Thomas Pringle (Donegal South West, Independent)

The Minister's restructuring plan and the provision of an additional €24 billion in capitalisation for the banks are intended to solve the problems of our banking sector once and for all. The plan includes a deleveraging of €57 billion of assets in the next three years which, with the addition of €24 billion in capital from the State, is designed to free up credit of some €12 billion a year for lending to small businesses and mortgage applicants. The big question is whether the plan will work.

We are told the provision of an additional €24 billion represents the end of the banking problem. Everybody on the Government side has their fingers crossed and is hoping that is the case. Yesterday, however, a Government Member, Deputy Mathews, stated his belief that the losses in the banks would amount to €90 to €95 billion, well above the €70 billion already provided by the State. We are getting to the point where the cost of the debt will be unsustainable, if it is not already.

In the first quarter of this year, according to Exchequer returns, the interest payable on the national debt was €1.4 billion. A €70 billion recapitalisation would increase that interest to €4.2 billion. If the final figure reaches €90 to €95 billion, the interest payable will approach €6 billion. The way in which the Government proposes to meet those payments is by cutting a further €3 billion of public expenditure annually for the next three years, yet €3 billion is less than the annual interest bill based on a final capitalisation figure of €70 billion. In the years to come the cycle will continue, with reductions in the number of public sector workers, a driving down of private sector wages and more people succumbing to loan and mortgage defaults. Then the banks will come back seeking further capitalisation because of the losses arising from increasing defaults. We will be back in the House hearing that further capitalisation is required.

The Minister stated that selling assets in a rush, where the world knows they must be sold to provide banks with immediate cash, is never the way to maximise sale prices. How can one describe the sale of €57 billion in assets in the next two to three years as other than selling in a rush? Anybody who is interested in these assets knows they can simply wait six months until they are put on the market. The value will never be realised and the projected price of €57 billion may end up being much less than that, which in turn will lead to requests for further recapitalisation.

The Minister observed that Standard & Poor's has described our outlook as stable and has taken a positive view of the latest recapitalisation. He also said that Moody's sees it as a credit-positive move. He forgot to mention Moody's observation that the recapitalisation is good for the banks but bad for the sovereign. In the coming years we will see an increasing burden being placed on sovereign debt and the increasing socialisation of bank debt. There will inevitably be further requests to this House for recapitalisation unless the Government accepts the inevitable and opts for an alternative policy which puts the people first instead of the banks.

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