Brian Lenihan Jnr (Dublin West, Fianna Fail)

The case needs to be made and it will require considerable diplomatic activity because it will require the agreement of the other member states. That is the second issue of fundamental importance; this cannot be negotiated on the basis that Ireland is looking for this uniquely. It can be negotiated on the basis that the other member states agree that the current arrangements impose an excessive penalty on member states. On that basis, negotiations can proceed which will require the construction of diplomatic alliances and building up good will. In the context of building up that good will we must acknowledge that our banking system has more than €100 billion on loan to it at a very low interest rate - slightly above 1% - from the European Central Bank. That is another reality that does not seem to cloud this debate very much domestically but of course is of great interest to European analysts who look at the position in Ireland.

There is a third factor influencing this debate. I am optimistic that real progress can be made in the months ahead regarding the interest rates that are applied. We can have an international agreement on that issue. The idea that the European Central Bank and the European authorities would encourage default on senior debt obligations in Ireland has become a particular obsession in our domestic debate. That would be a very difficult idea to develop at European level. As all Deputies know, it is not possible to proceed along those lines without the backing of a central bank and the European Central Bank has set its face against this. I raised the issue in the last negotiations and it refused. My intelligence at this stage is that there is considerable resistance to this in Europe because of Ireland's very high GDP. Ireland is not seen as being the same as Greece; it is seen as a comparatively wealthy country that should not be allowed to default on its obligations. I am only reporting to the House what I hear in these circles. However, there is scope for progress on the rate of interest.

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