Michael McGrath (Cork South Central, Fianna Fail)

I thank the Minister for his opening remarks on this critical issue. At a time of deepening crisis across the eurozone, which is spreading beyond it to the global economy, it is appropriate that we are in the House today and are being given an opportunity to make our contributions. The debate can sometimes seem abstract to people at home who are watching what is happening in Greece and turbulence in the stock markets, and they can understandably ask how it affects them and their families. The answer is quite straightforward. It affects people in a very real way, something I will discuss.

If proof were needed, there is evidence that Ireland could potentially be affected by the turbulence in the eurozone, namely the decision of the EFSF today to postpone a bond auction of €3 billion which was earmarked for Ireland as part of the programme of assistance with the EU and IMF. I assume it has no impact on the funding position of the State, even though bonds are maturing in November. However, it serves to highlight the possible implications for Ireland if the crisis is not resolved decisively and with some speed. That is the fundamental issue we all want to see dealt with.

We are in a bailout programme with the EU, the IMF and the ECB. In a sense we are insulated from movements in the markets, in particular the cost of borrowing which is beneficial for Ireland at this time. We do not have to go to the markets at a time when there is such volatility in the cost of borrowing for other eurozone members, a point which is worth making. We do not want to see a situation develop where the tranches of funding we have to draw down from the EU and IMF are jeopardised by turbulence in the markets. It was significant that the bond auction had to be postponed today by the EFSF but it is to be hoped it will take place shortly.

The Government will announce the new medium-term fiscal framework on Friday. There are potential implications for Ireland because the question of our debt sustainability and economic recovery is very much tied up with the wider economic situation in Europe. We are focused on an export-led recovery. We are doing very well with exports but if our main trading partners in the eurozone and the UK are struggling to generate growth in their economies inevitably the demand for goods and services produced in Ireland will be affected. The single most dangerous threat to our economic recovery is a weakened eurozone and global economy. It is a very real threat.

At the end of this week the Government will outline its new growth forecasts for 2012. The 2.5% growth forecast for GDP now looks wholly optimistic and will be significantly downgraded. If the media reports over the weekend are to be believed, a percentage point will be deducted and the growth projection for next year will probably be in the range of 1.5% which has budgetary implications, as the Minister outlined. Every 1% growth in GDP that is not achieved impacts on State revenue to the tune of about €800 million. Economic growth is absolutely central to our economic prospects, debt sustainability and Ireland returning to the bond markets as a sovereign country again, something we all aspire to.

The October Exchequer returns have been released. I have not received any information on them but I hope they are in line with the budget adopted last December and we are continuing to make progress on the public finances. It is a central element of our efforts in that regard.

The Greek situation could hardly be more serious. I was somewhat shocked and surprised when I read that the Greek Prime Minister decided to call a referendum on the outcome of the European summit negotiations. The main issue it raises is that the certainty we all hoped for and investors were optimistic about following the summit of 26 October has now been replaced with huge uncertainty and turbulence in the markets. There were stock market collapses yesterday on a par with those in the autumn of 2008, a place to which we have returned.

Prime Minister Papandreou is meeting the German Chancellor and President Sarkozy this evening. I am sure there will be some straight talking, as there needs to be. From a democratic point of view it is commendable that he wishes to put the proposal to the Greek people. It would give it democratic legitimacy. However, there are also huge risks involved. There will now be a vacuum for an undefined period of time. The timing of the referendum is not clear. Whether the Greeks have the capacity to hold it before Christmas is seriously open to question.

There are elements of the communiqué from the summit that have yet to be finalised. Even if the Greeks were ready to press a button on a referendum tomorrow they do not have a full package of measures to put before the people. It is not clear what question or questions will be put to the Greek people. It may well be a political calculation by Mr. Papandreou.

The Greeks have already obtained a substantially better deal than that which was negotiated last July. They now understand that when the referendum is put before the people, as seems increasingly likely provided the Government survives a vote of confidence on Friday, the eyes of not just Europe but the world will be on Greece. The question of additional concessions for Greece may be on the table.

The German Foreign Minister made it clear today that the deal was not open to negotiation and was concluded in Brussels on 26 October. I would not be surprised if the Greeks made a calculation that there was more to give on the various issues under discussion.

It would be in all our interests if that referendum were held as quickly as possible. In light of the fact that Greece has not held a referendum since 1974 and given its record on issues relating to corporate governance, financial control and public administration, one is obliged to question the capacity of that country to hold and administer a referendum successfully in a short period. It is to be hoped, however, that it will be able to do so. It is critically important that the vacuum created which gave rise to the carnage that took place on the stock markets yesterday and, to a lesser extent, today be replaced by an element of certainty. Such certainty is essential.

Clearly, the elephant in the room is Italy. While the entire focus has been on Greece, rightly so, as a result of the forthcoming referendum to be held there, the situation in Italy is becoming more serious by the day. Its cost of borrowing increased to 6.3% yesterday and remains at over 6% today. A country with a debt of €1.9 trillion - equating to approximately 120% of GDP - faces fundamental questions about the sustainability of that debt. I am aware that emergency meetings are taking place in Italy today in advance of the G20 meeting tomorrow. The commitments which Mr. Berlusconi made to his European colleagues will have to be honoured in full. However, the issue of the sustainability of Italian debt is coming centre stage. The fact that the existing eurozone infrastructure simply does not possess the capacity to bail out a country of Italy's size is one which must be confronted. It is clear that Italy is relying almost entirely on the interventions of the ECB in the markets in order to keep its bond spreads within reasonable parameters. However, I wonder how sustainable it is for that country to continue to borrow at rates of over 6% when programme countries such as Ireland, Greece and Portugal can access funding through the EFSF at a rate of approximately 3%. That is a question for which an answer must be provided. The Italian stock market dropped by 6.8% in value yesterday, the largest decline since October 2008. This provides a measure of the crisis in Italy and throughout the wider eurozone.

I wish to deal with some of the individual elements of the communiqué signed in Brussels on 26 October. Moving from a position where the Greeks were offered a discount of 21% on sovereign bonds held by European financial institutions in July to one where they are being offered a discount of 50% demonstrates the extent to which summit meetings can be affected by an air of unreality. The most recent summit is one of a series which have singularly failed to address the current crisis in a meaningful way. This is particularly evident when one considers the increase in the discount on offer, from 21% to 50%, in just a few months. Some commentators have pointed out that because the bonds held by state institutions and European authorities will not be subject to the haircut, the actual discount on overall Greek debt will be approximately 20%. That fact appears to have been lost in the general debate.

Spain was the subject of comment in the communiqué and is going to be obliged to deal with serious challenges in its economy and the difficulties with which it is faced. Ireland is commended in the communiqué for the progress made in the full implementation of its adjustment programme which is delivering positive results. This is true, to an extent. However, the Minister is a practising politician. He is well aware that the people will not agree with the assertion made in the communiqué and that they will not see any tangible difference until jobs begin to be created and the 450,000 individuals on the live register are given a measure of hope and some grounds for optimism. All Members are focused on ensuring the latter will happen as soon as possible.

I will not discuss at length the issue of the bond relating to Anglo Irish Bank that was redeemed earlier today. This matter has been well and truly debated, both inside and outside the House. However, I disagree with the ECB's analysis. I accept that there are risks involved from the point of view of the Government and that the Minister is now in a position to fully appreciate the difference between being on this side of the House and on the opposite side. The risks to which I refer must be weighed up in a more careful way, particularly in the light of the level of turbulence in the markets. The extraordinary cost - €64 billion or over 40% of GDP - the State has been obliged to take on in order to recapitalise the banks does not compare to that taken on by any other country in Europe or elsewhere.

Some recognition must be given in this matter. The bond to which I refer was paid earlier today. However, Ireland's case in redesigning the promissory note structure must have been strengthened by recent developments. I admit that the promissory note structure was costly, but it was put in place at a time when Ireland simply did not have €30 billion to recapitalise Anglo Irish Bank and the Irish Nationwide Building Society. It was developed at a time when there was no European fund of which Ireland could avail in order to lessen the burden in bailing out Anglo-Irish Bank.

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