Seán Fleming (Laois-Offaly, Fianna Fail)

I appreciate the opportunity to speak this evening on the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Bill 2011. That title is a bit of a mouthful. This Bill will essentially implement the decision agreed by the EU member states on 21 July 2011. The Bill will increase the effective lending capacity of the EFSF to €440 billion, and will increase the flexibility of the EFSF and ESM by allowing them to act on the basis of a precautionary programme.

The euro member states agreed in May to create a European financial stability facility to support financially eurozone member states that are in difficulties caused by exceptional circumstances beyond their control. This is part of the essence of why we are all here today. We are going to be here next year and the following year, because I do not believe that some of what we are dealing with is beyond the control of the respective member states. It is essentially as a result of decisions by governments and states, and perhaps the population of Europe at large, to run a deficit and to spend money we do not have. We have a financial problem and not a political problem.

Ireland was the first beneficiary from this and Portugal followed shortly afterwards. On 30 June 2011, the euro area Ministers of Finance signed the European financial stability facility framework agreement, subject to the completion of national parliamentary procedures. The purpose of this discussion is to allow the Oireachtas to complete this procedure. Ireland, Portugal and Greece cannot benefit from reduced interest rates, an issue to which I will return, and increased flexibility until the agreement is fully implemented. Hence, legislation on the agreement must pass through all relevant national parliaments, including that of Greece.

The cost of bailing out bankrupt banks has been a particular problem in Ireland. However, the cost of the budget deficit is a much larger problem in Ireland and at European level generally. Most European countries, including France and Germany, are running deficits, as is the United States. A few years ago, one used figures of thousands. We subsequently spoke of millions and later billions. The word "trillions" now hangs in the air and the US debt of between €16 trillion and €17 trillion is beginning to give us an indication of where we are. Japan has been running a deficit for some time and has some of the highest borrowing levels in the world. I concur with Deputy Mathews that its growth rates have been muted. How could they be other than muted when the country has such a large debt? As with any household, one cannot spend and invest when one has a large overhang of debt.

Where is all this leading? China is essentially financing the overspending of western democracies, which used to borrow for capital investment programmes and repay the borrowing over a period. How many western countries are running current deficits with the result that their citizens have lifestyles that are not based on the income they are generating? This cost must be paid and essentially people are asking future generations to pay for their lifestyle. That may sound a little harsh but it goes to the heart of this debate.

The agreement refers to reduced interest rates and increasing the flexibility of and extending the repayment schedule. I have a simple view on this matter. While a person with a bank loan or mortgage who extends the loan will succeed in having his or her monthly payment reduced, he or she will pay more interest in the long term because the life of the loan is being extended. For this reason, I ask responsible journalists to give a complete picture when they are reporting on these matters. I noticed a headline in a reputable paper the other day stating that the changes to our loan facility will deliver savings of €10 billion. This reminds me of a person who, having bought an item in a sale which has been marked down from €100 to €90, returns home and when asked how the Saturday shopping trip went, says he or she saved €10. This is a nonsensical concept and I am surprised that a responsible journalist would put such a headline on an article. The person returning from the shop does not tell us how much he or she spent in the first place. In fact, he or she may not have saved anything because we do not know whether the item in question ever cost €100 as it may have been marked up before being marked down. The same applies to the extension of the loan period for our loan.

When representatives of the National Treasury Management Agency appeared before the Joint Committee on Finance, Public Service and Reform recently, they could not pin down the actual savings being made on our loan. I would like to know what will be the savings over the original agreement based on the interest rate we paid. The NTMA should be able to compute a figure on the actual accumulated interest Ireland will pay based on a matrix of using the loan facility to its maximum and rescheduling repayments at the reduced interest rate. The overall interest payment will increase. To put the matter in simple English, the country is living on hire purchase which it is repeatedly extending.

This returns me to my basic position. The crisis at European level is not political but financial. I have been saying for months, although I am not sure if anyone has been listening, that the problem will persist because it is one to which there is no political solution. It is a financial problem for which a financial solution must be found. People give out about the reaction of the markets and ratings agencies such as Standard & Poor's and Moody's. The markets react in a logical fashion when they see a band aid of an agreement. While I support the legislation, it is only a band aid or patch up job to get us over the next few months, at which point another band aid will be applied. We will be back at this point ad infinitum or until western countries are in a position to get their debt under control. By continuing to borrow more money that one does not have, one passes on the debt to one's children. This is unfair. In Japan and some other countries, people have two generation mortgages. Ireland will have a two or three generational national debt unless we start getting it under control. The Minister will argue that my party added to the problem. I will not engage in party politics and will admit that we did so, but the problem is continuing and must be addressed.

Eurobonds are the latest trick proposed by some people. If I was a German, I would tell those proposing eurobonds to take a hike because the concept is essentially one of asking Germany to open up its bank accounts and allow all other countries to be joint signatories to them. This is daft and Germany and France are correct to tell the rest of Europe to take a hike. The current problem stems from the failure to introduce a proper infrastructure to back up the euro when it was introduced. We had money in our pocket and the euro worked well within a few days of the changeover. While we did the public relations, front-of-house job, we did not establish the infrastructure or back office facilities to back up the euro. There should be one central bank in Europe managing one currency. The concept of having a Mickey Mouse central bank in each of the 27 countries printing its own little currency with its own little pictures on it is a nonsense. While I am not praising or criticising Germany and France, it is utterly financially logical that they would not have anything to do with a eurobond when they do not have any control over how other countries are spending money.

The IMF, in the growth projections it published today, stated that financial sovereignty is needed in Europe. We will rear up to this proposal and it will not be realised because it would require a referendum in this country and there is no chance that Irish people would pass a referendum in the foreseeable future to give Europe more powers over our financial affairs. People resent the level of intrusion into our affairs at present and would not go further down that road. We will have to address this issue.

Seven or eight years ago I used to ask that the debt of some of the heavily indebted sub-Saharan countries be written off. Ireland has come full circle and become a heavily indebted country. Until western democracies start to live within their means, we will continue to borrow and wonder every so often why the financial markets have a problem with political solutions to what are essentially financial problems.

While I welcome the legislation, it is a sticking plaster and we will, unfortunately, be back discussing this issue again.

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