Pearse Doherty (Donegal South West, Sinn Fein)

The amendment touches on a very important point, namely, the powers to be conferred on the Minister for Finance, however long the present incumbent will last in that office. Given the difficulties my colleague, Deputy Arthur Morgan raised in regard to potential constitutional problems arising from this legislation overriding or supplanting laws already in existence, it is a minefield. I am curious to find out what type of legal opinion the Minister has received in that regard, knowing that the Government has received legal opinion in other cases, only to be defeated in the High Court and no doubt ultimately in the Supreme Court whenever the case will be heard in regard to the by-election.

If we look at the wider economy, while the Bill is important in terms of the powers to be transferred to the Minister for Finance to allow him or her to act unilaterally, the big problem arises from the powers that will not be transferred. That is where the gaping hole in the legislation lies, and none of the speakers from the other parties have raised this. One of the powers the Minister will have is to make a subordinate liability order, while he or she will not have the power to make a senior liability order.

The crux of the matter is that while burden sharing will be dealt with in regard to subordinate debt, no matter how toxic or insolvent the bank is without State support, senior debt will continue to be guaranteed. Unless that position changes we are headed into a very difficult position in the future. We have issues as regards expenditure and falling income receipts and these can all be dealt with, as the Minister has indicated in his four-year plan. I believe that this is not achievable, however, in terms of the desired outcomes because it will contract and strangle the economy. Sinn Féin has said it will take six years but not only is there a difference in timeframes, there is also disagreement in terms of how this is to brought about.

One way to proceed is through cuts in deflation, which is the Government's approach, along with those who have signed up to the consensus for cuts. The second approach is through a growth stimulus package. However, if we continue to allow private bank debt to be tagged on to the sovereign debt we will not be able to grow the economy in the way that is needed. The Government is planning to rape the National Pensions Reserve Fund to prop up the banks and the bondholders. Not just our party but also the Labour Party was planning to utilise some of that funding in terms of job creation and stimulating the economy.

Perhaps I am naive, but many experts are telling us that senior debt cannot continue to be guaranteed by the Irish State. There is no reason for it, and it can be looked at in two ways. The first is to look at it from a fairness viewpoint. As legislators and politicians elected on behalf of the Irish people we have to act in their best interests. This phase - "acting in the national interest" - is probably the most bandied about misused phrase that I have heard since entering the Dáil or before that because of the many interpretations one may apply to it. Is it fair that we continue to allow the Irish taxpayer to guarantee senior debt? In this Bill the powers conveyed on the Minister for Finance will be to deal with subordinate debt. I have looked through the measures that conveys these powers and one of these is the likely extent to which subordinate creditors will be repaid amounts owing to them in the event of the winding up of an institution in the absence of such financial support.

These subordinate bondholders are investors. They invested in a bank which would not be functioning unless there was State support. However, the senior bondholders did exactly the same thing, so why should they not be treated in the same manner as the subordinate bondholders? The Minister continually poses the question of what will happen if we burn the bondholders, which Sinn Féin argues we should do in respect of those banks that have no future. Let us deal with Anglo Irish Bank in isolation. The senior bondholders in that bank should not get one red cent from the Irish taxpayer. There are other measures that can be used to address the situation in other banks, for example, debt for equity swaps, which is a measure with which the Minister is empowering himself in order to deal with subordinated bondholders.

The Minister has asked how we will get money from the market if we burn bondholders. The reality is that if we separate bank debt from sovereign debt our debt to GDP ratio falls to 75%. Mr. David McWilliams pointed out today how this compares with other European countries. Sinn Féin has been arguing for a long time for a separation of bank and sovereign debt. We cannot allow private debt to become sovereign debt. If we make that separation our debt to GDP ratio will be 75% compared with Greece which stands at 126%, Italy at 116%, Belgium at 96%, Portugal at 76% and France at 78%, with Germany - it is mostly German and French bondholders we are bailing out in this scheme - 2% below us in terms of debt to GDP ratio. The Minister should do what we are asking and at least allow himself the power to burn the bondholders or deal with debt for equity swaps in terms of senior bondholders, whether or not he invokes them. We argue that the Minister should invoke them. If the Minister had those powers and dealt with bank debt separately from sovereign debt there would be no reason we could not go back into the markets after a short period.

The Minister may laugh.

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