Seán Fleming (Laois-Offaly, Fianna Fail)

I welcome the opportunity to contribute to the debate on the revised document published recently following completion of the quarterly reviews for the first quarter of 2011 of EU financial assistance to Ireland and of the extended IMF arrangement.

I will deal with a number of aspects of the document before the House and then refer to our overall position as a result of this agreement. A major section of the document deals with financial sector policies, restructuring, deleveraging and recapitalisation. It says that the prudential capital assessment review recently found that €24 billion is required to ensure a sound capital basis for the banks and this will cover losses up to approximately 2013 over those previously estimated. That is in addition to funding that has already gone into the various banks. Much of this money will be put into the banks in the short term.

The revised document contains new changes about which I am worried. First, the position of the new Government parties is to go soft on the Irish banks again in a way they have not told the people about and in a way they hope people will not pick up on. They propose to inject up to €24 billion in the banks and the documents state that they will make arrangements "for a clawback of any injection of capital by the State subject to the approval of the CBI. This mechanism will require the banks to repay any such capital in excess of their regulatory obligations when the financial institutions again have stable access to the wholesale funding market or otherwise stabilise their funding, including a normal reliance on Central Bank funding". That means money has to be put in for recapitalisation purposes. If it is found to be too much, some of the money can be repaid with agreement.

More important, the cost of the €24 billion at the blended interest rate of 5.6% will mean the taxpayer providing an interest subsidy of approximately €1.3 billion per annum to the banks. Most of the loans taken out under the deal run for an average of seven years and, therefore, the taxpayer will provide a further interest subsidy of €10 billion to the banks for providing the €24 billion injection now. There is no mention of the Government making an effort to seek a refund of the interest the people will pay on the money drawn down from the EU and the IMF. I can understand someone saying I am splitting hairs when AIB is under State control and is almost 100% State owned but it is a commercial institution and it is effectively a semi-State body. There is a case for AIB to make a dividend payment to the Exchequer down the line to cover the interest subsidy it is receiving.

More important, why is such a subsidy being provided for Bank of Ireland? The taxpayer does not have full control of the bank but the State is putting expensive funds borrowed under this deal into the bank and no request is being made of the bank to repay the interest the taxpayer is paying. If between €4 billion and €8 billion is injected into Bank of Ireland over a period, the bank should be charged the blended rate of interest and the money generated recouped by the Exchequer. The bank should not be in a position to increase profits and pay dividends to its shareholders, thereby increasing their wealth, on the basis of this subsidy.

I acknowledge Bank of Ireland is in competition with a semi-State bank, AIB but the interest subsidy must constitute state aid when the bank is still operating outside the jurisdiction. It will be in receipt of not only the capital injection but the interest subsidy for the duration of this plan. The Minister has not referred to this at any stage. The Government parties are going soft on the banks and they are not coming clean on this, which is a new development.

The document refers to AIB and the Bank of Ireland as the two pillar banks. I worry about the over reliance on domestic banks to deal with our financial crisis. International competition is needed in the banking sector and, as part of this deal, the Government should try to attract banks from outside the eurozone and, therefore, outside the control of the ECB, which has a vested interest in recouping as much money as it can from our economy. The Government parties are in the process of creating two major banks, both of which will be too big to fail. They are creating new sacred cows, which will be untouchable, no matter how much harm or damage they do, no matter how much pain they inflict on the people and no matter how dangerous their behaviour is for the economy.

Now that there are only two Irish banks they are too big to fail. We are now making sacred cows out of them. We must guard against that. Currently, Ulster Bank is carrying out a significant amount of financial activity in this country. It is necessary that we have competition from outside the euro area. That is to be welcomed because otherwise the two banks will have a duopoly which is not a safe way to proceed.

The Minister made clear yesterday that the public interest directors have no right or legal authority to communicate with him. Having been appointed based on their previous CV, in the same way as judges, their sole duty is to do their job. There is no mechanism in law for them to do otherwise. They have a fiduciary duty to the banks of which they are board members to deal specifically with the bank. We have seen that problem occur in the past. In the previous Dáil the problem became especially evident in FÁS where departmental officials who were on the board did not report back to the Minister because they felt they had a corporate duty to FÁS rather than to the Minister when they were attending board meetings. That was a serious issue.

People will be keen to discuss in further detail the reference to the importance of making effective use of State assets and, where appropriate, to dispose of them to help reduce the Government debt. It is a disgrace to sell off some key State assets that can produce jobs. Two generations ago when the country was becoming strong we set up big semi-State companies such as the ESB, Bord na Móna and CIE. They provided a good social service in terms of employment. It is bad enough that the Government wants to sell them off, but one must ask who was fooling whom when it convinced the people that the sale of State assets would be used to create jobs.

I am also concerned by the reference on page 28 of the document to "the small but locally important credit union". The reference to "small" is almost derogatory. The Government intends to force mergers among credit unions. We agree there should be proper standards of governance in credit unions but the Government is picking on them unnecessarily in some cases. The document indicates that the Government will provide financial assistance if required, subject to EU state aid rules. In other words, it is going to hold credit unions over a barrel under that heading. There will be no mention whatever of EU state aid rules when it comes to giving billions worth of interest-free, major cash injections to Bank of Ireland and AIB.

The Fine Gael Party put much emphasis on the abolition of quangos. However, on page 30 there is a commitment to setting up a new water utility company. Every Member in the House is aware that if a water leak occurs or there is a water improvement investment programme to be carried out in a local authority, those best placed to do it are staff in the relevant local authority. There will now be one central agency. It will be another new quango and another layer of bureaucracy. It will be another way of making the Minister less accountable to the House. The new water utility company is one of the first official new quangos the Government is to set up. It will be interesting to see how many other new quangos it will set up. We are seeing the start of it now. I could speak further on the matter but I understand my time is up.

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