Lucinda Creighton (Dublin South East, Fine Gael)

This is probably a more gracious acknowledgment than we have seen from many of his colleagues. The Government is just three weeks in office and has been on a roller-coaster ride in dealing with many of the issues left hanging when the outgoing Government scarpered to the country. A mammoth task faces the Government. This is only the first step but it is an important step. I wholeheartedly stand over the steps taken by the Government and the Minister for Finance, Deputy Michael Noonan, last week in responding to the crucial stress tests. The objectives of the stress tests were threefold - to restore confidence; to recapitalise and restructure the banks; and to restore credit to the economy. The last of those objectives is incredibly important. To have any credible plan to exit the crippling debt crisis we face we must restore solvency to our banks and to the State.

Notwithstanding some of the somewhat misleading remarks from Deputies opposite, it is essential to point out that the fortunes of the Irish banking system are not divisible from the fortunes of this State. A credible and viable banking system is essential to our economy and, therefore, our society because society is dependent and interlinked with our economy. It is important this is acknowledged by all Members of this House.

The key actions which have taken place in the past number of days, as announced by the Minister, which will be ongoing in the months ahead include radical reorganisation of the banking system to serve the needs of our economy. I reject the contention from Members of the House that this is simply continuity of previous Government policy. It is a bold move to restructure the banks, something we have not seen before. We did not see any meaningful restructuring of the banking sector from the previous Government. It is essential that this is implemented as quickly as possible. The deleveraging of the banking system to reduce lending in areas which will not support our economic recovery is also essential. The emphasis on banks trying to sort out their balance sheet problems in so far as is possible, is also an essential element. Returning our banks to profitability by reducing their cost base is also a key step forward. No doubt the Government will return in the months ahead to the issues associated with restructuring and revamping the banking sector. We will be keeping a close eye on progress and ensuring banks step up to the plate, as is required by Government and expected by members of the public, and rightly so.

It is important to note that barring some major disaster this package should - I believe it will - enable the industry to withstand any future shock. I accept the point made by many Members that we have heard this before. It is what we have been hearing from Government for the past two and a half years. However, what is different on this occasion is the depth and comprehensive nature of the stress tests which have been completed. That is an important distinction. They carry credibility on the international markets and with our trading partners, which is important.

It has been highlighted in recent days the output growth tends to be slow for years following a banking crisis. However, we must do everything to ensure that we can create the conditions for business to foster growth. Members will be aware that export growth is already moving rapidly ahead. In some cases, it is growing in double digits. We must now concentrate on the domestic economy, in particular the small and medium enterprise sector. New lending is essential to our domestic economy. For SMEs and new mortgage lending, the new core pillar banks will provide approximately €16 billion to €20 billion over three years. This is likely to make a significant difference in serving the projected needs of the SME sector. This again marks a significant departure from previous recapitalisations which did not result in any freeing up of credit to SMEs. Banks were previously at risk of hoarding capital owing to concerns about loan losses. Members will be aware that this did happen. It is no longer an aspiration of Government to ensure the free flow of credit rather it will be a reality on the basis of the €24 billion recapitalisation announced by the Minister.

There has been much scoffing from the opposite side of the House about the support of our European partners from whom we have received an enormous amount of support. I do not hesitate to use the term "European partners". Our EU partners have shown a significant degree of solidarity towards us, which has been essential to our well-being and in terms of assisting us in meeting our public service demands, running the State, keeping current spending flowing and ensuring elements of the capital programme were maintained. As pointed out by the Minister for Finance in his article last week for FT, the EU has for decades since we joined in 1973, helped to make Ireland business friendly and entrepreneurial. The recent solidarity, by way of liquidity support, from the eurosystem and ECB has been critical in ensuring our ATMS continue to function and that no problems arise for depositors. At a time when our credibility has been at an all-time low, it has enabled our banks to function, although not in an entirely satisfactory fashion.

We need to step back and think about this. The combined liquidity assistance from the ECB to Irish banks amounts to €177 billion, some €117 billion in ordinary funding mechanisms and a further €60 billion in emergency funding, which is not to be sneezed at. Much of this has been made available to our banks at the low interest rate of 1%, which is not something about which we are reading in the press. To my knowledge, this has not been acknowledged by anyone on the opposite side of the House.

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