Batt O'Keeffe (Cork North West, Fianna Fail)

That would achieve Labour's ideologically driven goal of a fully State-owned banking system. Labour's approach is in violation of EU Commission rules since the Commission insists that valuations must be determined following a due diligence examination of each loan. Under NAMA, each loan will be valued one by one. The Commission does not allow a flat discount across all loans as Labour proposes.

The Government has ruled out the full nationalisation of Allied Irish Banks and Bank of Ireland on the basis of information from due diligence or stress test exercises undertaken in March and other information on expected future bank losses indicating that full nationalisation is unnecessary. Once an institution is fully nationalised, the State has to sustain the institution. Anglo Irish Bank is a case in point. The State has to ensure that the minimal capital is maintained in that institution. If that is not done, the institution ceases to be a bank and all the liabilities become an immediate charge on the State and the taxpayer. If Allied Irish Banks and Bank of Ireland were fully nationalised, shareholders would have to be compensated with cash from the State. At current share prices, that could mean a €5 billion cash payout. Where does the Labour Party propose the State finds that money? That is before a single cent of new capital has been injected. Full nationalisation would inevitably result in the downgrading of Ireland's sovereign credit rating and the State would have to pay higher interest rates on its borrowings.

Under the Labour Party's plan, banks would be removed from the stock market. One can ask how the Labour Party would propose that the State would sell off its stakes over time and when it would do so. How would fully nationalised banks perform in the interim? The Labour Party cannot cost its proposal because once the State assumes total responsibility for the financial sector the cost could be endless.

See this speech in context