Joan Burton (Dublin West, Labour)

This morning on the RTE news I heard that the Taoiseach, Deputy Brian Cowen, is jetting off to the once-a-year schmooze-fest for the ultra-rich in Davos, Switzerland. It was interesting to note that during the week the International Herald Tribune and The New York Times have put this fundamental question in the context of Davos: could the much-maligned social welfare systems in Europe end up being the model of the 21st century? This has been suggested because of the extent of the bank failures and job losses, the wiping out of retirement savings and the loss of health cover. This has taken place in the US economy in particular, but also more generally in the private sector in countries throughout the globe. The conclusion in the editorials of these newspapers yesterday was that support is growing for what they call a European-style safety net and that Mr. Keynes's economics is back in fashion.

I hope the officials in the Department of Finance will note that the US President, Mr. Barack Obama, and his team are busy studying the Swedish solution to the banking crisis of the 1990s, along with the Dutch and Swiss health care models based on universal health provision. I am certain they will do so. These are the objectives of Mr. Obama. I refer to a quote from Mr. Kenneth Rogoff, the former chief economist at the International Monetary Fund, IMF. I am certain those in the Department of Finance will recognise him as a credible authority. He made an interesting point yesterday, stating that when the world's biggest economy, namely, the US, and the world's biggest emerging economy, namely, China, look for lessons in the same place, namely, Europe and the European social model, at the same time, it is clear that something is up. We are witnessing a paradigm shift towards a more European social state.

While the Taoiseach is up in the clear mountain air in Davos with its extraordinarily rich parties and its festivities for the super-rich, I hope he will be able to open his mind to the fact that Ireland needs a third way, that is, a mixed economy. This is inevitable with the collapse of the banking industry and I will discuss the blame for that presently. However, given the collapse of our banking and financial industries in the past five months, there should be a bigger role for the State in financial and banking affairs. That is inevitable and there is no point in the right-wing people in Fianna Fáil gnashing their teeth.

Yesterday, we saw a display of childish antics by the Minister for Transport, Deputy Noel Dempsey. It is clear the management of the banking crisis is beyond the capacity of the officials in the Department of Finance, the Minister for Finance, the Taoiseach, who only recently held the position of Minister for Finance, and the Merrill Lynch advisors. As we know, the Merrill Lynch advisors are not without their own problems.

We must have a framework comprising an individual or a group of people with serious national and international credibility to oversee the stabilisation of the banking system. It is possible we will need to create an Irish version of the Resolution Trust Corporation, RCT, established in the US to help solve the savings and loan crisis in the late 1980s. By way of parallel, Sweden set up the Bank Support Authority with a similar function in the early 1990s during its crisis. This idea has a good deal of merit, because once we get beyond the very immediate banking crisis, or once a clear strategy for doing so becomes apparent, the Minister for Finance and his officials will have a great many more pressing issues in their in-boxes than micro-managing the entire Irish banking sector. Furthermore, they do not have the expertise or the experience to do so. In any case, we are not there yet as we have seen from the Government contributions to the debate.

My proposal should be realised on a genuinely bipartisan basis rather than the usual old boys club of the Fianna Fáil golden circle. Last week, in contrast to the remarks of the Taoiseach, Deputy Cowen, Mr. Barack Obama stated that what we need is a clean break from business as usual. There are many difficulties involved, including the fair value price for assets. I will not elaborate on this, but it is the heart of the matter. If fair values are not calculated, there could be gross corruption in the system I propose.

There is a systemic problem requiring a systemic answer. In proposing such a resolution for the banking and finance sector, there should be a parallel mortgage protection agency framework. I realise there are proposals in the Government's framework document, but they are very tepid. A mortgage protection agency framework could sit within the National Treasury Management Agency and it could help people aged between 30 to 45 years who are married or in a relationship with two or three small children and living in large houses. It is possible in such cases that one parent has lost his or her job or perhaps both are working reduced time. Such people will not lose their house this month or next month, but nevertheless they are terrified of the consequences. We should say to these people, who represent the bedrock of the Celtic tiger, that there could be a mortgage protection agency framework. If the banks repossess houses they can do nothing with them. The Minister for State at the Department of the Environment, Heritage and Local Government, Deputy Michael Finneran, might buy them cheaply, but that is not a solution either. We need such a framework. The Labour Party suggests these two very workable and practical proposals, but they must be created on a bipartisan basis. We already have a start-up vehicle and resources available in the form of the National Treasury Management Agency.

The Irish economy needs a reformed banking sector and hopefully we will end up with at least two Irish-owned banks based in Ireland. While that certainly is a highly desirable objective, there must be a searching evaluation of the economic trade-offs between what is desirable in Irish banking and what should be the maximum cost to the Irish taxpayer and the maximum financial risk exposure to the Irish public finances. There is no doubt that last September the Government made one appalling mistake in the manner in which it structured the guarantee. Only history will tell whether this will turn out to be the most expensive decision by any Irish Government, which has put the fundamental finances of the State at some risk. Moreover, no solution is guaranteed as yet as we are not out of the woods in respect of the banking crisis.

As for Anglo Irish Bank, while I do not have time to go into that issue in detail, the abuses there must be addressed. An inspector must be appointed to recover Ireland's reputation and to send out a message that we are clearing out and cleaning out wrongdoing. That is important and will help in the restoration of our reputation in places such as the United Kingdom and the United States where, unfortunately, it has been shredded by the Government and its actions. However, the most important solution is to get investment going again in the trading sectors of the economy, namely industry, tourism and export services. Our small economy cannot prosper without getting investment and credit flows going again. The question is whether Ireland should adopt a strategy that belatedly will encourage higher-productivity indigenous industry. This issue must be considered.

Finally, the public sector did not cause this economic crisis. Fianna Fáil mismanagement did, particularly that of Charlie McCreevy, Deputy Bertie Ahern and, unfortunately, Deputy Brian Cowen, who inherited their policies on becoming Minister for Finance. Nevertheless, the public sector reform issue will form part of the solution. Members must stand back and be fair when evaluating the strengths and failures of the public sector in Ireland. The Government's facilitation, through benchmarking, of the creation of what is called in the United States a muffin ring or spare tyre of unnecessary administration in the Irish public service must be addressed. This applies to public administration in many areas, including local authorities, in which binmen and park workers have been sacked without preventing an increase in the numbers in middle management or the amount of reporting. This dilemma, which we have created for ourselves, must be addressed.

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