Enda Kenny (Mayo, Fine Gael)

There are a number of very pressing issues with which the House should deal. Yesterday Allied Irish Banks issued an interim management statement ahead of the annual general meeting tomorrow. The developments alluded to in the statement are extremely disturbing. The bank now expects its bad debt charges for 2009 will be of the order of €4.5 billion. Loans that are vulnerable, on watch or impaired have increased in the first quarter of the year by €9 billion up to €24.3 billion. Mortgage arrears are rising and now stand at 2% of the total book.

The banking sector is deteriorating day by day. Just two months after the detailed analysis of its loan book, Allied Irish Banks is now stating its outlook is even worse than the worst case scenario it envisaged. It stated last year it did not have any problems at all, but we now find ourselves in extreme uncertainty and danger. If this is mishandled or got wrong by the Government, it will have the potential to sink the economy entirely. On the basis of well accepted assumptions internationally, the IMF estimated that, on the basis of the Government's policies, the cost to the taxpayer of bailing out banks could be as high as €24 billion, which sum would not be available for schools, hospitals, education, policing or the next generation. This would obviously be a disaster of unprecedented proportions. The response of the Government has been dictated to date by the needs of the bank, without great regard to taxpayers or their customers.

Consider the decision to save Anglo Irish Bank last September, at which time we were not told the full truth that there had been a massive run on the bank. A decision was made to recapitalise it when it was obvious to all that its business model was broken and that it had lost the trust of regulators, depositors and the public. The decision to invest €7.5 billion in Allied Irish Banks and Bank of Ireland which allowed for the nursing of dodgy developer-related debts without any credible commitments to extend credit to the hard pressed and struggling small and medium enterprise sector and the latest decision, on foot of a short report, to buy €90 billion worth of unsellable toxic property debt from the banks, to be managed by the State, were made, although virtually every single economist not on the Government's payroll had said this was the wrong direction in which to go. Who or what is dictating policy? Is it the banks or the public interest? For whom or what has the Government more respect? Is it the banks, the international bond markets that funded the banks or the taxpayer?

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