Brian Hayes (Dublin South West, Fine Gael)

I was aware that when the IMF and the EU were coming to town, this was a project about saving the euro, that it was not about a bailout. The first letter in the document circulated to Members today states:

Ireland faces an economic crisis without parallel in its recent history. The problems of low growth, doubts about fiscal sustainability, and a fragile banking sector are now feeding on each other, undermining confidence.

This letter is written by the Minister for Finance, Deputy Brian Lenihan, to Mr. Jean-Claude Juncker, Mr. Didier Reynders, Mr. Olli Rehn and Mr. Jean-Claude Trichet. If ever there was an example of the level of the crisis we face it must be this recent letter.

I was under the illusion that Ireland would get the interest rate on the three parcels of money, the emergency fund, the bilateral loan facilities and the IMF money, as making up the €85 billion but at no stage in the memorandum are we informed as to the specific interest rate. I would have thought this memorandum of understanding from a negotiation would state the specific interest rate about the facility that is to be given.

Like the invasion of Iraq, the bank guarantee scheme was based on a falsehood. The Minister for Finance informed this House in September 2008 that the problem with the banks was liquidity. This was untrue. The problem was much more serious. Certainly, in September 2008, the banks had a liquidity problem but the liquidity problems of the banks at that stage were merely a symptom of a much deeper malaise. That deeper malaise was a solvency issue. The bank guarantee of September 2008 has brought this country to its knees and contributed significantly to the wider financial crisis now threatening Europe. Things should never have reached this stage.

The warning signs were flashing amber as far back as summer 2007. In a recent article in The Irish Times, Mr. Michael Somers, the former head of the NTMA, referred to the fact that the banks had funding problems in August 2007. The collapse of Northern Rock in Britain in September 2007 was the first collapse of a retail bank in Britain in 150 years. That should have been a red light warning to all Irish banks, to the Financial Regulator, to the Central Bank and to the Government. Warning signs were to follow. All through the spring and summer of 2008, there were clear indications that the Irish banks were in trouble. This Government's banking policy has been a catastrophic failure in every respect. For more than a year, the Government ignored the clear signs. Its analysis and diagnosis of the problem was flawed. The bank guarantee and the bank bailouts which followed have cost €60 billion to date with another €25 billion on stand-by. All this money has failed to stabilise the banking system. Anglo Irish Bank, which the Minister informed us was of systemic importance, may cost the State €35 billion and possibly more. It is now no better than a beaten docket on the floor of the Fianna Fáil tent at the Galway races. Of course, it was the Galway tent school of economics that has brought this country to its knees.

For more than two years, this Government's banking policy has sucked this country deeper into the red. The Government now tries to present the bailout from the IMF and the EU institutions as a good deal for Ireland. It does not even deceive itself on this one. Yesterday, the soon to retire Minister for Justice and Law Reform, made it clear on RTE radio that the Irish Government was mugged and forced to take the money. This was the truth and not fiction. Even the Governor of the Central Bank has admitted that this was not his preferred option. This Government put the country's hand into the dog's mouth and had it bitten off.

If we are to get out of this economic mess, a crucial first step must be a clear recognition that the banking policy pursued by the Government has been an abject failure. Other countries have been forced to accept policy failures and a change of course. This has been the case with America after the Vietnam war, with Russia after Afghanistan, with NATO forces leaving Iraq. Britain has set a date for its troops to leave Afghanistan. We must do the same with the bank guarantee. A clear exit strategy is now required. The idea that an open-ended guarantee can exist in perpetuity will further the downward spiral in our economy.

We must also demand of the ECB that it assumes its responsibilities as lender of last resort. The Irish Government and people have carried the burden for too long and the burden must now be shared by the ECB and the bondholders and there must be a pan-European response. No one should underestimate the cost of this bailout, not just in cash terms but also the reputational damage done to this country. If Ireland is the last battleground in a campaign to save the euro, we need to know that EU partners have stood with us in that battle. We have paid a heavy price for this battle. Can we say that solidarity was shown to us, particularly from those institutions that stood back and allowed cheap money to flow into this country for more than a decade?

I hope that the dark sinister forces, be they from the hard left or the hard right, will not be unleashed on this country because of the difficult terms that have been imposed by the bailout. Has Europe stood with us as we face this challenge? That is the question I will leave for history to answer.

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