Peter Mathews (Dublin South, Fine Gael)

On Thursday, 24 February, my canvass team was tired, worn out and tense, the weather was not ideal and there were only hours to go before election day. One of my sons, who was out of a job at the time, was on the team when a very angry lady constituent in Goatstown opened the hall door of her house. The following day, which was election day, she wrote me an e-mail, which I propose to read to the House. It stated:

Dear Mr Mathews,

This is both a message of good luck for today, and also an apology. Last night, a young polite friendly man knocked on my door canvassing for you. [It was my son]. It was five minutes after I had learned that my second (and last) child is about to move abroad to find work, and I was totally heartbroken. Her brother left eighteen months ago. I just wish it had been a Fianna Fáil candidate (or Sinn Féin) who had knocked on the door at that moment. They would have been more deserving of my comments.

I have read your manifesto; I will be giving you one of my top votes, and I wish you, and our poor country, the very best.

If by any chance you happen to know who the unfortunate young man was, would you please pass him my apologies, and give him my best wishes. Also congratulate him on managing to get your leaflet into my hands despite my anger, and because of him you will get my vote.

The reason I read this out is although we are only 45 working days into this new Government it is important, good, helpful and the right move to have a jobs initiative. Many Members opposite have noted there are good points in this jobs initiative, which is the case. However, only last week, Members discussed another document, namely, the programme review of the EU-IMF programme of financial support for Ireland, wherein our Minister for Finance and Governor of the Central Bank were forced to give those who tighten the laces on our straitjacket an update report on what we are trying to do to balance our budgets and to fix the country.

I will not take Members through the individual headings in this initiative because there has been much discussion of them and Members already are familiar with the VAT reduction rate to 9% for tourism in respect of hotels and restaurants, as well as hairdressers and so on. These are positive measures that show the Government is trying to think creatively and is trying, within the straitjacket, to get some movement towards ways of rethinking things out and of re-engineering jobs and work through traineeships and all the rest. However, what this really tells all Members is that a great lump of lead is weighing down the economy and is suffocating it and one must drill through and find out what it is. More accurately, although we know what it is, some people try to argue that Ireland can continue to bear this load and knapsack because it is manageable. While the sentiment in that regard is okay, the measurement is all wrong. This is the reason that when Morgan Kelly of UCD wrote his opinion article in last Saturday's edition of The Irish Times, he returned to the measurement problem and got it right. The onus is on all 166 Members to get across the message of the measurement to those who need to hear it because the approach to the answer which one can anticipate is becoming more clear and Members must be courageous and must highlight that area of answer.

It is possible for everyone to admit that the losses as a result of a massive credit and fixed asset price bubble following a €200 billion surge of lending over four years will result in losses of €100 billion and such a scale of losses now is beginning to be recognised. However, this message has reached those who have come with the bailout or assistance package from the European Union, the ECB and the IMF in a foggy way. They have been listening to a confused and bewildered story for the past two years and it is time for Members to sharpen the focus by getting to them the first page of a three-page message. Three A4 pages are needed to tell the story and to give an update report both to ourselves and to the people within the European Economic Community. Incidentally, I like the old nomenclature because it has the emphasis on the word "community". The first A4 page must show the losses, their location and how they arose. That is easy and as I have just noted, they will be approximately €100 billion. We are on our way to getting there and the stress test report was published on 31 March. Fair dues to the Minister for Finance who took the expensive reports commissioned approximately three months before the change of Government from BlackRock Solutions, Barclays Capital and the Boston Consulting Group. That was tweaked and edited, indicating a capital requirement of €70 billion. However, I suggest that €100 billion is a meaningful figure because only €50 billion of losses had been recognised up to the end of September 2010. That constitutes 50% of the story and may be the reason the ECB and the people in Europe decided to say "No" to the initial approaches that there might be loans write-downs of amounts due from our banks to the ECB or to senior bondholders. However, were we to update them on the true extent of losses, it would concentrate the mind.

The second A4 page should explain that at present, funding in the banks comprises approximately €170 billion of loans advanced by the ECB and the Central Bank of Ireland to our banks, while there still remain unredeemed senior and other bondholders of approximately €50 billion. Everyone knows, and people like Morgan Kelly and others remind us, that this is too great a load of debt. In particular, if a bailout package of €85 billion, or €55 billion net, that was signed up to at the end of November 2010 is too big a load for a small economy to work its way through, one must then examine what can be done about it. If, as is the case, €70 billion of the loans advanced by the European Central Bank into our banks within that €170 billion derive from loans made to redeem senior bondholders in full up to the end of last year, then they really are loans advanced to fund losses. However, the people of Ireland were not involved in creating those losses. This is another story, analysis or explanation to be told to Ireland's counterparts and one must ensure they understand it.

I suggest the third A4 page should have a solution, namely, there should be debt write-down in the order of perhaps €75 billion, of which €50 billion would be presented to the ECB and €25 billion to the remaining senior bondholders in the banks. This would represent a 50% write-down of senior bondholders from €50 billion to €25 billion. It would suggest a write-down of €50 billion or one third on the loans advanced by the ECB to banks which, when one mixes them together, stand at approximately €170 billion. Members should consider the scale of such a write-down in the context of the affairs of the European Central Bank and of Europe in general. The European Union has a gross domestic product, GDP, of approximately €9 trillion and Ireland's gross domestic product is approximately €150 billion. A write-down of debt owed by our banks to the ECB of €50 billion comprises one third of our GDP. As our GDP represents approximately 1.5% of the GDP of the European Union, then one third of that constitutes 0.5% of the total. Were such a report to be given to the European authorities clearly, in full detail and explanation and showing the provenance of the figures, they probably would begin to understand it, particularly were one to tell them that 0.5% of the European Union's GDP is the write-down requirement necessary against the loans due to the ECB.

What would that do for Ireland's economy?

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