Joan Burton (Dublin West, Labour)

He looked like a happy camper. What does he know that we do not know?

What we heard today was not fantastic news for the poor taxpayers and citizens who the Minister will ask to take cuts in services and wages and further tax increases in the next few weeks. Last night, I was reminded of a line from a song, "As he walked along the Bois de Boulogne with an independent air", except the location in this case was Merrion Street. Does the Minister remember the old British music hall song about the man who broke the bank in Monte Carlo? Yesterday, we had some of the men - if I may allow myself a less than worthy comment, all of them appeared to be men - who broke the bank strolling down Merrion Street looking much happier than the Minister for Defence, Deputy O'Dea, and others on the Government benches earlier this afternoon. The Tánaiste does not look happy either. What did the Minister tell the bankers that made them feel happy. Will they get more bailouts? Is there more money to come?

This time last year, the Minister told us his bank guarantee was the best in the world and would work a treat. It did not work and some weeks later he told us a little recapitalisation would be required. Some time after that, he returned to tell us Anglo Irish Bank would have to be nationalised. The Labour Party has offered the Minister a mechanism which would allow him to neatly do the job in hand. In most European countries public ownership has been used in two ways. First, it is used when private capital fails to invest and advance a project - electrification in the early years of this State is one example - and, second, it is used when private capital fails. The banking industry has failed because it was caught in a bubble concentrated on property.

The Minister referred to Japan. The proposals he laid before us today indicate we are taking the Japanese as opposed to the Swedish route. Newspaper reports have referred to a preferendum of Green Party members. It seems party members inclined to the Swedish rather than Japanese model and we all understand the reason they did so. We should recall that when faced with a banking crisis the Swedes temporarily nationalised those banks that were in a desperate position. The Labour Party is perfectly happy to take a similar course of action here.

My party has suggested a remedy to address the fear expressed by some that nationalised banks could be subject to political interference. We propose the establishment of a banking commission to supervise the nationalised banks at arm's length from all politicians. We also advocate that nationalised banks maintain the market disciplines of reporting on a quarterly basis, as they do when they have a stock exchange quotation. Nationalisation in this context would be temporary and would be done for rescue purposes. In light of the blanket guarantee, it would not be possible to proceed with some of the other alternatives that have been put forward. The Minister also announced that the blanket guarantee will continue on a roll-over basis for five years.

It is disingenuous of the Minister and his adviser, Dr. Alan Ahearne, to suggest NAMA will, to use Dr. Ahearne's phrase, wash its face. The tables indicate that the bonds will be six to 12 month bonds which will be subject to an interest rate of 1.5%. One does not have to be an economist to know that as other European countries emerge from recession and their economies stabilise, the European Central Bank will start to gradually increase interest rates. For this reason, the 1.5% rate is only likely to last for between six and 18 months up to a maximum of two years. I repeat my earlier call on the Minister to produce a business plan which sets out the flows of the bonds and their likely cost over their ten-year life.

The subordinated bonds to which the Minister referred do not constitute risk sharing, as proposed by Professor Honohan. His proposal was that bank shareholders be given a share in NAMA to ensure that the banks share the risk and to incentivise them to make the agency work as well as possible. The Minister, however, is proposing to give subordinated debts or bonds to the banks as part of the overall package. While I do not know how the market will price the bonds of €54 billion, they must, under ECB rules, be available for trading and sale on the open market.

The Minister did not address what will happen to the bonds over their lifetime. To place all of them on the open market at the same time would mean having a huge competitor flotation of Irish debt on the market at a time when the National Treasury Management Agency is trying to raise approximately €1.5 billion per month in bond auctions. We want issues such as this spelled out to enable us to understand them.

I hope the Minister does not believe he has some magical formula at his disposal that will not impose a cost on taxpayers because no one in the bond markets believe that is the case. Once the bonds are issued, they will rank in traders' minds as Irish Government debt. Does the Minister agree?

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