Brian Lenihan Jnr (Dublin West, Fianna Fail)

The different parties can deal with that. It was extraordinary that the Green Party, which made such an effort at pushing the question, could not find it in its heart to give the Government another week or two to arrange for that. These are matters of political consideration. They are not matters relating to the Finance Bill.

The Bill is always important legislation. It is not normally the focus of national and international media and, indeed, intense public attention. That this is the case on this occasion points to the unusual circumstances in which we find ourselves, both politically and economically.

The Finance Bill 2011 is an essential part of our commitment under the external assistance programme. A failure to have it enacted or uncertainty relating to its progress would jeopardise Ireland internationally. It could jeopardise even the arrangements we have arrived at with the EU and IMF on our funding.

The debate on the funding and the EU-IMF arrangement has not progressed beyond the elementary argument about sovereignty. The reality is that when one borrows one loses one's sovereignty and this country has had to borrow extensively since 2008 from world money markets to continue to fund itself. It is that which has compromised our sovereignty, not any particular decision to enter any particular arrangement. It is important that the public understands that. Sovereignty, one's freedom to choose, one's freedom to exercise different options, rests in financial matters on the financial capacity one has and if one's financial capacity is already compromised by an excessive reliance and dependence on external borrowings, the origin or source of that really should not determine the question of sovereignty. Putting it in plain language, once one must visit a bank manager, one loses some of one's sovereignty. It does not matter who is the manager. It is important for this country, however, that some certainty be brought to this matter when world money markets were as bad as they were in autumn last.

Also, because no doubt it will excite much debate in the weeks ahead, there seems to be a view expressed by many commentators and some Members of the Oireachtas that these problems can be solved in a unilateral way in this country. We are part of a European arrangement. We are part of an arrangement, for example, in currency matters, that involves the European Central Bank. We are part of an arrangement in economic matters that involves the European Union itself. We are in arrangements with international lenders. We are a small open economy which is extraordinarily exposed to global trends. The idea that Ireland can unilaterally execute a démarche and renegotiate anything is a complete illusion. The idea that such would be submitted to the people as a serious policy proposition in the next few weeks is disturbing because it is misleading the people as to the essential and real choices available to us.

Of course, there is a scope for international discussions on this subject but these are not bilateral discussions between Ireland and some international ogre. They are multinational discussions which will have to take place between the Government of Ireland and the Governments of all of the other European countries because the interest rates in this particular arrangement were fixed and determined in advance of any discussions or application by Ireland. We must ensure that whatever interest rates apply, for example, are reduced by international consensus, and that is a different task from arriving in Brussels with a fresh mandate and stating one wants to renegotiate this. If one arrives with a fresh mandate and states one wants to renegotiate this, one will be told to go home and cop on to oneself. We really need to understand that difficult international discussions must take place here and that these discussions have already begun.

At the January meeting of the Finance Ministers all of these issues were discussed in great detail. The focus, of course, was on the effect that high interest rates have right across the board on countries that will be in the facility. The focus was on how Europe generally can stabilise the position of the euro. The focus was on how Europe collectively can borrow more money rather than leaving it to individual member states. The focus was on the issue of whether there is scope to buy member state bonds at European level. All of these issues are on the table but it will require a sophisticated, sensitive approach to international discussions to ensure our essential interests are safeguarded and advanced. As I stated previously, both in Brussels and at home, the Skibbereen Eagle approach that believes the Czar of all the Russias will listen to our representations is not the right approach in these matters.

We need to go there, field our best and work together to ascertain how we can advance our interests. While I have digressed somewhat, this is the political context in which this Finance Bill has been discussed.

I already have gone through the timescale and have explained that this Bill gives permanent effect to the revenue measures provided for in the financial resolutions that were passed on budget night on 7 December last. On the Second Stage debate in the Dáil, the subject of the public finances was a recurring theme and the question of the interest rate levied by the European Union also was raised. Following the granting of bilateral loans to Greece and after detailed discussions, the member states agreed to the financial assistance. The cost of the loans provided to Ireland is on the same basis as would apply to any other member state and consequently, any change to such rates cannot be negotiated for Ireland in isolation but must be seen in the wider context. As has been widely reported and as I noted previously, discussions are ongoing at European Union level on a comprehensive package of measures to deal with the various financial challenges facing the European Union and the euro area. This includes possible changes to improve the efficiency of the various facilities.

As for the banks, because this has been the other area of great difficulty for Ireland it is important to understand that we already are in receipt of substantial external assistance for the banking system. It has become a matter of common knowledge that the European Central Bank has in excess of €100 billion in the Irish banking system at highly favourable interest rates of 1%. The Irish banking system is being propped up by our central bank, as it should be, because the European Central Bank is our central bank. While I have had my arguments with that institution, as I am sure will members of future Governments, it is the central bank with which we must deal. The European Central Bank has provided this degree of support to the Irish banking system and clearly is anxious about that exposure and this is the context in which many of our banking problems have arisen.

Much domestic debate has been dominated by the idea that we can somehow default on certain categories of bank obligations, after which we would be out of the loop and would have no difficulties. That is a highly attractive story and were it so simple, it would be very attractive and everyone would be delighted to implement it. However, it is not as simple as that. The vast amount of the external funding that came into the Irish banks came by way of deposit and not by way of debt finance via bonds. Moreover, the vast majority of those deposits have been withdrawn and replaced by support from the European Central Bank. The idea that Ireland can renege on bank debt unilaterally would be very difficult to implement without the support of a central bank. In the United States, where the principle of moral hazard has been acknowledged to a greater degree and where default on bank obligations has taken place, the Federal Reserve stands ready to protect the banks and wash them through with money whenever such a default is executed. The idea that the Irish Central Bank on its own could supervise such an operation is illusory, as this would require the support of the European Central Bank.

Again, one returns to the point of departure in respect of the question of interest rates and of the question of bank default. It can only be done in the context of a restructuring that is agreed with our European partners. Having raised the issue of unguaranteed senior debt in the EU-IMF discussions, I discern at present a very limited appetite for such restructuring. Were that issue to be pressed during the forthcoming election campaign, public figures and commentators would be peddling an illusion to the electorate. They would not focus the electorate on the real choices we must face.

Having dealt with all the bad news and bad stories, I will outline some of the good news and positive signs because if there is a criticism to be made about the conduct of our economic debate, it concerns our lack of faith in ourselves and in our capacities and strengths. The labour market has seen a significant fall in the claimant count number of unemployed in the fourth quarter of 2010. Another highly encouraging development is the movement of the current account of the balance of payments into positive territory in the third quarter of last year. This means that from that point, the nation as a whole no longer has been increasing its external liabilities but quite the reverse. Recently published figures show GDP and GNP expanding in the third quarter of 2010, which is highly encouraging.