Michael Ahern (Cork East, Fianna Fail)

When the Government agreed to guarantee the banks, it steadied the banking system here. The reaction from banks and from Governments in Europe, especially in Great Britain, was very serious as money came flowing back into the Irish banking system. That was a sign that a wise move was taken by the Government. The Government is trying to ensure that Ireland has a sound, solid financial sector to service the needs of the economy. It must service small, medium and large businesses, the mortgage business and the individual members of the public, which include our families and our neighbours.

The return on the pension fund in the past year was 0.9%. The Government return under this agreement will be a fixed dividend on preference shares of 8% per annum, which is much better. The shares can be purchased at par up until the fifth anniversary, and at 125% of the price thereafter. This is a positive return for an investment to ensure that our banking system can service the needs of this economy.

It is also worth remembering that in 1986, the then coalition Government bailed out Allied Irish Banks for its involvement in the ICI situation. We are still paying a 2% levy today as a result of that decision by that Government. We are being preached at today by some of the members of that Government. A senior official of Allied Irish Banks was allowed his bonus that year, but that is not happening under the decisions taken by the Government today.

Concern has been expressed over the last few months about the lack of cash flow by mortgage seekers and people involved in small and medium enterprises. The agreement announced today by the Government sets out a statutory code of practice on business spending and mortgage arrears, which have been finalised and which will be published by the Financial Regulator later this week. The code will be put in place to ensure that all banks operating here deal in an honest way with customers, and that consumers are treated in a reputable and respectable fashion. It is important that there is public confidence in our banking system. The decisions being taken by the Government and by the Minister will bring back confidence in the system and will make available finance that is badly needed by small and medium businesses, and by individuals looking for money to build extensions or buy a car. It will be vitally important to bring about a change in mood among the people.

We have also heard that there has been a mishandling of the crisis. Every country across the world has had difficulty in grappling with what has occurred over the last six to nine months. There was a meeting in Brussels this week of European committee chairpersons. We have had a report back from one of the Deputies at the meeting, who told us that representatives from every country were asking what could be done about the same problems. I gather that no consensus came out of that meeting. That is the problem with which we are still grappling across the European banking and financial system.

The decision by the Government not to rush in and throw money at the problem without a detailed plan, as was done in other countries that have since had to revisit their plans, was a wise thing to do. The Minister's announcement will bring back that confidence and will allow our cash flow situation to return to some form of normality. In the future, we will again have the sound system that we had for many years.

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