Pat Rabbitte (Dublin South West, Labour)

The reference is the Honohan report, paragraph 8.38, page 127-8.

The Minister of State told us today that the euro group is delighted with the moves we took. It was horrified at the time and the Minister of State and the Government ploughed ahead. It may have been the case that on that fateful night the Minister and Taoiseach did not have the expertise available to them. We have all learned a bit about banking since then. However, whereas some of us can be excused for our level of ignorance before 28 September one can scarcely excuse the people who were supposed to be available to advise the Minister. Some €7.2 million was paid to Merrill Lynch for advice immediately before 28 September. It got a number of things wrong, presumably because it was relying on what the regulator and other sages told it, but its advice on a blanket guarantee was not wrong.

It pointed out the grave implications it would have for the creditworthiness of this State and made that very plain. Paragraph 8.39 of the Governor's report states, "The scope of the Irish guarantee was exceptionally broad". A serving Governor of the Central Bank could scarcely be more blunt than that. It also states,

Not only did it cover all deposits including corporate and even interbank deposits, as well as certain asset-backed bonds and senior debt, it also included certain subordinated debt. The inclusion of existing long-term bonds and some subordinated debt was not necessary in order to protect the immediate liquidity position.

Could he have been any clearer than that?

I ask the Ceann Comhairle to permit me to draw attention to what I understand to be driving this, namely, the changes that the ECB has made in terms of its supervision. Under the heading "Risk Control Measures" on its website it states, "Such exclusion may also be applied to specific counterparties, in particular if the credit quality of the counterparties appears to exhibit a high correlation with the credit quality of the collateral submitted by the counterparty." What that means in English, as I understand it, is that the ECB was no longer satisfied with applications coming from the banks in this country if the collateral was not up to scratch.

It has said it is no longer prepared to accept collateral in the form of NAMA bonds and that they are effectively the Irish State, and therefore regards this as one whole. The bank debt is on top of the State debt. Therefore, the ECB called a halt and the Irish Central Bank had to come to the rescue, providing more than €20 billion in liquidity to the Irish banks and had to go to Merrion Street to underwrite that. The question is with what was Merrion Street underwriting it. That is why we are under pressure. The ECB has had enough of this and is telling us to clean up the mess but the Minister of State came into the House and presented it as some kind of pat on the back for us from Europe when the opposite is the case. It is an absolute tragedy that we have been plunged into this situation. Fianna Fáil, which is an honourable party in so many ways, has sold out our economic sovereignty by its reckless mismanagement of the economy.

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