Olivia Mitchell (Dublin South, Fine Gael)

I wish to share time with Deputies Tom Hayes and John Paul Phelan, if that is all right.

The economic crisis has been described in various ways, such as being catastrophic, disastrous and appalling. No superlative really adequately describes the enormity of what has happened to us or the public rage at what people now must ensure for the next number of years for sins they for the most part certainly had no part in committing. Like everyone else, I rage at what we now must do but it is the price of bankruptcy, which unfortunately is the state we are in. I believe, however, that the process of negotiating the bailout deal will continue. It did not conclude at last week's summit but will go on and will continue to be negotiated and renegotiated. I welcome the news that the EU now discerns that it may not be wise to negotiate with an outgoing Government and has decided not to enter negotiations with the outgoing Government in Portugal until after the next election, should a bailout of any sort be required.

I spoke last night about the treatment of bondholders and generally and while I had not intended to repeat this today, while listening to this morning's debate I noted that one speaker spoke about the treatment of bondholders. In my mind, there is a world of difference between debt restructuring and burden sharing on the one hand and defaulting on the other. One speaker this morning stated that he was not afraid of the word "default" or of using that word. It is a great luxury not to be afraid of that word because it is a luxury that is not afforded to the vast majority of people in Ireland. Anyone who has a job that depends on the Irish economy, who is dependent on a State pension or salary or is in receipt of social welfare does not have that luxury. Anyone who is dependent on having access to their savings in the banks, however meagre they may be, does not have that luxury. It is arrogant to state that one is not afraid of the word "default" because one should be afraid of it.

As part of the renegotiation, I favour a move by the ECB to medium-term money. There is no doubt but that being subjected to emergency or overnight money makes it extremely difficult for the banks. It is almost impossible for a bank that is dependent on going to the lender of last resort on an emergency or virtually nightly basis to attract any investors, as it simply does not inspire confidence. However, I welcome the commitment from the ECB and recognise that it will make it much easier for Ireland to move away from that position. It has not really been appreciated that the ECB has committed literally to giving an unconditional promise of money on demand to Irish banks. It has a given an open-ended commitment to a full allotment of whatever the banks need. This is a huge concession and is by no means the norm. Central banks normally retain the discretion to have the variable rate of allotment of funds to banks in need of emergency funding because it is, after all, the manner in which the ECB controls the money supply. It is how it exercises its control over the money supply in the eurozone and to renounce that ability by giving our banks an open-ended commitment appears to be extremely generous, although it has not been widely recognised as being so generous. In the longer run, however, this probably is unsustainable from the ECB's perspective, which makes me think that it ultimately will switch to some kind of medium-term finance. As far as I am concerned, the sooner that is negotiated the better, because Ireland definitely needs access to cheap finance.

Much also has been said about the stress testing and its severity. The stress testing has been severe and this means that money is required upfront to recapitalise the banks. Moreover, it is true that the worst-case scenario was envisaged and that this has cost implications for Ireland. However, I believe this is essential because ever since September 2008, the worst case scenario always has materialised after every announcement. Even though Members were told of false dawns, that we were turning the corner and so on, almost within months there always has been a further announcement of the need for further financing for the banks. This has been extremely debilitating for public confidence and has had a huge impact on Ireland's reputation and credibility at home and abroad, as well as an enormous impact on the banks' ability to get back into business. In effect, there were three wasted years, the result of which is that we must overcapitalise our banks and provide a buffer against almost every eventuality, no matter how onerous this might be.

Some of the cost will be offset by dealing with subordinated bondholders at a level they might not prefer. It will also be offset by the sale of assets. I welcome the Minister's decision that there will be no fire sale of assets and that the banks will be given time to deleverage. What will be sold are the good loans, as they will command the best price, but the last thing we want to do is sell them at a price that is penal to us. We want to maximise their value. The ECB's open-ended commitment to provide short-term money gives us some time to maximise the value of those assets.

I welcome the new bank structures, which give clarity to the final shape of the banks. Irrespective of whether the two pillar banks are owned wholly or partially by the State - Bank of Ireland hopes it will retain some of its independence - they will largely be controlled by the State, so they will not be independent. Rather, they will be two banks with one owner, which is a monopoly by any standard, and monopolies are never in the best interests of the citizen. Even when their motives are benign, they do not produce the best deal for the citizen. The Minister recognised this when he referred to non-State banks providing the necessary competition. I hope this will be the case, although we have seen the flight of foreign banks from the country in recent years. Whether they come back or those in Ireland remain depends on growth in economic activity. It also depends on the conditions applied to those banks. For example, if non-State banks are required to carry the same capital ratios as the pillar banks, they are less likely to remain or to enter the market. If they are not subject to the same requirements and are allowed more lax capital definitions, they have an unfair advantage over the pillar banks. I hope the Minister will clarify this point.

Significant vigilance is required to ensure a competitive banking sector that serves the needs of the citizens and not the banks. I remember the bad old days when there were few banks and opening hours, fees and charges were all dictated by the needs of the banks and not the citizens they were meant to serve. The new architecture is an artificial construct. In such circumstances, allowing normal market forces to operate is difficult. The sector needs to be watched. Discussing a lack of competition is ironic, given the fact that intense competition caused the problem. However, that competition had no regulation.

I realise I only have one minute remaining. The property market is largely at the root of our problems. There is a natural inclination to punish that industry. We must be rational in how we deal with it, as not every buyer, seller, developer or investor did bad things. From our perspective, the bottom line is that, if the loans are not repaid, the banks suffer, and if the banks suffer, we suffer because we are the banks. While we need significant vigilance to ensure the property market does not create a new bubble, it is also essential that we not prevent the property market's recovery, thereby causing further problems for ourselves and the banks that are now synonymous with us.

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