on our behalf and that, as most commentators have said, we got the best deal possible.

With regard to the Opposition, I make the following point in all sincerity. If the leader of the Fianna Fáil Party thought it was important enough to give a mealy-mouthed apology to the people of this country at his Ard-Fheis, he should use his Private Members' time once every three weeks - he has had the opportunity for the last two years to do this - to come into this House and give a full and unequivocal apology to the people of this country for wrecking our economy. If he did that, he would be showing some semblance of humility and empathy with people who have been saddled with absolutely penal debt thanks to the actions of the Fianna Fáil Administration, which we now have to unravel. He would also be showing some degree of leadership whereas, to be honest, leadership has been totally lacking on the Opposition benches.

We might contrast this with the manner in which the Taoiseach, in particular, and the Tánaiste have undertaken their work in the last two years by quietly going around Europe and building up a network of the friends, which Ireland was sorely lacking, again thanks to the members of the previous Administration's attitude to, for example, the Council of Ministers, to which they might or might not turn up, sometimes sending a civil servant instead. Our reputation was at rock bottom. In the scale of things, given that it took 14 years to wreck our reputation, to take two years to rebuild it is commendable. We have managed to bring the ECB and the 17 governors from the individual member states, as well as the broader 27 member states, to a consensus that what had happened in Ireland was wrong and what the previous Administration had led us into was wrong. To unravel all of that was, I believe, a good deal for Ireland.

There are no capital payments until 2038 and 1% interest until then. If anyone borrowed money from their local credit union or bank on that basis, they would come out of it saying it was not a bad deal. People have said that what we did last week converted the debt into sovereign debt. It did not. It was sovereign debt from the day the promissory note was issued, given that the previous Government was clearly saying "We promise to pay". What could that be other than sovereign debt on behalf of the people of the State? Much of the comment that has been thrown around is, I note, from both the extreme right and extreme left of the Technical Group in particular. The two have moved so far apart that, some day, they will actually meet each other coming back. It is really scraping the bottom of the barrel.

The worst part of what the members of the Opposition have done in showing their hand is that not only did they not expect the Minister for Finance to get the deal he got, they actually hoped he would not get it. In my or anyone else's language, that is not just disloyalty to the country; to hope the Government fails is bordering on selling the country in a very treacherous kind of way. The Minister has made it perfectly clear - this comes from the agreement the Taoiseach managed to secure in June last year with the European Heads of State and Government - that this separation of sovereign debt from banking debt needs to be progressed into the future.

Staff members of IBRC have been in contact with me and, I am sure, with other Deputies. It is very important that we, as a House, do not lump the middle and lower echelons of IBRC and the former Irish Nationwide and Anglo Irish Bank into the category containing those who landed those institutions in trouble. I implore the liquidator - and the Minister, if he has any influence, although I realise this is at arm's length - to ensure the ordinary decent staff of that bank are accommodated and looked after. It was not their fault the Irish State was saddled with the debts of Anglo Irish Bank.

On a further important point, the people of this State want to know that the investigations into what happened leading up to the collapse of Irish Nationwide and Anglo Irish Bank will continue and that the resources of the State are put 100% behind it. This is part of a three-pronged approach - the resolution of the promissory note, the separation of banking and sovereign debt and, more importantly, the public response to ensure that those people - be they in politics, banking or regulation - who brought this country to near financial ruin get their day in court, and that the people of this country see justice served. Then, and only then, will we have a conclusion to this sorry mess once and for all.

I am glad to have an opportunity to speak on this particularly important issue. I was just thinking about 29 and 30 September 2008, when some of us were sitting on the other side of the House and the proposal was brought in by the then Government to the effect that a bank guarantee was to be undertaken on behalf of the Irish people. Some of us had very serious concerns about it. When people say Fine Gael voted in favour, it is true that we did, although we did not all agree with it. It is also true that the Government of the day had a working majority and did not need the Opposition to help it out, so claims that the Government was in any way assisted by the Opposition on that day are untrue.

I cannot understand why the Government of the day was looking for the Opposition to support it, given it had a full working majority itself and, in everything it had done in every budget before that for the previous 15 years, it never appealed to the Opposition once to support it or help. We know why that is the case and you know too, a Leas-Cheann Comhairle, although confidentiality forbids you from disclosing that kind of thing.

The Leas-Cheann Comhairle is not part of this debate.

I congratulate the Government and everybody associated with the deal - civil servants, the Taoiseach, the Tánaiste and the Ministers for Finance and Public Expenditure and Reform. The confused Members on the other side of the House have been predicting doom and gloom for the past two years, said it could never happen and that there would be no write-down. They called for a write-down of the capital, knowing full well that they had entered into a firm bond to repay. They met the troika, accepted the conditions laid down and were lucky to be able to walk away with this at the time. Deputy Billy Kelleher who is leading for the Opposition this morning is a very nice guy and I am very fond of him, but I am getting very worried about him because he seemed to be hallucinating. He seemed to be of the opinion that there was no community gain from this settlement, when there is a big one. The biggest of all is the possibility that there will be space for growth, the one thing missing from our economic equation in the past four years. There is now space and room for the country to grow again, the economy to move upwards and jobs to be created, as well as less room for cynicism.

Members on the other side of the House of all parties who have been predicting doom and gloom for the past two years were wrong in each and every one of their prophecies. They predicted and encouraged the fall of the euro. They suggested people should buy other currencies to be safe, but they were wrong. They predicted economic downfall and implosion, but they were wrong again. They predicted everything that could have happened and fed a continuous tirade to cause depression among the people through the media to such an extent that the people began to believe them. Fortunately, the Government saw the people through the gap, stood steadfastly behind them, took seriously the undertaking it had given them two years ago and negotiated hard in the European Union. Remember what we were told. We were told the Government did not know how to negotiate, that it was too wishy-washy and that it was not strong enough in the negotiations. Well now we know. It is a great relief to the people who have borne the burden of what has been foisted on them. They have done so valiantly and with great difficulty, but they have stood up to it. We must appreciate their integrity and the degree to which they have withstood the burden foisted on them.

The Opposition has constantly harped on recently about why did the Government not seek a write-down of the capital. How many times have we heard this? How many times have we heard speeches at public meetings and protests all over the country about the household charge and increases in taxation? At the same time, the people concerned were calling for a write-down of the capital. I challenge the Opposition to tell us the lending institutions its members have frequented to suggest they write down the capital borrowed last year, the year before or in the past ten years and that they want a continuous subsidy from them for the next five years in order that people will be able to pay their way. The point I am making is that some Members on the opposite side of the House do not seem to understand we have had a budget deficit for several years which must be addressed and that the previous Government entered into an undertaking to bring it down. The Government correctly decided to go along with the agreement to bring it down to 3% of GDP. We must do this. Members on the other side of the House confuse this with austerity, but it is good housekeeping. If it happens to be seen as austerity, that is unfortunate, but we are trying to recover the ground lost in a period of irresponsibility. It is a sad way to be, but that is the way it is.

Congratulations are due to the people, the Government and our friends in Europe who all stood together as one to try to bring about a solution to part of the problem the Government and the people have inherited. There is more to do. I do not want to paraphrase what a famous politician said; I certainly will not go there.

Suffice it to say a great deal of work has been done that need not have proved necessary in the first place. A great deal more remains to be done and it will be done on this occasion.

Debate adjourned.
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