Stephen Donnelly (Wicklow, Independent)

On the Anglo Irish Bank bondholders, while I understand the Minister's argument, its logic is a little circular. It appears to follow the following route. Arising from an expectation in the markets that Ireland would not honour investors' profits and serious haircuts would be imposed, bonds were trading at significant discounts. However, as the Government made it increasingly clear that it would pay or would have to pay the bondholders, the gap between par and the expectation of the markets closed. The logic, therefore, is that there is, as a result of Government statements that we would pay the bondholders, no point in refusing to pay them. Perhaps we could factor this logic into some of the other bonds we have to deal with by issuing statements that we may not pay them as this would correctly reduce the expected value.

It is a problem that the euro is maintaining and increasing its strength against the dollar and various other international currencies. We need the single currency to devalue significantly if we are to export our way out of our problems. On the linked issue of quantitative easing, it is my understanding Jean-Claude Trichet is constrained by the 2% ceiling on inflation and has stated he wants this ceiling raised. The Government is a member of the Economic and Financial Affairs Council, ECOFIN, and the euro group which are able to change the terms of reference of the European Central Bank. It is my understanding Mr. Trichet wants the bank to have the ability to print more money. If we can print more money, we can start to inflate our way out of debt. If the inflation rate were to hit 4.5% or 5% for a small number of years before being reined in again, we would be able to start to deflate the debt in real terms. Other than a write-down, the debt will not go away without inflation and quantitative easing. Moreover, increasing the money supply would result in significant stimulation of economic activity. These measures will enable us to begin to deal with the debt because the current approach is simply not working.

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