Brian Lenihan Jnr (Dublin West, Fianna Fail)

We do not know the preference of the Greek people in this matter. I am sure Greek naval personnel take a certain view of their requirements because they will crew these ships. Those who demonstrate in Athens may take a different view. I am not in a position to judge between the various opinions being expressed in Greece.

In regard to the return on our loan, it is a commercial arrangement in the sense that Ireland will not be at a loss but it is not an optimal arrangement from our point of view. I would not describe it as simply a good commercial bargain. As Deputy Burton noted yesterday, the facility was introduced in an act of solidarity with other EU member states.

Deputy Morgan referred to a category of international bond holders. As there is freedom of movement for capital and bonds in the European Union, I do not know who he intends to single out with the word "international". Many of these bonds are used as investments by pension funds but there are other reasons for purchasing bonds, such as secure returns over a period of years.

The Deputy asked whether investors are free from all prospect of default when they invest in financial institutions. It is the case that banks in the eurozone have not been allowed to fail in the current crisis. This means that the system of regulation will have to be stricter than what we have witnessed in recent years. That is the considered judgment of the European Central Bank and of governments. I understand it was a particular boast of the outgoing British Prime Minister that he did not allow financial failure of that scale to occur. He claimed that as one of his specific achievements in his valedictory address. His political view appears to be shared by the larger member states.

While the arrangement with Greece is an act of solidarity because it allows it to make structural changes to its budgetary arrangements, an incidental benefit is that it avoided the collapse of a string of financial institutions. The consensus view within the European Union on the political level seems to be that default on senior debt is not considered a serious political or economic option because of the consequences of it, and that view appears to be endorsed by the European Central Bank. An important point tends to be overlooked when discussing this issue in an Irish context, namely, that in strict law, the position of a bond holder who is a senior debtor is the same as that of a depositor. It is a simple banker-creditor relationship. A bond is simply a deposit that can be transferred to a bearer. A person cannot transfer his or her bank deposit to someone else, and neither I nor the bank can do so on his or her behalf. However, in the case of a bond, the deposit can be transferred; that is the simple character of a bond. In the eye of the law there is no difference between the character of the obligation promised in the bond and the character of the obligation owed to the ordinary depositor. It is possible in bank protection schemes to draw a distinction in advance and to say one will only guarantee-----

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