Stephen Donnelly (Wicklow, Independent)

I thank the Ceann Comhairle. I am going to vote against the Bill but not because I do not understand the benefits it offers. The interest rate reductions are significant and welcome and the Government estimates that we will save approximately €1 billion on debt repayments. This is extremely welcome. Potentially, the lending terms are going to be lengthened, which is also welcome. However, I am going to vote against the Bill because it further solidifies the wrong approach that is being taken in Europe. Essentially, the basis of that approach is to solve debt by taking on further debt, ensure that bondholders are repaid and an insistence to the effect that no banks should be closed down. In addition, Europe is insisting on austerity in the absence of any default or devaluations. It is also going to lend governments vast amounts of moneys to bankroll what is happening and is hoping that no one will default.

How are matters working out for Ireland so far? We have approximately €100 billion of other people's debts which we will be obliged to pay off. Our banks appear to be over-capitalised but they are not lending. Critically, as has become apparent in the past two weeks, they do not appear to be passing on money to mortgage holders. When they came before the Joint Committee on Finance, Public Expenditure and Reform, representatives from Bank of Ireland had to be asked six time whether they are passing on the money to which I refer before they confirmed that they are not doing so. The banks do not appear to be lending and seem, rather, to be taking very aggressive action against people whose mortgages are in a distressed state. The unemployment rate in Ireland is continuing to rise and our GDP growth is tipping along at, it is to be hoped, slightly above zero.

How is what is being done working for Europe? We all know that Greece is on the point of collapse and there is talk of it exiting the euro. Greece is almost certainly going to default and there is a run on the French banks at present. There is also the potential for a run on the German banks. The entire system is under extreme stress.

The report issued by the IMF yesterday predicts that global growth will be significantly lower than had been expected just six months ago. Of course, this will pose a major problem for Ireland because we are betting the house on the export-led sector. That sector comprises 15% of our economy and we need to develop it further. However, the IMF has stated that the global markets into which the sector sells are going to be far weaker than expected. That is a massive problem. As a result of the fact that European banks have not been allowed to fail, we have reached a position whereby the liabilities contained in those banks are three to four times greater than the GDP of Europe. To put this in perspective, the liabilities of the American banks are exactly the same as the GDP of the US. Our banks are, compared to their American counterparts, overleveraged by a factor of three to four.

The current approach is not solving the problem. It is not working and it is not going to work. Anyone who has a mortgage or a serious personal debt or who runs a business will know that it is not possible to solve the problem of debt by taking on more debt. This does not work and many eminent economists and commentators in Ireland and elsewhere have been saying as much for a long period. The chief economist recently stated that Europe needs to "get its act together". Recent analysis of the position by J. P. Morgan states, "austerity with no FX devaluation [in other words, in the absence of the printing of money] is doomed to failure". The same analysis points out that the IMF's handbook published in December 2010 states, "What is happening in Greece is a textbook response to austerity without an FX adjustment and easy monetary policy". In other words, austerity on its own - which is the prescription for Greece and Ireland - is not working and will not work.

There are two solutions which Europe must consider implementing. I trust the Minister has some influence at the European Council of Finance Ministers, of which he is a member. The first of the two solutions to which I refer is quantitative easing. In the past two rounds of quantitative easing, the US printed €2.1 trillion dollars. That has helped. The Germans are understandably afraid of inflation. The US rate of inflation currently stands at 3.8%. The UK has injected £200 billion into its economy during its rounds of quantitative easing. If this were scaled up, it would be the equivalent of Europe printing €1.4 trillion. Inflation in the UK stands at 4.5%. I put it to the Minister that what is required is a combination of serious quantitative easing - in the region of €1 trillion to €2 trillion - and real debt write-downs, as actively advocated by Deputy Mathews. I understand that this will be difficult to obtain and that our European partners see them as major concessions. However, there is a strong case to be made to the effect that, without them, we will continue to fail and the European Union will fall. I urge the Minister to bring these possible solutions to the attention of his colleagues in Europe.

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