Michael Noonan (Limerick East, Fine Gael)

This deal is a very bad deal and in one respect it is a downright obscenity. Ireland's sovereign debt was manageable, but once the banking liabilities incurred by the Government were added to the sovereign debt the situation could no longer be sustained. That is why Ireland could no longer borrow in the markets and why the IMF and the EU are bailing us out. The direct cause of the banking crisis and the bailout is the Government's banking policy which has led directly to the IMF and EU bailout which we are now discussing.

It is worth recalling the liabilities of the Irish banks which the Government decided to cover since September 2008. They comprise €440 billion of eligible institutions guaranteed under the CIF and ELG schemes; €80 billion of property and associated impaired loans from the banks to be purchased by NAMA in exchange for Government guaranteed bonds; and €31 billion upfront capital support in the form of promissory notes and ISS which has brought the general Government deficit to 32% of GDP, against a 2010 forecast of 11.9%.

The bailout plan has increased the debt burden for the Government and has led to sovereign downgrades. The terms of the bailout insist that a further €17 billion of loans be transferred to NAMA by the end of the year. It has signalled that there will be additional discounts on this tranche of loans, so a considerable additional cost to the Irish treasury will be added to the €33 billion.

There are increased market tensions arising from the bailout, which may add further to Ireland's debt burden, with increasing concerns that the position will become unsustainable. Despite all this, the Government failed to negotiate a burden sharing arrangement for non-guaranteed bank debt as part of the bailout arrangement. Ireland's commitments on sovereign debt and debt under guarantee must be honoured in full. What legal or moral compulsion is on Ireland, however, to honour in full debt incurred by Irish banks when there was no State involvement in the arrangements? These loans were entered into freely by willing lenders and borrowers with absolutely no State participation. The interest rate charged represented the risk at the time and there never was a State liability. It is obscene that liability for these loans is now being transferred to the Irish taxpayer, in many respects to the poorest of the Irish taxpayers.

There is €10 billion of subordinated debt in Irish banks and €15 billion of non-guaranteed senior debt. The Irish Government and the taxpayer has no liability whatsoever for these debts, but the bailout deal is now forcing them to accept liability because it puts this imposition on them. In the budget the Minister for Finance reduced social welfare payments, punished the blind, disabled, widows, carers and the unemployed and he taxed the poorest at work, and for what? It was so that the taxpayer can take on liability for debts the country never incurred and arose from private arrangements between private institutions. What a disaster and an obscenity. How can the Government stand over it? How can our European colleagues stand over it? When the deal was agreed, there was an attempt to justify it because any re-negotiation of bank debt in Ireland could have a major adverse effect on banks in Germany, France and the UK that lent to Irish banks. This consideration may have been valid some time ago but it is no longer valid.

The latest available bank data shows that Irish guaranteed bank debt has been sold on at a discount to hedge funds in the USA, the UK and Luxembourg, as well as to smaller speculative investors. If the Minister of State is interested in the data, he will find it through Clearstream and Euroclear. He can track the sale of bonds at discounts. They are no longer being held by European banks that lent the money in the first instance. Rather, they are now in the possession of hedge funds and t he Minister of State can find their names on the two websites to which I referred.

See this speech in context