Michael McGrath (Cork South Central, Fianna Fail)

I am sure there are. I fully acknowledge that the major risk the economy faces is related to the issue of growth and the global economic picture. We received the updated outlook from the IMF today which was quite pessimistic, and that certainly is a downside that will feed into the Government's pre-budget outlook and new multi-year plan which we look forward to seeing next month.

We would like to receive further information on other issues related to the 21 July eurozone summit decisions such as the purchase of debt on secondary markets by the EFSF, following the imprimatur of the ECB. Will Ireland be in a position to avail of this? Will it be availing of the extension of the maturities? There was a reference in the communique to a commitment to provide ongoing funding for programme countries that continued to meet the commitments into which they had entered. When Mr. John Corrigan appeared before the Oireachtas finance committee recently, he was of the view that if Ireland was not in a position to get back into the markets in the second half of 2013, we would be looking at drawing down funds from the new ESM fund which comes into being in the middle of that year. We would welcome the Minister's comments in that regard.

Given the seriousness of the situation, it is somewhat frustrating that the Bill at this stage is only able to deal with the first of the two amendments agreed to on the Greek loan facility. I note the Minister's comment that this issue may have to be revisited in separate legislation. The uncertainty over a second bailout for Greece needs to be brought to an end as soon as possible, as it is giving rise to fears of a domino effect across the European banking system.

The high profile pan-European stress test of bank balance sheets notably failed to allay investor fears about their ability to withstand a Greek default, the reasons for which are all too apparent. Many eurozone banks, particularly French banks, hold large amounts of Greek Government debt and are significantly exposed as a result. The fear of an imminent Greek default is causing investors to sell shares in such banks. The leading French banks, BNP Paribas and Société Générale, have seen their share prices tumble in recent times. In turn, this increases the cost of capital for such banks, making them more vulnerable. The contagion effect is clearly seen when other banks, which see falling bank share prices and widening credit-default spreads, react by refusing to provide the vulnerable banks with interbank liquidity. There is a sense of déjÀ vu from 2008 when the liquidity markets seized up. This breakdown in the interbank market leads to a breakdown of the credit circuit which can have very damaging implications for the eurozone economy, including the Irish economy.

The economist Daniel Gros recently warned that a failure to avert a breakdown of the normal functioning of the credit markets would lead to a repeat of the "immediate recession" experienced after the Lehman Brothers bankruptcy. The consequences for Ireland of such a scenario would be to choke off recovery in the economy. The central point is that our interest in the negotiations at European level to deal with the crisis did not end with the securing of a reduction in our bailout interest rate. We must be active participants in the design and implementation of measures to deal comprehensively with the related problems of sovereign finances and bank liquidity and solvency.

The creation of the EFSF and its successor, the European Stability Mechanism which will be launched in mid-2013 was designed to prevent such a disastrous chain of events from taking place. Unfortunately, the EU authorities have not always acted quickly enough to take measures to stabilise the situation. How often have we heard the phrase that the euro is back from the brink? The decisions taken during the summer certainly brought a temporary improvement to the situation in relaxing the terms of the current bailout arrangements for Greece, Portugal and Ireland and providing for private sector involvement in the proposed second bailout for Greece. This is not being extended to Portugal and Ireland - nor was it sought, as the Minister indicated previously. However, even at this short remove, there are considerable concerns that there will sooner or later be a need to revisit the operation and size of the EFSF. That is a fundamental issue at the heart of the uncertainty in the financial markets. There is a lack of credibility to the fund which clearly is not big enough to bail out large economies such as Italy and Spain.

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