Michael Ahern (Cork East, Fianna Fail)

I am grateful for the opportunity to speak on this Bill in the context of the wider economic situation in which we find ourselves. On 10 May 2010, the ECOFIN Council agreed on a €500 billion package of measures to support financial stability in the European Union. By this decision, member states are showing their resolve in supporting the overall European economy and the interests of all European citizens. The measures adopted by the ECOFIN Council are bold and I hope they restore confidence in the euro. EU finance ministers unanimously agreed to assist Greece through the use of loans which must be repaid within a fixed time period. Contrary to some reports which appeared in newspapers over the weekend, these loans will carry a significant interest rate of approximately 5% per annum to ensure that all countries make a return on them.

The agreement also provides that the funding costs of member states participating in the financial support package will be fully covered. Ireland's contribution of up to €1.3 billion will be sourced by the National Treasury Management Agency and made available over three years. Not only will there be a financial return to the State from these loans but there will also be wider economic benefits in terms of safeguarding financial stability in the euro area. Given that 40% of our exports go to mainland Europe, this will be vital for Ireland's own recovery.

The Bill before us will enable Ireland to play its part in providing financial support to Greece, which because of its economic mismanagement over many years can no longer borrow in the international bond markets at sustainable rates. This support is designed to safeguard the fundamental financial stability of the single currency area. Ireland will not be making a gift of this money and the full amount will be repaid with interest.

Since the commencement of the global recession, negative sentiments have regularly been repeated by Opposition Members. Positive questioning and constructive criticism are welcome and necessary but that has not been forthcoming in general, much to the shame of the Opposition in these times of national crisis. Examples of tribal negativity, knee-jerk reactions and irrational arguments include the debates over NAMA, the deposit guarantee scheme and the bank recapitalisation scheme. Many in the Opposition claim they are being ignored but nothing could be further from the truth. The Minister for Finance, Deputy Brian Lenihan, has listened attentively and with great interest to all the views expressed by his Opposition colleagues. This House held its longest sitting in many years to debate Committee Stage of the National Assets Management Agency Bill 2009.

It is interesting to compare the views of international experts with those of the Deputies opposite. The Financial Times reported:

"Yet Irish finance minister Brian Lenihan has led the way among ailing peripheral eurozone economies in taking the harsh fiscal measures needed to regain investor confidence. He set the example months ago that Athens should follow...Ireland is not in the same league as Greece: the former Celtic Tiger has a credible recovery plan and has bounced back before. Its public debt, now at 64.5 per cent of output, from 25.2 per cent pre-crisis, is certainly more manageable than Greece's ruinous 110 per cent, not least because Dublin – unlike Athens – has completed its funding requirements for this year.

As Athens forces the eurozone to confront its principal defect – one currency, one central bank governor, but no single finance minister – investors should not forget Mr Lenihan's first-mover advantage. He is at least 18 months ahead of his peers."

The economic outlook for 2010 has improved significantly and most commentators, including the Central Bank and the ESRI, now forecast positive growth in the second half of the year. This echoes the Minister's comments during December's budget debate. Exchequer figures published last week indicate that the public finances are stabilising. Tax revenues and public spending are in line with expectations, which shows we are meeting the targets set in the budget. The European Commission's economic forecast predicts Ireland will have a 3% growth rate in 2011. This reinforces the positive economic outlook for the Irish economy. EU Commissioner for Economic and Monetary Affairs, Ollie Rehn, has stated that Ireland's bold and credible measures are paying off. The President of the European Central Bank, Mr. Trichet, and the Minister for Economic Affairs, Industry and Employment of France, Christine Lagarde, have also commented favourably on the Government's strategy.

Today, Nouriel Roubini, the economist who became known as "Dr. Doom" in 2006 after he predicted worldwide financial meltdown, was interviewed on "Morning Ireland". He believes Ireland is going in the right direction even though policy changes are difficult. He is more optimistic for Ireland despite the difficult times we are experiencing and thinks the Government was willing to implement financial adjustments more credibly and sooner than Greece and other countries. He stated that Ireland has a more flexible, dynamic and entrepreneurial economy and that we have not lost as much competitiveness as Spain, Portugal or Greece. He sees a light at the end of the tunnel for us if the Government can hold to fiscal austerity and structural reform and that we might end up doing better in time. The Government's actions are paying off, therefore.

There are several hopeful signs. The purchasing managers index has gone over 50 for the first time in months, indicating an increase in confidence in that area. A recent editorial in The Irish Times spoke of hopeful indicators that the economy has turned the corner. The Bank of Ireland has succeeded in raising private capital funds which only weeks ago the Opposition was predicting could not be done. Yesterday's bond sale by the National Treasury Management Agency raised €1.5 billion, with demand three times greater than supply. I have already referred to the views expressed by the ESRI and the Central Bank. Davy Stockbrokers has indicated its view that the economy returned to growth in the first quarter and that we have turned the corner. As a result of decisions taken by the Government in dealing with the banks, we have ensured there will be a payback in the future when the banks become profitable again. By contrast, the AIB-ICI bailout by a Labour Party-Fine Gael Government some years ago included no payback clause and a 2% levy remains in place.

The State and its taxpayers will receive a handsome return on its investment in the Bank of Ireland. The State will shortly receive more than €540 million for its previous investment in the bank. We will own more than €1.8 billion of preference shares which will yield some €180 million in cash to the Exchequer annually. The State will own up to 36.5% of this valuable bank, which it can sell in the future. Our policies are delivering a cleaned up, well capitalised and better funded bank that is in a position to provide the vital credit to support economic recovery and job creation. This transaction is good news for our economy, good news for the taxpayer and good news for Bank of Ireland's shareholders and investors.

We are in a global recession and the Irish economy has for several years been facing unprecedented challenges. The economy went into reverse for three reasons, namely, a steady loss of competitiveness, the bursting of the property bubble, and an international banking crisis which triggered a worldwide recession.However, the Government has taken bolddecisions to address this, as it did in the 1930s, 1960s and late 1980s when faced with other crises, and we have seen decisive and innovative steps to manage our way through the crisis. In the last 18 months the Government implemented budgetary adjustments of more than €8 billion for 2009. Had it not done so, the deficit would have ballooned towards 20% of GDP, a level at which the very financial survival of the country would have been at risk. We have taken many decisions that have brought the country around the corner and set us on the right road for the future.

Fine Gael and the Labour Party agree we need to adjust public expenditure by €4 billion in 2010, but they differ entirely on how best to achieve these savings. For example, Fine Gael wants headline salary cuts imposed on the public sector, but the Labour Party is strongly opposed to such a measure. The Labour Party proposes an additional €2.3 billion in taxes in a full year, while Fine Gael tells us it is not possible to tax our way to recovery. This is surely an empty mantra given that the party proposes large hikes in employee PRSI to fund reductions in employer PRSI and the extension of the health levy to incomes over €13,000 which is the same as a tax increase. The Labour Party advocates a new top rate of tax, giving an effective marginal rate of 59%, which is simply a reversion to the failed policies of a more socialist past. Just as they are in regard to the banks, the two main Opposition parties are deeply and fundamentally divided on how to stabilise the public finances. This is at the core of the issues facing us. We need quick decisive action to put our public finances back on track. It is unclear whether the Opposition parties would, in government, be able to agree a coherent and credible economic policy. We do not want a repeat of the 1980s with the necessary action being delayed and deferred.

The most recent set of Exchequer returns covering the period to the end of April are in line with expectations and show that the action taken by the Government in managing the public finances is working. Our focus now is to continue to engender confidence in households, in the domestic business sector and in the international investment community by adhering to our stated plan and proving we can look after our own affairs. Recent developments such as those which give rise to the Bill before us today highlight the need to adhere to that plan.

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