Billy Kelleher (Cork North Central, Fianna Fail)

I congratulate the Leas-Cheann Comhairle on his appointment and I wish him the best of luck. I welcome the opportunity to speak on this issue, which has dominated political discussion in the Parliament and outside for the past two and a half years. An examination of the stress tests and the results of same show the deep difficulties which the Irish banking system is in and underline the essence of what the last Government attempted to ensure we provided capital for banks, to restructure the banks and to try to get them lending to small and medium sized businesses and that they would begin to lend to the broader economy again. Out of interest and not to belittle the seriousness of this discussion, I consulted the websites of the various parties and their manifestos prior to the election. I tried to gel the two manifestos together to establish whether they added up to the announcement of the Minister, Deputy Noonan, with regard to the reorganisation of the banks and the recapitalisation. Unfortunately, when laid on top of one another they did not really add up. The previous programme for Government and the manifestos had strident language on the burning of bondholders. There were to be pyres outside Dublin Castle on which bankers and bondholders would be thrown. Unfortunately, the reality has come home to roost given the serious difficulties facing the Irish banking system. At least most political parties are now having rational debate in the Dáil on how we address the problems and how we try to recapitalise, restructure and reorganise the banks to ensure credit is available to the broader economy.

One issue of concern which has been raised on several occasions and which the stress tests highlight is the fragility of the property market. If it does not begin to churn soon we will have another difficulty with the banks and they will require further recapitalisation. If we do not find the bottom of the market and get people purchasing homes and get a real value for property this situation will continue to impair the balance sheets. Will the Minister for Finance recommend that people should go out and purchase homes now? Does he believe, as the Governor of the Central Bank stated recently, that there could be a further fall in property values? Such language discourages people from purchasing homes. I make the point because it is critical that people are careful when speaking in the House. People may not appreciate the importance of their voices in this House. When I was a Minister of State with responsibility for trade, commentary in this House travelled and was listened to throughout the world. The viewpoints of various political parties were discussed. This had an impact on people's view of Ireland and the safety of investing in Ireland. People should be conscious of this when they comment. The views of parties in this House are taken on board when people make decisions on investments either in banks, State assets or commercial, foreign direct investment.

Last week the Minister for Finance came to the House on foot of the announcement of the stress test results and used some rather emotive language. He compared 30 September 2008 to one of the bleakest days in Ireland's history since the Civil War. Since then, I have read Professor Honohan's report into the banking guarantee. Professor Honohan, the Governor of the Central Bank, stated clearly that the bank guarantee was of critical importance, that were there no guarantee, the banking system would have imploded and that it would have had catastrophic effects on the broader economy. He suggested that it was hard to quantify but that it would have added to further damaging of the economy. He further suggested that without the bank guarantee, Irish banks would have collapsed overnight bringing our economy with them. Banks would have run out of money and people would have been unable to access their salaries and savings. This was confirmed by the Governor who went on to state:

Closure of all, or a large part, of the banking system would have entailed a catastrophic immediate and sustained economy-wide disruption involving very significant, albeit extremely difficult to quantify, social costs reflecting, in particular, the fundamental function of the payments system in a modern economy. These costs would have been broad-based in terms of income, employment and the destruction of the value of the economic assets and would have been on top of the recessionary downturn which has actually occurred.

This was the commentary of Professor Honohan in his report into the bank guarantee.

It leads me to pose the question that if the Minister for Finance believes 30 September was the blackest day since the Civil War, does he have confidence in the Governor of the Central Bank? Their views are very much at variance.

See this speech in context