Joan Burton (Dublin West, Labour)

-----there should be no risk for bondholders. Capitalism, actually, is about the allocation of capital. That is where it gets its name, and the allocation of capital is never a risk-free project. We know pension funds, for instance, want a high degree of security and high levels of information. Clearly, what happened in Ireland as regards our banks has come as a terrible shock, not just to us but to them too because the regulation system set up by the Minister's predecessor, former Deputy Charlie McCreevy and overseen by Deputy Brian Cowen as Minister for Finance, failed miserably and hopelessly. Added to that Fianna Fáil's crony bankers and developers along with the former tax breaks introduced by former Minister for Finance, Charlie McCreevy for the construction industry all helped to create a bubble. The European Union obviously did not have the policy instruments to provide oversight in an adequate manner, and the regulators in Ireland failed miserably. I do not know what they were doing, but that is for another day. That is why Ireland has lost its reputation.

The Minister is now saying that in terms of debt deflation, we can grow the economy and take this level of debt burden while having this savage deflation. Like Fine Gael, the Labour Party obviously met the teams. It seemed to me to some degree that the IMF was playing soft cop, but I believe it has learned from its experience in Latin America and Africa - in particular relating to democratic stability - by having austerity programmes that are too great for countries to bear. The IMF recently published very detailed research by Barry Eichengreen, which showed it could not find any examples of countries that have been able to successfully endure the type of inflation the Minister proposes to introduce next Tuesday in his budget and actually get back to recovery.

There is a question to be answered here. Clearly, we have a Government that is really exhausted, but has Europe reached its limit? Leadership from the European Union can provide a better way. Europe has the resources and our colleague in the Socialist group in the European Parliament, the head of the Party of European Socialists, Mr. Paul Rasmussen, at the start of the crisis more than two years ago put forward a proposal to effectively have eurobonds, where weaker European member states could have a mechanism for borrowing. The more conservative minded in the European People's Party and the Liberals to which Fianna Fáil is aligned have yet to be persuaded of the merits of this, but I understand they might be coming around to it. However, there are solutions to the problem. What Europe needs is a Rooseveltian New Deal outlook for countries that are troubled, as opposed to the Hoover Administration approach that the Minister and his counterparts in Europe, unfortunately, seem to be fixed on at the moment.

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