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

I do. I would like to pick up on something Mr. Carrigan said. It is now acknowledged across the eurozone that the financial system buckled and remains very fragile and loose around the joints. It is like a cardiovascular system. The real economy of Europe, including businesses, SMEs, households and all the rest, cannot breathe, exercise and create economic growth unless the cardiovascular system is working. The system has been fast-tracked to deal with banking resolution, supervision and other such matters. There is a word-play involved. When one hears of the ESM being available to recapitalise banks, as if they need cortisone injections or steroids, the question arises as to whether retrospective capitalisation can be done.

Nobody abroad understands our system because the message has not been explained. Our banks were all bust, and resolution rather than recapitalisation was involved. The promissory note was the creation of an asset that the people of Ireland underwrote to stick into a dead bank to enable the euro system to get money into it to repay bonds. That message is only slightly understood here and there. There is a moral imperative for the euro system to somehow devise a retrospective resolution for our banks.

It is not recapitalisation in the sense that Spanish banks are stumbling along and need some cortisone in the form of €100 billion. We can safely say they need €500 billion because when bankers say they have a problem, history has shown the figures must be multiplied by five to get somewhere into the territory of the truth. We should talk to Europe in the language used across the dinner table because that is what gets effected. Pensions have been hammered. We heard that in IBRC, a €400,000 deposit owned by a pension fund will be eviscerated by the resolution process.

It comes down to real lives and businesses. We have to snap out of the theoretical, abstract and hypothetical language of papers and considerations, and get down to the real measurement of what is at stake and where. SMEs have too much historical debt. They are smothered in it. Fiona Muldoon said €25 billion in loans is impaired and distressed and needs to be dealt with surgically. If one had a body with a gangrenous limb, it would be cut out. One would not keep putting ointment on it and see how it is after five or seven years, as the insolvency regime does. That is not the way to solve the problem. If Dunnes Stores or another firm bought in bad stock which the market would not take, there would be no point in feeding it in at 10% a year over the next five years to see whether the market would take it. That is how the drip-feed method of dealing with bad debts in banks operates.

The banks need a good injection of capital. Waiting to see how PCAR 3 goes is not the right approach. PCAR 1 and 2 were wrong. PCAR 3 should not engage in a cosmetic exercise, rather it should get into the banks’ balance sheets, look at the loans and do whatever it takes. Retired people from the banks, who understand how to do cashflow calculations, should be employed. Such calculations are straightforward; they are not rocket science. We can find out what needs to be written off.