Brian Hayes (Dublin South West, Fine Gael)

I am not speaking from a script because I do not believe Ministers should do so on Private Members' business. I am here to listen and I took detailed notes on what Deputies said. I ask for the opportunity to respond in a mature way rather than the type of yaboo, old-fashioned politics this country needs to move away from. I ask colleagues to engage in that spirit. I take this debate seriously and have listened attentively to what Members have said.

We must get back to an honest debate about this issue rather than pretending that a referendum will solve the problem one way or the other. The reality is that it might make the situation infinitely worse. We are in a rolling situation and the Government has had to negotiate in very difficult circumstances. Members are well aware of the enormous legacy we must deal with. We did not take the decision on the bank guarantee in 2008, an open-ended and wrong guarantee which has put this country in a straitjacket. We did not take the decision to put €30 billion of the €46 billion of recapitalisation into the zombie bank that is Anglo Irish Bank. We are left with that legacy from the previous Administration.

It is the clear ambition of the Government to do everything in our power to renegotiate the terms of the EU-IMF deal. Of crucial significance for the Government right now is the necessity to seek a lower rate of interest on the EU portion of the overall package of funding coming into the country over a period of time. That is a live issue. It is an issue we will fight for to ensure we get that reduction in the same way a reduction was secured by Greece. It remains the ambition of the Government to seek a write-down of senior Government debt, but that is not possible at the moment because the majority view is not there within the ECB.

However, a fundamental aspect of the restructuring plan announced by the Minister for Finance, Deputy Noonan, last Thursday was, first and foremost, a very substantial write-down of up to €6 billion on subordinated debt, which will be part of the €24 billion package. In addition, we will demand a sale of the non-core elements of the banking system abroad, which are profitable and successful, at a time when we need that money in this country. We will demand that the banks concentrate on their core work, that is, lending to SMEs and businesses and getting the country running again.

I refute the charge by colleagues opposite that there is no new start from this announcement. This is a radical restructuring of the Irish banking system, with the subordinate debt, with the package of funds - €12 billion on an annualised basis, which will be pumped into the Irish economy - and with the demand that the banking sector shed the non-core international activities in which it became far too involved over a period of time. I refute the notion that there is nothing new in this, that this is not a major and fresh initiative. It is a new start; it is a turning point.

When the previous stress tests were announced the international ratings agencies did not believe a word of the findings. What is significantly different on this occasion is that there is an international perception that we have got to the bottom of this, that this is as bad as it will get. It was significant that on the day following the announcement Standard & Poor's said it accepted the robustness of the stress tests. The whole objective of Government policy is to overcapitalise the banks to such an extent that, first, they can get lending into the real economy and, second, we can get to a sense that this is the end of the end in terms of the big black hole in the banking sector.

We all saw how private, corporate funds have left the system. We will not have a stable banking system until we can attract those funds back. It is interesting that when it comes to retail deposits - ordinary deposits by individuals and businesses - there has not been a dramatic reduction in comparison with the flight of funds on the corporate side. It must be a key objective of Government, in order for the banks to function again and to make a real impact in the economy, that they are overcapitalised. Mr. Arthur Beesley observed last week in The Irish Times that our banks are now better capitalised than many Swiss banks. The task of Government is to overcapitalise the banks to such an extent that they recommence lending. That is how we will rebuild our country. Why does the real economy - the domestic economy - lag so far behind? It is because people are frightened to spend. There is no confidence that the situation they face next week or the following month will not deteriorate, that their partner or spouse will not suffer unemployment. The real task of Government is to use the Irish banking sector as the engine for growth. The only way that can be done is to overcapitalise. The way in which the international markets and the rating agencies have responded to the stress tests is constructive.

Those who argue for a default need to answer a fundamental question - Deputy Boyd Barrett and I had this debate in public last Saturday. If they are suggesting to the Irish taxpayer that there is a better way, will they please show me where we will obtain at 1%, anywhere in the world, the enormous liquidity that is required for our banking system? As I said to Deputy Donnelly, we will have to assess the question of risk. We cannot play with people's lives; we cannot play with the ordinary incomes of people working in this country. Irrespective of the banking crisis, we face a fiscal crisis which is nothing to do with the banking issue. The fiscal crisis arises from the total imbalance between income and expenditure. It is absolutely essential that people are honest in this debate. They must answer the question of where we would obtain the liquidity to keep the banking system going and keep businesses going were the ECB tap to be turned off. That is a fundamental issue in this debate and people must be honest about it. The issue will not simply be wished away by the notion that others will provide the funds.

We should not forget that on the evening when our ratings were reduced because of the enormity of the stress tests, the ECB changed its rules to allow medium-term funding to operate within the Irish banking sector. Without that funding at 1% the banking system would cease to exist. We should never lose focus on this point, that the economy is being held together because of ECB support. That support comes at a price, but the Government view is that we must continue to negotiate and continue to build bridges following the enormous reputational damage done to this country by the previous Administration. We will do that.

I very much welcome the initiative taken by the Tánaiste this week in bringing together our diplomats and all of us involved in public administration, so that we are all singing from the same hymn sheet in terms of trying to build those international bridges. Who knows what the landscape will be in Europe in three months, let alone six months? Who knows what will happen to the Portuguese or the Spanish? We have to box clever. We must use the hand we are given, albeit a very difficult one, in such a way that we get the best results for Ireland. I would not go around quoting the Icelandic example of default. I would not go around talking, as Deputy Boyd Barrett did, about Argentina and Ecuador. This is a developed economy, part of a single currency zone. There are huge risks for the country in talking up the notion of default, huge risks for the people dependent on social welfare and the people in the public sector who are dependent on the Exchequer to pay their wages.

Where default has happened it has led to a collapse, to a 70% reduction in the ordinary wages of teachers, doctors, nurses and public officials. This notion that there is some type of free-range option is a dishonest position. It is not fair, it is not honest. It is fine for the type of polemical, theatrical performance which some people want to continue, but it will not help the honest debate this country needs. Such a debate is needed and in so far-----

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