Economic Situation: Statements

I welcome the Minister of State, Deputy Brian Hayes, to the House. I congratulate him and wish him the best of luck in his new position as Minister of State.

Thank you. It is wonderful to be back in Seanad Éireann and to see so many colleagues here for these important statements on the economy. I understand this is the last day of the current Seanad and I take this opportunity to wish those Senators who will not contest the election or who have decided to retire every success. Senator O'Toole, who is in the Chamber, has made an enormous contribution over many years and left a great legacy to this House and Irish politics.

I wish those colleagues who have decided to go into battle again and who have run around the country over the course of the past few weeks every success in next week's Seanad elections.

It is a great privilege to have been appointed as a Minister of State in the Department of Finance and in the new Department of Public Expenditure and Reform. As colleagues are aware, I have responsibility for the Office of Public Works side as well.

The mandate the new Government received brings an enormous responsibility for those of us privileged to have been given ministerial office. The mandate is a simple one. It is to do whatever we can to fix this huge problem we have all inherited in a way which tells the people the truth about the scale of the challenges we face and which is honest and up-front about the kind of decisions this country must take over the course of the coming years to ensure we can get back to a sustainable path of economic growth and that jobs will ultimately flow from that.

There is no magic bullet answer to these problems, as colleagues are aware, but what the new Government has done successfully in the past five weeks in government is instil some confidence that we can take decisions rapidly. We have communicated decisions to the public across the board about the necessity to get on to the next stage of recovery. That twin objective of being honest and up-front about those problems and speaking plainly about those issues, and being prepared to take decisions quickly, marks out new territory that we need to be in to bring the economic recovery we all wish close to hand.

I am pleased to be here today and in my remarks I will briefly take stock of recent economic trends before outlining the policies the Government is putting in place to support economic recovery and to maintain the public finances on a sustainable path. In terms of putting public finances on a sustainable path, I stress that the Government will be fair and will endeavour to cushion the impact of consolidation on the most vulnerable in our society.

As all Members know, the economy is in the midst of an extraordinarily difficult adjustment. Gross domestic product — the most comprehensive measure of economy activity in Ireland — continued to fall last year, the third successive year of declining activity. Economic activity has fallen by around 15% since its peak at the end of 2007, implying a substantial decline in our living standards. We have seen an adjustment in terms of our own public finance position of approximately €20 billion over that period.

I have made the point, as have other Ministers, that this country has gone through an enormous period of restructuring in terms of that public finance position. It is fair to say that despite the difficulties in countries like Greece and Portugal we have already seen an extraordinary adjustment of about €20 billion and, as colleagues are aware, it is the clearly stated position of the Government as set out in the programme for Government that the accumulated adjustments for 2011, the €6 billion, and for 2012 have been clearly stated to the international community and that we intend to continue on the path of trying to correct our public finance position to ensure the international community has a clear view that this country will fix the fiscal position which has been allowed to get out of kilter dramatically in recent years.

The recent data, however, provide some grounds for optimism. Perhaps most encouraging has been the performance of the exporting sectors, where an increase of 9.5% was recorded last year, the strongest rate of growth in a decade. The broad-based nature of the increase in exports is also noteworthy. On foot of the strong export performance, the current account of the balance of payments — essentially our trade and income balance with the rest of the world — has moved into surplus. Ireland as a whole, therefore, is once again paying its way in the world.

Foreign direct investment inflows have also recovered, with the bulk of these inflows being in high technology sectors, which is where our comparative advantage lies. Several well known multinational firms have recently announced new investments in Ireland, generating employment in high value-added, knowledge-intensive sectors. They include Intel, Google, eBay, Facebook and many others. I see that as a strong vote of confidence in the economy and its future.

While our international reputation has suffered in recent times, it is also fair to say that we retain the key underlying strengths which make us one of the most attractive locations in the EU for mobile, direct investment flows. All in this House would endorse the Government's strategy concerning the 12.5% corporation tax rate. It is a key growth driver in the economy and any changes would hamper our ability to get ourselves out of the current difficulty.

The impressive export performance and the increase in FDI inflows reflect, in no small part, the significant improvements in competitiveness that have taken place in recent years. A substantial realignment of unit labour costs relative to those in our major trading partners has taken place, while consumer price inflation has been below that in the rest of the euro area since the beginning of 2009. Moreover, the necessary adjustments to our cost base have occurred over a fairly short period, demonstrating the inherent flexibility of the economy. This adaptability is a beneficial feature of the economy, and has helped to differentiate us from other peripheral economies in difficulty.

The Government will maintain its efforts to secure further competitiveness improvements, in order to strengthen our economic recovery based on boosting exports and investment. While the recent information flow on the exporting front has been encouraging, unfortunately the same cannot be said about internal demand. Conditions in this area remain weak, as excesses that were built up during the bubble period remain to be unwound. For instance, the downsizing of the construction sector, the necessary fiscal consolidation and the repair of household balance sheets are all continuing to depress domestic demand. It is as if we have two economies because exports — which traditionally are not job rich compared to the local domestic economy — are flourishing and showing extraordinary signs of growth. Meanwhile, we have an internal economy which effectively is not working because people are afraid to spend and make investment decisions. At a time when people are saving as never before, we effectively have two economies — a domestic one that has not recovered and an export-led one that is leading the way. The objective of all the Government's decisions taken, and to be taken, is to bring some confidence back to the economy in order that people will be encouraged to spend again, making small investments in their homes or businesses.

The Government's other task is to ensure that the banks' restructuring plans are implemented along with the €30 billion investment in the next three years. We must be honest and blunt in saying that there has to be a political imperative from the Department of Finance to the Central Bank and everyone else involved to ensure that the lending capacity, which will soon be put at the heart of these over-capitalised banks, needs to be driven to make sure that credit lines are there for domestic and business borrowers. That is the only way we will shock the economy into having the confidence we all hope for.

The contraction in activity has taken a severe toll on the labour market where the unemployment rate has almost tripled since 2008. Of particular concern is the increasing drift from short-term to long-term unemployment — the latter now makes up half of all those who are unemployed. We know this is happening across our constituencies, particularly with young men, when we look at the shocking statistics concerning the numbers of people who cannot find work.

Turning to the public finances, it is clear that this is an area which will continue to occupy a considerable amount of the Government's time and energy for the foreseeable future. Two key issues need to be addressed: first, the deficit must be reduced; and, second, the budgetary architecture needs to be improved. As regards the deficit, the situation appears to have stabilised. Data for the first quarter of 2011 were broadly in line with expectations. The end-quarter fiscal outturn was also in line with the performance criteria set under the joint EU-IMF programme of financial support, with the targets for the Exchequer primary balance — that is, the Exchequer balance excluding debt interest expenditure — and net national debt being achieved.

Last week, the troika acknowledged that at the end of the first quarter of this year, the fiscal outturns were well within the target limits. Notwithstanding this stabilisation, it is abundantly clear that a large and unsustainable deficit remains. As most of this will not be corrected by the economic cycle, further budgetary consolidation will be required if the State's spending and revenues are to be more closely aligned in the coming years.

The Government is firmly committed to reaching the 3% of GDP deficit target by 2015 and is committed to implementing the necessary fiscal consolidation to ensure that this target is met. That sends a positive signal to the international community and those partners who are working with us on the financial difficulties we face, that there is a clear commitment that we want to reach a 3% deficit target by 2015.

It is abundantly clear that robust action on the public expenditure front is necessary to ensure that consolidation targets are achieved. In this regard, the Government has initiated a comprehensive review of public spending, which will form the basis for deficit reduction in the coming years. The challenge of the review lies in examining not only how we can spend less, but also how we can do more — in other words, it is about boosting productivity. The review also involves asking the question as to how we can achieve our policy objectives differently, as well as how we can be more effective and efficient. The objective of the process will be to provide the Government with a comprehensive set of options.

One of the most exciting decisions taken by the new Government in its first five or six weeks in office has been the comprehensive spending review. Previous Governments, through the Department of Finance, took the view that a percentage reduction in one Department should be sought without having regard to the various programmes which are run by those Departments and are ultimately accountable to the line Minister. If we are to reach our targets and achieve the necessary efficiencies, it must be led by Ministers in their Departments. Ministers need to have the confidence to go through departmental Estimates with their officials line by line and vote by vote to see exactly what is involved. They must ask themselves if particular programmes are required, can they be done better or can services be shared as a means of reducing ultimate costs. This review is the most radical departure in public expenditure in a generation because it puts the responsibility involved on the line Minister, and ultimately on the Dáil and the Seanad. If we are to get out of this hole we need a totally new way of budgeting with Ministers putting forward plans early. We must move away from this dreadful cloak and dagger budgetary process in which the Minister for Finance stands up in December with a great tome of wisdom, which has been leaked the previous Sunday. That approach is no longer good enough and it is not fit for purpose. We need a budgetary process in which information is in the public domain possibly four months in advance, in order that there can be an open and honest debate about the options facing Ministers. Such debates should be held in public rather than the smoke and daggers approach currently adopted. My ministerial colleague, Deputy Brendan Howlin, is dealing with this area on behalf of the Government. The comprehensive spending review is crucial to our recovery, as well as the reform agenda and ensuring that the State gets back on its feet again. The current budgetary process is not working and is not fit for purpose.

I would like to comment on the banking sector. There is a realisation that as regards the stress-test reports that have been published, there is a sense both locally and internationally that we are getting to the bottom of the banking problem. There is a sense that we have been told the truth about the potential scale of liabilities the banks will ultimately have to face. That is the first step on the road to restructuring our banks. The statement by the Minister for Finance in the Dáil last Thursday three weeks was about over-capitalising our banks to ensure they have higher capital ratios than Swiss banks in order that people can be assured their money is safe in them. The largest outflows of deposits have been on the capital side, not the retail side. The economy cannot function unless it has a functioning banking system. We have to ensure there is confidence in our banks and the decision taken by the Government on the two pillar banks is about the future. There is a sense that we have a plan in place to deliver that future through a much stronger supervisory role for the Department of Finance, the Central Bank and others. It was crucially important that this first step in restructuring our banking system was taken by the Government.

This was set out clearly by my party and the Labour Party during the election campaign as the most important issue. It was addressed within three weeks of the Government taking up office and I am proud of that. However, the policy now must be driven, as there is no point in having a plan and demanding reform in the banking sector with new bank boards and management systems, unless we get to a new position. There must be a fundamental cultural change within our banking system. The old arrogance, the notions of grandeur and the days of the bank manager knowing best are over. Managers have to get to know their clients again. They must be involved in their communities and they must be aware of the decisions that have to be made to assist SMEs in towns. The new cultural change means we must return to traditional banking methods if we are to seriously turn everything around.

We face daunting challenges but the Government has hit the ground running and within five weeks of taking office, major policy announcements were made covering political reform, public sector reform and the reorientation of banking and fiscal policies. It has started as it means to go on by taking decisions that are needed when they are needed. I look forward to the contributions of colleagues on this historic final sitting of this Seanad. I have always believed that the contributions made in the House form an important part of the national debate.

I wholeheartedly congratulate the Minister of State on his appointment. I had the great pleasure of serving with him in this House and he was always a straight talker. I agreed with much of what he had to say then and I agree with an uncanny number of his comments today. Much of his contribution recognised the policies of the past and the many strengths of the economy. It is important that we realise in the midst of the doom and gloom nationally and internationally following the regulatory and systemic failures of our nation and the international financial services sector in recent years that many of the gains of the so-called boom years are secure. The Minister of State outlined a few of them and one would almost think he was giving accolades to the previous Government for its policies when one considers our export performance, improvements in competitiveness and the creation of 11,000 jobs last year.

However, I take issue with one comment. Did the Minister of State say that within the past three weeks the Government has established a floor for our banking liabilities through the stress tests?

I said there was confidence around the stress tests.

The Minister of State said the Minister for Finance's announcement of the results of the stress tests was the thing of which he was most proud. However, it is important to note that the previous Minister commissioned Black Rock Consulting to undertake the stress tests. As I said on the Order of Business, the new Government parties have started with great commitment and they have the genuine goodwill of the people and Fianna Fáil people behind them as they set out to seize opportunities to help us recover from the difficult position we are in.

Fianna Fáil broadly supports the Government's banking strategy. Exports are performing positively and the foreign direct investment sector performed strongly last year. Various surveys show Ireland is among the easiest and best placed to do business and business sentiment is stabilising. We have a highly educated workforce, employment growth in manufacturing was stronger last year than for the previous ten years, Exchequer returns were broadly on target, as the Minister of State said, and recent data highlight that in 2009 investment in research and development was higher than in previous years, notwithstanding that significant work still remains to be done.

The Nyberg report was published yesterday and it is appropriate that the new Seanad debate it during its first or second sitting. I am sure Senator Coghlan who is home and dry in an electoral context, as has always been the case, will see to that on the Order of Business during the first sitting day.

There is no such thing but I admired the book the Senator circulated.

It would be appropriate to schedule such a debate.

I welcome the report, which highlighted systemic and regulatory failures and the cosiness of the relationship between regulatory authorities and banks in the past. There was a lack of expertise in key areas. When key figures were asked why certain actions were not taken, the reason provided was that officials found the issues to be complex and they could not take the necessary actions. It would be useful to go over the report in detail, perhaps through an Oireachtas joint committee which has the ability to call witnesses. The Taoiseach referred to this. I was a member of the previous Joint Committee on Finance and the Public Service and we had the opportunity to ask questions. A continuation of that dialogue would be useful because the people want their pound of flesh. Due process will provide that for them but finding solutions is much more urgent.

The new Government must acknowledge that much of its banking strategy is in line with that set out by Fianna Fáil. The previous Minister for Finance commissioned Black Rock Consulting in January. During the election campaign, the Minister for Transport, Tourism and Sport, Deputy Varadkar said "not another cent" would go into the banks while the Minister for Foreign Affairs, Deputy Gilmore, said it would be "Labour's way or Frankfurt's way." However, when the votes were cast, reality had to be embraced. In the real world, real policies must be pursued and the Government's banking policy is similar to that pursued by the previous Minister for Finance.

On the issue of burden sharing, both Fine Gael and the Labour Party said they would burn the bondholders. During the negotiations with the IMF and the ECB, the then Minister for Finance, Deputy Lenihan, raised the issue of burden sharing with senior bondholders and this was flatly rejected by the ECB. The new Government continued to pretend this was an option until very recently when the Taoiseach said it was not "reasonable or logical" to go after the bondholders in "live banks" which depended on the markets for funding.

Last December, Deputy Lenihan introduced the Credit Institutions (Stabilisation) Bill, which allowed for burden sharing with subordinated bondholders, despite claims from the Government parties that they were the first to deal with the issue. It is incorrect and misleading to suggest that. Subordinated bond holders have contributed approximately €10 billion to the cost of the bailout to date and negotiations are ongoing, which is welcome. The reality, as Fianna Fáil has continually pointed out, is that if we keep talking about burning bondholders, we can hardly be surprised if depositors remove their funds from the banking system and have little faith or confidence in it. This is a worry.

The Government parties were oblivious in opposition to the fact that senior debt has the same legal status in the State as deposits. People will not leave their money on deposit in our banking system if there is a constant barrage and chorus of calls not to honour Irish senior debt. It is no coincidence that the withdrawal of deposits from Irish banks has been stemmed since the Government's confirmation last week that it was holding true to Fianna Fáil's policy.

The Minister for Finance, Deputy Noonan, announced the restructuring of the Irish banking sector into two pillar banks, made up of Bank of Ireland and AIB and incorporating the EBS, as agreed under the memorandum of understanding with the EU and the IMF. Fianna Fáil has always maintained that we needed to restructure our banks to better reflect the size and scale of the economy, but it was clear this could not be done until the completion of the stress tests commissioned by Fianna Fáil in January.

On the issue of strategic investment banking, the Minister of State mentioned the speech delivered by the Minister for Finance, Deputy Noonan, three weeks ago. The programme for Government pledges to establish a strategic investment bank as proposed by the Labour Party. We have never agreed with this policy. Our two main banks already compete in the financial markets for funding and putting another bank there would detract from their ability to secure funds, taking funding away from the two pillar banks and threatening their sustainability. I have noticed there has been no mention in any of the important banking statements made by the relevant Ministers in the new Government of the strategic investment bank. Is this a U-turn or what is the situation?

There is clearly still a difficulty with regard to getting credit flowing. We have all met people with first hand experience of the difficulty in this regard in our constituencies. Yesterday, I dealt with a person who had secured a mortgage within the past six months and who was making some adjustments to the house while the mortgage was being completed. However, the mortgage sanction expired just days before completion of the work and drawing down the mortgage. Now the person must go through the process again. The fact this person had used some savings to pay for additions to the house while being built have been taken into account and now the person may not be accepted for the mortgage.

There is also an issue with regard to businesses. The Minister of State said we must get back to the time where the bank manager knows and appreciates the customer. I agree. We are now applying a level of regulation that was probably appropriate to the height of the boom. However, it is being put into practice today when it is not fit for purpose. While it is good to have banks that are well capitalised, we cannot expect people to be required to do the equivalent of filling their petrol tanks every ten miles. Much of what Fianna Fáil was doing was correct and the new Government is continuing that, but it is important it acknowledges that in the interest of credibility.

I urge the new Government to be relentless in its pursuit of savings through the Croke Park agreement. While on the Government side of the House, I said we cannot have a business plan for the public service, but that is what I would call a Croke Park agreement that takes two years to implement, or two years to agree to implement. If we were talking about private agile industry, the deal would have been agreed yesterday and implemented this morning at 9 a.m. We must aspire to a public service that operates the same way. I am aware the new Government has appointed a Minister in this area. Reviews, considerations, meetings and forums are a waste of time. While we all yearn for that place from which we can begin to grow again — many good things continue to happen to contribute to arriving at that destination — until we get in deep and dirty and have the rows that are needed, we will not achieve the kind of structural reform that will provide us with the fuel to take the next step.

I thank the Minister of State, a former Member of the Seanad, for coming to the House and congratulate him and his family on his deserved appointment. He will have the best support from this side of the House, whoever is here, provided the measures being taken are in the interest of the State, as I am sure they will be.

I welcome the Minister of State, Deputy Brian Hayes, back to this House and wish him well over the next interesting, exciting and important few years for the country.

The election at the end of February brought about a political revolution in this country and the political landscape has changed utterly. The economic landscape facing us now is similar to that on the day of the general election. We have a new Government which has brought a degree of hope and confidence to the people, but the very same problems face the new Government as faced the previous one during the final few weeks of the Administration of former Taoiseach, Brian Cowen. Every action taken by the new Government in the next few crucial months must be to begin the turning of the economic status of the country.

History generally repeats itself and few governments get the opportunity to chart a new direction. Therefore, every government should try to learn, in so far as it can, from the actions and mistakes of previous governments. It would be wise for the current Government to look back a few decades and reflect on the challenges which faced the coalition Government of Dr. FitzGerald in the early to mid 1980s. I concede today's challenges are much greater, but in November 1982, Fine Gael and the Labour Party formed a new Administration which was hugely welcomed by the public at a time when the previous Administration had lapsed into not just financial difficulty but a degree of political scandal. Massive challenges faced the Garret FitzGerald-led Government in the early part of 1983. A roadmap was set out by that Government as to what it should do. This included the curtailment of public expenditure, the changing of our tax base and a degree of political and economic reform. However, the decisions required to be taken in the early stages of that Government were not made. They were deferred. Everybody knew what needed to be done, but everybody decided it would be done "tomorrow" and "tomorrow" never came. My message to my colleague, the Minister of State, is that once again, we know what needs to be done. We know it will be painful, but it must be done. The new Government has huge public goodwill and it is in the interests of everybody, politician and non-politician, that it works well for the country. There is huge goodwill, but goodwill can only last so long. Therefore, the period between now and Christmas must be one in which the foundation block for the rebuilding of the nation is set in stone. The difficult decisions we know need to be taken must be taken. Tomorrow's decisions must not be left till next week, but must be taken today.

I acknowledge that the previous speaker has always spoken strongly on the issue of the Croke Park agreement. When the agreement is mentioned, it is often seen as some kind of attack on the public service. Fine Gael Members on this side of the House represent the party that founded the public service and the State and we will always defend the public service. However, we also recognise that the public service must work for the public and must pay its way. We aspire to a public service which we the taxpayer can afford to pay, and pay properly. We need a public service which works for Ireland. Therefore, it is important the Croke Park agreement is implemented in full. We must ensure in the next few weeks that the component parts of the Croke Park agreement are up and running. There can be no delay in implementing the agreement. We have heard all the warnings from external agencies that if the agreement is not implemented and the savings are not made, we will have to have pay or job cuts. Let us work together to ensure the agreement is fully implemented, not next year, but this year.

Our economic situation is characterised by what I would call the three "Ds": the debt crisis; the deficit crisis; and the debate on default. Those of us on this side of the House will recall a most interesting presentation by the Professor Colm McCarthy to a Fine Gael Parliamentary Party meeting almost two years ago. It was at the onset of the banking crisis, which was very much on the political agenda. I believe the meeting took place in Galway and Professor McCarthy asked us not to ignore the fact that even if there was never a banking crisis here, we still had an enormous problem with our current budget deficit. While it might not have been — and still is not — grabbing the same headlines as the banking crisis, a country borrowing up to €400 million a week to keep ticking over is not sustainable. We obviously need to challenge the current budget deficit, which is difficult. It will be difficult to meet the 3% target and I am glad the Minister of State has again given the Government's commitment to meet it. It is easy to say we will meet it; it is more difficult to do it, but do it we must. Unfortunately across virtually every Department it will mean restraint and saving not of Government spending but of taxpayers' money. It is important that the review the Minister of State mentioned is very thorough and produces the required savings because we cannot as a country continue to live beyond our means. We lived in that sort of economic cloud cuckoo land for far too long. It and much more brought us to where we are and no further must we go, which is why the deficit issue must remain at the top of the political economic agenda alongside the banking issue.

Default is a very easy word to say and it has gained much currency — excuse the pun — in recent months. Internationally we must maintain our financial reputation because we will need to borrow the money internationally every week and month in coming years to pay our teachers and nurses to keep our schools and hospitals open. Any corporate or personal entity that needs to borrow money every week must in so far as possible repay those moneys. Obviously we hope the Government will be able to come up with more favourable arrangements on our international financial commitments, but we need to get real about suggesting that if we wave the magic wand all our problems will go away and the same people will continue to lend us money.

The national sovereign debt is of concern to us all. The debt of the banks is almost the taxpayers' debt. The level of personal indebtedness on mortgages and credit cards requires particular attention. I fully understand how difficult it is for many citizens to pay their monthly or annual financial commitments to various financial agencies for mortgages, car loans, credit union repayments, etc., and simultaneously see the Government apparently bailing out banks and paying off bondholders. The question of a type of NAMA for mortgage holders is possibly one of those simplistic slogans that does not stack up, but it is important that we work to put some structure in place to ensure people do not lose their homes and there is some degree of flexibility on debt forgiveness in order that we do not end up putting people on the street, which is no solution to our mortgage and debt crisis.

I look forward to publication of the jobs initiative in the coming weeks. The solution to most of our problems would be considerably easier to bring about if we had 100,000 more people at work. In its actions across all Departments, the Government must try to ensure that job creation is at the top of our agenda. In the 1980s I remember the Talbot car factory and other such projects. We must talk about job creation that is real rather than imaginary, job creation that is sustainable rather than made up as one goes along. Throughout the country there are entrepreneurs who if given some credit and assistance can begin the process of rebuilding the country. They must be at the core of our job creation strategy. As the days of large multinational factories establishing here are unlikely to be repeated, the indigenous side of production and job creation must be to the fore. I look forward to the jobs initiative changing PRSI, introducing employers' incentives, etc. Giving people the incentive to go back to work should be at the core of the Government's thinking.

I welcome the Minister of State, Deputy Brian Hayes, to the House. I congratulate him on his appointment and wish him the very best of luck in the future.

I join in that welcome. The Minister of State has intersected in terms of my sojourns in this and the other House. I am not sure whether his current position in the other House might mean that I will return to this House next week, but we will see what the Seanad electorate has to say about that. I was struck by the tone of the Minister of State's helpful contribution. There were some hints of the Government wanting to stress its distance from the situation that brought about our current economic situation and jab rather than point fingers, but that is forgivable in the circumstances in which we find ourselves, particularly so soon after a general election. In trying to find our way through an economic morass, we need to understand in the first instance that the factors affecting our economic development are multifaceted and the response to it is also diffuse. That means there is a collective responsibility to identifying and trying to deal with those problems.

There are some hopeful indicators and others that are less hopeful. We have agreed a package of measures with the European Union and the International Monetary Fund which will be difficult to meet in any circumstances. To indicate otherwise is not being honest with the stark reality of that agreement and with the people themselves. In attempting to meet those particularly stringent criteria we might ultimately fall short. There is an onus on those involved in that particular package, the European Union and the International Monetary Fund, to ensure that the effort in trying to achieve those criteria is not a retarding factor in Ireland's future economic development. That is something on which there will be collective agreement.

In meeting those criteria many hard decisions remain as my party found in our first experience of government and our contribution to economic policy. Decisions were made with our agreement and often at our behest in terms of dealing with the various difficult circumstances in which the country has found itself. Such decisions do not lend themselves — as we all too vividly know — to political popularity. To bring about a solution to Ireland's future economic development means risking the hard-won popularity the new Government has and thinking of politics, particularly in the area of economic development, in a longer term than up to the next general election. We find ourselves in this set of economic circumstances because successive Governments have not moved their eyes beyond that political timeline. Until we do so, it will be very hard to develop as a country.

That said, many of the changes we need to make are not necessarily policy linked or even accounting linked in terms of budgetary strategy. We still need to address issues relating to political and societal culture, and the idea of greed being good, benefiting the few. Those who cause most damage not taking responsibility for that damage feeds public anger. While that still occurs I fear that the rate of development and the timetable for success in such development will be hampered even further. We have seen an example of that in the past week. I will try to avoid finger pointing but contend that the idea of a chief executive – his title was under question – in a particular bank earning €3 million while that bank was losing €12 billion is incredible. People cannot understand that. That the decision was informed by public interest directors, among others, cannot be stood over by anyone in public life. With regard to future banking strategy, we must consider the question marks over the efficacy, efficiency and competence of people appointed as public interest directors of the various financial institutions. If they are not doing their job, we must get people who can do a better job. My party fully supports steps in this regard.

I welcome the small amount of movement in the Minister for Finance's statement on banking strategy. This is necessary because we have moribund and dead banks that need to be reconstituted into other structures. When in government, my party tried to consider the banking system itself. We should have financial institutions that reflect various aspects of the financial services market. We should have a common or garden commercial break and a co-operative small savers bank, a small lending institution. We should have pursued the more up-market development bank idea. It does not matter what political party is responsible for this; what is important is the mix. The mix in Irish banking at present is wrong, as are the structures.

There are worrying signs in respect of the general economy. The plan agreed with the European Union and IMF is predicated on average growth of 2.25% to 2.5%. It was not anticipated that we would reach this in the early years of the programme. It was hoped that, in the first year, the figure would be 1.5%. This figure was downgraded by the Central Bank to 1% and subsequently downgraded by the IMF to 0.5%. Every downgrade means more catching up must occur. Increasingly difficult decisions must be made on public expenditure. The new Government has further challenges regarding the catching up involved.

I would like to see the model turned on its head. Even if projected growth is downgraded by our institutions and those on which we are depending for capital and current expenditure, we should still note that in the most difficult set of circumstances we are achieving economic growth and developing structures to build upon.

I welcome the Minister of State's recognition that there are sectors in the economy that are performing quite well. With regard to investment and policy, my party, when in government, helped to achieve many of the successes, especially in respect of the green economy, renewable energy and information technology. The economy must be based on looking to the future. If we have learned anything from the collapses in banking, public expenditure and property in the past ten years, it is that an economy based on putting all one's eggs in the one basket is doomed to repeat its failures. I hope the new Government takes this policy lesson on board as soon as possible.

I want economic debates that move away from the very narrow and simplistic questioning of why we are where we are and how we got here. We are not where we are because of the bank guarantee; a bank guarantee of one form or another would have been needed in any case. The guarantee was too broad when given but the then Government acted sincerely upon information given to it, largely dishonestly, by many of the banks and operated according to what was perceived to be the best policy option.

An asset management approach was needed. During the debates on the NAMA legislation, the then Opposition parties, Fine Gael and the Labour Party, spoke about an asset management approach in addition to the Government. I hope this approach is allowed to work. It is important that the property portfolio, which was bought at a considerable discount and has the potential to bring all the money back to the Exchequer, will be allowed to be sat upon such that its value will be maximised when sold. I was and still am worried that the Minister for Finance has indicated a fire sale approach to some NAMA properties. This undermines what NAMA and asset management should be about. We should try to obtain the best possible return for our money.

We must definitely move away from debating who was present at or asleep at various meetings. Very important policy decisions are not made on the spur of the moment, despite the impression that was being created. I hope this will be true in the case of the new Government also. Decisions are made on foot of broad consultation and there is much deliberation before and after those decisions. Every Government must face circumstances in which it must act immediately. Bearing in mind the report on the efficacy of the Department of Finance, one must note one of the main problems with decision-making here is the tendency to make decisions too slowly and apply them in a contradictory fashion. If the balance in this regard can be got right, I am confident we will get out of our economic difficulties sooner rather than later. Ultimately, however, if the country is to succeed we require political honesty of a kind that has, all too sadly, been lacking in the past.

I join the Chairman and Senators MacSharry, Bradford and Boyle in welcoming the Minister of State, Deputy Brian Hayes. We enjoyed the five years in which he was a Senator, during which time he demonstrated good leadership, even if we were in opposition.

The Minister of State has outlined very fairly the task facing the Government. He approached the matter very honestly. The task is to fix and help rejuvenate this broken economy. My colleagues have made thoughtful contributions on our problems. Our task is a mammoth one not just because of the banking circumstances but because of the huge deficit resulting from the gap between revenue and money spent running the State. I refer to the fall in our gross domestic product and the resulting decline in living standards.

It was interesting to hear Senator Bradford's comparison with circumstances in the 1980s. The circumstances that now obtain are far worse than those in the 1980s because the problems are greater. The Government in the 1980s sadly postponed decisions that needed to be taken. In fairness to the present Government, it is showing great diligence in tackling and facing head-on the tough decisions that must be made. It is making decisions daily and I hope this will continue to the benefit of the country.

The Minister of State touched upon one of the most essential points, based on the fact that we cannot function without a banking system. A banking system must be in good order and, if not, it must be brought back into order. The restoration of credit lines for businesses is necessary. This is related to confidence, an intangible, nebulous concept. Without confidence, so much cannot be put back in order. I am not saying we should talk up the current circumstances because we do not want to do something that is false but we must be realistic and, through the moves the Government is making, restore confidence as soon as possible and get credit flowing again to viable businesses.

The problem in the banking sector was caused by the headlong rush to back practically everybody engaging in property deals, so much of which were false and, I am sad to say, could not stand up. I loved the Minister of State's reference to bank managers. In the old-fashioned system, the bank manager probably did know best. Recently, however, on foot of centralisation in the main banks, atrocious decisions were made. Sadly, individuals chased after Anglo Irish Bank for a greater market share. The banks were selling a false product by chasing property and advancing money for it. Security on credit advances was forgotten and no consideration given to whom they were lending because they were big names. It turned out, however, to be a pillar of sand. We have to get back, as the Minister of State, Deputy Brian Hayes, said, to traditional banking values. Bankers must again be prudential. Advances cannot be made in lending without some level of security offered. It is to be hoped this will happen on the Minister of State's watch. He and the Minister for Finance, Deputy Noonan, enjoy our full confidence and are going in the right direction.

For years I have told the Seanad that those bank directors who steered the banking ship on to the rocks should have been removed when the first appointments of public interest directors to their boards were made. This has not yet happened, however, and I am wondering about regulatory capture. It seems the public interest directors have been captured by the banks' management.

More importantly, individuals at senior managerial level in the two larger banks who made these decisions as to how credit could be advanced and, in turn, created a property bubble are still in charge and still enjoy positions of responsibility. Some of them are even managing agents of impaired loan portfolios for NAMA. When the Government makes more public interest directorship appointments, it will have to insist the individuals in question are not allowed to continue in their positions. It is neither right nor inspires confidence in the sector.

The recent stress test exercises undertaken by the Central Bank have been well received by both market participants and the public. While they were severe, they were also necessary in our circumstances. There is a growing consensus that a floor has finally been placed under the banking crisis. The objective of the exercise is to deliver a smaller but more robust banking system capable of supporting economic recovery. The approach creates the capacity for the two pillar banks to lend in excess of €30 billion into the economy in the next three years, providing, in turn, a sound foundation for recovery. This is essential. We all know of business people who did not get caught up in the property game but who are having their working capital and advance credit facilities cut by their banks. This should not be tolerated for long-established, profitable and properly audited businesses. I hope Mr. John Trethowan and the Credit Review Office will offer redress in those cases referred to it and assist genuine businesses in regaining access to credit facilities. Without confidence, we will not get through this.

It is my great pleasure to welcome the Minister of State, Deputy Brian Hayes, to the House and congratulate him on his elevation to office. I wish him well, not just in his career but also in his ministry, in these difficult times.

Last week, there was a classic example of which economic expert should we believe. Various international and domestic experts were asked to give their prediction for Ireland's – this small island on the western suburbs of Europe — economic growth for next year. The EU-IMF-ECB troika reduced its predicted growth rate from 0.9% to 0.4% while the Irish authorities reduced it to 0.8%. A day later, IBEC claimed the growth rate would be 1.4%. I have always stated the largest problem in addressing economic problems is knowing which expert to believe. We now know the previous Government was told lies. If it was not told lies, it was not told the full truth or given the full facts and many times was misled. Will the Minister of State tell me which figure for next year's economic growth I should believe?

It is important the Minister of State keeps these figures so as to return to them next January to see which expert might have been right. I will add that, over the years, the Irish authorities have tended to be more correct in their predictions. As we know, the great economic gurus in Standard & Poor's recently worsened our global credit rating which has caused knock-on problems for overseas companies making deposits in Irish banks. It is important, therefore, that people take economic projections with a grain of salt. Will the Minister of State explain why the Department of Finance had a more optimistic and positive view than the European Commission?

In recent years I was always opposed to the burn the bondholders approach as I believed it would have had a serious impact on Ireland's economic credibility. Now, I am not so sure. The most recent issue ofThe Economist contains up to four articles on Ireland burning the bondholders. One commentator, Charlemagne, highlighted the differences between the approach of Ireland and Iceland to their respective economic crises. It is not just about a simplistic approach of putting the question of default to a national referendum. Six months ago we could not think of doing it because the impact, internationally, would have destroyed our credibility. However, now that we are beginning to control the size of the banks problem, we at least are in a situation, if not to burden the bondholders, to ask them to share the burden. I would like to hear the Minister of State say how that might be approached.

At the beginning of this, about two years ago, I remember supporting the then Government on everything except the date, 2014. It is worthwhile recalling the arguments of those who said that timeframe would put too much pressure on the economy, that it was unsustainable and would destroy domestic demand, in particular. I am aware that the Government is prevaricating slightly and the date has clearly been extended to 2015, if not 2016. There is nothing wrong with that, and I should like to hear the Minister of State's views on that as well. Without being chauvinistic or nationalistic, it is important to have some discussion on the contrasts and comparisons between Ireland, Portugal, Greece and Iceland. If I were to pick one of those economies to try to get right, it would be Ireland for a whole variety of reasons.

The Minister of State mentioned exports. I mention the issue of education, third level in particular. Ireland is now in a position to grow the economy with doctoral level input, whereas in Portugal only 14% of students get to third level. It seems impossible to see how that economy could be weaned away almost from pre-development economic status.

On the question of domestic demand, the media got on the bandwagon last week as regards the auction in St. Stephen's Green of the distressed properties. However, the issue for the rest of us should be where the money came from. It came from the extraordinary levels of savings that have been made in Ireland in the past three or four years. The State has been so focused on the structural issues that I should like to hear the Government talking about releasing that money. Both sides of the House acknowledge this has to be done, but how can we give people the confidence to buy? What we saw last week was not just a kick-start to the property boom but rather the fact that people saw a bargain. In the event, they were able to spend, and they had the money. There is no doubt that this is the reality and it is something that needs to be looked into somewhat further.

The growth in exports, as the Minister of State has indicated, is crucial to where we are going. I apologise that I did not hear Senator Boyle's speech as I was with some people at the time, but the question of renewable energy is an issue we need to look at. Specifically, I ask the Minister of State to consider the following. There are two problems with the development of renewable energy in terms of wave power, green and wind energy in particular, one of which is connection to the grid. People are playing ducks and drakes. There are people buying a place in the queue with no intention of connecting to the grid, but rather with the intention of selling the place in the queue to other entrepreneurs who are seriously trying to make an investment. That needs to be examined.

The other issue is the REFIT price, the price paid for renewable energy that is being fed into the grid, and that needs to be raised. A cost benefit analysis needs to be done on what would happen if the REFIT price were increased. I believe we would gain; it would make us more energy independent and more energy competitive. All these variables might be fed into a cost benefit analysis.

I do not have time to speak on the Croke Park agreement, but I want to deal with an issue that has arisen recently, that is, the State agencies. I would like to hear how the Government will approach State agencies. Very simply, I am asking that every State agency should be formally requested to put forward proposals to the Government on how it can make a positive impact on the economy. Before we close down a State agency, we might ask whether there is any reason it might not be expanded. Let us see what they have to offer. One of problems is that people are entirely focused on the Government's assertion that it will get rid of 200 quangos, to the exclusion of all else. I do not have any fundament problem with this if they are not doing their business. However, the question should be asked as to whether they might have been doing something which had to be done, and who will do it now. A cost benefit analysis would show the cost of the operation, but it must be determined whether a particular agency might have been doing something extra, that it had not been doing previously. I can certainly give plenty of examples and chapter and verse in that regard.

I congratulate the Minister of State on his appointment. I wish him well and hope he is successful in his portfolio.

I welcome the Minister of State, Deputy Hayes to the House and wish him well in his brief. I listened to his speech. I did not hear Senator Boyle's speech, but I am sure he will fill me in on anything that I missed. The fact that the IMF-EU-ECB troika has just completed its quarterly review of our finances gives us a fairly good idea of where we are at. The economy is on a precipice and we have taken firm steps to address the banking crisis once and for all. Our real economy is still in tatters and any unforeseen shock might well put us into sovereign default territory. The Greek crisis is particularly worrying in this regard.

An increasing body of opinion suggests that debt restructuring is on the cards before the summer is out. These indicators have been well touted in the media and the effects on the EU economy and on Ireland in particular could be serious. The Government is being forced to take decisions on bank support that it had not wanted. Senior bondholders of the two pillar banks are being protected because these institutions cannot look to the capital markets for funding while at the same time not paying back existing debt. The Financial Regulator, Mr. Matthew Elderfield, says that protecting senior bondholders in the pillar banks is cheaper than applying haircuts, because those banks would be charged unsustainably high interest rates when they return to the markets. In the event, taxpayers would be asked to pay more money than they are now paying in, and I really do not believe the taxpayer can take one further hit.

The money going in now will attract private capital, which will reduce the amount the taxpayer will have to put in. There is a minority view on the board of the ECB to the effect that senior bondholders should take a hit, so perhaps more needs to be written on that subject. However, the majority view is that if bondholders suffer losses on such safe financial investments, that is, senior debt in regulated banks, this could spark a new crisis of confidence in the eurozone. That is the big fear.

I acknowledge that economic activity here has fallen by 15% since the end peak of 2007, as the Minister of State said. This has had an enormous impact on living standards, although people are coping and adjusting quite well. We have more competition now, and there is cheaper electricity, for example. People are shopping around, and nobody accepts the first price he or she is being offered. They are looking for the best bargain not because they want to, but because they need to. That is the big difference.

It is surprising that the media are asserting that the Government has not got Ireland a better a deal, or somehow has reneged on election promises. In the light of the actions being taken now, this could not be further from the truth. It was said here earlier that there was an immensely long honeymoon period for the new Government. I do not believe this is so. There has been an absolute "hit the ground running" element to the Government, and an immense amount has been done within a very short period. Not only has this pace been necessary to indicate that there has been a genuine effort at reform, but a real effort is also being made in having measurements that will stand up to scrutiny.

I spoke on the Order of Business today on payments to people who are leaving office, as well as on bonus payments. Ordinary members of the public find it very difficult to understand how people justify these bonuses. The standard answer is that it is in the contract and that this element cannot be changed. I have already gone on record as saying that elements of that contract should be put up to public scrutiny. When we have Oireachtas committees with some degree of accountability, we can bring those people in and ask them how they justify their bonuses.

A bonus is supposed to indicate that a person performed at an extraordinary level that is worth so much. What is the benchmark for measuring people's output? How can these people be protected in law when they are getting huge bonuses for having spectacularly failed at their job? It is hard to justify these pay scales to people when they are so much more than their natural needs. I am not saying that we should all live in poverty, but it is very difficult to explain that to people on the ground. They do not understand it when they cannot get a medical card, a rent review or a re-evaluation of their rates. People are utterly confused about the mixed messages that are being sent. Having been in opposition and listening to members of the last Government saying that these things were set in stone and could not be changed, I believe that we now need to look for reform everywhere.

The media are commenting on issues that have not been concluded, and the Government has certainly hit the ground running. The Tánaiste used an interesting word when the latest bank recapitalisations were announced. He referred to the Government's engagement in a "process" with the troika and a diplomatic offensive with our European partners. It seems that too many people are making assumptions about how the economy will be funded in future. There has been unhelpful rhetoric coming from some European states, as if it has nothing to do with economic analysis and everything to do with domestic political considerations. We all know that is not the case. There is broad agreement on the need for peripheral economies to recover to address shaky confidence in the EU, and I believe this will be the ultimate consideration for those with whom we are negotiating. If circumstances change, the deal will have to change as well. I can understand a Minister not wanting to say this, but it seems self-evident to me. I would urge commentators to view the Government's approach to negotiations as something that is flexible, but also something that is evolving. We will only know the terms of the bank bailout and the terms for sovereign funding long after they are written.

I thank the Minister of State for listening to me and I wish him every success.

I also wish the Minister of State well. He will bring a sharp mind and a clear sense of priority to his new role. I look forward to watching him from the sidelines in the years ahead.

The Government has made a decision to long finger the issue of a climate change Bill. Such a Bill is not only a progressive and critical environmental measure, it would also provide massive momentum to the economy in the years ahead. At its climate change summit last November, the CBI identified the global market in low-carbon goods and services to be worth €5 trillion by 2015, which is the year by which I hope we will have met the last of our targets. Such numbers are doing the rounds right now and will be a reality in time. As a nation that adapts early and forces its processes of delivery of goods and services to comply with rigorous legislation, this could be a massive guide, compass and driver for innovation. Such innovation would be met by a global market. If we look at the climate change Bill as a measure that can give real focus and distinction to the economy, then it should be moved up the agenda, and not long fingered as has happened.

Innovation is critical. Fine Gael representatives have often spoken about the innovation task force report, which is a fantastic blueprint for the future of the economy. We are not getting enough definition on what that new economy will look like. There are many generic phrases, such as "smart", "clean", "green" and so on, but what exactly do they mean? The people on that task force, who are operators in the economy, put real focus and practical ideas on how Ireland can become the innovation island. It is a policy that I would back. However, what energy will drive this? Will it be imported fossil fuel, or the energy that is abundantly available around us? If we could capture all the wind that has come out of this Chamber on renewables, it would be a good start. To an extent, it is all wind; an aspiration. Renewables meet 15% of our national energy demands, but that can go a whole lot further.

I am very disappointed that the 26th recommendation in today's McCarthy report states that the group "recommends that EirGrid's Grid25 targets be re-considered in the light of demand developments and the Group's recommendations regarding reduced wind penetration". I like McCarthy's approach and I am generally in favour of what he says. As somebody who operates in the private sector, much of it resonates with me. However, I do not get this notion of reducing wind penetration. I think he has got an inherent suspicion of investment in wind energy projects and he sees it as a potential bubble. It would be counterintuitive for us to adopt this as national policy and it would not represent common sense, given the fact that it is a resource we are uniquely positioned to exploit in Europe, along with Scotland. Nobody else can touch us. In wind regimes even at minor sites, such as one I am opposing due to its poor location, seven metres per second is not great by Irish standards. Sites are being exploited in Germany at 4.5 metres per second. That part of the report needs to be challenged.

I would like to highlight just how native public interest directors can go. Senator Boyle will forgive me if I relate a telephone call he received from the previous Minister for Finance, having himself received a telephone call from the public interest directors on comments that the Senator made about Mr. Michael Fingleton's bonus payment, which is still to be returned. They were effectively defending Mr. Fingleton and chastising Senator Boyle for his comments. That is how uninterested in public service those particular individuals were at the time. I find it quite extraordinary that such an incident could happen.

I would like to comment on NAMA, the value of its assets and the interface between this and the Planning and Development (Amendment) Act 2010. It is critical that this Act is adhered to and is not diluted. An effort is being made to return certain powers to councillors, but it is critical that the core assets of NAMA retain their value. If we open the supply tap, that will be undermined and will lead to confusion in the market. It will lead to a fuzziness about where the economy is going and the fact that it can no longer return to being a development-based economy. I call this the "stupid economy", as opposed to the smart economy we are trying to develop. The 2010 Act acts as a bulwark against a return to those days and we need to adhere to it. There is pressure within Fine Gael for a certain unpicking of the Act, but I would warn against it. It would be very retrograde in terms of giving definition to our future economy.

A previous speaker mentioned that SMEs will drive our future growth and that the large inward investments of the past will become less frequent. Let us bring them on if they are still available. They can be available to us, particularly if we can guarantee clean energy. Some of the big search engines are looking not just for cheap energy but for clean energy. They want to be in places like Niagara, Norway and Switzerland where hydro energy is available. They are going to places where power is clean and affordable. We can also offer that.

Enterprise, ultimately, will help the economy to grow. Growth is a curious concept because we all understand that nothing can grow infinitely, even economies if they are based on resource use. The decoupling of resource use from growth will be a key challenge for the economy. It has been written about many times. It is a common theme for Green Party Members to speak about economic development without increased growth. It is a major conundrum to crack and it is one we must examine. In the area of energy, Ireland can do that.

Several months ago I spoke about how young, unskilled men are seriously affected by unemployment. A transition to a lower wage should be examined as a means of bringing them into the economy. The difference between what they receive and the minimum wage should be given to them rather than €100 per week on social welfare. This sum will be much less than €100 a week and, net, the State will pay them less and they will be in employment. In so far as the increase in the minimum wage presents a barrier to employment for some young people, this matter must be tackled. We did not mention unemployment in this debate. The function of the economy is to give employment, to give meaning to lives, to give dignity to people and to give people a sense of self-esteem when they wake up in the morning. What is the economy about if not that? It is certainly not about repaying our enormous debts, even though it must also do this.

I will leave it there, with apologies for saying so much. These are my last few words here and I am happy to have made them.

I am conscious of the fact that we have had beautiful weather, especially in the past four weeks. It is a good time to reflect on an industry that is important to this country. I am talking about tourism. This year the numbers will be increased. Figures suggest the American tourists have returned. The American tourists are back and the tourism industry has responded positively. I am conscious that prices have not been raised in hotels around the country this Easter. This is a positive move by the industry to ensure people get the benefit of Ireland in all its glory, which candidates for the Seanad saw in the past four weeks. It is important that the tourism industry is showing improvement. It is an industry with an immediate cash input. It creates significant numbers of jobs in the service industry. In the past we benefited from it significantly. We were very badly hit last year by the ash cloud and the difficulties hanging over the airline industry. Notwithstanding that, this year we have seen a recovery.

The second positive area concerns food production. As an agricultural country, we can see the price of commodities hold strong at a time when we benefit particularly from it. This is happening across a range of products, including beef, milk, and grain. These are all in positive territory and that is what we need. Thankfully, we are getting it. The tough decisions made in the past and the world economy have benefited Ireland. We should look to the economy and the future with hope.

We have seen the herd mentality in the past while and the media engaged in a race to the bottom to see how bad things can be. Not only could they offer bankruptcy, they offered it to us on a daily basis but I do not accept that. In fact, matters were worse in the 1980s. I wish the Government every success, as does every Fianna Fáil Member. Our first concern is this country and ensuring the revival and thriving of the economy. That we have maintained the corporation tax rate, against many pressures, is essential when dealing with foreign direct investment. This investment still arriving on our shores. We need to get rid of the negativity and see that we have rates that produce major savings. We need people to feel more confident. We must put all our resources behind whatever programmes the Government introduces to entice employment to this country. We have a record in this area. When the people set their minds to a single task, they achieve it. We achieved this in the 1960s by bringing the economy from what would now be regarded as Third World status to First World status. We achieved a task by tackling the intractable problems of the North of Ireland. I have no doubt about the policies we maintained in the 1980s to create employment. If we can move from property-based incentives to employment-based incentives, we can significantly increase employment. I am thinking of tax breaks that companies can offer to investors at the top marginal rate without restriction, in order that we have employment-based incentives to bring employment back to the nation. We are a cork on the ocean. Our economy is one of the most open in the world. We now have an opportunity to change direction. There is no point in navel gazing, talking about the past, what went on and what we should have done. We must go forward together, to ensure this nation offers a future to young people.

On the Order of Business, I raised the matter of young people who believed that the way forward in business was through property. They are heavily involved in property and there are many innocent young people who find themselves caught and could technically be bankrupt. For those who are innocent, we should offer them a quick way out rather than having Victorian bankruptcy laws. We should have a fast-track method to have young entrepreneurs working for Ireland and ensuring there are jobs for this country in the future. This is our future. The opportunities in export-led growth are almost limitless. We are heading in the right direction with BRIC countries. We have natural resources that we have not fully utilised and I have no doubt that, with the same geological structure as the North Sea and the UK, we have oil offshore. Why have 3,000 oil wells been drilled off the UK shore and fewer than 200 in Ireland? Ireland has produced the fields in Ballycotton, the Seven Heads and the Corrib. We have oil and gas and for people to say that we have given it away is arrant nonsense. Billions of euro have been spent in exploration in this country, with no reward for some. There must be risk and there must be reward. That is an area in which this Government can concentrate, given that the price of oil is $121 a barrel. There are also new methods of extracting smaller fields. I refer to the Helvick field, with 10 million barrels of oil. We should use new methods of extracting oil from smaller fields and get the first commercial onshore oil in Ireland. Can Members imagine the benefit to the economy when we see the first commercial barrel brought ashore? We would have belief in ourselves. We can go 200 miles offshore now and claim it as our national territory. It is all there for us to develop. Ireland is a country with a wonderful future. Why do people insist on going through the same negativity and bringing us down? Why does the media offer one worse scenario after another? It has become almost a national frenzy. Some 16% of people's disposable income is being saved as people buy down their debt. Surely it is time for people to say that we can provide a future but that we also believe in ourselves.

Cuirim fáilte roimh an Aire Stáit go dtí an Teach. Go n-éirí go geal leis san obair thábhachtach atá le déanamh aige ar son an Rialtais agus, go mórmhór, ar son mhuintir na hÉireann.

We are living in the deepest recession since the foundation of the State. In this regard, an interesting leaflet was produced by the Oireachtas Library and Research Service in recent days which showed that in the 1930s the our economy fell by 5% but in the past three years GNP has fallen by 16%. This very graphically spells out the depth of the recession we are in, which is unprecedented for us. Its projections indicate that it will be 2018 before Ireland will recover to the 2007 level of GNP. This is over-optimistic; last October when the Government announced its projections I stated they would not be met and that we would be lucky to be at 1%, but we will be at less than that. Growth for this year and, I believe for next year, will be more or less flat and if we make projections which are far too optimistic the corrections and solutions we apply will be inadequate. This would have the absolute effect of countering the suggestion the Minister of State made, which I agree with, that one of the great priorities we have now is to restore confidence. The more we procrastinate on dealing with the issues and prolonging the agony, with bad news coming on a six monthly or annual basis, will mean that it could be a generation before we see the end of this.

The biggest cost of the recession, apart from over-leveraging by many, is unemployment whereby individuals and families have had to suffer setbacks in their lifestyles and incomes which are unparalleled for them. Many of them never saw bad days or recessions in the past.

A number of issues need to be tackled and I will deal with them quickly. If we are to restore growth in the economy, one of the first issues to be dealt with is competitiveness. It is amazing that after cutbacks our salaries and wages are still probably anywhere between 25% and 40% too high compared with other European countries. A 2008 report by the University of Glasgow indicated clearly where our wages stoodvis-à-vis other western European countries. This is a major issue which has not been seriously tackled. If it is not tackled and if we merely mark time for the economy to grow to where the level of wages is commensurate with the wealth being created, we will be waiting for quite some time.

There is also the issue of the minimum wage which the previous Government introduced. It inspired no confidence in me to see the current Government take what is a populist stand. It shows either an unawareness of the depth of the problems we are encountering or a lack of economic analysis of what needs to be done.

The issue with regard to wages generally must be tackled from the top and very severe cuts should be made in public administrative positions, in the wages paid to people at higher levels in the public service, and in the private sector as we have seen. It is interesting that it took IMF pressure for the Government to respond to the huge cost of our legal fees, on which many in the House have commented over a period of time. Medical expenses and fees by other professionals have never been seriously tackled. It is a real failure of successive Governments and public administration as this is anti-competitive behaviour which does untold damage to the economy. It is an abuse of privilege and I have previously quoted in the House the words of Pedro Arrupe who stated, "Let there be men and women who will bend their energies not to strengthen positions of privilege, but, to the extent possible, reduce privilege in favour of the underprivileged."

The question of the economic agreements for various sectors in the economy, which were really between unions representing larger employers and the major employers themselves to protect their positions and not have smaller operations competing favourably against them, has done much damage to the economy. All these agreements, including the minimum wage, should be suspended for the next three years and reviewed prior to being reintroduced. Let the market decide where we should be. Failure to deal with the minimum wage and other such issues is leading to people remaining on the dole on social welfare wages and not taking up employment or, as is happening in many instances, retaining their social welfare payments and working in the black economy. This is an area of increasing concern. Unless it is tackled forthrightly and fairly, all we are doing, as I stated previously, is delaying dealing with it.

Our failure to tackle public sector pay and numbers is leading to increases in taxation. In opposition, Government Members strongly advocated the avoidance of increases in taxation in order not to impede or retard growth in the economy. In government, I would like to see them acting on these opinions as it needs to be done. If, as I suspect, there will be feet-dragging on the Croke Park agreement and failure to tackle the huge increase in numbers and pay, then the Government will find the problems we are encountering now will still be there at the end of its term and we will still be debating the same issues, only they will be more embedded in the economy and there will be much pain for people as a consequence.

I urge the Minister of State, those elected to the Lower House and those who will be elected to this House to support the Government in its courageous effort to make corrections on fiscal rectitude and the economy and to eradicate wasteful expenditure in the public service in the interests of the people. If the Government does so, it will deserve the support of all sides of the House and the public at large.

I am obliged to call the Minister of State.

May I have an extra four or five minutes to make a short contribution?

I propose the time be extended by four minutes to allow the Father of the House, Senator Cassidy, to make a contribution.

Is that agreed? Agreed.

I thank everyone. I congratulate the Minister of State, Deputy Brian Hayes, who was a distinguished Member of this House when he was leader of the Opposition. I wish him well in his new role.

That the Government has the confidence of the people was demonstrated in the ballot boxes. It has the confidence of everyone in Ireland to try to turn the economy around in the national interest. However, it is my firm belief that if it does not set the parameters right in the first 100 days it could take five to seven years to turn around. Everything is going well, and it was nice to see the British Prime Minister with the Taoiseach. Her Majesty is coming for an official visit, as is the President of the United States. A huge amount of goodwill is being shown to Ireland throughout the world. The former Taoiseach, Brian Cowen, set much of this in place and the present Government is the beneficiary.

What is most important for people who will create jobs is to create confidence and give hope. This can be done through credit facilities, and the banks will have a major role with regard to making credit available. At present, there is a race to the bottom because credit is not available. Look at the Exchequer returns, which are €1.3 billion down on this time last year. This is because the retail sector is on its knees. As I stated previously, in the first year of this three-year downturn people spent their savings, in the second year they spent their overdraft facilities and they have nothing left this year. The Government should know this from the Exchequer returns. At least 20% to 25% of the billions of euro we are putting into the banks, which the Government now owns, must be put into circulation. I hope the Government will seriously consider David Begg's proposal to spread the debt over a 50 year period to allow for the day-to-day running of the country. It would allow us to recover more quickly and we would be in a good position to build on the sound foundations laid in past decades. Those of us who are campaigning in the Seanad election cannot but notice the great infrastructure that has been built in the past 14 years.

We must do something for those who took out mortgages at the height of the boom. I ask the Minister of State to consider seriously a programme of debt remission for such individuals.

I wish the Cathaoirleach well on the occasion of his retirement from the Seanad. I do not know of any other Member who is as widely respected for the way he has carried out his duties in the past four years. He can be rightly proud of the steely and commonsensical contribution he has made to this House.

We have had an informed debate, with a total of ten contributions from all sides. I thank the former Leader and other Senators for their kind remarks.

Senator Dearey forcefully reminded us that we have not focused sufficiently on unemployment. Despite all the fiscal, banking and jobs problems this country faces, however, 1.8 million people continue to work in this country, or 800,000 more than was the case 11 years ago. The Government's absolute priority must be to preserve every single job. I concur with Senator Walsh that we have to improve our competitiveness and we are making huge strides in productivity. One of the reasons we have done well is because wages have decreased and our productivity has improved. We can do more, however, and we have to keep every individual who is at work in his or her position, even as we create new jobs in areas such as tourism and agrifoods. We have not concentrated sufficiently on goods we can produce more cheaply and better than others. We have failed to develop an industrial policy which concentrates on what we need to achieve.

Senator O'Toole asked about the wide variation in projections for growth. Last week the Central Bank predicted a growth rate of 0.9%, IBEC predicted 1.3% and the IMF predicted 0.5%. The Government's assessment, which is, of course, the best one, will be published next week. I remind Senators of the point made by Dr. Garret FitzGerald that small open economies that go down quickly can return to growth rapidly if we put in place the right domestic policies.

We said that too.

Irrespective of our worries about growth rates at the end of this year, we have to introduce the necessary changes to our domestic policies. Our assessment will be put in the public domain next week, but who knows what the rate will be at the end of the year? The difference between the first and third quarter can be very different depending on the tax take from businesses.

Senator O'Toole also asked about burning the bondholders, or what those of us who take a more considered view called burden sharing during the election campaign. His question about whether we studied what has happened in other countries was a fundamental one. I urge my colleagues to read a simple pamphlet published by Deputy Donohoe which outlines in clear terms the options on default and points out that we are a developed economy and, unlike Iceland, part of a single currency. To consider the options on default, people need to be clear about where we will get the liquidity needed to keep our banks intact at an equivalent rate to the 1% we are getting from the ECB. If anyone can suggest another agency on this planet which can offer us that 1% facility, I am all ears, but it is not likely to happen. Deputy Donnelly, who is a very sensible individual with a big contribution to make, recently appeared on a "Prime Time" programme with the Minister for Enterprise, Trade and Innovation, Deputy Bruton, and when pushed to state what country he was thinking of in terms of default, his answer was Argentina. That country experienced 27% inflation over a period of two years. I ask Members to compare the pay levels of our teachers with that of Argentinian teachers or the difference between the top of that society and those at the bottom.

We are a developed and sophisticated economy and are part of a single currency zone. The notion that we would default on our sovereign debt or take unilateral action as a result of being a member of the ECB is daft. I stated as much during the election campaign, regardless of what others said about not paying a penny more.

We will ask that individual the question at some stage.

It would be a crazy policy to act unilaterally when we are part of a bigger club. Furthermore, we cannot act unless we are certain about getting alternative money to keep the country going.

Nouriel Roubini advised that we should extend the repayment period and reduce the coupon.

Please allow the Minister of State to continue, without interruption.

Who knows what will happen in the next three to six months? We know a new restructuring package will be on the agenda after 2013. The Government has already started burden sharing between €5 billion and €6 billion in subordinated debt. Last Thursday the Minister for Finance announced that an application to this effect had been made in the courts. We have started the process in respect of junior bondholders, which is exactly what we committed to do in our manifesto. The Government wanted to do more on senior bonds but that is not the majority view in the ECB.

The junior bondholders were being cut before the Government took office.

No interruptions, please.

We were told for two years that subordinated debt could not be touched. We have to work with our partners in this. The lender of last resort is this country and that will continue to be the case until we restore market confidence in our ability to resell our debt and reduce our bond ratios.

Senator Bradford made one of the most important points in this debate when he reminded us of the need to learn the lessons of the past. Dr. Garret FitzGerald and the Labour Party in the period between 1981 and 1987 were given a mandate to fix a problem but they failed to do the heavy lifting. We have collectively learned from that experience. I do not wish to undermine in any way the great contribution Dr. FitzGerald has made on a host of subjects, from the redefinition of Irish nationalism to his constitutional crusade for a more open and tolerant society, but on the economic issues we did not do it and we have to learn from our mistakes. It has to be done in an ordered, sensible, constrained way. As Senator O'Toole said, our ambition is to reach the deficit 3% target by 2015. As he is aware, in the programme we will review the matter as the end of the two year period to see where we see the economy going in light of the experience of the past two years. I agree with Senator Bradford that this situation has to be fixed once and for all, otherwise this country will have a decade of a lack of investment, no hope for young people who leave college and a sense of absolute hopelessness. That is something we cannot countenance.

Senator Boyle spoke about the stringent conditions of the memorandum. Before and during the course of the election we said it was the ambition of the Government to renegotiate the deal. We have seen some success in terms of the memorandum which will be published, I understand, on 16 May following the troika meeting of last week. The Government has announced that we have inserted into the memorandum areas where we believe we can stimulate employment. Whether it is called a jobs budget or initiative is irrelevant, as far as I am concerned. Measures can be taken to grow the economy to get people back to work and make it more productive for employers to take people on andvice versa. We have shown quickly that we have introduced some renegotiation. We have made it abundantly clear that the overall burden and targets have not changed but that there can be changes within the context of the memorandum to help stimulate the domestic economy and create some hope within it. That is an important first step. Last week Mr. Chopra said we have reached our targets comfortably in terms of the first quarter and fiscal position.

The sense of hopelessness has to be replaced with a sense of hope. I know that is the view of colleagues on all sides of the House, no matter what political position or party from which one comes. Hope comes from a sense of confidence, doing things quickly, making decisions early in the life of the Government and doing, as one colleague said, things in the first 100 days because if they are not done then, they might not be done at all. We have learned that from experience. We will continue to do that and colleagues can be assured that is the frame of mind the Government is in, namely, to make decisions quickly and to instil hope that there is a way out of the straitjacket in which we find ourselves. I do not believe that harping back to the past will create one extra job in this economy. The past is the past. The people have had their say, made their verdict and given the new Government an extraordinary mandate to fix the problems within the economy. There is honest support in this House, as I am sure there will be in the new Seanad when it is returned, for the Government's efforts to build confidence and get this great country going again.

I reiterate my thanks to all colleagues on both sides of the House for their work in what was a very difficult working environment in the past four and a half years, given the enormous financial pressures the country has faced. I wish those who are standing down or retiring well. I especially wish all my colleagues on both sides of the House who are contesting what has to be the most complicated, bizarre and difficult electoral process in western Europe every success next week.