Joe Costello (Dublin Central, Labour)

My area has high unemployment and is disadvantaged in respect of housing, education for special needs and so on. It needs as much money as can possibly be injected into its infrastructure and facilities.

This is effectively the third budget in six months, following one last October and the pension levy which was to take a further €2 billion out of the economy. This new budget is to take anything up to €6 billion out of its expenditure. These are substantial sums of money. While I understand the Government's five year strategy, it will take approximately €16 billion from the taxpayer and out of capital projects. This will have a major impact on retail. If one takes money out of the economy, it is difficult to stimulate it and if one takes money out of taxpayers' pockets, it is difficult for them to spend. We must be careful to avoid deflation. We are breaching the terms of the Stability and Growth Pact by a massive 6.5% at least, bringing us to three times the 3% normally allowed under the EU legislation and agreements. We have been allowed to do this on a temporary basis and are going from 9% this year to a colossal 11% next year and then we are supposed to row back to the normal 3% in 2013. It is difficult to see that happening without employment taking a massive hit. Already 354,000 people are unemployed and the Taoiseach says the figure will be 400,000 by the end of the year but it could well be more, especially with a budget like this, coming after the previous budget and the pension levy.

We must focus on the sector of greatest employment, the small and medium-sized enterprises, SMEs, which employ approximately 1 million people. A total of 64% of the people employed in the private sector work in SMEs, while 50% of all those employed are in SMEs. A survey last December found that the banks had refused credit to 58% of SMEs. Another survey last month found that figure had dropped to 49% but that many of those who had applied for credit in December had not bothered to apply again because the banks had indicated that they would not get it. The lifeblood of the economy is being starved of credit.

The credit crunch is increasing, six months after the October budget. How can the Government guarantee the banks to the tune of €500 billion, inject €7.5 billion into the main Irish banks and still not ensure that the banks will respond to the needs of SMEs? Why have a Minister for Finance if he is not going to crack the whip and tell the banks that they were recapitalised and guaranteed to support in every way possible the stabilisation of the economy through the sector that is crying out for funding to keep it going? That is the sector that is haemorrhaging jobs. Once again, the banks will betray the country. If it does nothing else, the Government must sort out that situation.

The European Union foresaw this problem. At the summit last October, when we were putting together a budget, the European Union put €30 billion aside to provide continuous funding for the SMEs in the 27 member states. The Irish banks refused to go near that money until the middle of this month, after the SMEs howled at them for it. They did not apply for it before now because the margins were not good enough for them. They were not the exorbitant margins they were used to getting. That is outrageous. This month, the European Central Bank has reduced interest rates by 65%. Anglo Irish Bank has reduced its rates by 16%, the Bank of Ireland by 21% and National Irish Bank by 5%, but Ulster Bank has not reduced its rates. The cost, however, of borrowing money through the European Central Bank is 65% and the interest rate is down by that amount. There is no sense of reality in the banks. Do they realise we are in a crisis? They operate as though it were the good old days of the Celtic tiger. We have seen this already in their considerable remuneration and pension packages. That cosy cartel has still not come out of its closet into the limelight of the real world. They still operate in virtual reality rather than in the reality of the situation.

I offer only one recommendation to the Government, namely, it should tell the banks they have failed us. The private banks have failed us. We now have our own nationalised bank, Anglo Irish Bank, which should become the State corporate bank, used to ensure that the Irish economy is not betrayed again, and to draw down money. Specifically, it should be given the portfolio that once belonged to the ACC and the ICC, both support banks for the Irish economy which served it well. We now have a nationalised State bank. Let us use it and ensure that never again will the Irish economy and small and medium enterprises be bled of the funds they are crying out for in order to keep people in employment and to stabilise this economy once again.

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