Micheál Martin (Cork South Central, Fianna Fail)

It will be a bad outcome if the summit finishes without a comprehensive and generous plan for Greek debt.

The summit must also provide a mechanism for recapitalising many more banks in recognition of both the Greek position and the fact that reserves need to be higher on an ongoing basis. German, French, Italian and Spanish banks are under pressure, as well as those in smaller economies. This reinforces the idea that financial regulation is a trans-European issue and not one which can be brushed aside as a problem for the periphery. It is a mark of this Government's abandonment of its pre-election policies that "Labour's Way" and "Not a Red Cent" were followed by the complete adoption of the restructuring proposals being prepared by its predecessor. Indeed, it has even gone so far as to try to claim to have developed these proposals. This is merely another irrelevant political game but what is highly relevant is that the recapitalisation policy is showing the potential to work and is helping to restore confidence, albeit slowly.

As the Government knows but chooses to ignore, agreement to burn many bondholders was sought last year but this was rejected by the key funders. Unilateral action was not and is not an option. The argument we were faced with last November was the risk of contagion which could be a European equivalent of the collapse of Lehman Brothers. The collapsed of Lehman's happened at a time when there was no planning for recapitalisation and no decent information about the exposures of different banks. If Greek sovereign debt is restructured and if banks have reserves which meet rigorous stress tests then this contagion fear is no longer valid. The Taoiseach must insist at the summit that the proposal to restructure Irish bank debt should now be agreed.

For the bank and sovereign bailouts to restore confidence, they must be backed up by a dramatically larger fund. Half measures have not worked. Only when markets know there is sufficient funding available to support larger countries will they feel more secure in lending to them. If this requires the leaders to have a direct conflict with the ECB about leveraging already agreed funding, then so be it.

These measures relating to Greek debt, recapitalisation and adequate funding are what is required to deal with the crisis in hand. They will address the lack of confidence and will provide certainty that the members of the eurozone have taken actions which are proportionate to the crisis in hand.

It appears the summit will also be presented with proposals concerning the reform of governance within the eurozone to include not only increased co-ordination but also a substantial increase in central fiscal powers. This has nothing to do with tackling the crisis at hand and threatens to distract the Union, wasting time in interminable and possibly futile discussions. On top of this, many of the proposals do nothing to address the core weaknesses of the currency union which have been exposed over the last three years. They owe more to a pre-crisis agenda than one which has critically engaged with the evidence of what has gone wrong.

This crisis is not one which would have been prevented by greater co-ordination of fiscal policies. Throughout the decade before the recession, the European Council, Commission and Central Bank produced report after report about the fundamental strengths of the Irish economy and regularly praised our fiscal policy. In 2007, a detailed research report on Ireland by the OECD predicted medium-term growth of 5% per annum. Increased co-ordination will be based on the same expertise; it is no panacea.

Those who care to look back can see that it was Germany and France in 2004 who led the way in breaking agreed deficit limits and who brushed aside criticisms of their actions. The idea that this is a crisis caused by a wild periphery which ignored the advice of the restrained centre is superficial nonsense. The Stability and Growth Pact has comprehensively failed and an agenda which is based mainly on ways of strengthening its enforcement will also fail. For example, there has been no consideration of the absurd provision that the punishment for a country getting into budget trouble should be to make those troubles worse through fines. The example of the currency union of the United States is instructive, in that the Federal Government has never had some of the controlling powers being proposed for the eurozone.

One glaring omission from the debate has been the need for a radical reform of the working of the ECB. It is a young institution which is as arrogant as it is powerful. It has made an enormous number of bad policy decisions over the past few years. It has followed the most inflexible and orthodox policies of any major central bank, inflicting substantial pressures on countries and citizens in the process. If one wants to see a bank out of touch with reality all one needs to do is to read a speech given to the London School of Economics by Jean-Claude Trichet in June. At length, he praised the ECB's work in the past decade, admitting no error whatsoever in any policy area. He bizarrely talked about achieving a "precision landing" for European inflation and he justified being the last central bank in the world to keep raising interest rates after the recession had started. He followed this with a defence of raising them again this year, just as the recession took another turn for the worse. Four months later he is warning the leaders of Europe that the financial system is on the edge of a precipice.

The ECB's mandate must change. Employment levels must be included in addition to inflation. In changes which do not necessarily require treaty amendments, the ECB needs to be given increased powers to oversee national financial regulation. A hawkish approach to bank capitalisation and risk management is far more relevant to addressing the causes of the current crisis than a hawkish approach to inflation.

The debate about reforms should first start with a proper consideration of the many factors which led to today's crisis. Simply saying, "Let's have a fiscal union" is not a policy and is certainly not an answer. There is much which can be done within the existing treaties, in particular on financial regulation. There are also significant administrative changes which would help, including a greater diversity of advice and oversight from within the institutions. Any attempt to rush structural decisions will take a long-term issue and use it make to the short-term crisis worse. Let us deal with the issues in hand and not complicate them.

The silence of the Government on most of these issues has been striking. There has been no detailed statement of the Government's policy. Are we supporting Greek debt restructuring? Are we demanding that bank bondholders be burnt? What institutional changes are we supporting? Have we tabled any policies for discussion? The Taoiseach and the Tánaiste have delivered a few comments on the side of media events, but there has been little else. I note today's contribution was strongly nuanced to try to move the Taoiseach away somewhat from those comments, but as yet we have not heard any substantive statement on the issues Chancellor Merkel and President Sarkozy have put on the table following their summit.

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