Brian Lenihan Jnr (Dublin West, Fianna Fail)

I have listened to a lot. The Deputy should at least have the patience to listen to a little bit of my contribution. I agree with her that there is a danger of erring too far on the side of excessive expenditure reductions. We did not so err last year and I do not accept that we erred in that direction. The vindication of our position internationally is very obvious to everyone at this stage.

On the balance of which the Deputy speaks, I agree that it is an important balance and it is an issue which I will raise on Friday at the opening meeting of the conference which will examine how the Stability and Growth Pact can be strengthened. I take the Deputy's point in that regard - it is important and we must have regard to it at Friday's meeting.

It is not simply a matter of fiscal controls. However, it remains the fact that the fiscal mechanism we had, the Stability and Growth Pact, did not address the difficulties this country encountered because it was compliant with the Stability and Growth Pact throughout the period of its euro membership. Under previous Governments, the Stability and Growth Pact was adhered to but despite that, serious structural imbalances emerged in this economy in regard to our competitiveness, our banking position and the volume of our public expenditure. All of these structural difficulties developed notwithstanding the fact the State was in strict compliance with the obligations it faced as a result of eurozone membership. Clearly, the current arrangement is inadequate if it does not contain adequate precautions against that.

There are speculators on the markets and I agree with Deputy Burton there are those who take bets on the markets. However, the markets also give indications. They are not totally arbitrary. They are based on informed assessments of difficulties that have emerged in particular states at a time of acute economic distress. For example, in Greece, the increases in expenditure were way ahead of the rate of inflation in the eurozone. A similar phenomenon took place in Ireland. Unlike in Greece, there was no statistical falsification of these increases in Ireland, so the process was more transparent. However, it is that volume of increase above and beyond the inflation rate in the eurozone that creates resentment in other eurozone countries that some countries are profiting at their expense. That is entirely understandable. That is not a problem invented by markets. That is something markets see and make an assessment about.

In regard to our position on the markets and the concerns Deputy Burton expressed in respect of the funding of Anglo Irish Bank, yesterday we had a highly successful bond auction at a time of acute international difficulty in money markets. That is a tribute to the work of the National Treasury Management Agency and the work it has done to explain to the markets the precise nature of the mechanisms being used by the Government to work out the problems of the two institutions to which Deputy Burton referred. Clearly, the markets understand what the Government is doing in that regard and accept it will not impose an undue burden on the State. I am quite prepared to agree it is an unacceptable burden but the markets are saying it is not an undue burden and is something we can sustain.

It is no accident that as a result of the careful briefing by the NTMA to the rating agencies that the markets understand the difficulties we face and how we are addressing them and they are not distracted by the kind of headline figures the Deputy read out because they know they relate to statistical adjustments. I accept it is part of the Exchequer borrowing requirement but that is understood on the markets as well. The markets do not deceive us in regard to this issue and it is no accident that yesterday's bond issue was more than three times over-subscribed. That is a measure of the international confidence that has been built up in this country and we need to sustain that confidence. We can and should have our own domestic arguments about banking but that element of confidence has been built up because the strategy is considered to be credible and that is why the markets buy Irish bonds and why they were not buying Greek bonds.

In regard to the meeting on Friday, as I outlined already, the position of the Government is that it will examine any proposals, in a constructive way, that seek to ensure what has happened in the case of Greece is not repeated and that the system of budgetary surveillance is such as to ensure that is the case.

However, as Deputy Burton rightly said, wider structural issues are of fundamental importance as well. One cannot simply revise the Stability and Growth Pact to ensure there are bare fiscal targets in regard to borrowing that are complied with. Any assessment of the risks associated with borrowing must take into account the structural position in the particular member state. This is an issue of particular importance in these discussions.

As I said earlier when replying to Second Stage, where economies have profound structural problems, clearly that must be factored into any assessment in regard to their borrowing and repayment capacities. In the case of Greece, the conditions agreed do not relate exclusively to meeting financial targets or reducing volumes of expenditure, there is also a series of structural measures involving administrative reform, innovation and competitiveness written into the agreement. That is important to note because as Deputy Burton rightly said, unless Greece is in a position to pay and the Greek economic is in a position where it is a sustainable economy capable of yielding these receipts and capable of making these repayments, then obviously we will be in a far more difficult position in three years' or four years' time than we are now with Greece.

Deputy Burton mentioned the whole subject of recovery in Europe, which is an important one. There was the Lisbon Agenda and it is clear one of the issues that must be addressed in Europe is how we put together a framework that will facilitate recovery. However, such a framework must include elements of liberalisation in regard to the factors of production and their freeing up, their movement and their competitiveness. It is difficult to see how one can have recovery if one does not have those conditions present and clearly that is one aspect that must be examined. Investment in infrastructure and innovation is also of great importance for the future.

I am sure all of these matters will be raised and discussed in the conference which begins on Friday. I will be very pleased to forward the concerns of all sides of the House because I do not believe there is as much between us on those issues as there may be on certain domestic issues.

Deputy Bruton asked a question about the promissory note mechanism. The issue here is with EUROSTAT, the statistics office. It is a classification issue. To date, it has not been raised by the Commission as a Stability and Growth Pact issue. If, in the course of my discussions with Commissioner Rehn leading up to the June meeting, it is raised, I will report to the House on that but to date it has not been raised by the Commission as a Stability and Growth Pact issue. It is a statistical issue which is being handled by EUROSTAT.

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