Seán Fleming (Laois-Offaly, Fianna Fail)

I welcome the opportunity to contribute to this debate on the eurozone and related financial matters, which issues have been the main topic of discussion today not alone in the House but throughout the country at large and will remain so for some time to come.

The problem we have at European level is a financial one. Part of the problem is that politicians believe they can solve what is not a political problem. I have said on a couple of occasions during the past few months that the solution put forward by politicians, despite their being the democratically elected leaders of their countries, might not necessarily be the right solution. Unless the financial basics underlying political agreements are corrected, they will not hold.

The recently held fourth summit of Heads of State and Government was a failure despite the Taoiseach returning home and expressing his pleasure with the outcome of it. The problem that is not being dealt with by the various governments is the level of deficit likely to be run up each year by governments. Not alone Greece, Ireland and Italy but practically every country in the EU, and eurozone in particular, are running deficits. Germany is to a small extent doing the same. A country that is running a deficit year-in and year-out must borrow money year-in, year-out, resulting in an increasing accumulation in debt taking account of borrowings and interest rates. This issue is not being tackled at source. The EU is simply trying to deal with the mountain of debt. The mountain of debt is not what is causing pain for citizens across Europe in whose countries austerity measures are being implemented, including in Greece and Ireland. There needs to be consideration of how to cut budget deficits on a year to year basis to ensure we do not continue to add to the debt mountain. This has not yet been fully grasped.

While Greece might have been offered a 50% reduction in its debt, Greek people will have to suffer enormous pain to achieve that by way of cutbacks in expenditure and increased taxation. The two issues are separate. I believe there is a specific problem facing the 17 members of the eurozone. I also believe in the euro currency. It is a good idea that has not been given an opportunity to work. I support a common euro currency throughout Europe. I would like to see all 27 members of the EU become members of the eurozone area. The problem is that we set up a euro currency without putting in place the infrastructure to support it.

As I recall, in recent years, the operation of that currency could be compared to a facade of a building. It looked good and everybody had the currency in their hands and in their bank accounts. We believed we had a real currency like the US dollar. However, we did not have the financial infrastructure in place to back it up, as in one central bank equivalent to the US Federal Reserve. There are 17 mini-central banks in the eurozone and a governor from each of these banks goes to the European Central Bank to try to operate on a European basis. This is not the best way to run a central bank. I acknowledge there needs to be direct input from the various countries but a currency must be managed and it is not just a case of keeping everyone happy. This is what has happened in recent times. Greater monetary union will be required but fiscal union and agreement on taxation rates and various other expenditure measures cannot be undertaken on a European-wide basis. The United States of America comprises 50 states and different local economic circumstances apply, but there is one federal reserve and one dollar which is supreme. This has not as yet been achieved in Europe.

Last week, Greece was on the trolley in the accident and emergency department. Nobody was dealing with the European problem nor with the underlying issues. The Greek Government arrived and it needed a Band-Aid to get it over the weekend. Even though Heads of State believed they had done a good day's work, we all know this has been short-lived as a result of Prime Minister Papandreou calling a referendum. Europe will need to be very careful that it does not chastise democratically elected leaders who for whatever reason ask their public to express their views on a particular issue. There is a democratic deficit in Europe and this is part of the reason people are not engaging with Europe as strongly as they should be.

I contrast what is happening in Europe with the situation in the United States of America. The US has a strong currency and people believe in it and have confidence in it. The Americans were strong enough to let Lehman Brothers fail and as recently as last weekend they were strong enough to allow MF Global, a US brokerage firm, to fail, collapse and disappear off the face of the planet. This represents the strength of the US authorities that they would allow financial institutions, some of them bigger than most of the banks in Europe, to fail. This is a very important point. The dollar is strong enough to allow failures in the American financial system. Europe must do the same. In recent years, Europe has been operating out of a sign of weakness. Phoney stress tests are arranged whenever an issue arises with regard to a bank. These tests do not examine the big issue. No sooner do banks pass a stress test than they are in financial difficulty a few months later because the terms of reference of the stress test did not include a wide enough examination. For example, some stress testing of banks did not deal with mortgages or with possible sovereign failure at EU level.

Europe must allow banks and bankrupt financial institutions to go bust. Ireland today is a microcosm of the European problem. Anglo Irish Bank has a new name, the Irish Bank Resolution Corporation Limited. There was a big debate about the billion dollar unsecured senior bondholders being repaid, but the issue goes deeper. We must recognise that Anglo Irish Bank was bankrupt from the very beginning. Europe would not permit us to allow Anglo Irish Bank go to the wall as it did not want a financial failure. It insisted that we should prop up Anglo Irish Bank, that the Irish taxpayer should pay the bondholders and that the bank should be nationalised. We have come a long way and our two pillar banks have been separated from any contagion from the former Anglo Irish Bank. The time has come to re-privatise Anglo Irish Bank and immediately liquidate it. The cost will then be borne by everybody who has a bond or a share or a deposit in the bank and those who have taken the risk to leave funds there. Like any liquidation, those people will get their return of 10 cent, 30 cent or 40 cent in the euro. The Minister knows that it could be done even though our partners in Europe may not like it.

The Minister adverted in his contribution to the EU-IMF deal which stated there would be no deal if burden-sharing with senior bondholders was on the table. The Minister was correct in this regard but Europe crossed the Rubicon last week when it agreed to a 50% write-down for Greece. Europe now accepts there has to be burden-sharing by senior bondholders and this can now be applied to Anglo Irish Bank under its new name. Legislation will be required to re-privatise it and the liquidator should be called in. Any assets should be sold. Any company going into liquidation has to take its chances. It would be a sign of strength for the euro if a bankrupt bank is allowed to fail. Otherwise, it will be a continuing draw on the euro if Europe does not face up to the financial realities and let a bankrupt bank go to the wall.

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