Kieran O'Donnell (Limerick East, Fine Gael)

Fine Gael supports the Bill. I wish to address a number of issues relating to the Bill and the broader European measures. In his speech the Minister has provided technical details of the content of the Bill. Perhaps he will be able to clarify a number of points. First, he indicated that the level of the guarantee would be up to 120% of our requirement in terms of the schedule, which was €7 billion. A total of 120% of that would be approximately €8.4 billion yet section 3 specifies the maximum amount we can contribute as €7.5 billion. Is it technically possible that based on the €7 billion we are required to provide under the guarantee that we could have to provide up to €8.4 billion in spite of the fact that the maximum amount of contribution specified in section 3 is €7.5 billion? I ask the Minister to clarify that point.

A number of issues need to be addressed in the Bill. I welcome the fact that the Minister has reduced the frequency of reporting under the euro area loan facility agreement from a year to six months. The European financial stability facility company must report on a quarterly basis to the European Commission. We tabled amendments to require the Minister to lay the reports before the House within two weeks of receiving them from the various European bodies.

It is important to know the level of funding required. I assume the €7.5 billion to which the Minister referred contributes to the €478,000 that we could potentially put into the company by way of additional share capital, plus the running costs. Will the Minster clarify this? The expenditure by way of capital and expenses on foot of the agreement should be reported on annually.

The Euro Area Loan Facility Bill contains a mechanism whereby no government would be out of pocket, specifically in respect of Greece. If the cost of funding in respect of borrowing on the part of a member state is higher than what a member state receives from Greece, there is a mechanism whereby that member state will be recompensed. As the Minister is well aware, our bond yields are well in excess of those of Germany, perhaps by 250 basis points. If it arises that Ireland is required to give a guarantee along with other member states, that will certainly affect the cost of borrowing from the international markets. Unlike countries that may not be as affected, will we be compensated in any way through the mechanism for the additional cost to the Irish taxpayer?

The European Financial Stability Facility Bill 2010 is to provide stability in the Union. When the package was launched in early May, bond yields reduced considerably. They reduced from 6% to 4.5% in the Irish case, and subsequently rose to 5.2%. The bond markets are worried that the scale of the problem could be bigger than the actual package. Will the Minister address this? The bond markets fear that European policy is very much being driven by fiscal austerity measures when what is required is a proper growth strategy.

The Europe 2020 document has effectively been agreed by the member states. Ireland will have to produce its own plan in that regard but I do not believe one can bridge a budget deficit without a credible growth strategy. In Ireland, this has been missing. It is a point of discussion with the Minister that takes into account the fundamentals in terms of the economy, low inflation, low interest rates and cost competitiveness. I am not in any way disagreeing with that but various reports state our unemployment level will remain consistently high, at 13.1% in 2010, 12.2% in 2011 and 11% in 2012. In 2014, there will be an unemployment rate of 10%. We do not want purely jobless growth.

The Union has identified that a growth strategy is critical. It has been lacking here and this has not been addressed. There are 440,000 people on the live register as we speak. The Minister will be aware that many people who became unemployed in the past year were on jobseeker's benefit and are now to receive the jobseeker's allowance and the amount they are receiving is decreasing significantly. There will be long-term unemployment, which causes major problems.

The Europe 2020 document refers specifically to people in the younger age bracket. The aim is to raise to 75% the employment rate for women and men aged 20 to 64, including through greater participation of young people, older workers and low-skilled workers, and the better integration of legal migrants.

Our live register figures would be significantly higher but for emigration. It has effectively lowered the real unemployment level and cannot be overlooked. With regard to the European context, the IMF is stating Asia has a tremendous growth pattern and that even the United States has a stronger growth pattern than Ireland. The latter has a growth strategy.

I said in the Chamber approximately 18 months ago that I always felt there should be a contingency fund put aside every year in the budget for a rainy day. Professor Honohan mentioned this also. I refer to an equivalent of the National Pensions Reserve Fund. If we had this, we would have been able to have a fiscal stimulus when the financial crisis arose at the end of 2007. However, the overdraft was at its limit and the Minister did not have that luxury. We needed to have it and, as with banks, we need mechanisms in place that make contingency funds available.

The Minister is constantly referring to the National Pensions Reserve Fund. It was set up for pensions but I am talking about a fund that would be used specifically to create a fiscal stimulus if the country encountered a financial crisis. The Government has cut the capital budget, which has major consequences. The cuts over recent years have probably cost 40,000 jobs.

The Taoiseach referred last night to the capital budget and the jobs it creates. Many of the capital projects of the past were not geared towards employment creation. Fine Gael feels strongly that the capital budget should be left unchecked. It has always advocated that there should be proper cost-benefit analysis. Many of the plans under the national development plan were never subject to rigorous cost-benefit analysis before they were implemented. Doing so is fundamental.

I note in media reports today that the Department of Finance stated it highlighted the existence of the property bubble in 2005 to the Ministers in charge, including the current Taoiseach. The tax incentive schemes were continued until July 2008, two and a half years later. This needs to be addressed.

The only person we have not heard from on this issue is the Taoiseach. We have had this discussion many times. All the eminent and excellent reports issued to date imply the key missing ingredient was discussion with the relevant Minister when issues arose. It is critical that the terms of reference for the external review of the Department of Finance be made public and that they include the policy decisions made by Ministers at given times. The external review is to cover the period from 2000. To ensure public confidence and accountability, it is critical that the terms of reference refer in absolute terms to the Ministers for Finance in office during the period covered by the review. There were three, including the current Minister, Deputy Brian Lenihan. I note that the Minister, Deputy Lenihan, is willing. The two previous Ministers, namely the Taoiseach and the former Deputy Charlie McCreevy, would be available to give evidence in public. People want accountability and transparency. The ESRI and other bodies have stated that they all had difficulties in looking at issues at a moment in time. For the sake of completeness, we need to hear from the Taoiseach as well.

If this package is never called in, we will have succeeded. If it is called in, then there are major issues. A number of questions must be asked. Will the austerity measures be complied with by the countries that need to comply with them and will there be a situation where one size fits all? My worry would be that large economies such as Germany benefit significantly from the euro. Germany is very much an export orientated country. In the natural environment without a common currency the deutschemark would have appreciated and this would have enabled other countries to improve their competitiveness. However, Germany is extremely strong in terms of exports and it needs to boost domestic consumption. If it boosts domestic consumption, that would benefit the rest of the EU.

It is critical when looking at Europe as a whole that we have financial measures in place that enable all countries to function, not necessarily the larger countries but countries such as ourselves as well. We are an export nation and we must get to a situation where we can export into Europe in a competitive way. Germany has a major comparative advantage because it is exporting to such an enormous degree and it is gaining such an enormous advantage from a common currency. The key feature is domestic consumption in Germany and if we can find a mechanism by which that can rise, that would be a significant element.

The critical issue, which I mentioned earlier, is the growth strategy and the Europe 2020 document. I want to know when the Minister will put forward Ireland's proposals for targets. There is a national programme to be put forward to that effect to the EU as well. Targets must be set. How can we ensure that people come off the live register in a constructive way?

We must look at, while not necessarily commenting on, the British emergency budget yesterday in which there was a point of principle, which was that the private sector will be key to economic recovery. The British Government reduced its corporation tax rate, which has implications for us as a country. In the wider context, it will be the SME sector that will bring about growth.

We discussed NAMA on the Order of Business, but it would be critical in terms of the role of Mr. John Trethowan in the SME sector to get credit flowing so that there would be sectoral limits of credit to flow to various sectoral areas so that we identify areas, where we are strong and very much export driven. We have a situation whereby we are providing credit flowing to the SME sector with an element being policy driven. One must have something here that will enable the SME sector to come out of the situation in which it is.

Often this is like a bubble where we speak about matters in abstract terms. There are businesses around the country which are losing one and two employees. There are 320,000 SME employers in the country, 155,000 of which employ two or three persons or more. If each of those could taken on an extra person, that would result in 155,000 persons coming off the live register. These are the straightforward simple questions.

In my experience over many years in practice as an accountant - I was a sole trader for many years - cash is king and credit is the key element that puts businesses out of operation. If they have not cashflow, profitable viable entities will go out of business. One can have a profitable business that will cease to trade because it has not cashflow. Equally, one can have a unprofitable business that can continue because it has cashflow. With the approach in Ireland, we must ensure that credit flows to the SME sector.

My party put forward a range of suggestions. There is a strong case for cutting employers' PRSI. My party put forward, in our last pre-budget document, that the lower rate should be halved and the upper rate should be reduced considerably, by 2% or 3%, to give a benefit.

In Europe, there is a need for fiscal consolidation and structural reform. I spoke about structural reform in terms of Germany and the other countries. Greece's economy is heavily reliant on tourism and has a soft underbelly. There must be ways to facilitate structural reform across Europe to ensure that this guarantee is never called upon. The way that will arise is if each country deals with its cost base, fiscal measures and growth measures.

The other issue I want to address is banking. The European Union is currently looking into financial stability measures for the banking sector and I understand they will be produced in 2011. It is critical that there would be consistency between member states in how regulation is enforced. We are now moving towards very much principles' based regulation, which I welcome. It must be done in a way to ensure that we can balance it with attracting industry. It will be to our benefit. If we have capital ratio crime, it is in the banking sector. Effectively, it will ensure the security of those banks. It is something about which I feel strongly and is something we badly need to address in a European context.

In looking at it from both a European context and a national context, for this proposal to operate the key features are that it must never be called upon, and that is about Europe dealing with the issues of financial stability, structural reform, the area of banking regulation and the area of a growth strategy. In terms of Ireland Inc, it is critical that we address all of those issues as well. In Ireland, the key issue that stands out is the stark levels of unemployment with 440,000 plus on the live register. That is the issue for us as a country.

Banking is being dealt with. Issues over which we will have concerns are NAMA, the flow of credit and fiscal consolidation. We have concerns about the cutting of the capital budget. We have issues with bringing in a property tax on home owners who are under severe pressure at a time when many of them are in negative equity. There are ways the Minister can make savings in general public spending and these are issues that should be looked at rather than taking the easy option of imposing a property tax on residential homes. As we well know, its previous incarnation was the residential property tax measure, which did not work and was a nightmare. The difference in this context is people cannot afford it. Governments are there to represent people and it is something that must be taken on board.

Of the 440,000 people unemployed, many are fast becoming chronically long-term unemployed. Each Deputy's constituency office is visited by people who have become unemployed, received redundancy payments and gone on jobseeker's benefit only to find that, after 12 months, they must be means tested for jobseeker's allowance. Since a person's husband or wife might still be working, the allowance is significantly reduced. This places people in considerable financial difficulties. They could have a mortgage they are finding difficult to service, yet the Government is discussing the introduction of a property tax that could be applied to them, as they would be still in receipt of income. I note from reports that the tax might not be applied to the unemployed, but what about a married couple in which only one partner has become unemployed? The principle of a property tax on residential homes is draconian and unfair. It is an retrograde step by the Government. The issue could be addressed in another fashion.

In the European context, the concern is that Ireland is moving into a debt crisis. Our national debt has doubled. One reason for our bond yields being the second highest in Europe after Portugal's is our debt level. We have borrowed close to €50 billion in respect of NAMA, an amount that will fall on the taxpayer. There is a general view that the Government did not move quickly enough to react to the financial crisis when it evolved in 2007. I remember the then Minister for Finance, the current Taoiseach, telling the House we were in for a soft landing. He repeated this comment over many months. According to Dan O'Connor, an eminent economist, our bond yields are so high because of our debt levels and because the Government did not move quickly enough to deal with the budget deficit going out of control, although we still have an element of credibility. Something should have been done in the December 2007 budget. Instead, we waited virtually 18 months until April 2009 before measures were introduced to address the financial crisis.

Two further measures will impact on the cost of borrowing, namely, the eurozone loan facility in respect of Greece and this Bill. The former requires €1.5 billion and the latter requires €7.5 billion, amounting to €9 billion in total, nearly 6% of our GDP. This figure is phenomenal, but still manages to put into context the sheer scale of the money invested in Anglo Irish Bank. That investment is almost three times larger. When the bank's board appeared before the Oireachtas finance committee, I asked whether €22 billion had gone down the toilet. The answer was "Yes". The €9 billion is an horrendous amount of money. It is €1 billion more than our annual investment in the Department of Education and Skills and is an exposure for the taxpayer. We must ensure the European Financial Stability Facility Bill 2010 is never called upon.

Europe has identified that we will not bridge our budget deficit without a proper growth strategy. It is time that the Government recognised this fact also, as it will have implications for the 440,000 people on the live register. Taking someone off the live register restores his or her dignity and saves the Exchequer approximately €20,000.

Ireland is seeking to borrow up to €40 billion from the international markets between now and 2012. If our bond yields are increasing, the cost to the taxpayer will be greater and the service we can provide will be reduced. I would like a twin-track approach to reducing the budget deficit. We must make cuts in expenditure and savings, but we must find ways to boost our revenue from structured taxes like income tax instead of through, for example, a property tax that would place an unfair burden on people. Let us find mechanisms through which we can have a sustainable and export-driven economy and ensure that people return to work and that our markets are competitive. Side by side with these must be structural reforms in Europe, since it should not be a case of one size fitting all, given the presence of Germany and other large countries. We must ensure that our country can export and have a comparative advantage in Europe in that regard.

Fine Gael will support the Bill and I look forward to the Minister of State's response to my queries. We have tabled a number of amendments in respect of reporting requirements, as the Minister for Finance should lay the quarterly reports on the European Financial Stability Facility Bill and the eurozone loan Bill before the House two weeks after receiving them. We need more details on the arrangements entered into under this legislation and the Greek bailout Bill on behalf of the taxpayer, as €440 billion of the €750 billion involved in the former will come from EU member states.

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