Peter Mathews (Dublin South, Fine Gael) | Oireachtas source

When it was engaged, it was already in a state of rescue involving Bank of America. It never admitted this on the papers of introduction and in the appendices to its advice to the Minister and the NTMA. This is the sort of establishment that does not inspire confidence. When we refer to confidence and PR staff whose job is to say confidence is improving, it wears thin with me.

Two weeks ago the bond issues were successful. Across the board in financial markets there is a race to the bottom regarding bond yields. The VIX index, with which the delegation will be familiar, exhibited a fortnight ago the least risky presentation since 1991. CNN's Fear & Greed Index was at the highest level. Therefore, the markets are piling in to reduce yields wherever there is cash. That is the truth on how our bonds were issued at such prices. We need to be honest about this. If we are not, we will let ourselves down in the negotiations which are running out of time and road as we approach 31 March.

I agree with Deputy Richard Boyd Barrett on the promissory note, a contrived financial instrument to validate the loans to our banks by the Central Bank of Ireland and the European Central Bank under exceptional liquidity assistance guidelines. These could not and would not have been advanced had the Government not been strong-armed into creating the promissory note. That is another point the public does not understand. The public believes the promissory note is a liability. It is not; it is a financial asset that becomes a liability as it is turned into cash to redeem exceptional liquidity assistance to the IBRC. The European Central Bank has lent money to the survivor banks. This is tantamount to capital in so far as it is plugging all the funding requirements of the banks. The return that should be received is not being received because the money is at a low cost base. The banks asset and profit generation capabilities are in bits because of the rotten loans they are still trying to collect.

The mortgage problem which is now beginning to be acknowledged must be borne in mind. The Governor, Mr. Honohan, stated some days ago that there were all sorts of interrelationships to be considered. The banks have a difficulty in dealing with household and SME loans, the legacy loans, from the bursting of the bubble. They are incapable of being repaid by the borrowers. The banks, therefore, will need more capital. The severe stress tests were not nearly severe enough. It is like attending to the boil after it has burst and must be cleaned up. The problem will need to be addressed in one year if we do not state emphatically to our colleagues in Europe that the scale is bigger than it was. They will not like hearing this because they believe they are actually carrying the load. They are not; they are lending to us. There are no free gifts. They are giving us loans that they should not have been lending. As in the case of Iceland, the investors should have taken a bath. If this had occurred, we would be back to recovery, with a primary deficit that would actually be very manageable.

As for the bridging of the gap between Government revenues and expenses, even though it was big and had a wow factor - with a lot of belt tightening, which has been done - it is manageable. The problem is the legacy financial architecture that will kill this country in the next ten years and that is not right. I am prepared to stand up anywhere in Europe, in any language they like - I will learn a language - to tell them this is the case. Ireland holds the Presidency of the European Union.