Mick Wallace (Wexford, Independent)

Fine, the Deputy is on.

Members will vote on this EFSF proposal and while I am not an economist, if anyone on the Government benches is interested in having a bet with me on whether it will work, we can meet outside to put down a wager, as I do not believe it will. Having started with 17 countries in the eurozone, three have been bailed out, which means the other 14 will guarantee borrowings for three. When that number increases to four, only 13 will remain to do so. This group could then fall to 12 countries and could eventually fall to just ten countries. I do not see how it will stack up in the long term and cannot envisage its survival. Moreover, I do not believe many people in Europe can envisage it working out either. I wish to cite a small piece from today's edition of the Financial Times by Peter Spiegel that discusses this very topic. He wrote:

The sum of €440bn was intended to "shock and awe" financial markets ... in May 2010 during the first Greek crisis. The EFSF has since evolved from a temporary set-up to help small peripheral countries into a multipurpose firefighter to assist large banks and bigger eurozone economies such as Italy and Spain. Most analysts believe it is too small for the tasks it will soon be called on to perform. Because increasing the size of the fund has proved controversial in many creditor countries – particularly Germany, Finland and the Netherlands – senior officials have tried not to discuss options publicly for fear of spooking parliamentarians who must approve the new powers...

The hurdles to increasing the fund are not just political. For some countries, bigger contributions to the EFSF will add ... pressure to their already strained public finances. Daniel Gros, director of the Centre for European Policy Studies think-tank, estimated that under some scenarios, the EFSF – and its successor, a permanent agency called the European Stability Mechanism – would have to be as big as €4,000bn.

Given the Italians owe €1,900 billion and realisation is slowly dawning that Italy's position is much worse than had previously been known and that, in recent weeks, matters have begun to unravel for French banks, developments in Europe have amounted to sticking plasters. No real solutions to the financial crisis that is swamping the whole of Europe have been put in place. The reason the Germans, who are the kingmakers, have been sitting on the fence to an extent is that they cannot make up their minds as to whether they really want a European Union that is a fiscal union. Such a union is coming down the tracks if the Germans choose it. Their alternative is an exit from the euro and they are yet to make up their minds as to which option to choose. Either way, the idea that Ireland will retain much financial sovereignty is pretty fanciful at this point.

The transfer of private banking debt to sovereign debt, with three years of deflationary budgets across Europe, has proved too much to bear. For some reason, Ireland does not seem to be interested in being active, rather it is reactive. Things happen to us, not because of anything we are doing but because something happens elsewhere in Europe which has an impact on us. We have become the victim of the impact of other serious matters in Europe. However, we are not doing anything ourselves or making anything happen. We are not dealing with our problems. What has been done for the domestic economy? I run wine bars and coffee shops, while my son runs clothes shops, and the system is failing. The amount of money in the pockets of those coming through the doors is decreasing. That is what austerity does. We have to invest, as what we are doing is not working. We are draining the system. That people will have more money in their pockets if it is constantly taken from them is akin to taking blood from a patient and thinking he or she will be well afterwards.

Not just Ireland but Europe also will eventually do a U-turn on the austerity philosophy. In the past few weeks the Bank of England and the Federal Reserve in America have rethought the matter and are starting to turn. The world economists with the highest stature, Paul Krugman and Joseph Stiglitz, have been shouting from the rooftops for three years. Unfortunately, the neoliberal agenda has kept their philosophy out of the equation up to now but eventually we will listen to them and start doing things their way.

See this speech in context