Kieran O'Donnell (Limerick City, Fine Gael)

I am delighted to contribute to the debate on this Bill. I congratulate the Minister and his staff on their efforts in respect of it.

The IMF reports which have emerged indicate that what is occurring is a European problem. When one considers this matter, one comes to realise the major issue that arises is the recapitalisation of the banks in Germany, France and Spain, in particular. The Germans and the French previously espoused a policy which suggested we should recapitalise our banks. They are not adopting such a policy themselves. They need to draw a line under the problems relating to the banking system in order to restore confidence. An architecture which provides confidence in the banking system to the effect that, regardless of what happens, Europe can withstand any eventualities must be put in place. The international markets do not believe this is the case. If one considers the level of recapitalisation required by the banks as a percentage of GDP, it is obvious that Germany and Spain are well below Ireland in this regard. Other European countries, particularly Germany and France, asked us to recapitalise our banks. The European Commission was clearly in favour of NAMA, which represents another form of recapitalisation because it removed risky assets from the balance sheets of the Irish banks and improved their capital ratios.

Deputy Ross was correct when he referred to domestic issues in the countries in question. I do not believe Germany wants to leave the euro because it has too much to lose. When the euro was introduced, Germany achieved an effective devaluation of its currency. It also eliminated risk in inter-trading between eurozone countries. Germany benefited enormously from joining the euro. The Germans are intrinsically European and believe in the euro project. However, they and others need to deal with their banking systems in order to provide confidence for the markets. If they do so, this might restore the possibility of inter-bank lending. The IMF has drawn attention to this matter, but it has been spoken about in general terms. Germany, France and Spain must either recapitalise their banks or put in place a guarantee that they will cover losses in these banks.

Ireland is an exporting nation and, as such, is dependent on growth. Both global and European growth rates are determining factors for us in restoring the economy to health. Our objective should be to extricate ourselves from the EU-IMF deal as quickly as possible in order to regain our financial independence and sovereignty. How can we achieve this in a way which is sustainable and brings about the proper structural changes required? Yesterday the IMF stated that for 2012 Ireland's growth rate, 1.5%, will be above the eurozone average, 1.1%. That is the first sign of this happening since 2007. The rate to which I refer is sustainable, whereas that which obtained in 2007 was effectively built on foundations of sand in the property market.

There are positive and encouraging signs for us. However, the IMF and the other members of the troika will be obliged to make strategic decisions of their own. If there is going to be a slowdown in the European and global economies and if they want to protect their investment, they should consider allowing the Government to use some of the money we have been given to fund proper jobs initiatives and stimulate domestic growth. I have no doubt discussions will take place in this regard. The troika should be asked to consider the suggestion I have made.

Is it possible, in the European context, to have monetary union in the absence of fiscal union? I accept that considering the matter in this way is not entirely practical. When the Stability and Growth Pact was established, a target of 3% of GDP was set as being the maximum level which general government deficits could be allowed to reach. Ireland never breached that ceiling during the years of the Celtic tiger, but we still found ourselves embroiled in a banking crisis which probably began in 2007. A proper mechanism needs to be in place within Europe. Countries like Ireland need to retain control over tax policy and how we implement individual policies. Sustainable proposals need to be made by Europe. Much of this country's economy depended on the growth of the property sector. That should never have happened. It is often overlooked that we never breached the 3% general government deficit limit. We found ourselves in this horrendous situation nevertheless.

There are some encouraging signs for Ireland. Our growth rate will be above the EU average in 2012. The IMF has said it expects Ireland to meet the budget deficit target it has set - 8.6% of GDP - by 2012. We are improving our competitiveness. For us, it is key that Europe gets to grips with its situation. There is now a banking crisis in Europe as well. Other European countries, particularly Germany and France, need to adopt the policies they asked us to adopt. These discussions will have to take place.

As Deputy Ross said, Mr. Sarkozy and Mrs. Merkel will have to deal with this is a way that benefits the overall European project. If this nettle is not grasped, we will limp from crisis to crisis. Germany has kicked the can down the road, in some ways, whereas we have dealt with the issue and continue to do so. Germany and France cannot continue to use Ireland as an example of a country that is dealing with these issues and getting the results. They have to deal with the situation in a way that draws a line of confidence under their banking systems, separately from the EFSF and the measures in this legislation. Ireland needs Europe to be stabilised. We need the foundation of a stable Europe.

Export-driven growth is important for Ireland. If the world economy or the European economy shrinks, that will affect our exports. I ask the troika to consider allowing Ireland to put job initiatives in place to stimulate domestic demand and credit. There needs to be a twin-track approach. Not only do we want exports to move ahead, we also want domestic demand to increase. We are at a watershed. Critical decisions will have to be made by Germany and France in a way that benefits everyone. The measures that are being adopted at the moment are of short-term benefit to the European project. They are not of benefit in terms of long sustainability. That is the critical issue.

We must look at the positive aspects of this question. The IMF is projecting that in 2012, Ireland will have a higher growth rate than Germany and France. We are getting things right. As a small and open economy, Ireland is affected by external factors. We have recapitalised our own banks at enormous cost to the Irish taxpayer, and thereby stabilised the banking system here. Germany, France and Spain need to show leadership and consistency in the policies they espouse. They need to step up and put in place measures to recapitalise their own banks by way of guaranteeing losses or investment in the banks. We can stabilise Europe overall. The international markets will make the decision. The banking systems in the respective main countries in Europe will withstand whatever eventualities that arise.

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