Micheál Martin (Cork South Central, Fianna Fail)

The Taoiseach should not be talking nonsense and allow me the opportunity to make my contribution.

As things stand there is one core problem which has brought Europe to the brink and which must be addressed if the euro is to be saved. The ECB's policies have destroyed market confidence in eurozone sovereign debt. This is not a matter of coming late to this issue. I have raised it constantly over many months and Fianna Fáil tabled a motion specifically about reform of the ECB back in July.

Over the last two years it has steadily become clearer that the ECB, or at least the group which wields the most power within the ECB, wants to tackle this unprecedented crisis within rigid policies which were developed for a type of economy which no longer exists. With an arrogance which is out of all proportion to the record of the bank, the ECB has been absolutely steadfast in refusing to see how its policies are destroying the ability of countries to fund their public services.

If the ECB was functioning properly, it would have long ago shown the markets that it was ready to buy sovereign debt at issuance, in other words to be the lender of last resort. Its potential resources would be unlimited and would cause bond yields to fall significantly. The evidence of the United States and Britain confirms this. The actions of the ECB in the secondary market have actually made matters much worse.

The repeated statements of how the funds available are limited have shown a half-hearted commitment. This bond buying has actually encouraged private sources to leave the market. They have been entirely rational in seeing an opportunity to secure their funds and avoid the escalating risk which is being driven by the refusal to enter the primary market.

It is the risk that countries may not be able to raise new debt to repay maturing debt which is driving rates up, and current policy is making this worse. It is highly likely that this avoidable dynamic helped push Ireland and Portugal out of the market in the last 12 months. It is not by accident that countries have faced higher bond costs every time the ECB has reaffirmed its limited commitment to secondary bond purchases and outright opposition to purchasing them at issuance.

This morning's reports from ECOFIN suggest that the ECB is now in the ridiculous position of supporting a major fund to support countries but only if it does not have to give the money. With Italy, Spain and Belgium on the brink of being priced out of the market and the rating of all countries under threat, the ECB is on the verge of being a central bank which killed the currency it was established to run.

The bank is quite right in saying that the legal basis upon which it is founded is restrictive. There is no doubt that it was set up to be vigilant against inflation and it was banned from buying debt directly from member states. Where the ECB and the handful of national leaders who are clinging to a no change policy are entirely wrong is their claim there is nothing more the ECB can do. Within their separate powers under the current treaties the European Council and ECB could take action tomorrow which would restore confidence in the euro.

First, there is the issue of the ECB's inflation mandate. The fundamentalists argue that it can do nothing other than target inflation in the manner in which it is currently doing. This is just not true. Under Article 3 of the treaty on the European Union the ECB is also obliged to be concerned about the general economic objectives of the EU. These include the objective of high levels of employment and growth.

If it wants it can be flexible. It can be equally concerned about deflation. It can change its short and medium-term targets. Funding sovereign debt is inflationary, but how this fits into a short, medium and long-term set of targets is flexible within the current treaties. The euro's gravestone should not record "Committed suicide in the name of an inflation target of below but close to 2%".

The treaties give the ECB independence and require the Council to refrain from undermining this independence. However, those who have been actively attacking the idea of the ECB changing its policies have freedom to speak which others should adopt. Next week the leaders should assert the need for the ECB to recognise the wider economic part of its mandate.

Some fundamentalists have questioned the legality of the current bond-purchasing programme. This needs to be addressed resolutely. Under Article 125(2) of the treaty on the functioning of the European Union, the Council has the right to clarify certain matters in regard to actions of the ECB in cases such as this. This right should be used immediately to state that existing bond-buying programmes are fully legal within the current treaties. The same power should be used to facilitate a mechanism to show that whatever amount is required to back up the issuance of sovereign debt will be made available.

The ECB cannot buy the bonds directly but it can enable an unlimited fund to do so. Whether it is through the IMF or another entity is now largely irrelevant. The October solution of touring the capitals of the world in a whip-around has failed, therefore the ECB will provide the funds or they will not be in place. The ECB can leverage whatever amount it wants and the legal basis is there if it chooses to use it. Any summit agreement next week which fails to include an immediate measure allowing effectively unlimited intervention in the sovereign bond market will mark the end of the euro.

The only thing which has been clear in the Government's approach to Europe in the last three months is what it is against. It is against treaty changes which have to go to a referendum. What it has missed is the more important point, namely that the agenda of significantly increasing central control over fiscal policy is, at best, a longer-term issue which has nothing to do with addressing the crisis at hand. That most of the proposals would require treaty changes which would not be ratified is also true.

At the start of the year a new programme of fiscal co-ordination was agreed and has not yet been through even one cycle. More fundamentally, the fiscal union agenda is another example of a flawed proposal which does not deliver what it promises. A fiscal union cannot be solely about setting overall limits for everyone. A genuine fiscal union would involve a dramatic increase in the central budget and transfers from wealthy countries to poorer ones.

The budget currently under discussion for the European Union for the next few years amounts to 1% of Europe's annual income. No country proposing a so-called fiscal union is proposing to increase the resources they give to the Union. Their proposal would effectively place a barrier to development on all poorer states, obliging them to accept limits but be given no opportunities to grow.

A measure which would genuinely promote confidence in the willingness of the eurozone to coordinate fiscal policy would be a much larger, eurozone-specific budget to fund cohesion and promote growth. It would also provide a serious incentive to comply with fiscal limits.

Since we last discussed a European summit the Taoiseach has ended his policy of not holding bilateral summits with eurozone leaders. His visit to Berlin, as with most things to do with his Government, showed a dedication to putting media spin ahead of hard substance. He disagreed with his hosts on a number of unavoidable matters and sent his staff out to talk up these disagreements, just as he did in March after a far from unusual discussion with President Sarkozy.

What the Taoiseach failed to do in Berlin was to set out a definite agenda or to make a clear appeal to his hosts. He spent more time claiming credit for a budget he voted against than he did providing specifics about urgent policies. In contrast, Mr. Radek Sikorski, Poland's Foreign Minister, used his visit to Berlin on Monday to speak with a directness and urgency we should all applaud. Even though his country is not in the euro, he spoke passionately about its future and appealed to Germany to show leadership. The history of relations between Poland and Germany is a very dark one, so it is impossible not to be struck by his statement, "I fear German power less than I am beginning to fear German inactivity".

I have no doubt the motives of Germany's leaders are sincere. They have a profound attachment to a very specific view of the role of a central bank and of fiscal rules. However, no matter how sincere they are, they are wrong. The country which has done more than any to build up Europe and which has shown a deep solidarity within the Union now stands as its greatest threat. Before next week's summit the Taoiseach owes it to the people of this country to put aside generalities and to be open about what he will demand. Being against anything which requires a referendum is not a policy; it is political rhetoric.

The President of the European Council, Mr. Van Rompuy, is due to propose reforms to the Union at the summit, but Ireland has tabled no measures for inclusion. We must be resolute in opposing an agenda of fiscal union which is purely about control. Much more than that, we must demand that the crisis at hand be tackled before any other issues are addressed. There will be agreement next week on effectively unlimited funding to buy eurozone bonds, or there will soon be no euro. The crisis will continue to spiral as long as the main policy is about the provision of bailout funds. What we need is funding which prevents bailouts from becoming necessary, funding which confirms that there will be a market for European sovereign debt. The leaders of Europe have thus far shown none of the required urgency, imagination or generosity required to tackle this crisis. For the sake of Europe and its citizens we must all hope this will immediately change.

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