Brian Cowen (Laois-Offaly, Fianna Fail)

Today we take a tough but necessary step to recovery as a nation. The work done in the past year and a half on Ireland's public finances has greatly improved the world's view of Ireland. The cost of borrowing to fund our day-to-day enterprises has reduced markedly and we are now in a position to recover and grow the economy on a more sustainable basis. Many prominent commentators on the world stage see our efforts as being the model for others to follow. For example, the influential www.bloomberg.com notes today that Ireland's bonds are poised to outperform those of every other eurozone member except Austria this quarter, as investors have confidence that Ireland will be more successful than other European countries in cutting its budget deficit. Furthermore, Ireland's bonds are the second-best performing of all EU countries this quarter, returning 3.5%. External confidence in Ireland is returning. It is the same confidence shown by those who invest in our capacity as a country by buying Government bonds. We need this confidence to attract investment and to raise money on the international market. The international community has positively noted the measures we took to restructure our economy. This point was strongly made to me in recent visits to the United States, when the Secretary of State, Hillary Clinton, praised the difficult but essential decisions Government is making.

The measures we have outlined will set our banking system on the road to recovery. While the cost of facing up to our problems is very significant, the alternative is a recipe for stagnation and decay. In addition, the lending targets outlined today will provide a welcome boost to the productive sectors of the economy. Allied to that is the proposal that banks will be required to realign their business practices with the needs of the modern Irish economy. We are restructuring our economy so that in future Ireland will grow through the hard work and innovation that will come. The improvements we are making to our banking system will facilitate growth and bolster the advances made to date.

Just as a stable banking system is crucial to our economic renewal, so too is industrial peace. I warmly welcome the outcome of discussions between the Government and public sector unions. It is good news for the Irish economy and for our country. It can send a very strong signal at home and abroad that we will work together to come through these difficulties. I thank those involved for their positive and proactive contribution and I especially thank the two facilitators, Mr. Kieran Mulvey and Mr. Kevin Foley. They all put in long hours of negotiation to achieve a consensus that will help underpin economic recovery. This agreement is good news because it will help restore stability to the public service after a period of uncertainty. I look forward to and hope for its ratification by the constituent unions concerned. This agreement will mean no further reductions in pay rates for public servants, flexible redeployment within the public service and changes in work practices that will deliver savings and help to make the public sector more efficient. It will give us a public sector fit for purpose in the 21st century and will provide better and more effective public services to the public we serve. I urge all public servants on the basis of this good agreement - all our doctors, teachers, nurses, gardaí, those who do much day in and day out to provide people with essential services - to give this agreement their careful consideration. Everyone must judge the proposals on the benefits they will bring to themselves and to the public in the long term. I have made the point previously that in order for Ireland to prosper we must transform our public services. This agreement has the potential to do that.

I have also made it clear that for Ireland to prosper again, we must get our public finances back on a sustainable basis. Those foundations are being put in place by the resolute action of the Government. Revenue and expenditure measures amounting to 5% of GDP were taken to improve the 2009 deficit. The recent budget for 2010 contained spending adjustments amounting to 2.5% of GDP. As a result we have stabilised the deficit at 11.25% of GDP this year, a fact no amount of distortion or spin can undermine. We have a credible multiannual framework to restore order to public finances, which has met with strong international approval. The European Commission, the European Central Bank, the International Monetary Fund, the OECD and respected international commentators are among those who welcomed Ireland's fiscal consolidation framework. The ECB president, Jean-Claude Trichet, described the measures as bold and courageous decisions taken to put the economy back on its feet in difficult and demanding circumstances. Our strategy has attracted praise because it is working and will meet our target of restoring our deficit to a sustainable level by 2013-14. The Minister for Finance has outlined the Government's detailed course of action in this debate. The crisis in banking has taken up much of our time as a Government and we have had to take momentous decisions. We are one of the first Governments to introduce a state guarantee of the banking system, one of the first to set up an asset management agency in the current banking crisis and we know that without a healthy and functioning banking system, our businesses and service providers will not be able to grow and develop products for our main markets and sustain employment, which is what it is all about.

We need credit to flow for business and jobs and that is why today we are imposing specific lending targets on AIB and Bank of Ireland. They will make available to SMEs not less than €3 billion each for targeted lending through new or increased credit facilities in 2010 and 2011. Those working capital arrangements, provided for in the legal framework announced by the Minister of Finance, are in addition to the EIB situation, which speaks about new projects. We are ensuring existing credit facilities to businesses are catered for in this situation. From the outset, I have said our motivation in establishing NAMA was to provide credit to small businesses in order that they can grow and thrive. We are taking a further step on that road. The simplistic argument will be made that today is about bailing out banks. It is about bailing out the economy and creating the right environment for enterprise and employment, facing up to problems and dealing with them decisively and firmly. While no one would wish that these steps would be needed, I am proud the Government I am leading has shown the resolve to do what is necessary in leading the battle for public solvency and prosperity for families in Ireland.

As has been made clear, the Government is committed to recapitalising each of the institutions involved in the NAMA process so the system as a whole can return to its rightful role as provider of credit to the real economy. This course of action will necessarily involve a substantial investment by the State and the taxpayer in the institutions. We will structure our payments in a way that eases the burden on taxpayers. We are forcing the banks to recognise their losses upfront and once and for all rid the system of the scourge of speculative loans and mismanagement in the banking system. It is right we should approach the issue in this way, as all other courses of action would not result in a swift return by the banking sector to its function as a provider of finance to productive enterprises. While the State is committed to making up any shortfall in the capital needs of the institutions, it will not be called upon until other avenues of private capital raising have been explored.

Our new Central Bank legislation, which was outlined today, offers greater protection to the economy from the reckless practices of banks in recent times. The combined regulator and Central Bank will scrutinise more closely the work of banks in our economy. It will have stronger powers and will be set up to use them more often than in the past. In turn, the Central Bank will be subject to enhanced Oireachtas scrutiny. The newly appointed Governor, Professor Patrick Honohan, and the new head of the Financial Regulator, Matthew Elderfield, have shown their independence and commitment to putting the financial system here on a sounder footing. While it cannot be denied there are large costs to resolving our banking crisis, there are significant benefits to the State and its taxpayers from these moves.

As the Minister has already explained, our economy is likely to grow faster as we have now set the banking system to rights again. It is likely that NAMA will in the end deliver a net gain for the taxpayer owing to the robust valuation process it has pursued. The National Pensions Reserve Fund, NPRF, will have in the two main banks valuable investments that have the potential to realise gains. There is a proven gain of €1 billion which will accrue to taxpayers in six months time from the guarantee schemes put in place. Reforming Anglo Irish Bank into a reduced but sound credit institution which can be sold to private investors at a later date and carving out a good bank from what currently exists will go some way towards recouping the taxpayers' assistance to that bank at this time.

The steps we are taking today will provide certainty to the people from whom we must borrow, certainty among our trading partners and, as the Minister stated, certainty to those who will invest in the country. This certainty will further boost international confidence in the country, our people and the economy and will inevitably smooth our path to recovery. Our actions here today mean that we can now begin to live up to a renewed promise for growth and success in the Irish economy, which is the key objective of Government and one that we are resolved to achieve.

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