Finian McGrath (Dublin North Central, Independent)

I am grateful for the opportunity to speak on this important legislation. I welcome the debate because this Bill goes to the heart of the economic crisis and deals with its causes. I strongly believe it will force Members of the Oireachtas to wake up and deal with the issue of banking and financial institutions and how they were run in the past.

Let there be no mistake - these fat cats screwed the country, let the people down and should now pay the consequences. Blaming and penalising the sick, the disabled, the low paid and the unemployed should not be part of any strategy. Sadly, however, that is happening as I speak. Cuts to the number of special needs assistants, SNAs, for children with a mild learning disability are taking place while this Government and others look the other way. These cuts are happening on the Government's watch and that reality should be highlighted as it is linked to the debate on this legislation. To say otherwise is misleading and dishonest.

The purpose of the Bill is to make provision for an effective and expeditious resolution regime for certain credit institutions at the least cost to the State, to amend certain enactments and to provide for related matters. When the Irish financial crisis started in 2008 there was no suitable mechanism for dealing with distressed credit institutions or for winding up insolvent banks. When faced with an insolvent bank, options were limited to orchestrated market based solutions, examinership, bailout or nationalisation. However, to secure financial stability, minimise contagion and ensure the continuity of essential banking functions, an orderly winding down through the use of resolution tools would have been preferable. It is argued by many that had a resolution regime been in place when the crisis struck, most of the costs of the banking crisis that are now being borne by taxpayers could have been avoided. This is at the heart of the legislation before us today.

Before I outline my ideas about this Bill, it is important to look closely at those who were responsible for the crisis and the wealthy people in this country who gained during the Celtic tiger economy years. The Minister should consider introducing a Robin Hood type of tax which would take money from the wealthy and look after the poor. Many legislators throughout the European Union are on that wavelength and are forming policies on a Robin Hood type of tax. It was people who caused this crisis. Legislation is about responding to the crisis. The big issue for me is that people such as regulators, people in the banking system, speculators, developers and bondholders caused the crisis. It is important that we identify them and deal with them.

This reminds me of the recent debate on nursing homes. Where something goes badly wrong in a nursing home, the Health Information and Quality Authority, HIQA, moves in and closes down the nursing home instead of looking at other options such as getting rid of the people who are causing the problem in the first instance. That is preferable to laying off other staff and workers. We appear to have gone in the other direction when dealing with crises that emerge in our society, and this is another instance of it.

Last year, the German Chancellor, Angela Merkel, proclaimed that the current financial crisis represented a beneficial crisis or a golden opportunity to move forward with the establishment of an effective EU government to complement monetary union. The EU Council of Ministers agreed in March 2011 to adopt a comprehensive package of measures to respond to the crisis and to preserve financial stability in the European Union. Following the Council meeting, the President of the Commission, Jose Manuel Barroso, boasted to an RTE news programme about how far the EU had travelled. He said, "We have reinforced our monetary union with an economic union. .... The economic and monetary union will finally walk on its two legs...".

The centrepieces of the March package are the Euro Plus Pact and the amendment to the European Union treaties to establish a permanent European stability mechanism. The Euro Plus Pact will subject the 17 countries of the eurozone, particularly smaller ones such as Ireland, to a regime of detailed intrusive surveillance of budgets, tax policy, wages policy, pensions policy and economic policy, to be enforced by fines and sanctions. It represents a drastic reduction in a state's national democracy and independence. This is something to which we must face up in the current economic climate. The country was bailed out by the European Union and the ECB through the European Financial Stability Fund and the European Financial Stability Mechanism, by the IMF through its extensive funds facility and by Britain, Sweden and Denmark through bilateral loans.

The dogs in the street now know the bailout was a stitch up. It was a forced loan that has turned the State into a vast debt servicing machine. Thousands and millions of euro in loans were provided on foot of the bailout to prevent insolvent Irish banks from going bust and thereby defaulting on their debts to the German, French, British and other banks, which were incurred during the property fuelled borrowing binge between 2002 and 2007. These are essential points that should be considered by everyone interested in this debate. These debts were shifted to the Irish State, and its citizens have been turned into 21st century financial serfs, bound to service a bankocracy every bit as grasping and oppressive as the aristocracy of feudal times.

From June 2013, a European stability mechanism, ESM, will take over from the European Financial Stability Facility and the European Financial Stabilisation Mechanism in the provision of loans to eurozone members in difficulties, strictly conditional on the implementation of a range of adjusted measures. Described by the German Chancellor, Angela Merkel, as a solidarity measure, the ESM will not have retrospective effect and will not be of any benefit to this country in its present situation. To add insult to injury, the Tánaiste admitted, in response to a question in the Dáil on 30 April 2011, that Ireland will be required to pay approximately €9.87 billion towards the fund.

The European Union authorities are anxious to avoid a referendum in any European state on the establishment of the ESM, even though it would entail an amendment to the European treaties. It is proposed to push this amendment using the self amending provision of the Lisbon Treaty, Article 48. The line from the Government and major Opposition parties, along with the usual supporting chorus in media, business and trade union circles, is that the changes do not increase the powers of the European Union. This is something I would like to highlight and bring to the attention of the Dáil. This line is based on the opinion of the previous Attorney General, Paul Gallagher. It was the same Mr. Gallagher who advised the previous Government, in September 2008, that a blanket State guarantee of all the debts of Ireland's private banks was legal and that Irish law required that the creditors and bondholders of the Irish banks should not be touched, in view of such a guarantee. This opinion fitted neatly with the insistence of the European Central Bank on a guarantee that no Irish bank could be allowed to fail in case the German and French banks, from which the Irish banks had borrowed, would not be paid back. The refusal to hold a referendum clearly breaches the Supreme Court judgment in the Crotty case of 1987, simply so that the German and French Governments and Brussels will not be inconvenienced.

This is a travesty of democracy. By denying the people a say on this fundamental matter, the Government and the major Opposition parties will be engaging in yet another stitch-up to add to the bank guarantee and last November's bailout. It is one stitch-up too many. I ask people to consider this in the broader debate today.

Let us look also at the reality for more than 455,000 people who are unemployed. This is not taken very seriously. While I welcome aspects of the jobs initiative, we should examine it in more detail and take a more radical approach to it. We could talk all day about the huge greed and mistakes of the banking industry, but we must first deal with the results of the banks' actions. Since the summer, the number out of work has soared to more than 455,000, the highest live register figure since it began in 1967. At the same time, we are taking €3.6 billion out of the economy, which will lead to further job losses.

I accept that we must deal with the banking crisis but part of the solution must be a jobs and growth plan to get out of the current crisis. I agree with the Minister for Finance's call for consumer spending. His comments were dismissed in some circles, but I strongly disagree with those people. People who have a few extra euro must go out and spend an extra €10 or €20 to develop their local economy. It is not correct to say people do not have the money to spend. I am talking about targeting the people, particularly people over 55, who have a few bob in the bank. There is approximately €134 billion on deposit in Irish banks. I encourage older people to spend an extra €10 or €20. Economists and retailers reckon that 10,000 jobs could be created if everyone did that little bit for the country. This strategy must be adopted. In my own constituency there is massive support for it. For a business employing seven or eight people it could mean being able to hold onto two or three employees.

Even the conservative forces in the Financial Times and Barclays Bank say we must be very careful about our banking plan because it places the whole burden on the taxpayer.

There are those who say there is no alternative. The EU, the IMF, the ECB and the Irish establishment all want us to believe there is no alternative. There is an alternative. They claim there is no choice but to take pay cuts, slash social welfare benefits and give up hard won working conditions because there is not enough money to go round. This is a lie. Ireland is still a fairly affluent country. This has been highlighted by many independent economic observers. There is still a fair amount of wealth in this country. Between them, Ireland's millionaires have a combined wealth of €121 billion. According to a rich list published recently in TheSunday Times, the wealth of the richest 300 people in Ireland increased by more than €6 billion in the past year. Let us go after them. Let us impose a Robin Hood tax on them instead of taking money from the lowest paid or cutting services. There is an alternative but it requires tough decisions. We should go after the fat cats and the big guys.

The alternative involves using these massive resources to create jobs and to redevelop the economy. We are paying approximately €10 billion a year in interest on our debts. We should not be dismissive of our natural resources. We have huge natural resources with potential to develop the economy. Some people estimate the value of our natural resources at €850 billion. A wealth tax could also bring in money.

I am presenting an alternative reaction to the current situation. Before the general election some, including the Labour Party, said a job creation strategy was required. This is something I have always supported.

As an Independent Member of the Oireachtas, I will support any sensible solution. I supported the reduction in employer's PRSI in order to support small businesses. We need a serious job creation project.

Yesterday, I met members of the ESB group of unions. The ESB is an excellent organisation. They told public representatives we are taking our eye off the ball in dealing with the economic crisis. They said semi-state bodies should be developing the economy and assisting us. These bodies are profitable and keen to do the work and to take on employees. We should be allowed develop them and not slash them or sell them off. We need massive job creation projects.

With regard to small businesses the debate concentrates on joint labour committees and the potential to cut low-paid workers, which is something I strongly oppose. When one talks to small shopkeepers, or to the people who own chippers, they mention three things. They talk about commercial rates, energy costs and insurance costs. These issues could be looked at, rather than take the easy option of slashing the wages of low-paid workers.

In the past 40 months, the Irish retail industry has lost more than 40,000 jobs, as struggling shops close their doors for good. A further 40,000 retail jobs are currently at risk unless the Government intervenes. These jobs can be saved with a little creative thinking and a further 13,000 jobs could be created if strong action is taken.

Rents in Ireland as a percentage of sales are twice the global average. NAMA was established to deliver liquidity to the banking system, thus allowing commerce to function better. The agency wants to maintain upward only rents. By doing so, it will cause jobs losses and business failures and, in the medium-term, it will undermine asset yields because more businesses will fail and more jobs will be lost. Everyone will pay then.

I welcome the Minister to the House. I believe strongly in a competitive retail environment where market rents will result in lower prices for Irish consumers, significant job stability and creation and the retention of our national competitiveness. I accept the points made by previous competitors regarding these developments. Sensible ideas have been outlined in the debate, which I welcome.

Section 9(2), which deals with the credit institutions resolution fund, states: "The purpose of the Fund is to provide a source of funding for the resolution of financial instability in, or an imminent serious threat to the financial stability of, an authorised credit institution...". Section 9(3) also provides that the fund "shall be constituted by—

(a) the contributions made by authorised credit institutions pursuant to section 12,

(b) any sums paid into it by the Minister pursuant to section 11, and

(c) interest on those sums and contributions.

Section 9(4) also provides that the Central Bank "shall not provide any funds to the Fund from its own resources". Section 10 deals with the management and administration of the fund. It provides that the Central Bank, "shall manage and administer the Fund" and "shall determine the rate of interest payable from time to time on money standing to the credit of the Fund."

The IMF and the World Bank published a comprehensive report on banking insolvency in 2009 while many of the crises globally were still emerging. The report examined the legal, institutional and regulatory framework necessary for bank insolvency. The measures needed were divided into two parts - resolution mechanisms when there is economic stability and when there is financial turmoil.

As the Bill will provide for a special resolution regime to address future bank failures, the guidelines for resolution mechanisms in times of financial stability appear to be the most applicable. During times of financial stability, the objective of a bank insolvency framework is to safeguard the stability of the financial system. Bank insolvency proceedings refer to all types of official action that can take place when a bank has crossed the threshold to the commencement of insolvency proceedings. Official action includes the removal of management, restrictions on, or the suspension of, the rights of shareholders and the assumption of direct control of the bank by the authorities and these are features of the legislation.

While the law may distinguish between the two stages for the purposes of a special resolution regime, they are often combined into a single proceeding. There are official administration and liquidation processes. During the official administration phase, the authorities take direct control of credit institutions in an effort to restructure. Where a restructuring is not possible, the authorities place the bank in liquidation resulting in the dissolution of a bank as a separate legal entity. The purpose of liquidation is an orderly winding down of the credit institution with the focus on maximising the value of assets and an equitable distribution of the proceeds to creditors.

I welcome this important debate on this legislation. I acknowledge the views of colleagues from different parties. The Minister has a huge task ahead of him. He faces major problems and I accept he has inherited most of our economic problems from the previous Government but I urge when dealing with these issues to put his country first.

See this speech in context