Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank Professor FitzGerald for his contribution. I agree completely with the point he made about the UK, its environment and its relationship with the European Union. One of the challenges we face is that we are so immersed in the here and now and that the political and government systems are so immersed in the unemployment crisis, the fiscal crisis and the social challenges with which Professor FitzGerald will be familiar, that we do not have the space to engage in the what if question. One of the biggest "what if" questions is the one Professor FitzGerald mentioned, namely, what happens if the United Kingdom decides to leave the European Union?

I spend a lot of time in the UK, as many Irish people do. There is a wonderful argument to be made as to why the UK should stay in the EU. It is all about the thing which has always mattered to the United Kingdom and which Mrs. Thatcher realised was the great jewel in the crown, namely, access to the Common Market. The big question is whether anybody in the UK is willing to make that argument. We will find out the answer to that question in the next 12 to 18 months in terms of what the Labour Party decides to do and what happens in the Conservative Party. One of the consequences of the terrible difficulty we are in is that we have forfeited the ability to think about the big issue, to which Professor FitzGerald referred. I would be interested to hear his view on that.

I refer to three economic points Professor FitzGerald made, including the point about the balance of payments and the fact it is absent in the kind of current eurozone thinking. I always interpret balance of payments quite crudely as being the difference between what a country sells and what it takes in. Since the eurozone was created, it has made that mistake. Nobody ever talks about the balance of payments. The most amazing example of that was when all sorts of self-styled experts proclaimed Ireland would default. Their attention was never drawn to the fact we had a balance of payments surplus. The fact that is absent currently is entirely consistent with the history of the eurozone. Nobody ever talks about that issue. It is one of the big problems we need to address.

I refer to fiscal policy and would like to develop a point Senator Healy Eames made, which cuts to the heart of it. Whenever I put the case to people that co-ordination of fiscal policy should not mean everybody doing the same thing, the answer I get comprises two things. The first is another question: if Germany, Holland or another country decided it wanted to re-inflate its economy, who would lend it money? Second, if someone did so, would it leave the country immediately and go to Asia? What is Professor FitzGerald's view on that?

I refer to banking union. To put it very simply, one of the causes of our crisis is that banks stopped lending to each other, the ECB stepped in to provide the money and the ECB is trying to get back its money in different ways from different countries. Banking union should, hopefully, create the ability of banks to lend to each other again. Would the early phase of a banking union not create the capacity to further weaken national banking systems all over again? Implicit in the creation of a banking union is the idea that banks can fail. If that possibility is there, surely that means banks which have that risk hanging over them will find it more difficult to raise money and will have to offer depositors more money to put their money into the bank and so on. Some of the weaknesses which are probably there within national banking systems could be exacerbated in the early phase of a banking union.

I will conclude with an analogy which I put to an earlier guest, who completely disagreed with me. One of the challenges we face is that the bond markets lent to Greece, Ireland or Portugal at the same rate they lent to Germany, but they are not doing that at the moment. People also lent to banks at the same rate, regardless of how healthy the bank was. One of the consequences of a banking union is that might not happen anymore. If that is the case, will the early phase not be a rocky ride?