Simon Coveney (Cork South Central, Fine Gael)

I am glad that we have an opportunity to speak in this debate and that an extension of time was granted earlier. Today we are seeing the result of the Government's banking strategy, not only over the two years since the guarantee, which predominantly involved crisis management, but also over ten years of light-touch financial regulatory incompetence. The Minister said today that his statement brings full clarity on the costs and methods associated with recapitalising the Irish banks. He claims we are now bringing closure to this banking nightmare. I hope he is right this time, on the figures at least, and he does not have to revise them upwards again in the weeks ahead. I refer particularly to the figures in relation to AIB. Clarity on the actual monetary cost of recapitalisation is not the full story and certainly does not represent closure. We should look at the evidence and the results of the Government's banking strategy. I will begin by speaking about the public cost and the massive exposure of every family in this country. A debt of between €45 billion and €50 billion will need to be repaid with interest. The debt for Anglo Irish Bank alone is between €29.3 billion and €34.3 billion. When AIB, Bank of Ireland, Irish Nationwide, EBS and Irish Life and Permanent are included, the total cost of recapitalisation across all Irish banks will be between €45 billion and €50 billion. It may even be slightly above that. That is the equivalent of approximately €12,000 for every man, woman and child in Ireland, plus interest. One might suggest that some of the money will come from the National Pensions Reserve Fund, but I remind one that an opportunity cost is associated with the committing of that money. However, there is also an opportunity cost of committing that money. What has been crystallised today by the Minister is generational theft on a scale that is hard to comprehend. Our generation will pass on a debt that will cripple younger generations through repayment obligations and will severely limit Ireland's capacity to grow, to create wealth and jobs, and to pay for essential services already been cut on a weekly basis. That is a scandal that history will judge harshly, because it is the direct result of failed policy and practice banking.

Bond markets are now effectively closed to Irish sovereign borrowing. Confirmation of this is that we will not even attempt to raise money on international bond markets in October or November. The essence of the Minister's rationale and thinking in terms of the approach that he has taken to date on banking policy, and in particular on senior bondholders and subordinate debt at Anglo Irish Bank, has been to ensure that we as a sovereign State maintain credibility with international markets. Banking policy has been guided by the Government's determination to keep financial markets happy. However, despite the transfer by the Government of bank debt into sovereign debt that our people will now have to shoulder, we lost the confidence of bond markets weeks ago.

We are in the fortunate position, if anything about this is fortunate, of having raised sufficient capital through the NTMA to carry the country through until mid-2011. Through the NTMA, we have been prudent enough to buy some time but there is no guarantee that the bond markets will view us favourably when we are required to return to raise funds in the new year. However, this is not the full story because unfortunately banks in Ireland are not in the same position as the State in terms of borrowing ahead. They have not borrowed to carry them into next year. I understand that not only do bond markets not want to lend to the Irish State, but international markets do not want to lend to Irish banks either. Therefore, it is the ECB, which is essentially a lender of last resort, that will continue to have to fund Irish banks.

What does this mean in terms of a functioning banking system and providing liquidity in the Irish economy? It means a tighter credit squeeze on small businesses and homeowners, and a more aggressive banking approach to shore up weak balance sheets. It means banks will be even more risk averse to lending, and that is exactly what this economy does not need right now. If we are to provide any stimulus, jobs growth and support for small and large businesses we must ensure they can access capital when they need it. The consequences for SMEs of not being able to access capital and having their overdrafts turned into term loans, and the consequences for unfortunate homeowners who have variable mortgage interest rates, will be in all likelihood that they will face even higher interest rates on the repayments they make. The unfairness of that is certainly not lost on the public.

In simple terms, the Government has delivered, along with a rotten banking system, €50 billion of debt that we will hand on to taxpayers for the next ten years; no access to sovereign debt through bond markets in the short term; limited access to funds for Irish banks and the consequences of that for the economy; a hardening of bank policy in terms of lending and liquidity; and, of course, let us not forget a paralysed property market because of the consequences and lethargy of NAMA. What could and should the Government have done differently? Certainly, with regard to the bank guarantee of two years ago, it is now clear - this is supported by Patrick Honohan's report - that the State should not have guaranteed all debt in Anglo Irish Bank in full, and that it should have made a distinction between senior bondholders, subordinated debt, and deposit holders and other debt in Anglo Irish Bank. However, it chose not to do so. That mistake is now costing taxpayers in quite a significant way.

To date, the NAMA experiment is failing. Yes, it did crystallise losses and forced banks to address broken balance sheets. However, it has also created total paralysis in the property market in Ireland, which is showing no signs of abating. The Minister lays all of the blame at the feet of reckless banking and bankers. He is right to express anger at banking behaviour and I think that is shared throughout the House and certainly among the public. However, what has the Government done in response to that justified anger? It is only today that the Minister is committing to replace the remaining management and board members in AIB, something for which we and the Labour Party have been asking for the past two years.

As Deputy Seán Power asked today, where are the prosecutions? In January 2009, the Garda raided Anglo Irish bank's headquarters in Dublin and we were told that a file would be sent to the DPP shortly. When will that happen?

On the more pragmatic issue of an insistence on external recruitment into Irish banks, we have seen a lack of determination and will coming from the Minister. Due to the banking fiasco and the huge structural budgetary deficit of between €18 billion and €20 billion, the Government's options in the build up to the next budget are limited. Irrespective of whether we like it, we are being forced to run our country to please international financial markets, or to at least reassure them, because we are entirely reliant on the capital they provide for the future functioning of our State if we are to avoid losing our economic sovereignty by accessing EU emergency funds. Ireland needs to borrow approximately €55 million per day simply to meet our day-to-day expenditure and to bridge the gap between revenue and expenditure. That does not even include bank capitalisation costs.

The context for framing the next budget is a tough one. On the one hand, we must impress on markets that Ireland is implementing a credible plan over the next four to five years that can reduce the budgetary deficit and, on the other hand, we need to get stimulus into the economy because, as the Taoiseach has conceded and as we have been trying to say for many months, Ireland's problems will not be solved by cuts alone.

Now it is even more complex than that for the Government because it is not just about one budget; it is about four budgets. The Minister for Finance, Deputy Lenihan, has stated he intends to bring forward a framework to commit Ireland to a budgetary strategy for the next four years. Let me tell him that he has no mandate to do that. His Government is running out of time. Even if it runs full term it has only another 18 months to run. He has no mandate or right to commit Ireland to a budgetary strategy for the next four to five years. I hope the Government will look on those two options as the only two that should be available to it.

The idea that a Government that is in a very significant part responsible for the financial crisis that this country now faces, when we are on the brink of having to access emergency funding, and all of the strings that are attached to that where, essentially, we lose economic sovereignty, would have the arrogance to use its slim majority to drive through a budgetary package for the next four to five years when in all likelihood it will not be there for at least three of those years, is fundamentally undemocratic. I, for one, as an Opposition spokesperson, would be willing to explore, obviously, the option of putting a new Government in place, but also the other option, if the Government chooses to go down that road.

There is no credibility in putting together a four-year strategy if this Government is likely, as most people accept, to face a general election in the next six months. For the sake of the country in terms of its credibility and its capacity to borrow money and attract investment and confidence again, there is an obligation either to get consensus on the really tough job of putting a four-year budgetary strategy together with parties that are likely to form the next Government or to step aside to allow the people to decide who will get a mandate to do that job. I hope the Government will think about those options. It is bad enough that they have taken us to this position, but the idea that they would have the arrogance to assume that they have the answers for the next four years when many of them are unlikely even to be in this Chamber for three of them is in my mind a step too far and fundamentally undemocratic and without mandate.

My party has a positive contribution to make in terms of ideas on getting stimulus into this economy without resorting to borrowing and it is long past time that the Government engaged with us in a serious way to try to implement some of that thinking. The Government asked Mr. Colm McCarthy to put together a report on the value and strategic importance of State assets such as the semi-State companies and how the Government could potentially reconfigure the portfolio of such companies to make them more effective and to improve their capacity to borrow money to front-load investment in infrastructure and to try to get stimulus into the economy in a way that is unconventional or, certainly, has not been part of Government thinking for the past ten years. That report is due before Christmas, but in my view the Government does not have that much time. There is an obligation now to listen to Opposition party thinking, in particular, on the semi-State sector and existing opportunities to raise significant amounts of capital by selling non-strategic assets in order to drive investment in new strategic assets that need to be built in Ireland anyway and will be built over the next five to ten years, but to do it in a way that can front-load that investment to try to get some stimulus into the economy at a time when it is desperately needed. The priorities around those issues have been fast-forwarded because of the Government's challenges in terms of raising money for even basic expenditure into next year.

Today is a sad day for Ireland. It spells a failure of governance and leadership, and obviously, banking. Ultimately, we are responsible as legislators. The Government is responsible for how all elements of the economy operate, including banking. We are the House that should have ensured that the necessary reins were in place to prevent the kind of gambling that has turned into massive debt, which has switched from bank debt to sovereign debt in Ireland. Therefore, we have an obligation to look at politics in a way that perhaps we have not looked at it previously, in terms of partisanship in this House and the way in which political parties interact with each other. I hope the challenges that we now face, when Ireland, as I described earlier, is on the brink of losing its economic sovereignty, will ensure the honest behaviour of Government in an effort to try to build consensus around how the country should move forward so that the next Government will be able to stand over decisions being made between now and Christmas. However, I have my doubts.

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