Joan Burton (Dublin West, Labour)

The purpose of the Government's motion before the House is in effect to extend the original bank guarantee scheme in a modified way until the end of December 2011. That bank guarantee applied to six banking institutions, two of which, Anglo Irish Bank and Irish Nationwide Building Society, were beyond help.

Two very big banks, Bank of Ireland and AIB, are important to the functioning of economic life in this country, particularly for small and medium sized businesses accessing credit. There were two building societies, including Permanent TSB which also has an insurance company attached to it. They all had a different set of difficulties.

Anglo Irish Bank and Irish Nationwide Building Society, INBS, were basically bust because their business model had come to an end. They were developer niche banks. INBS was a building society but the people who ran that institution developed it into a developer bank within a building society. I do not understand how they could do that under the regulations. I also do not understand how they could lend mainly to people in the London area of the United Kingdom and abroad. However, Mr. Fingleton was close to the powers-that-be in Fianna Fáil. He even succeeded in having a special Act passed in the Dáil relating to his building society. That is the context.

As people are doing their jobs, putting money in the bank and taking it out again they feel incredible pain, worry and uncertainty about their businesses, employment, mortgage and their children's mortgages. Fianna Fáil is telling us today that we are extending the bank guarantee in five year periods for at least another year and a quarter to the end of December 2011. The European Union has agreed to that up to the end of June 2011, as it can only do so in six month tranches. What is the amount guaranteed? It is a staggering figure. It was €147 billion at the end of September. The Minister did not enlighten us as to whether that amount has increased since then. Judging by the very worrying news we have been hearing from different elements of the six institutions under the guarantee I would not be surprised if it had already increased significantly. The Minister should tell the House at what amount the extended guarantee stood at the middle of November. What is his expectation for the amounts under the guarantee to the end of December?

This is important. Many people talk about burning bondholders, talk with which I have never agreed, and defaulting. However, the Government created a mechanism from the start of the guarantee and with the extended guarantee whereby, in effect, that became almost impossible. The Government made the decision on the night of the guarantee to give a blanket guarantee, not the extensive guarantee Professor Honohan writes about in his report. The blanket guarantee covered everything, regardless of whether it merited guarantee. Every Member of the House agreed that ordinary depositors merited a guarantee. I wrote to the Minister two or three weeks before the guarantee was put in place - the Minister has the letter - suggesting that the Government had to introduce a guarantee system for ordinary depositors. At the time the guarantee for depositors only stood at €25,000. The Minister told me to take a hike, as was the Fianna Fáil style. The Government did nothing. On 29 September there was total panic in the ranks. The Government did not introduce a graduated and thought-out guarantee for different classes of assets, particularly ordinary depositors who should be protected, but a blanket guarantee. That is the reason Mr. Regling, Mr. Watson and Professor Honohan in their reports have described Ireland's appalling situation with the guaranteed institutions as a home-made catastrophe.

It is also the reason so many people in Europe are angry and less than impressed with Ireland. Ireland bounced the other European countries into this form of guarantee by being the first mover. I was at Kilkenomics last week in Kilkenny and one of the comedians there said we have two Brians and no brains running the country. It was an interesting take. The strategy has been a disaster and today we simply confirm that the Government is passing further guarantees for more than five years from the end of next year with regard to at least €147 billion.

It is important to get some of these institutions back to health. However, if there was a proper bank resolution scheme, some of them would have been wound up. I raised this with the Minister on numerous occasions both in the Joint Committee on Finance and the Public Service and in the House. Initially, he did not even know what a bank resolution scheme was, then he decided to think about it and then did nothing. Such a scheme allows one to wind up banks that are in default in an orderly and structured way.

People in Europe talk about Ireland being a source of contagion for Portugal and, worst of all, for Greece. The Taoiseach said this morning that this is now a eurozone problem, not an exclusively Irish one. What is the contagion? The contagion goes back to Anglo Irish Bank and Irish Nationwide Building Society because they set up this Ponzi pyramid scheme of banking in this country for developers. The other banks got greedy. It is famously said that somebody in AIB complained: "Those guys in Anglo are eating our lunch, and that has to stop". That has been AIB's downfall. Bank of Ireland appears to have been more staid in going after that type of business.

The fundamental question is how to unravel this. We can only do so through serious reform of the banking system. We must wind down institutions that are utterly defunct and destroyed. We might have to seek people from abroad to take over some of the other institutions and lick them into some type of shape. There must be fundamental bank reform but we cannot do that without a bank resolution mechanism. That is not before us today. What is before us today is a cheque for an initial figure of €147 billion, which Fianna Fáil is asking us to sign.

The ECB became alarmed at the end of last week about the Central Bank. Was it because some of the six institutions no longer have collateral to offer to the ECB? The Central Bank, therefore, was committing itself under its powers to write cheques to some of those institutions. Can the Minister confirm that? I understand the amounts of those commitments by the Central Bank to be between €20 billion and €30 billion. If the purpose of the discussions with the IMF, ECB and the European Commission is to sort that out, does that mean the claim and memorandum of understanding will initially be about that €20 billion to €30 billion? That is now dead money because it has already gone into banks that had no collateral to offer the ECB. It is no wonder that the ECB is extremely worried and concerned. It must be, as all of us would be worried and concerned, because the integrity of the euro currency has been endangered to some extent by what is happening. Worst still, the House is not being told exactly what is happening so Members can make an orderly judgment.

Two weeks ago the Minister for Finance had the Opposition spokespersons trooping in and out of the front door of the Department of Finance, with the assembled media waiting outside to see how shocked one could look when one came out of the Department into the freezing cold and wind.

Commissioner Rehn came to Dublin last week and introduced me to a tall Hungarian man with glasses, who was no Victor Laszlo. He seemed to be a very dedicated type of Government senior civil servant accounting or finance type. Since then I have not heard a word from the Department of Finance or the Minister of Finance about opening any more books.

The team, many parts of which have been in Dublin before, will come here tomorrow. I have seen IMF people in the country looking at our State and institutional assets, such as hospitals, and counting them. That is what IMF do teams when they come into a country. They draw up a balance sheet of assets and liabilities in a country. When they come here under what the structure of the European Union and the IMF will they be operating? There are agreements on the European stabilisation fund and the European financial stabilisation mechanism, EFSM, comprises €60 billion. Mr. Regling, who did a report here, is the boss of the European financial stability facility. The €60 billion was originally intended for non-euro countries such as Latvia, Hungary and Romania but it is going into the Regling fund or will be used alongside it. The IMF will also act as a partner.

The IMF has been in countries for a very long time. The leader of the Labour Party asked the Taoiseach today what the negotiating position was. The IMF will have teams, each of which will have a team leader. There will be somebody from the ECB, the IMF and the European Commission. Perhaps there will also be somebody on behalf of Mr. Regling, although he may enter the field later. A memorandum of understanding will be drawn up. I want to know what its headings will be. Will Fianna Fáil include all State assets in it, down to schools and hospitals? In other countries the IMF decided there were too many schools or hospitals and it would cut the numbers by X%. This is serious stuff for the ordinary Irish person on the street because it will affect their children. The debt will affect not just them and their children but their grandchildren.

What amounts will be targeted in the memorandum of understanding? Is it to enhance all of the facilities of the banks? What was included in it? The information is in the answers which were provided. One can use it partially for financial support for banks in accordance with an agreed country programme. That is what the memorandum of understanding is about. I want to know if the Government has decided strategically that the memorandum of understanding is simply about a further bailouts of the banks or if it also involves commitments to Ireland in terms of budgetary support.

I have no problem with the Minister of State, Deputy Mansergh, as an individual but it is wrong that no senior Minister is here for this very important debate and that the debate was not deferred, as I requested yesterday, until the Minister of Finance became available.

See this speech in context