Michael McGrath (Cork South Central, Fianna Fail)

I am pleased to have an opportunity to make a contribution to this important debate on the eurozone debt crisis. The most disappointing aspect of how the debt crisis has been handled in Europe thus far has been the sense of drift that has been allowed to develop. The handling of the crisis has been characterised by a lack of clarity, by uncertainty and by indecision. Moreover, the decision-making process in the European Union has been badly exposed as cumbersome, slow and inadequate in every respect, notwithstanding the various initiatives the Minister outlined in his opening contribution. More than anything else, this inadequacy was summed up for me by the failure to follow up promptly on the outcome of the Heads of Government summit of July 21. Decisions were reached that were criticised by some but which, if implemented quickly, certainly would have made a difference to how the debt crisis evolved over the summer and the autumn. However, instead of arranging for those decisions to be implemented quickly, all the Heads of State and Government returned to their home countries and went on holidays. Consequently, there was uncertainty for the rest of the summer and the autumn and only now are national parliaments getting around to ratifying the provisions of that summit and hopefully having them implemented shortly. It is truly extraordinary that as Europe faces its greatest peacetime crisis, the measures decided upon on 21 July have yet to be implemented. There has been much grandstanding, as well as a plethora of meetings involving the French President and the German Chancellor and even the United States Secretary of the Treasury, Timothy Geithner, came to meet the European Finance Ministers in Poland. However, there has been little real tangible action to make a difference to the crisis.

We now have an interlinked sovereign debt crisis in Europe and a banking crisis that is threatening to spiral out of control and which poses a serious risk to the very survival of the euro itself. Moreover, at a human level, there is a personal debt crisis in this country and other countries that is affecting many families at present. To make this debate relevant for people, one must ask what does all this mean for Ireland. I am sure there is a tendency for people who watch the news every evening as this crisis rumbles on to question how it really affects them or their country. The truth is it affects us directly and in a tangible and meaningful way. The protracted nature of the eurozone debt crisis has damaged confidence across economies both in Europe and across the globe. It has dampened demand among our trading partners and has the potential to derail the prospects for Irish recovery through the export-led growth people here are working to develop. Exports are the single area of the Irish economy that is performing exceptionally well and the lack of confidence in Europe among our main trading partners poses a serious threat to those exports.

Moreover, as the Minister outlined earlier today during Question Time, each 1% reduction in economic growth means €800 million of revenue loss to the State. Consequently, if exports do not perform as well as they otherwise might, it will affect economic growth, which in turn affects the Exchequer position. There is a clear relationship between the debt crisis and Ireland's economic performance, which may then result in the need for budgetary decisions involving a greater adjustment then would otherwise have been necessary. The decisions in that budgetary context directly affect consumer sentiment, the level of people's disposable income and spending power within the economy. There is a clear connection between the debt crisis, the performance of the economy, Ireland's national budget and how that affects people's day-to-day lives and in particular, on retail spending and disposable income.

On top of all that, the huge turbulence that has pervaded stock markets during the summer and the autumn has wiped billions of euro off share prices. Many people have had their pension funds taking a huge hit over that time. Some markets are down by 20% to 25% in recent months. People are directly affected as a result - through their pensions, investment products, credit union investments and so forth. The point is that this debate is relevant to people's daily lives. As the Minister prepares the pre-budget outlook and the new multiannual plan, the key variable is economic growth. Not only does that impact on the State's revenue, but the size also determines the deficit percentage and we all know we are committed to achieving a deficit of 8.6% next year.

Those are all the negatives, but there has been one very large positive for Ireland arising from this debt crisis. No one - not even the Minister - believes that Ireland would have got such a substantial interest rate reduction on the bailout funds in the absence of such a clear and present danger to the euro in recent months. That interest rate reduction is very positive and will have a real impact on the budgetary plans.

At the heart of all this is the position of Greece. Most independent economists now seem to take the view that the 21% voluntary discount of Greek debt simply will not be enough; Greece is drowning in debt. For weeks we were led to believe that Greece would run out of money on 14 October, but we are now being told it will not happen until mid-November. That delay only serves to provide an excuse for further procrastination and uncertainty. It is clear the Greek people will only accept so much austerity, no more than any other country would, including our own. Given the level of volatility in the markets Ireland is fortunate at this time to have a secure funding stream available so that the State can conduct its business and put through the essential reforms in the economy.

We have had mixed messages from Europe characterising the entire debate and the handling of this crisis. Mr. Jean-Claude Juncker says that Greece will not default but yet he says that the next tranche of the first bailout is to be delayed. At the heart of the matter is a complete lack of credibility about the European response: the failure to make decisions promptly, and when they are made they are not deemed to be sufficiently comprehensive and are not implemented with decisiveness.

I acknowledge there is no easy solution to this crisis, but it now seems inevitable that the level of private creditor involvement will play a greater role in the ultimate resolution of the process. In that context the attitude of the ECB to Ireland's desire to achieve some level of burden sharing with the remaining unsecured, unguaranteed bondholders in Anglo Irish Bank and Irish Nationwide Building Society is quite unbelievable. Holders of Greek government bonds will certainly take a larger hit. Just as Irish banks did on property loans, European banks look likely to take a hit on the Greek bonds they hold. The share price of European banks in recent weeks reflects that reality. It appears the markets have already priced in the restructuring of Greek debt. We now appear to be looking at a programme of bank recapitalisation across Europe. Even back as far as August, the managing director of the IMF, Ms Christine Lagarde, indicated she believed that was required.

I look forward to having an exchange during the time allocated for questions. There are many questions about Ireland's handling of this crisis, including: what we are seeking; our view on many of the elements that are now being proposed as forming part of the overall resolution of the issues; the financial transactions tax; the euro bond; and increased flexibility in the EFSF.

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