Pearse Doherty (Donegal South West, Sinn Fein)

The economic treason that has happened in this country took place when Deputy Lenihan, sitting on those benches as a Minister, hung, drew and quartered the Irish economy. That is what he did and still he is scoring cheap points here today.

I intend to focus on several points regarding the stress tests. In any business where there are serious losses and debt, the business can be restored if two things can be injected. The first is if the losses can be absolved, that is, someone comes forward with a blank cheque and wipes out all the losses. The second is to restore confidence to that business such that it can continue to trade. We are seeing the same thing with the Irish banking sector. Does the €24 billion commitment that the Government has given re-inject confidence in the Irish banking sector? It is to be welcomed that there are early signs that it is having this effect and the Minister, Deputy Noonan, dealt with this in his speech.

However, as I stated here last Thursday, our approach to the banking sector must be threefold. We must have a functioning banking system. The State writing a blank cheque and dealing with all the losses that accrue in the banking system is one way of doing it. Restoring international confidence in the banking sector will help. However, there must be two other pillars to the banking strategy, including restoring confidence to the economy and reducing the burden of the taxpayer. In these two pillars the Government has failed in respect of its approach in the aftermath of the stress test. Although we could write a blank cheque and sort out the losses in the banks, the question arises as to whether this takes the sovereign further into a position of unsustainability. I will continue to press this issue. In the spirit of openness and transparency, will the Minister call on the Department of Finance to run the computational models available in the Department with regard to the unsustainability of this State? I call on the Minister to prove that I am wrong and to prove to others that we are wrong to say that the State is now at a point of unsustainability. The Minister has the information, access to the data and the Department and the ability to run the models and present the figures. Hopefully, please God, we are wrong. No one wishes for us to be in a position of sovereign default.

I have continually outlined several problems with the Minister's approach, including the burning of senior bondholders. It is not a solution in itself; it is not the be all and end all. There is no simple solution to the banking crisis but it is a part of the solution. It is immoral and wrong to allow senior, unguaranteed bondholders to be paid in full by the State while they are burning themselves at this minute by selling these bonds on the secondary market and taking a hit themselves. This will cause serious stress and depression in the domestic economy because it leads to our having to inject additional money to capitalise the banks, which, in turn, will mean that we must implement further austerity measures.

I have continually raised a final issue in respect of the stress tests on which we must get a grip. When we examine the details of the stress tests, we can see the losses that have accrued in the banks over a three year period and the lifetime losses in the banks. However, let us focus on the three year period. During this period, losses of €9,491 million in residential mortgages will accrue in the four Irish institutions. This is €9.4 billion on which the four banks will take a hit by the end of the three year period. Put simply, we could write the blank cheque or, as the Government proposes, give the banks blank cheques to write off these losses. However, what happens to the people who owe that money to the banks? I have no wish to put it in simplistic terms because it is too serious a debate, but what happens to them? What happens to those who hold the IOU to the banks amounting to €9.4 billion and which they must repay in three years time? We may write off the losses for the banks but what happens to them?

We must come forward with serious proposals because, as the Minister correctly stated, we must get people spending again in the economy. The Exchequer figures in March have shown this much clearly. Serious problems will arise down the line. I realise the figures have been offset by excise duties and corporation tax at this point, but unless we increase income tax and VAT returns we will have a seriously depressed domestic economy and we must deal with it. We must get people spending. Up to 95% of distressed mortgages are in this State and people are in hock to the banks to the tune of €9.5 billion. They will be in hock even more but this is the estimation of what will not be paid back in the three year period. How can we get people to spend with this debt hanging around their necks? If we are writing it off for the banks, we must come up with proposals on how we deal with individuals. I do not have the answers to this information nor does my party. Models must be examined which include non-recourse mortgages and debt relief. This is distinct from interest relief because what the Minister proposes is a drop in the ocean and it will be simply wiped out by an ECB interest hike. The Minister needs to ensure serious proposals are brought forward by the Government. Perhaps the best thing would be to set up an advisory panel to examine the issue in detail. We have done this with regard to the banks and it has cost us tens of millions of euro but we must have the same focused approach for mortgage holders.

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