Joan Burton (Dublin West, Labour)

In the blanket bank guarantee, we essentially drew the losses of the banks onto the shoulders of the citizens. We had privatised bank profits up to that point, in effect, and from then on we socialised all bank losses onto the citizens of the country. To date, no one has been able to work out how to unravel what was created that night.

There is a great deal of conversation about defaulting at the moment. When people talk about defaulting, they are basically talking about two separate things. It might be important for people to think about which of them they mean. The first type of default requires bondholders to share in the losses that the citizens are taking on in respect of the banks. The remarks made by Mrs. Merkel a couple of weeks ago caused a huge amount of fluttering, to Ireland's disadvantage in the international markets. She was basically saying that if a situation like this arises in future, bondholders should bear some of the liabilities. Of course, bondholders do not like to be told anything like that in advance. To be perfectly honest, if one successfully negotiates with bondholders, one should really announce it the day after one has achieved the settlement.

The second type of default that people are talking about is a sovereign country default. I am not aware of any developed European country that has technically defaulted since Germany did so in 1948. While no one has a road map for such a default, we know the borrowing capacity of a country that defaults stops dead and it immediately goes to a zero-based budget. People talk about countries like Argentina, Zimbabwe and Liberia that have defaulted in recent decades. One needs to contrast a commodities-producing country like Argentina, which endured five or six horrible years before successfully returning to the markets, with a small open economy with a small population like Ireland. I do not understand the road plan for a sovereign default by a country like Ireland.

We need to find a mechanism for dealing with the banks. If our construction people borrowed recklessly, it should be stated that some bondholders, particularly the German and French banks, loaned recklessly. They should bear some share of that. It is deeply disappointing that this was not recognised in Ireland's recent negotiations or entreatments. When we talk about Ireland being insolvent, this is the context. Some parts of the Irish economy are profitable. This country's responsibility for the debt of the banks remains a massive problem for Ireland. I do not think the arrangements that have been entered into are fair. They will not enable Ireland to get out of that dilemma.

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