Kieran O'Donnell (Limerick East, Fine Gael)

This debate on the extension of the eligible liabilities guarantee scheme should not be taking place today. We should have a debate but the Minister for Finance should be here. We must establish exactly the position regarding the IMF, the European Commission and the ECB. I am unsure whether the men from Washington, Frankfurt and Brussels are coming here out of the goodness of their health or for a social call. Deputy McGrath referred to "discussions" but the correct term is "negotiations". The people are looking on at the moment and are very worried. They must be given confidence regarding the security of their deposits. The schemes are in place but the position must be explained to them in black and white to the effect that their money is secure in Irish banks. This is a significant concern for ordinary people.

This morning, the Taoiseach treated the people with contempt. I do not say as much lightly nor do I indulge in attacking people on a personal basis. The Taoiseach must have been living in Alice in Wonderland when he referred to there being no negotiations. My understanding is that officials from the IMF, the EU and the ECB are already in Ireland. Will the Minister of State confirm this? Are they here on an unofficial basis at the moment? They will be here tomorrow on official basis. I note that this afternoon following the ECOFIN meeting, the Commissioner, Olli Rehn, stated that their focus would be on two main areas: the fiscal situation, including the four-year budgetary plan, and the banking sector. Clearly, this is a negotiating position. We are in a very difficult situation. The Taoiseach must state emphatically and exactly what is taking place. We must know who exactly is coming tomorrow although we are aware of the organisations involved. What are their terms of reference? What instructions have they been given? What position will the Government take up?

My concern is that we are in negotiations but the outcomes of negotiations are only as good for a participant as his or her negotiators. The Government has neither the financial nor the moral capacity to negotiate what is best for the people. The institutions, including the IMF, the European Commission and the European Union do not believe the figures provided by the Government or the stated losses within the Irish banking system. Deputy Michael McGrath made an interesting observation. I am unsure whether it is Government policy but he stated that the taxpayer should not have to take any further burden in respect of the banking sector. My understanding of the rules of the European bailout fund is that any funds provided are provided in the first instance to the Government, which then passes them on to the banks. Effectively, it is a case of sovereign debt taking on board bank debt.

Let us reflect back on the time of the bank guarantee. The Government spent much time justifying the grounds for the guarantee. At the time, Professor Honohan did not agree with a blanket guarantee. The Government side continually refers to the fact that 3% of the liabilities are made up of subordinated debt. How much of this figure relates to the losses of the banks? It is already the case that we are sharing the pain with Anglo Irish Bank. The Government side is great at rounding up figures but they must be put in context. The Government side referred to the question of liquidity versus solvency. These were the two principal issues at the time of the guarantee. In the previous two years, the former chief executive of the National Treasury Management Agency, Mr. Michael Somers, stated he held concerns about placing deposits in Anglo Irish Bank. Why? It was because the bank was overexposed in the property market.

If he was concerned about the NTMA's deposits with Anglo Irish Bank, he clearly had concerns about its solvency. Furthermore, in documentation that was given to the Committee of Public Accounts on the lead-up to the establishment of the guarantee, the former Secretary General of the Department of Finance stated that further work should be done on the potential losses of the banks. Losses are related to solvency, not liquidity. It is clear that this issue existed in advance of the guarantee. The Government did not need to bring in such a wide-ranging blanket guarantee for a two-year period. It could have introduced a guarantee that excluded subordinated debt and, alongside that, a bank resolution scheme.

When the current Financial Regulator, Matthew Elderfield, recently came before the Joint Committee on Economic Regulatory Affairs, of which I am a member, I asked him whether he believed the Irish Government should have been considering a bank resolution scheme prior to the introduction of the guarantee, and he agreed that it should have. A resolution scheme would have allowed the Government to separate national debt from bank debt. Instead, the Government coupled these. They should have been separated, and the way to do that was through a bank resolution scheme, specifically in respect of Anglo Irish Bank.

To compound the issue, the Government came up with NAMA, and accepted the figures from the banks. No due diligence was carried out prior to the development of the business plan, so it was done on the basis of inaccurate information. NAMA was supposed to stabilise the market but, in fact, it destabilised it. It resulted in enormous holes in the banks. Anglo Irish Bank became a lightning rod for the bond markets, which caused them to consider the fiscal situation in Ireland in greater depth and conclude that the risks were too high. Now the three wise men - the European Commission, the ECB and the IMF - are coming to Ireland at the same time as the original three wise men made their journey, and effectively laying down the law because they do not feel the Government is sufficiently competent to deal with the situation itself. They are protecting their interest, which is the euro. When did the Government protect the interests of taxpayers? We still do not know about the decision making process that took place before the introduction of the bank guarantee. Professor Honohan's report stated that the records of what happened the night before were sketchy. The Irish people are entitled to know, but they still do not know.

Fine Gael will not support this motion for one simple reason. We feel the discussion should be deferred until we have a better idea of what is happening and until the Minister for Finance can be here for a proper debate. Then the Irish people will be able to look at us and say that this House is taking care of their interests. At the moment, they do not believe that. People are petrified about losing their deposits, which they need to realise are perfectly safe, and about their mortgages. The expert group on mortgage arrears and personal debt has issued its report today, which states that it expects further losses. There is €115 billion on the banks' mortgage books, and I have no doubt this is one of the first things the IMF will consider. We must decouple our banking debt from our sovereign debt. A bank resolution scheme should be on the floor of the House today so that we can show we are being proactive.

We have an incompetent Government, and I do not say that lightly. That is not a personal accusation but a conclusion based on its policies. The Government's banking policies have failed miserably. The bank guarantee scheme was too wide and effectively coupled sovereign debt with banking debt. The NAMA legislation was a theoretical exercise that has proven in its application to be a disaster. In that there was no proposal to introduce a bank resolution scheme, the Taoiseach was ignoring the issue, perhaps because he does not understand it. Such a scheme needs to be brought in with immediate effect. We need to show leadership to the Irish people. They deserve no less.

My final concern is that we are now in a negotiating process with the IMF, the ECB and the European Commission. We must get a result for the Irish taxpayer, but I do not think the Government is capable of doing that. It is part of the problem. The European Commission has spoken about the structural problems of the banking sector. There is a structural problem with the Irish Government and it needs to acknowledge that fact. The Irish people deserve no less.

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