Pearse Doherty (Donegal South West, Sinn Fein)

The Minister for Finance recently said of the European Stability Mechanism:

It has the organic potential to put in place a great many tools or policy measures to protect the eurozone post-2013. This is one of the most significant developments that has taken place. If we had our crisis in 2015 or 2016, much of the architecture of the euro land would be in place. The crisis hit and when the architecture was tested it was insufficient and the policy instruments were not in place.

Our problem is that the crisis did not hit between 2013 and 2016, but now. Burden sharing with private creditors is needed now, as is investment, not austerity.

The pact for the euro is essentially an IMF for the eurozone. It will lend money to countries in need and can also buy their bonds directly. Provision of support will be conditional and agreed by all other member states. We must remember that what happens in practice will depend not least on the political balance of power at the time help is requested. We can see that when we consider Ireland's current situation. We are bowing to the whim of two strong core countries that are on the cusp of national elections. I am sure we are all glad that the leading Government party is part of the European People's Party, EPP. Imagine the situation if we did not have friends such as Angela Merkel and Nickolas Sarkozy. What mess would we be in then?

The perverse measures imposed on Greece and Ireland are not encouraging precedents. The price of the loans – the surcharge on the interest rates that the ESM pays on its borrowing – has already been set at two percentage points for short-term loans and three percentage points for loans above three years. That is too high. If we are really a partner among equals, why further punish a country that is committing to an agreed and painful consolidation package and make the consolidation that much more difficult? There was no modesty from the European Council when it stated its conclusions about economic policy by proclaiming:

The European Council today adopted a comprehensive package of measures to respond to the crisis, preserve financial stability and lay the ground for smart, sustainable, socially inclusive and job-creating growth. This will strengthen the economic governance and competitiveness of the euro area and of the European Union.

The euro pact plus builds on the eurozone's old macroeconomic code of conduct, the Stability and Growth Pact. It extends the original pact's rules into new areas, such as wage negotiation procedures, and gives the European Union a stronger legal framework to increase compliance. Essentially, it puts pay, pensions and social benefits at the centre of how to run the euro in the future. As currencies cannot be devalued, the pressure will be on pay, pensions and other social investments to be devalued instead. It is vital to recognise that the euro pact plus does not chart a path out of the crisis. In particular, there is no strategy for achieving faster growth through higher public and private investment. On the contrary, the combination of fiscal austerity and supply side reforms will delay the pick-up of growth and keep unemployment unacceptably high for the foreseeable future. We can see that in the figures being released each week in this country.

The pact also does not hold out the promise of near-term resolution of the ongoing banking crisis, an essential precondition for recovery. We are looking to 2013 for burden sharing when countries such as Ireland need it now. To that extent the pact is a missed opportunity. The trouble with the European approach to the problem is that it is the wrong way around. When a business becomes insolvent, one does not generally lend it more money. Rather, one seeks to restructure the debts so that the business stands a fighting chance of becoming a going concern once more. Banks exposed to the write-offs are then recapitalised after private creditors take a hit. One recapitalises to fund the banks' workings, not to pay off private speculated debt, but that is not what is happening here. Instead, in effect, the core is lending the periphery even more money in the hope that by so doing it will protect the core's banking systems from further damage.

After the agreement by the Taoiseach to this euro-pact plus on behalf of the Irish people, there are questions that need to be answered. One of them is: what are the concrete commitments to be achieved in the next 12 months in the name of the Irish people as a result of this pact and what concrete commitments are included in the national reform and stability programmes to be submitted later this month as a result of this pact?

Several weeks ago, I learned, through questions, from the Minister for Finance, Deputy Noonan, that we must put €1.7 billion over four years into the European stability mechanism starting in 2013. Some €1.7 billion of our money will go into this new fund that the Government signed off on. This means that Irish people must contribute to this fund so that at a later date we may tap into or get a loan from this fund and be charged an extortionate interest rate on the money that we gave it in the first instance. It is akin to a burglar robbing your home and charging you to take away the loot.

I asked specifically earlier today for a debate on what happens after 2012 because I and many others are unconvinced. My colleague, Deputy MacLochlainn spoke of Nobel prize winners and others who are unconvinced by the Government's strategy. The European Commission is telling us clearly that this bailout will not last us the four-year term. The European Commission states that we must tap into the bond markets by the end of 2012 at the latest.

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