Michael D'Arcy (Wexford, Fine Gael)

On the Government's mishandling of the negotiations and the communication that it would deal with the ECB and the IMF, the level of dishonesty was appalling. Although negotiations were ongoing, people were pretending they were not happening. At some stage one has to stop treating the public like fools. It was not until the Thursday morning, when Professor Patrick Honohan went on "Morning Ireland" to speak about what was happening and what was going to happen, that we heard what the likely result of the negotiations would be. The level of mismanagement was telling. Given that the Government could not correctly communicate the fact of the negotiations, how could it be expected to manage the negotiations?

The singular role of the European Central Bank is to protect the euro. That may or may not affect certain jurisdictions, but it is having a massive effect on this jurisdiction. Ireland has come through an era of "spend while you have it", as the former Minister, Charlie McCreevy, used to say. By God, we did spend. Other options are available to the ECB, one of which is to consider what has happened in other jurisdictions around the world. If a decision were taken to consider the bond holders, it would not be a precedent. Nobody represents capitalism more than the bond holders. When their investments do not work out, their losses should not be transferred to the taxpayer. The reality is that when bond holders make profits, they do not transfer those profits to the taxpayer. They hire the best tax lawyers and tax accountants in the world to come up with mechanisms to ensure they do not pay any taxes.

We have an option to default on the bank moneys of the bond holders. We have to bear in mind that the bond holders took a commercial decision, which was converted into a sovereign guarantee within the past two years. That has been shown to have been the worst possible decision ever made by any Government in this jurisdiction. To put it into context, the bonds held by the bond holders in AIB and Bank of Ireland are worth approximately €30 billion and the bonds held in all the Irish covered institutions are worth approximately €45 billion. There is a worldwide precedent for reducing those amounts in a negotiated way. If those of us on this side of the House go into government, we will end up doing that. There is no option. It does not matter whether one is dealing with somebody in a small business, a large business, a State institution or the State itself - if one cannot afford it, one cannot afford it. At some stage we might as well appreciate that we cannot afford it. At the end of this year, the national debt will be €95 billion. A further €80 billion will be accounted for by the bank guarantee and the NAMA moneys, which are to increase further.

It has been suggested that the US Government made the worst possible decision when it decided to let Lehman Brothers go. It was let go because there was a solvency crisis, rather than a liquidity crisis. We are constantly told we have a liquidity crisis in the Irish banking sector, but I suggest we have a solvency crisis. There is a rule to the effect that one cannot solve a solvency crisis by purchasing more debt. There are other options; for example, Henry VIII printed money. It was as black and white as that.

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