Michael Noonan (Limerick East, Fine Gael)

If the situation were not so serious, the catch phrase from Laurel and Hardy would be appropriate, namely, "another fine mess you've gotten us into". This is an appalling disaster. The Government's strategy on banking has collapsed around it and the credibility of the Minister for Finance is in tatters this morning.

Following all the spin and propaganda, the country is left in the situation of having to cancel next month's bond auction. Why? Because the country does not have credit worthiness any more and could not sell the bonds at an affordable price. That is the bottom line on the banking strategy which the Government has pursued for two years. We can no longer trade in the bond market because our sovereign credit worthiness is gone.

It is not difficult to trace the Government's progress to date. Two years ago yesterday, the Government introduced a blanket guarantee for the banks. Not alone was the scope of the guarantee too wide, as indicated by the Governor of the Central Bank in his recent report, but the Government made the calamitous error of guaranteeing all of Anglo Irish Bank's liabilities. It did so without knowing the full extent of those liabilities. Months later, following introduction of the guarantee and the nationalisation at the beginning of 2009 of Anglo Irish Bank, the Minister assured this House that the potential liability of Anglo Irish Bank would not exceed €4.5 billion. I accept the Minister was misled and misinformed and so on but there is a huge gap between €4.5 billion and the €34 billion referred to by the Minister in his statement this morning.

The scope of the guarantee was a major policy error. The more fundamental error made is what has now put the country in such a precarious position. The error was one that no Government should make. The Government put the credit worthiness of the sovereign State at risk to rescue a failed bank. It should never have gotten into that situation. The national interest always requires that one protects the credit worthiness of the sovereign. When faced with the choice of the sovereign and a financial institution, one opts for the sovereign. The Government should not have gotten itself into the situation it did. I accept the Minister was badly served by the then Central Bank, the Financial Regulator's Office and some of the advisers brought in at high rates of pay. However, at the end of the day Deputy Brian Lenihan is the Minister. He is the person who holds constitutional obligation for the finances of the State. The role of only two Cabinet Members is enshrined in the Constitution. This happened on the Minister's watch and he is responsible for the disaster.

See this speech in context