Brian Lenihan Jnr (Dublin West, Fianna Fail)

Back then, our banks were on the brink of financial collapse and our economy had gone into reverse. Revenue had fallen steeply and unemployment had risen sharply. For the first time in a quarter of a century, we were experiencing negative growth.

Economic activity remains weak and we face further difficult decisions. The crucial difference, however, is that we now have a credible fiscal position. That is because in the past two years, we have introduced budgetary adjustments of more than €15 billion. As a result, we are now in a position to stabilise the deficit and we are on a firm path to economic recovery.

This adjustment has imposed a heavy burden on our citizens. Taxes have increased, public sector workers have suffered significant reductions in their pay and social welfare payments have been reduced. It is regularly suggested in the House, and outside, that these painful measures have been necessitated by our banking crisis and the cuts in pay are funding a bailout of the banks. That is wrong. The reason we had to make substantial savings is because of the huge gap that opened up between the revenue we take in and the cost of running the State. We are borrowing for day-to-day expenses which all Members know is not sustainable.

Our determination to deal with this imbalance in our public finances through firm and decisive action has engendered real confidence in our economy on the international stage. The outside world believes in us and in our ability to work our way through our difficulties and return to growth.

Jean-Claude Trichet, president of the European Central Bank, recently said, "In the case of Ireland very, very tough decisions have been taken by the Government and rightly so". More recently, Mr Trichet's colleague, José Manuel González-Páramo of the European Central Bank's executive board, said, "The Irish measures are very courageous. They are going in the right direction". The French Minister of Finance, Christine Lagarde said, "Ireland has set the high standard the rest of us must follow". On a recent visit to Ireland, the German Minister for European Affairs, Dr. Werner Hoyer, said, "I think there is a deeply rooted trust and confidence in this country's ability to sort out its problems. ... There is a fundamental belief that the Irish are going to solve it".

Already, we have reaped the benefits of this growing confidence. Since last April's supplementary budget and the announcement of the decision to establish NAMA, borrowing costs have fallen and our bond spreads have halved. This trend was reinforced by last December's budget which outlined the next stage of our plans to return to a sustainable fiscal position. That is why we must retain our fiscal discipline.

Having stabilised our public finances, we must move to the final phase in stabilising our banking system. There has been much criticism of the length of time it has taken us to get to this point. I reject such criticism. Crucial pieces of the jigsaw had to fall into place before we could embark on this ultimate phase of our bank rescue.

First, we are in a position to do what we are doing today because as a sovereign State we are now fiscally stable and credible. Second, we now know the extent of the losses in our banks and the scale of the damage that has been done by the excessive lending and bad practices of recent years. Through its bottom-up valuation exercise, the National Asset Management Agency, NAMA, is progressively valuing and removing the most impaired loans from the system. Third, we now have in place a Financial Regulator of international standing who has independently and rigorously reviewed the capital requirements of the Irish banking system in accordance with best international practice.

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