Michael Noonan (Limerick City, Fine Gael)

I thank all the Deputies who contributed to this debate. It was very interesting and we had a very good exchange of ideas. I thank in particular the Deputies in Opposition who said they will support the Bill when we vote on it. I regret it will not pass unanimously but that is the way Parliament works and the system by which we live and do our business.

The euro has been a great success and it would be a pity not to acknowledge that. There has been a 50% increase in trade volumes in Europe in the past 12 years, and Ireland has shared enormously in that. The fact we are in the euro and it continues to be our currency is one of the main drivers of the export led growth we currently have.

The euro has controlled inflation better than the German market over the years, even though it was much lauded as the great cure for inflation. The average inflation rate in Europe since the euro was put in place is 1.97%. That is very important because inflation makes people poorer, erodes savings and cuts the purchasing power of wages. The biggest contributor to poverty in a country like Ireland or any European country is inflation and it is very important that it continues to be kept low.

The overall debt figures in Europe are better than those in the United States. If Europe could get its act together collectively, we would find a solution pretty quickly. The collective deficit in Europe is only 60% of that in the United States. A comparison with a similar currency zone shows the comparisons are in favour of Europe. If one examined the mechanisms to protect a currency in times of adversity, one would find all the advantages are with the United States. The crisis we are in comes from a number of sources, but its cure is to retrospectively fit the policy instruments which can protect a currency in adversity. Such a model exists in the mechanisms in the United States.

The euro has continued to be a valuable currency. When it was founded, the exchange rate with the US dollar, if I recall correctly, was $1.22. Even after the crisis peaked in recent weeks it decreased from $1.44 to approximately $1.37 today. It is still a long way above where it started and it has increased in value against other currencies.

As late as ten days ago when Switzerland's currency, the Swiss franc, was becoming impossibly strong to the extent that it was massively affecting exports it decided to peg the currency to stop it rising further. It did not peg it to the dollar, yen or gold standard but to the euro. It is a vote of confidence in the euro as a successful currency. The future for Ireland is to be a successful country in the eurozone. We should collectively help to protect the euro. This Bill is one of the instruments that will protect it.

The EFSF is being put in place to assist countries in difficulty in order that programme countries like Greece, Ireland, Portugal and others who may get into difficulty have sufficient funds to protect them in times of adversity. It is also a device to protect the euro as a whole. Some Deputies said the fund is too small to protect countries like Italy and Spain. That is self-evidently true. Deputy Ross referred to Timothy Geithner's proposal that some leveraging will be done by using the fund to have a bigger firewall against adversity, which is well worth considering. There are no solutions currently in place to resist the storm that is blowing through Europe but work is ongoing and the Bill is an essential piece of architecture. I recommend it to the House on that basis.

I will pick up on many of the proposals made by Deputies. The debate has been constructive. Deputy Michael McGrath was the first speaker, followed by Deputy Smith with similar arguments. They inquired about the specific Exchequer primary balance targets we are required to meet under the programme of financial support. These are set out in the technical memorandum of understanding, TMU, which is part of the programme documents. As they are primary balance targets, they exclude Exchequer debt interest payments. They also allow for the exclusion of expenditure related to the banking sector recapitalisation and adjust for over or underperformance in Exchequer tax revenues and PRSI receipts. We have adhered to the first three targets set for the end of December 2010, the end of March and the end of June 2011. The next target is set for the end of September 2011.

The ECOFIN meeting in December 2010, in a revised excessive deficit procedure recommendation, decided that Ireland's general government deficit must not exceed 8.6% of GDP in 2012. That is the budgetary target we have to reach when making budgetary corrections this year. The recently announced interest rate reductions will be of benefit in helping us to achieve this target. However, there are other pluses and minuses which we will have to take into account in formulating a view on the likely deficit for next year and the level of adjustment that will be required to ensure we adhere to it.

We will set out revised economic and fiscal forecasts in the next month's pre-budget outlook. Some Deputies inquired about them and they will be issued towards the end of October. They will take account of the most up-to-date information available, including quarter 2 national accounts data from the Central Statistics Office and the end of September Exchequer returns.

The Government is committed to reducing the general government deficit to below 3% of GDP by 2015. A number of Deputies made proposals on taxation. Deputy Finian McGrath suggested the introduction of a financial transaction tax. In a communication in October 2010 the European Commission stated it supported the idea of such a tax to help fund international challenges, such as development in Third World countries or climate change. However, the Commission recently proposed the introduction of a tax like this in Europe to fund the European Union. We are not in favour of that and think the European Union should continue to be funded by contributions from member states rather than taxes levied centrally across Europe such as a financial transaction tax. Some countries are in favour of a financial tax, whether it would be used domestically or to fund the European Union. I have an open mind about it but I do not want there to be a financial transaction tax in Dublin that does not apply in London, which would be injurious to the financial services industry in this city and would be injurious to the jobs of 20,000 people who work downtown in that industry. One might agree with the principle, but we need to be careful with its application. The ideal solution would be if the G20 were to apply such a tax globally.

I am not sure whether the projected yields that are claimed would be realised. I know someone who used to design software for transactions on the money market. That company had developed software that could do 2,000 transactions a minute with preprogrammed sell and buy instructions in the software. I believe they would stop trading that way if a tax was applied to financial transactions. I believe the yields are probably exaggerated because behaviour will change, as it always does when a tax is imposed. There is no consensus in Europe yet, but it is an ongoing issue.

Deputy Finian McGrath also spoke about taxes on high-income individuals, which can come up again at budget time. He also talked about increasing excise on tobacco products, but I believe he had a formula which would result in a reduction in tobacco. I was not sure whether he was advocating an increase in excise or a reduction.

See this speech in context