Peter Mathews (Dublin South, Fine Gael)

The Finance (No. 2) Bill is welcome in so far as it is a piece in a jigsaw. The Minister for Finance outlined how it is set against the country's economic position as defined by predictable measurements and the revisions of gross domestic product and so forth that occurred during the IMF-EU review. I have suggested that our position is even starker and that it will have a far greater impact that we must not forget.

Our situation is not properly understood in the EU or the IMF. Following the credit and subsequent property and asset bubble, losses in our banking system will amount to approximately €100 billion. This has been a slow-burn story to date. It was unreliable until the end of last year and during the change of government. The problem now is this monstrous debt. While it is awful that 450,000 people are unemployed and 50,000 are emigrating, those emigrating are at least not saddled with debt. With their qualifications, they have a survival kit, albeit abroad. The people who are being crushed are those who must stay because they are tied to their debt obligations. The true story that needs to be brought forward by this House is that the banks' historical losses are approximately €100 billion. The embedded debt in the banking system, with the further debts in the household and business systems, are too large.

The debt in the banking system has a hardcore of approximately €150 billion, essentially provided by the European Central Bank. Of that, €70 billion has a provenance in the repayment in full of senior bondholders up to the end of last year. The banks did not have the money to repay the senior bondholders; accordingly, they got it from the ECB on loan and used it to repay them. That happened when people did not understand the size of the losses in the system were as large as I have outlined.

What is the solution? There should be a write-down of the debt owed by our banking sector to its creditors, that is the ECB and the remaining senior bondholders. It has been suggested the write-down on ECB balances should be €50 billion with €25 billion on those to outstanding senior bondholders, making a total of €75 billion. If that €75 billion were cascaded through the system by a debt write-down for households and businesses that took on impossible debt between 2003 and 2007, it would lead to a massive and real, not a bogus or ghost, stimulus to the economy.

Take the example of a person paying back €1,850 a month on debt repayments. If they in turn were able to get a debt write-down of 25%-30% their monthly repayments and loan amount outstanding would be manageable. Moral hazard will be put forward as a possibility to prevent such consideration but this can be dealt with through logical and fair argument.

The contributions I heard yesterday on this Bill were constructive and showed that everyone in this House is genuinely trying to make little adjustments and alterations to what is essentially a good proposal to deal with our housekeeping arrangements. As stated by Deputy Doherty we have three problems: a debt problem, which I have just mentioned, a fiscal problem, which is housekeeping balances and, a jobs problem, all of which are inter-related. We must not fall short in setting out the true picture, explanations and suggestions-----

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