Leo Varadkar (Dublin West, Fine Gael)

Both the Minister for Education and Science and the Minister for Finance mentioned two former Fine Gael Party leaders, Alan Dukes and Garret FitzGerald. I respect both of them but they have not been right about everything in their careers and they are not right about NAMA. We have heard very little about the views of former Fianna Fáil leaders on this legislation. They have been silent but I am not surprised. The party's previous leader, Deputy Bertie Ahern, was bankrolled personally by stockbrokers and developers and Charles Haughey was bailed out by the banks. Through NAMA, Fianna Fáil is repaying the debts of its former leaders.

In approaching this debate, we must ask what are the common principles and what we are all trying to achieve. First, we want to minimise the risk to the taxpayer in any policy to save the banks. Second, we want to repair the financial system in order that credit can flow again to small businesses, homeowners and consumers. NAMA does not protect the taxpayer. We were informed earlier the book value of the loans is €77 billion, which includes €9 billion in rolled up interest. It is not that long since Sean FitzPatrick told us the banks did not roll up interest for developers. The real haircut is 20% and not 30%, as the Minister suggested earlier. He also admitted the long-term economic value of the loans is €7 billion higher than the market value. It is at least that amount because the figures also include the equity put in the developers and it remains to be seen how much is phantom equity. It may be found that the cost to the taxpayer could be substantially higher than €7 billion and it could be as much as €16 billion.

The Minister's calculations are based on two massive gambles. The first is that property prices have bottomed out. having fallen 47% since the market peaked and this is where they will sit. That is untrue. Next year will be characterised, according to the Government's projections, by increasing unemployment, decreasing wages, which it has promised to cut, and higher ECB interest rates. On that basis, there is a strong probability property prices will continue to fall. It is at best a wish for the Minister to base his calculations on a 47% fall from peak but it is definitely a gamble. All the Government's projections fall if property prices decrease further. They could fall 1% a month over the next few months but once interest rates increase, prices will fall again and that will destroy the Minister's projections.

The second gamble is the projection that NAMA will break even every year. This is based on two arguments, one of which is that 40% of the assets to be purchased are performing. That probably is the case but the Minister is assuming they will continue to perform once they have been taken over by the agency and once interest rates begin to increase next year. That is a false assumption. The Minister is assuming that because 40% of the loans are performing now, they will continue to perform next year. That is a big gamble. In addition, the entire exercise is based on the 1.5% coupon that is being charged for the NAMA bonds.

Where are the Government's projections? Where has it factored in the likelihood that interest rates will rise? Everyone accepts that the ECB will start increasing interest rates in the middle of next year. Where are the Government's projections in this document showing what will happen when ECB rates start rising, how much more those bonds will cost us and how many of the developer loans that are now performing will cease to perform? Why are there no projections for that? They are none because the Government knows if that happens NAMA fails and not only do we have to pay it all back in ten or 15 years, but NAMA will take a loss every year which we also have to pay for.

We also have risk sharing. We were promised by the Green Party, with the usual pomp from the Minister, Deputy Ryan, that we would have equal risk sharing. Whatever equal is, it is not 5%. Maybe he left out the zero, but 5% versus 95% is not equal risk sharing; it is just a fig leaf for the Green Party.

Will NAMA get credit flowing to business, homeowners and people who want to buy? I do not think it will because the mortgage books are also in trouble and there will be 17% unemployment, falling incomes and rising interest rates next year. Businesses are going out of business and the business books are in trouble too. The personal loan books are also in trouble. Irish banks owe €100 billion to foreign banks. They financed their lending for the last four years not from deposits but from the €100 billion they borrowed from foreign banks and institutions. That has to be paid back.

They will also have to rebuild their capital ratios. A 4% or 5% tier 1 capital ratio will not be acceptable - it will have to be 8%, 9% or even 10%. All the extra money the Government is giving to the banks will stay in them not because of badness but because, given those realities, they will not be able to lend money. When it is clear that money is not flowing into the economy, in February, March or April next year we will come back to the idea of a national recovery bank, because the only way we will get money flowing into the economy is by setting up a new clean bank and not relying on giving €7 billion to the zombie banks and thinking it is enough for them to increase their capital ratios, write down all their losses on developer loans, cover their losses on mortgage and personal loans and deal with their foreign liabilities.

What happened with foreign liabilities is amazing. In 1995 the banks' foreign liabilities were approximately 10% of GDP. In 2003 it was still 10% of GDP, but between 2003 and 2007 it went up to 50% of GDP. That is the amount the Irish banks borrowed from overseas to lend into the Irish economy and whether we like it or not it all has to be paid back and a de-leveraging of €100 billion from the Irish economy will be painful and NAMA will not fix that problem.

I have some questions which have not been addressed in any statements. How long does the 1.5% coupon from the ECB last for, when does it start to rise and where are the Government's projections for it? Regarding the breakdown of the haircut by each bank, we know how much in terms of loans the Government will buy from each bank but we do not know how much the write-downs are. For all we know, the write-down for AIB or Bank of Ireland might only be 5% or 10%. Meanwhile, the write-down for Anglo Irish Bank might be 60%. If that is the case it puts a very different reflection on the Bill. We do not know how long it will unwind over. What has the ECB said to us about the repayment of the bonds? Surely they are not perpetual. At some point there will have to be some unwinding of the bonds and when will that be?

The Minister kindly expressed his concern about people in negative equity, which includes people like me who bought in 2004, tens of thousands in my constituency and hundreds of thousands of people in my age group. What is in this Bill to assist people who are in negative equity? What is in it to assist people who are facing debt deflation for the first time since the 1930s, whereby a rising share of their falling income is being paid to the banks, the new landlords whom the Government want to bail out? What does the Government have to say for them? It has nothing to offer.

Regarding associated loans, 36% of the loans referred to in the document are not land or development loans but are associate loans. What are they? Are they personal loans for developers? Are they loans to finance their mansions and horses? The largest section of loans the Government is buying is associated loans, then land and developments and I want to know more about them.

I would also like to know what proposals the Government has for staff in the banks. The banking sector will shrink and there will be redundancies. What provisions will the Government make to ensure they are done fairly and the workers are properly compensated and looked after?

We had a very good performance today from the Minister, Deputy Lenihan. He is a very good barrister who is very well trained at making a very bad case seem good and he did that well today, but it does not change the fact that this is based on sand. As most people in the Chamber will know I am a capitalist and I believe in capitalism, the free market and enterprise. It is the best way to generate wealth and it is then the job of Government to ensure it is spread fairly. However, I do not believe in capitalists any more because they seem to want socialism for themselves. When they start up they want subsidies, when they are making profits they want to be protected and when they fail they want to be bailed out. That is what this is. It is socialism for the super rich.

As politicians we need to defend capitalism against the capitalists. That is the key question which comes before us today. This is NAMA, it does not protect the taxpayer and does not get credit flowing to businesses or homeowners. It merely saves the banks from nationalisation. It must be asked if it is really worth just that.

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