Éamon Ó Cuív (Galway West, Fianna Fail)

Tá áthas orm deis a bheith agam labhairt ar an ceist seo. Reading the motion from the Technical Group, there is much in the first three or four paragraphs with which nobody could find fault. In a just world it is horrendous that people in Europe who speculated with money are having debts paid by taxpayers right across the Continent. Nobody can have an argument with this and I have no brief for bankers, banks or the way they acted over the past ten or 15 years, particularly since the inception of the euro. The question is whether there are easy answers that can wipe away debts without repercussions if the country acts unilaterally and in a fashion that is not co-ordinated. That is where the difficulty lies, as the previous Government found out.

Deputy Mathews has argued that the election was almost a referendum. With a referendum the people normally get a choice and the people's will is implemented. In this case there was a choice but the current Government realised that what was put to the Irish people was not exactly the best choice; I am thankful an about turn was implemented. When one considers coldly the choices, some of the proposals which were so handy and attractive are not so practical when one reads the small print.

As we do not want to repeat the problem we should go back to its beginning. I said this last week and will do so again tonight. When the euro was constructed, there was a major fault line going back to a hang-up which Europe and America has that profit is might and people in private industries, where there is enough competition, will always make profits and good decisions for the people. When the euro was introduced, it came with rules and regulations concerning what governments could do. There was a fixated idea that the private sector could do no wrong and if there was enough competition, all people would get better and cheaper services, although this is not necessarily true. It certainly was not true in this case and what we are discussing are some of the most expensive private services ever provided to people. No rules were laid concerning the international transfer of money and there was no proper European oversight.

Deputy Mathews is correct in that it is absolutely astounding that at a European Central Bank level nobody considered the transfer of funds between the states. The Irish banks made significant mistakes but it is also fair to point out that the non-Irish banks in this market, such as Bank of Scotland, Ulster Bank and so, made the same mistakes and followed the same pattern. Even if the Irish banks had not gone down that road, other banks may have. If we are to ensure this does not happen in future, we must introduce control on private competition and move away from a concept that seems to be one of the basic tenets of the European Union. It may have been founded in food security but now the simplistic notion is that competition solves all problems. That certainly has not been the case with us and ultimately it has been a very expensive choice.

There are other issues, such as banking oversight by the Oireachtas and the Government. There are people who argue that we should not have provided a guarantee, which is a fair point that can be examined. I am willing to consider any point. I have never heard anybody contradict my understanding, which is if there had not been a guarantee, Anglo Irish Bank would have collapsed and may have brought many financial institutions in the State with it. In the event of the bank's default, depositors were at risk. The idea of the guarantee was not to guarantee shares in the bank - they are worthless - but to hold money in the system and reassure depositors that the money was safe.

Over time we reduced the extent of the guarantee but the question arises as to why, in the short term, both bonds and depositors were guaranteed. The answer is simple; if only depositors were guaranteed, all the bondholders would have cashed in as quickly as possible and a difficulty would have ensued. The idea was to create stability and space.

What has happened to the guarantee in time? In practice, the guarantee has been superseded by liquidity provided on a fortnightly basis. In other words, we never paid out directly on the guarantee but paid out on solvency issues in the bank. People have withdrawn money in the past few years so the guarantee has been overtaken by liquidity provided by the European Central Bank. By November last year the relevant figure had risen to €100 billion. Banking issues rather than sovereign problems triggered the EU and IMF deal.

There is a simple equation as I saw it at the time. We had enough money to run the State to June this year because we had pre-funded but a problem would have occurred if the ECB indicated the money it rolled over every fortnight was no longer available or that there was a cap to it. If that had occurred, there was potential for the banking edifice to come down around our ears. That money is at 1% but if the interest is doubled, the cost to the State becomes absolutely enormous as any cost to banks is a cost to the State.

In those circumstances it is being argued that people would vote in a certain way. I would be very happy for a referendum on the issue because the Irish people are pragmatic. They are mad at Fianna Fáil and we got that message. They are mad at bankers, which we also understand. Faced with the equation we saw in November, the Irish people would have made the same choice the previous Government made and which the current Government is making now. To make any other choice and stop that flow of money coming from the ECB which is shoring up banks' liquidity - I understand the figure has gone up considerably since November - would lead to the whole show coming to a shuddering stop.

If the State could not borrow money to run the country and keep the banks open, the cutbacks arising from the EU and IMF deal would have looked very small because the country would have run out of money. Faced with such a dilemma, we took the view that a maintenance of services and our ability to borrow €16 billion for this year and more money for subsequent years was absolutely vital. We saw only one show in town and if we tried to unilaterally renege on bonds, Europe would have not given us a guarantee to keep liquidity in the banks.

The Government got it absolutely right last week with an issue that was of great concern to me last November. There was a tacit understanding that the money would be injected from the ECB. However, I would be much happier if that money was put in on a medium-term basis. I am not comfortable with the idea of tacitly rolling it over every few weeks. It is better than not having it at all but is not a satisfactory situation. What we must do next is ensure stability and the only way to do that is to ensure the money from the ECB and the Central Bank, which latter, in terms of currency, is only a sub-office, is there for the long term. That would create a climate of certainty within the banking sector. In addition to corporate depositors, many ordinary people still move their money out because they are not absolutely sure whether the banks will continue to be funded from the point of view of liquidity.

My understanding of this, in simple terms, was that the ECB would provide the liquidity if we provided the capital. There was to be a total package. As far as I have heard, nobody has put in the totality, an alternative package that would give us the possibility of ensuring that, in the course of the medium term, we can fund the Exchequer services that require to be funded and ensure there is not an implosion of the banking system.

I reiterate I have no love for banks or bankers. What they did was absolutely scandalous and unprecedented. However, ordinary people depend on the financial system. The notion that one hurts nobody but bankers by allowing banks to collapse is naive in the extreme. Therefore, as in a chess game, before making any moves one must work out all the forward steps to ensure one does not create an unforeseen situation that would cause enormous damage to a great number of people.

Another issue which was overlooked when we considered bond markets and financial markets, and so on, is that there is a great mixture present, just as in the case of depositors in the banks. There are those who have big money and big investments but side by side with these are the moneys from the small people which are put into life insurance policies, pension funds, and so on. If one starts to burn people willy nilly there is no way of knowing which person one will burn. Looking at the top end, nobody can know where the trail will lead, whether to a big person or a small person. That is a problem.

I took part in a radio debate recently where a person suggested he would have paid the big depositors who were socially acceptable but not those who were not socially acceptable. I am afraid the law does not provide for that. When one enters this House the price one pays is that although one makes the laws one must live by them no matter how inconvenient it is. One cannot change the law retrospectively. The notion that one can say one does not like such a person and therefore will not pay out but one likes another and will pay is naive in the extreme. It is strange for people who are part of the law-making system to talk in that fashion because the moment we bring into disrepute law-making and abidance with the law by the Government and the Oireachtas we undermine our democratic system and the Constitution. There are calls for a referendum but we must try to solve this problem within the law. If one tried to act outside the law one would be brought quickly to the courts. If we did not stick by the law the courts would bring us to heel very quickly and give an order that we had to comply with the law.

When one sits in the Cabinet room there is a constant constraint. Many solutions are put forward but may not comply with the law. For example, matters may be treated one way in a certain jurisdiction and certain bonds were taken out of this jurisdiction. However, by changing domestic law one does not change the status of those bonds. That matter would not be decided in a court in Ireland in any event.

Very attractive solutions have been put forward that I wish would work. I wish there was a magic bullet because I certainly do not wish to put any burden on the backs of the ordinary people. However, many of the propositions are either not legally possible or would create such great collateral damage that the resulting fallout would be much more severe on the people than the way we have taken to date. The Government which is now facing these constraints----

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