Michael McGrath (Cork South Central, Fianna Fail)

I welcome the fact that we are having this debate. It is of fundamental importance to the operation of democracy in this country that the agreement between the EU, the IMF and the Government should be put to a vote of Dáil Éireann. That is why Deputy Byrne and I tabled a motion at a meeting of the Fianna Fáil Parliamentary Party. I believe the Dáil should remain at the centre of Irish politics. It would be an insult to the House if an agreement of such national importance were not put before it for a meaningful debate and a decision. I welcome the fact that we will have a vote on it this afternoon. I thank the Taoiseach and the parliamentary party for accepting the motion in the spirit in which it was proposed and agreeing to this debate.

The agreement with the EU and the IMF gives us certainty about this country's funding for the next three years. It comes at a price. It secures a funding stream. It gives us some space to work on reducing our budget deficit. We took a significant step in that regard last week when we passed the budget, which provides for savings of €6 billion in 2011.

I would like to pick up on a point that was made by Deputy Byrne. As one listens to the debate, one would think it was all about the banks. Of the €85 billion in question, some €67.5 billion will come from the fund that has been provided. Of that €67.5 billion, some €50 billion will be used for the running of the State. This mechanism will ensure that a replacement source of funding is available when the cash reserves built up by the NTMA expire in the middle of next year. It will enable us to continue to fund social welfare payments and pay public servants, gardaí, teachers, nurses and fire fighters. We owe them a duty to have a clear policy and strategy in place to ensure the State is funded on a stable basis for the next few years.

This plan gives us that opportunity.

There has been a good deal of debate about senior bondholders. The European Union, at present, will not countenance default on senior debt. When the German Chancellor made reference to a new mechanism that would be put in place, we saw how the markets reacted. Subsequently, clarification was given to the effect that any new regime involving burden sharing among senior bondholders would apply only post-2013. The fact is that at present the EU will not entertain a default of senior debt.

As Professor Patrick Honohan pointed out recently, about 5% of total bank debt is accounted for by non-guaranteed senior bonds. It would be wrong, therefore, to characterise the whole debate in terms of the issue of senior debt and defaulting on the senior debt being held by the banks. It appears there is a move within the European Union to put in place a permanent European stability mechanism. That may involve some element of burden sharing even with senior bondholders, but the fact is that such a mechanism is not in place at the moment, and the deal before the House today would not be on the table if the Government insisted on imposing burden sharing on senior bondholders at the present time. That is the reality.

On the issue of the interest rate, we would all like to see this as low as possible. The Spanish ten-year yields yesterday hit 5.54%, which is moving very close to the 5.8% figure contained in this deal. There is growing turbulence in the markets along with question marks about the stability, and the future, of the euro that will have to be dealt with. Countries such as Belgium, Italy, Portugal and Spain are all having to deal with growing concerns about their financial positions, and they are also seeing bond spread increases. The key issue, however, is the alternative to the deal on the table. It would be disingenuous of any politician to seek to misrepresent this deal and attempt to persuade the Irish people that in some way its fundamentals can be renegotiated, because they cannot. The interest rate is not negotiable, and neither is the overall fiscal consolidation of €15 billion nor the achievement of €6 billion in savings in 2011.

Within the parameters of the deal individual elements may be argued about, as well as the details and where the emphasis should lie in terms of taxation increases or expenditure cuts, but the broad thrust of the deal will remain in place and have to be honoured. For any party or politician to make representations to the contrary would be to mislead the Irish people, because it is not possible to fundamentally renegotiate this deal. I have yet to hear a credible alternative being put forward that provides a secure source of funding for this country over the next three years.

In conclusion, we all want to ensure we get back to the markets as quickly as possible. As Professor John FitzGerald pointed out, in a very balanced article in the Sunday Business Post at the weekend, having this facility in place will enable the NTMA to secure short-term borrowing at relatively low interest rates for the country, to ensure we can continue to fund public services and pay social welfare.

See this speech in context