Billy Timmins (Wicklow, Fine Gael)

I wish to speak on two issues, namely, property and the banking strategy. People want hope but they cannot have hope unless they have the truth first. Those formulating our banking strategy have failed to see the big picture. Irish banks have outstanding loans in the region of €150 billion. In normal times, they should have a margin of 2% on costs, leaving a profit of €1.5 billion per year. However, the cost base of our flawed banking model is €4.5 billion. In a best case scenario, one third of the €150 billion of loans are dead. The Government intends to inject €50 billion into a banking system that will simply incur more losses. The policy must change. Bondholders should receive equity as opposed to monetary repayment. The IMF has operated this model for more than one decade. The future is bleak and our standard of living must become sustainable.

In August 2007, all derivative markets went pear shaped. However, it took until October 2008 for the stock market to reflect this. Since early 2010, all European Governments have been bust because the projected future tax stream is too small to service the debt. This is one realisation of which we must all become aware. Before the year end, Spain, and possibly Portugal, may go down the road travelled by Greece. We will follow suit if we continue as we have done in the first six months of this year, taking in €14 billion and spending €22 billion. This is unsustainable. We have an extreme case of living beyond our means.

In the developed world in 1976, the ratio of government and personal debt to GDP was 110%. In 2007, the percentage reached 350%. The figure must return to that 1976 figure. Investors dislike uncertainly and large deficits. Let us be honest with the public. We filled potholes while the country was going down the drain. Is it any wonder the public is so angry?

As the record shows, in the run-up to the 2007 general election I spoke against capital investment in public housing because I believed, correctly, that it was fuelling the property market and I took the view the funding used should have been invested in infrastructure. We did not experience a property bubble, rather a money supply bubble.

The average house price should be in the region of three to five and a half times one's income. In 2007, it was 17.5 times one's income in this country. The average house price today is approximately €240,000. The property market will not operate properly again until this has decreased to somewhere in the region of €100,000 or €150,000 and the market will ensure this takes place in the next two or three years.

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