Michael Noonan (Limerick City, Fine Gael)

I am relating the advice of the European Central Bank to the Deputy so that he is in a position to make a judgment and he can go for the can of diesel and the box of matches after that, but he is entitled to the advice which is that it would be very risky. The Government has not made a decision. On leaving Poland I said that we would reflect on it, but this is the input on which we must reflect and it is a serious situation.

There was a suggestion that the numbers keep changing on the interest rate reductions, which is true. When the Taoiseach returned from the Brussels meeting on 21 July, we did all the calculations on a 2% reduction. However, as the technical papers were worked through, the situation has improved. On the EFSF side, the minimum reduction we will get is approximately 260 basis points, which is 60 basis points more than the calculations we did originally. However, on the EFSM, which is the biggest fund on which we draw, the Commission decided that we would get that without any margin added. In that case the reduction is not 2 percentage points but 3.75 percentage points, which is what has resulted in the big variation in the figures, and certainly there has been big movement on it.

The maturity length of the loans is obviously a factor when we are pricing, but we priced it on the basis that the average for the money drawn down would be 7.5%. On that basis there is a saving of €9 billion. There is a saving of €900 million next year and between now and the end of the year there is a saving of approximately €130 million. I do not expect much of a variation on that - there might be a variation of 10 basis points on the EFSF fund but I have given the Deputy the lower figure, so we might do slightly better than that.

In addition we had put in margins for guarantees and so on which amounted to €600 million, and we are getting that money back because they have changed the design of the fund. However, we will not get it back until 2016 because we will not get it back until the bonds, in which it is included, mature. Therefore there is a real gain.

On the other hand we could take up the option of extending the maturity of the loans. Obviously if we are paying over a longer period we pay more in the total but there would be very significant savings on the interest rates. If, for example, we went to 15 years on the drawdowns for the future - I do not want to go into it today because we need to examine it and ascertain the best option for the country - the saving would run to more than €14 billion, which is a serious amount of money. That is the position on the interest rate. It was not accidental good luck because we campaigned on that and negotiated it for months on end. I was checking back on some stuff we did during the election campaign and found a report from the Financial Times from January, before we went into government. In response to the reporter who interviewed me, I said our position was to get the interest rate down to the balance of payment fund in Europe, which was offering money without the margin. The last money I saw from the balance of payment of payment fund was at 3.3%. That was our negotiating position and it worked out.

We were committed to renegotiating the programme but we are doing it in stages. The first renegotiation took place at around the time of the jobs initiative when we got the minimum wage reduction reversed. We got agreement to reduce VAT, particularly for the tourism industry. We got agreement that we would take another year up to 2015 to correct the programme. The second phase related to the price of the programme - the interest rates and the other matters to which I referred. The next phase of negotiation must be to see if we can reduce the burden of the overall debt. That is why I would like to put in place an alternative to the promissory note because the promissory note on Anglo Irish Bank is extraordinarily expensive. While it is not difficult to design a piece of financial engineering which would give one an instrument to do that, getting the agreement of 27 countries in Europe on the political side to allow us to do it is a different story. That is what the negotiation must be about going forward. It is certainly well worth attempting.

A number of Deputies made points which were not factual. Deputy Pearse Doherty seemed to think this legislation was some type of subterfuge for introducing the ESM treaty; it is not. There are references to the ESM treaty in the text but when we ratify it here separate legislation will be introduced and this legislation does not impinge on it. A referendum is not required for either this measure or for the ESM. This legislation is neutral in terms of any decision the House will take on the ESM.

Deputy Clare Daly talked about the Irish guarantees and that the figure had moved up to €11 billion. That is true but it is notional. That we are a programme country meant we could step out of the arrangement for guarantees. Even though Members will note on the recital attached to the Bill the amounts that Ireland would have to guarantee, that is only the case if we were not in the programme. Once we are in the programme, we do not have to give those guarantees and, therefore, there will be no hit on Ireland.

Some of the Opposition are very critical of what we are doing, which is fair enough as that is what parliament is about, but they are very short on alternatives. Deputy Joe Higgins came forward with an alternative today. He said the free market system, capitalism and the financial industry that supports it is a busted flush and that the alternative is socialism. The problem with that argument is that of the three governments in programmes, there was a socialist government in Portugal when it went into the programme and that government was replaced by the social democrats. The then socialist government in Portugal was more to the left than the mainstream European social democrats. It was a fairly straightforward socialist party. It was the socialists in Portugal who presided over its decline which forced it into a rescue. The government in power in Greece is Mr. Papandreou's socialist party, as opposed to a centre right party, which has a long tradition there and has provided good government but it is a socialist government. It is not socialist in the sense of the social democratic European mainstream, it is a socialist party that presides over a country where 52% of GDP is generated by state assets and state control. The finance minister in Poland told me that Greece was more a state economy than Poland was before the Russians left. In Ireland we did not have a socialist party, we had Fianna Fáil. Although a former Taoiseach said he was one of the three socialists in the Dáil, I presume Deputy Higgins was the second and I do not know who was the third. He used to look at me at times as if I had left wing leanings. That is the position.

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