Martin Mansergh (Tipperary South, Fianna Fail)

At this critical juncture, it is important we have an informed discussion of the issues relevant to the current situation. The economic environment has changed fundamentally. The strong and decisive management of the economy now being delivered by the Government will prove key to restoring the confidence essential to the restoration in time of healthy economic growth.

The world economy is experiencing its deepest and most widespread recession for over a half century. This severe deterioration has its root in problems emanating from global financial markets and has spread across the world economy. In an unparalleled post-war development, economic output is contracting and is predicted to be accompanied by a fall in world trade.

Clearly, as a small open economy, our export performance will be severely affected by the predicted 3.75% contraction this year among the advanced global economies which are Ireland's principal trading partners. Furthermore, the depreciation of sterling has proven very unhelpful for our indigenous exporting sector and has further eroded its competitiveness. On the domestic side, the continuing adjustment of the residential building sector to more sustainable levels of output will subtract about 3.75% from economic activity this year.

As the recession which commenced during 2008 extends further, Ireland's GNP is projected to decline by 8% this year, its sharpest decline on record. A further decline is expected in 2010 but as the expected international recovery gains momentum and the sharp shock to residential housing output passes through, our economy is expected to start growing again in 2011.

In the supplementary budget, the Minister for Finance highlighted a number of key steps to ensure the economy recovers from this period of economic distress. These included resolute steps directed at the stabilisation of the public finances, the restoration of the banking system, the recovery of our lost competitiveness, the protection of existing jobs, the stimulation of economic confidence, and the restoration of Ireland's reputation abroad.

The European Commission has welcomed the Government's reaction to the economic crisis and endorsed the approach pursued in the supplementary budget. The Minister will meet key investors and explain the Government's strategy in this regard. Such action will play a further important role in restoring international investor confidence in Ireland's economic prospects and clarify the actions we are taking to underpin the sustainability of our public finances.

The recent supplementary budget forecast a general Government deficit of 10.75% of GDP at the end of 2009. It is acknowledged that this deficit is still at a high level but it follows the introduction of a significant level of adjustments in the supplementary budget amounting to some €3.3 billion in 2009 and over €5 billion in a full year. The supplementary budget built on measures that began last July and which were followed by subsequent measures in the October budget and again in February of this year. The measures introduced are undoubtedly difficult but are absolutely necessary to stabilise the fiscal position.

I do not have much time on this occasion to go into the causes of our current position. I did so in the Dáil earlier this afternoon. I remember the mantra that the country was awash with money, and this was used as an argument and justification for supporting practically any and every spending project.

The supplementary budget set out a multi-annual consolidation plan for the public finances to bring the general Government deficit to 3% of GDP by the end of 2013, as is required by European rules. For the first time, multi-annual plans have been contained in the budgetary projections. Targets have been set for adjustments to taxation and expenditure in 2010 and 2011 and while the specifics of the measures are still being formulated, the overall policy areas for examination in this context have been announced. It is clear that further difficult decisions in all areas of policy must be taken. However, they are necessary to restore sustainability to our public finances and ensure international confidence in Ireland as a place in which to do business.

The Commission on Taxation and the Special Group on Public Service Numbers and Expenditure Programmes, due to report by mid year, will also have important roles to play in identifying measures that will improve the budgetary position in the coming years. The exact scale and nature of the measures to be taken in later years will be informed by the course of the economic cycle over the next two years.

In response to the threats to the financial system in recent months, the Government's actions have been based on three broad principles. These are to prevent the collapse of systemically important financial institutions, and therefore the banking system as a whole, by protecting depositors and other important creditors who finance the banking system; support the economy by ensuring the flow of credit to sound business and personal borrowers; and protect fully the interests of the taxpayer in all of the Government's interventions to save the banking system. I attended a lunch with EU ambassadors today and sat next to the Swedish Ambassador. He made the observation that when they set up a bank for bad loans in the early 1990s, they made a modest profit on the overall transaction.

The Government's approach to the financial crisis has been structured and considered, demonstrating its commitment to preventing the failure of any systemically important financial institution. While the range of measures already introduced have gone a long way to supporting the banking sector and ensuring its stability, it has become clear that Ireland, like many developed countries across the globe, will require further measured and appropriate action. That is why the Government decided that the asset position of the banking system must also be addressed. Accordingly, a national asset management agency, NAMA, will be established on a statutory basis under the aegis of the National Treasury Management Agency, NTMA. The Government has received expert financial, economic, legal and valuation advice at every step of its measured response to the recent turbulence in the banking sector. Likewise, specialist expertise will be procured by NAMA in all relevant areas to ensure it is established in the most efficient manner to safeguard taxpayers' interests. The Government does not consider it practicable to extend freedom of information to the operations of NAMA any more than it would consider such an extension to the activities of the NTMA.

To ensure the new banking system remains fit for purpose, it will also be necessary to restructure our regulatory and supervisory regime. This will require the introduction of necessary measures to allow the domestic banking sector to service effectively the needs of the real economy and to restore the reputation of the country as a sound and secure centre of excellence in international financial services - in which sphere employment has been maintained virtually at the same level as previously - ahead of its peers and regulated to the best EU and international standards. As the Minister for Finance, Deputy Brian Lenihan, indicated in the recent supplementary budget, the role of the Central Bank of Ireland will be reformed to place it at the centre of financial supervision and financial stability oversight, providing a single integrated structure combining both these critical functions.

The reconfiguration of our financial regulatory and supervisory system - the previous system was debated at some length by this House when I served as a Member of it - is, therefore, a priority for the Government. It is imperative to establish a new model and approach to financial regulation that will lead to the introduction of new regulatory structures, new standards in banking supervision and new standards of corporate governance for the banks.

Understandably, there has been a call for measures to improve the regulation of the business and political environment in the aftermath of recent financial and economic developments. It is worth pointing out that there is already a substantial body of company law which provides for good corporate governance - I refer here to the Companies Acts 1963 to 2006 - and for its enforcement by the Office of the Director of Corporate Enforcement, which has a very good track record. Irish company law is a significant part of the infrastructure which underpins the development of Irish business. It provides the framework that governs how Irish companies conduct their business, how they communicate with shareholders and other investors and how they deal with creditors. To remain fit for purpose, company law has been updated and refined regularly since 1963 in response to dynamic changes in the Irish and international corporate environment. In this connection, I commend the work of the company law review group in producing proposals for the major reform and consolidation of the 13 Companies Acts, resulting early next year in the publication of a significant item of legislation which will contain 1,250 sections. A lengthy period will be required for the debate on this legislation. In the meantime, the Companies (Amendment) Bill 2009 is before this House. Among other things, this legislation provides for enhanced powers for the Director of Corporate Enforcement in his efforts to ensure compliance with the company law code and improvements regarding the transparency of loans made by companies that are licensed banks to their directors and persons connected with them.

The Government is committed to ensuring the corporate governance regime for the financial and corporate sector generally accords with best international practice. The Minister for Finance will be working closely with the Tánaiste and Minister for Enterprise, Trade and Employment to take account of the lessons that will emerge from current inquiries by the Director of Corporate Enforcement in respect of recent developments. We will address, as appropriate, any concerns in this area.

The code of practice for the governance of State bodies sets out a governance framework within which the internal management and internal and external reporting relationships of such bodies is to take place. A review of the code's operation has been under way since 2005, predating recent events in the financial services area, and drafting of a revised and updated version is now complete. The Minister for Finance has notified his colleagues that he intends to publish the revised and updated code of practice soon.

There have been some discussions during this debate with regard to nominations to State boards. A number of prominent persons associated with Opposition parties have been appointed by the Government to such boards. Included among their number is a former Leader of the Opposition in this House who was appointed to the Irish Human Rights Commission. I will be interested in seeing, should there be a change of Government in the near future or in the next few years-----