Michael Noonan (Limerick City, Fine Gael)

Although the Government opposes the motion put forward by the 13 members of the Technical Group, I can understand why they seek a referendum on the bank bailout and the EU-IMF programme. There is no doubt that the bailout will impose a heavy debt burden on Ireland for many years to come. Neither is there any doubt that compliance with the programme involves implementing many difficult fiscal measures which will affect nearly everyone in the State.

I also understand why there is anger throughout the country at having to pay the bill for the reckless and thoroughly incompetent behaviour of some of the most highly paid and self regarding individuals on this island. These are people who demonstrated little or no evidence of having understood the responsibilities with which they were entrusted or the consequences of their actions for their shareholders, their companies and the economy, or for society as a whole. In this context, society is not a neutral abstraction - it is made up of our families, our friends, our neighbours and all those other hundreds of thousands of men, women and young people who have to cope each day with the reality of straitened incomes, large mortgages and uncertain job prospects.

Before I respond to the issue of the proposed referendum it is relevant to comment on developments since my announcement last week in response to the bank stress tests. The reaction at home and abroad to this announcement has been favourable and shows that confidence in our banks and in the economy has begun to re-emerge. Standard and Poor's has removed Ireland from the CreditWatch monitoring system, noting "the outlook is now stable ". They believe the Irish economy has stronger growth prospects than others due to Ireland's "openness, its flexibility, and its competitiveness". The investment bank Morgan Stanley states that Ireland is still facing major challenges - as indeed it is - but went on to say:"The stabilization of the Irish banking system that we expect the stress test to facilitate should allow the economic turnaround already underway to boost investor confidence in Ireland's medium-term debt sustainability."

This underlines the need for certainty and stability. Confidence is fragile. The inevitable uncertainty that would be generated by the announcement by this Government of a referendum on the bailout and the EU-IMF programme could have serious consequences for this emerging confidence, regardless of the outcome of the referendum. To be specific, if the Government were to agree to a referendum this would be interpreted as a weakening of its resolve regarding its commitments to the bank bailout and the EU-IMF programme. Even if the result of the referendum were a strong "Yes" in favour of the Government's policy, much damage would have been done in the meantime. If the answer were "No", we would be faced with the immediate crisis of trying to find new sources of funds to prevent our public services from collapsing. We cannot afford any ambiguity regarding our commitments on the bailout or the EU-IMF programme.

The Government already has a strong mandate from the Irish electorate to sort out the banking crisis and the economy. In our programme for Government we support the objectives of the EU-IMF programme, namely, restructuring and recapitalising the banking system, achieving fiscal stability and returning the economy to growth. We also state our objectives of restoring confidence, growth, job creation and the State's access to affordable credit from private lenders.

Many points were made in the debate on this motion but I have time to respond to only a few of them. Deputy Ó Cuív made a thoughtful contribution to the debate and made many interesting comments. I particularly agree with his statement: "the notion that one hurts nobody but bankers by allowing banks to collapse is naive in the extreme ". It is also worth repeating his point about burning bondholders, namely, there is no way of discriminating between the money from those who have made big investments and the money from small people which is invested in life insurance policies and pension funds. Neither is there a way to distinguish the investment in senior unguaranteed bonds made by several members of the Irish League of Credit Unions. I do not believe there is any Member on the other side of the House who would like to burn the bonds in his or her local credit union.

Deputies Keaveney and Dowds asked questions regarding the Central Bank's estimate that SME and mortgage credit of between €11 billion and €16.5 billion of gross new lending will be required over the next three years. Deputy Keaveney asked how we will ensure that these moneys will be circulated into the local and national economies to encourage risktakers in the SME sector to get involved in job creation. Deputy Dowds asked the Government to demonstrate how the money being pumped into the banks will be made available for lending to small to medium-sized businesses. I hope that my speech to the Dáil earlier today during statements on bank reorganisation provided an adequate response to these important questions.

In that speech I pointed out that credit was essential to the economy and that it was critical to have a new approach to system design to provide the necessary credit to spearhead economic recovery. I also pointed out the importance of reasonably-priced loans for investment in SMEs and for house-buyers. Until now our under-capitalised banks have been under pressure to delever assets to repay the funding due to the ECB and the Central Bank and were forced to avoid new lending. Now this problem has been solved, more than €30 billion of new lending will become available between now and 2013. I am determined to ensure this money will be used for investment, as well as for consumer spending, so that confidence can be restored to the economy which will, in turn, lead to increased employment and even further investment, consumer spending and confidence. Accordingly, I have decided that the banking policy division of the Department of Finance will work with the Central Bank to monitor lending closely to ensure that it will be offered where it will do the most good for the economy as a whole.

I repeat the point I made earlier. If we were to delever the main banks down to the equilibrium point that would be required for prudent deleveraging, there would not be headroom for further lending; we are delevering below that point so there is headroom for further lending. As well as that, we are looking at the quantum, which was excessive, that was lent by Irish banks to the building and development sector. As that works its way through the system, we will ensure the funds that were allocated to speculative building and development will be reallocated to important growth areas of the economy and to social ends. In other words, SMEs that can create jobs will get the credit lines they need and young couples who want to form families will again have access to mortgages. It is deplorable that we would arrive at a point where according to the latest figures available to me, only 87 new houses were registered in Dublin last month. It is socially corrosive if young couples cannot purchase homes and form families. The reason for that is the declining market that seems to have no bottom and in which no mortgages are available. When there is no market, people do not buy.

We must establish the credit lines again and I assure the House this will be driven by the Central Bank and the Department of Finance. The big mistake made by my predecessor was that while he made many statements and proposed many good policies, he did not have an implementation unit to drive implementation. He was then accused of making promises he did not fulfil. That will not happen on this occasion.

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