Timmy Dooley (Clare, Fianna Fail)

I welcome the opportunity to contribute to this important debate. There seems to be no end to the challenges and unexpected shocks to the worldwide economy over the past three years. When this debate was initiated last week, there appeared to be an air of calm in Europe and especially in the eurozone. An accommodation had been reached on the Greek situation. The Greek debt problem had been addressed and the leaders across Europe had looked at the notion of providing a haircut of up to 50% with the support of the banks concerned. To some extent, there was an acceptance that difficult decisions had been taken and we were getting back to addressing the crisis. There was also a recognition that Greece was isolated in a way that prevented contagion and was ring fenced by the solution. That was seen as a positive move overall.

The impact of the haircut on European banks was significant. The leadership across Europe looked at the necessity of addressing the recapitalisation of those banks. That process had been agreed and a path to implementation was clearly underway. The bolstering of the EFSF was also recognised and the broad parameters of that were accepted, so that it could be strong enough to act as a deterrent to the predatory approach of many of the speculators we have spoken about. While more specifics needed to be worked out, it looked like a solid proposal. The funding of the EFSF to deal with the predatory approach of speculators was underway. Klaus Regling had made contact with Asian markets and sovereign wealth funds in that region, and all this looked extremely positive in addressing the crisis.

Suddenly we have been thrown into a crisis that looks infinitely more challenging than what has gone on before. I will not use this opportunity to be critical of any other country or the leadership of any other country. Things have been done with the best intent by the Greek Prime Minister in addressing what he believes was a necessity to have the affirmation of his people. It certainly is not helpful in the current climate, but we should not question the motivation. I am surprised by some of the comments in the last couple of days around Europe and at the criticism being levelled at Greece. It can be argued that the leaders of France and Germany have taken positions that have been in their own interest over the last few months that have allowed this situation to go on and on over the course of 13 or 14 meetings without facing up to the serious issues involved. Some might suggest the Prime Minister of Greece is being a little bit nationalistic in seeking the support of his people through a referendum, but one could argue he has been led by the nose into this due to the approach taken by President Sarkozy and Chancellor Merkel, who have not been able to agree a strategy and have been playing a game of politics in trying to keep their own people behind them. I do not think we should be as surprised as some have sought to suggest about the Greek stance. There is no doubt it has created considerable panic, and not just in Europe - it has also affected the USA in terms of the market write-offs we saw yesterday and the further uncertainty at a time when we need to create much more certainty. There was a view that such certainty was starting to creep back in, but unfortunately it has not.

The biggest difficulty with this economic shock is that although there has been an impact on the markets, we have not reached the end of the life cycle. Previously, when shocks occurred, we started to build from there on, whether it was the collapse of Lehman Brothers or any other crisis that enveloped us. Now, however, it takes much longer to reach the point at which we know the impact of the shock and we can start to rebuild.

It is not clear when the referendum in Greece will take place. I welcome the comments today by the Minister for Finance, who has obviously encouraged Greece - I am sure other leaders are doing the same - to try to advance the date of the referendum, because leaving a vacuum of uncertainty will certainly create greater problems. It is unclear what the outcome of a referendum might be. We do not know what will happen if there is a "No" vote; are we looking at unstructured default? What are the implications for us in Ireland?

In that context, we need to talk about the Anglo Irish Bank bonds. I am somewhat disappointed with the comments of the previous speaker, Deputy Twomey, who sought to suggest that the current Government has an exceptional handle on dealing with the bonds. He seeks to put forward a simplistic approach when he talks about the €93 billion that was invested by the previous Government and says we should take responsibility for that. We have done so. I argue that the current Government is very much following the banking policy that was adopted by us. Much of the €93 billion that was pumped into Anglo Irish Bank was asset-backed and will give a return in the long run.

It was the Deputy's own Minister for Finance, on his 99th day in Government, who raised expectations and, I would charge, had an impact on the euro crisis by seeking to throw further uncertainty on the bond market when, in the United States, he made a clear and public statement that he was seeking to perpetrate a haircut on the bondholders, the first tranche of which we are dealing with today. He said this at the time without reference to Mr. Trichet or the European Central Bank. The Taoiseach, during Leaders' Questions and on the Order of Business today, indicated that as far back as March it was made clear to the Government that there was absolute opposition in Frankfurt to the notion of burning any senior bondholders. I could go through in some detail the comments made by various players on the other side of the House. They were made in the heat of the election campaign, and I am prepared to accept that. The Government wiped the slate clean to an extent and suffered the political fallout by being asked to respond in this House on an ongoing basis to the promises it made. However, this promise was not made prior to the election. It was an intervention by the Minister for Finance, sitting in a comfortable room somewhere in the United States, as far as he possibly could be from Frankfurt, when he told the world the Irish Government intended to take an aggressive approach to senior unsecured and unguaranteed bondholders in Anglo Irish Bank.

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