Kieran O'Donnell (Limerick East, Fine Gael)

In the brief time available to me, I will address the negotiated interest rate of 5.8%, which not sustainable. It is prohibitive. The question that arises is what is required to secure a decrease in this rate. From my perspective, the key element here is the banking crisis. We must separate sovereign debt from State debt. We must choose between solvency of the banks or solvency of the State. We must deal with the banks. What is required, in terms of going to Europe, is a Europe-wide resolution mechanism to deal with debt restructuring for insolvent banks and involving all bondholders. There is a mood of change within Europe which recognises that the rescue fund may not be large enough and that these issues need to be addressed.

We have €10 billion of subordinated debt and €15 billion of unguaranteed senior debt. Guaranteed senior debt will have to be honoured. If this situation were to arise, it would bring certainty to the banks and would draw a line under the cost to the Irish taxpayer and the Irish State. The bond markets would then take cognisance of this and our interest rates would come down. We could then go back to the EU and renegotiate for a shorter term. This would bring down interest rates and enable us to get back into the market. This is the type of thinking required. The rate being put forward is not sustainable for the taxpayer, the State or for Europe. Europe wants this money repaid.

This Government, which is in its last days of office, is weak and lacks credibility. We need a Europe-wide decision on the issue of restructuring insolvent banks in terms of debt for equity swaps and a range of other measures. We need it now. The incoming Government will have to find a mechanism to bring down interest rates. Fine Gael's proposals will ensure certainty. We should deal first with the banking crisis, following which we can resolve the interest rate situation. Our economy is fundamentally sound but the banking crisis is dragging it down.

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