Brian Hayes (Dublin South West, Fine Gael)

I wish to state clearly that there is nothing to suggest from yesterday's meeting between the Taoiseach and Chancellor Merkel, or from any statement or utterance made by Chancellor Merkel, that she is unreceptive to the plight of Europe's smaller nations. She, along with the European Heads of State, is working to resolve the crisis in the eurozone. I would draw a distinction between Anglo Irish Bank and Irish Nationwide Building Society, now named IRBC, and the other covered institutions. No consideration is being given to burden sharing with senior bondholders in any of the other covered institutions.

In regard to the repayment of unguaranteed unsecured senior debt, it has always been the Minister's position that, given the significant cost of IBRC to the State and the taxpayer, there should be a sharing of the burden of debt with bondholders. To avoid such repayments, the most logical option would have been to put the bank into administration. This option was available to the previous Administration but instead, it put the taxpayer on the line for the liabilities of Anglo Irish Bank.

If we were to suspend payments to creditors in Anglo Irish Bank, this would have a significant impact on both the bank and, ultimately, the State because it is a totally guaranteed and a nationalised bank. This senior debt, unsecured as it is, is an obligation of the bank. If the bank does not meet such obligations, it would lead to a default and following that, most likely, insolvency. Insolvency would result in a significant increase in the cost to the State to resolve Anglo Irish Bank, or IBRC as it is now known.

After the Minister's recent meeting with the previous European Central Bank President, Mr. Trichet, and Commissioner Rehn, our European partners expressed strong reservations about burden sharing with senior bondholders in IBRC. Mr. Trichet voiced his opinion that he was against such actions for two reasons. First, private sector involvement carries very significant contagion risk and may be inconsistent with encouraging private investors to return to markets. Second, he said Ireland had done particularly well over the summer. He mentioned the narrowing of bond spreads and he said he felt that anything to do with senior debt burden sharing might knock the confidence of the market in the absolute commitment of the Government to once again take its place in normally functioning markets and, as a result, bond yields could widen again and we might lose the ground we had gained over the past number of months.

Mr. Trichet's views were echoed by Commissioner Rehn. The positive international commentary on Ireland has been created by the Government's successful renegotiation of the memorandum of understanding, the introduction of the jobs initiative, the sizeable reduction of the interest rate on the EU-IMF programme and the reduction in the cost of the banks to the taxpayer.

The value of support, present and future, we receive from our European partners far outweighs any short-term gain from imposing burden sharing on these bonds in the face of European opposition to such a move. For example, €110 billion of funding is provided by the ECB and the Central Bank of Ireland to the Irish banks at a cost below which they could borrow in the market. This is in addition to the €85 billion set out in the programme with the troika.

Nonetheless, as the Minister and the Government have made it perfectly clear, we still have unfinished business with our partners to find the most cost-effective way of resolving IBRC over the long term. The Government's aim is to ensure that the overall cost of resolving the bank's debt and the costs of resolving the difficulties in the banking sector generally are kept to a minimum.

Discussions have commenced with the relevant authorities at a technical level but, as yet, there is no indication of a successful outcome. The Minister will consider the future repayment of maturing bonds in the bank in this context and in terms of what is best for the overall position of the State.

I draw to Deputy Wallace's attention and that of all Members the motion approved by this House last week and to indicate that nothing has changed in the meantime to alter our position and that of this House. Among other things, the motion acknowledged that the Government should not act unilaterally in regard to the repayment of unguaranteed senior debt and should have regard to the views of our partners who are providing the requisite funding for the financial institutions; acknowledged that the Government is working with our partners in the EU and IMF to address the situation and is actively involved in discussions with a view to reducing the overall cost to the State; and affirmed that the approach being pursued by the Government is, given the situation with which it has been presented with by the former Administration, the optimum approach which will produce the best medium to long-term outcome for the State and the Irish taxpayer.

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