Frank Fahey (Galway West, Fianna Fail)

I compliment the Minister for Finance on his handling of this matter. The important issue for the Government and the country is to consider how the banks can return to lending to the real economy. The guarantee is critical in this regard. Without it, we would have an almost impossible situation. While there will be reduced leverage, which is not a bad aspiration, it is equally important that banks be allowed to lend to the productive economy.

The question of investing capital in banks will become a live issue for the Government. At present, Irish banks are at a disadvantage in comparison to the British and continental European banks, which have had capital put into them by their respective Governments. I advocate that our Government should consider these issues. There is no risk involved in that the money will be repaid. Had the State taken a stake in AIB when it had problems many years ago, at which time Labour and Fine Gael rightly intervened, there would have been a considerable payback to the economy.

I have no difficulty in respect of Irish banks. Deputy Rabbitte asked how the other banks will respond if one defaults. They will respond positively and have agreed to do so. With due respect to Deputy Rabbitte, it is very unlikely that any Irish bank will default in that we have a strong banking system. An issue certainly arises regarding lending to the property sector but the amount of lending and the risks involved are overstated in the public commentary that has been heard on this issue.

There will be casualties and bad debts — the bad debt provisions are being provided by the banks — but the vast majority of people in the property sector at present are in good stead. It is important to recognise that those who are not in this position will go into liquidation, which is normal business practice.

The guarantee has been critical. We have shown leadership throughout Europe and farther afield in that many Governments have now followed our example. If it is necessary to inject capital into the banks, the Minister should not be afraid to do so.

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