Joe Costello (Dublin Central, Labour)

I thank Deputy Burton for tabling this Private Members' motion. I am delighted to have an opportunity to say a few words on it. The Government's approach to the economic crisis has a fatal flaw. It is obsessed by the need to bail out the banks without due consideration for the real economy, which comprises investment, business and employment. The Government has neglected those areas. The private banking system is a major cause of the crisis and it is still mired in undefined and virtually undefinable debt. The €450 million unconditional guarantee in September 2008 was followed by the €7 billion recapitalisation of AIB and Bank of Ireland. The last tranche of recapitalisation of AIB took place today after a hectic, egg-throwing AGM of angry shareholders who have already pretty much lost their shirts. AIB already has the begging bowl out for more and it is now clear that its bad debts are far greater than it had informed the Government. The latest generous offer of taxpayers' money by the Government to the private banking system is a massive buyout of the banks' bad debts at an estimated cost of €90 billion. We are still awaiting the legislation establishing NAMA to see the full extent of the liability on the State and the burden on this and future generations of Irish people.

The effect of this eight-month long banking bailout is that the Government has lurched from crisis to crisis, committing the taxpayer to virtually unlimited financial exposure without providing any benefits to the hard-pressed business and employment sector. The banks have one major function in the economy, namely, to lend money to citizens and to businesses. After eight months of shoring up by the Government, the banks are not doing the one thing the country needs them to do - they have simply stopped lending. The Government policy has failed, which it should recognise. It is in the process of saving the banks - that goes without question - but instead of the banks then trying to save the economy, they are now holding the country and the economy to ransom.

There has to be another way, which there is. First, we must consider the situation of the business community. The survey conducted by the Irish Small and Medium Enterprises Association, which has been referred to by a number of speakers and which was published today, is a stark verdict on the banks' failure to engage with the Irish economy and business. Some 83% of the 400 established businesses surveyed by ISME stated that it was now harder to access credit from Irish banks than it had been less than three months ago. The previous survey was conducted in February and, incredibly, more than half the businesses surveyed had been more than ten years with the same bank. They had a proven track record and were clearly not fly-by-night businesses. This is the backbone of the Irish economy. Some 58% of those businesses had applied for loan facilities and were refused by the banks. This is a substantial increase of 10% over the past two to three months.

Not only has the credit crunch worsened but the banks are effectively not open for business. The credit tap to business has been turned off by the banks. The banks' actions are even more perverse. On 3 October, the European Union saw the difficulties that national banks would have in providing the same level of credit to businesses in the 27 member states as before. The EU recognised that SMEs were the lifeblood of the 27 economies and, thus, it decided eight months ago to put together a fund of €30 billion through the European Investment Bank to be drawn down by the national banks of the 27 member states and distributed specifically to small and medium businesses. This was to ensure a steady flow of credit and the banks would not have to rely exclusively on their own reserves.

To date, the Irish banks have only drawn down €350 million - €50 million by the Bank of Scotland and €100 million each by AIB, Bank of Ireland and Ulster Bank. I do not believe a single penny of that money has actually been distributed. ISME believes that none of the money that was specifically made available by the EU to allow a credit flow to small and medium enterprises is being made available by the various banks because they are not getting it on the lucrative terms they received during the boom.

In conclusion, the manner in which the Government has addressed the economic crisis by bailing out the banks is wrong. It is time for the Government to see the virtue in the Labour Party's proposals.

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