Paschal Donohoe (Dublin Central, Fine Gael)

I apologise if I provoked Deputy Mattie McGrath but I will make my argument regardless of how often he tries to interrupt me. I clearly heard somebody exhort people to break the law and predict that blood would run down the streets of this country. As somebody who is clearly aware of the challenges we face, I believe we have to offer more than that to people who are hurting badly. The Deputy is entitled to disagree with the Bill or the Government's policies but he should offer more in terms of the prospects that await the country.

We are facing the stark reality that our country is an unwilling party to an external aid programme for which the rest of the world does not want to pay. We are caught in the middle of ferocious tension between countries which do not want to participate in these arrangements and countries which do not want to pay for them. This creates a grave challenge for countries like Ireland and the consequences could become apparent early in the new year. As an example of this tension, the rate of interest we are offered under this Bill is lower than the rate available to the countries which fund our programme of borrowing. Several of the larger countries that fund the programme are not able to borrow or are paying higher interest rates than the rates we pay on the money they lend to us. What we have in common with these countries is our inability to borrow from financial markets at an affordable rate.

We need to exit the programme at the earliest opportunity. I understand that the European Commission recommended Ireland return to the financial markets quickly but that would be a foolhardy move in the current environment. However, despite the terrible mistakes that the financial markets have made, it is infinitely preferable to borrow from them than to be in this programme. Every two weeks our balance sheet is scrutinised by somebody else. That is the ultimate example of the loss of our economic sovereignty.

Our current challenge is to make the arrangements more sustainable. The original interest rates charged for our funding were prohibitive but substantial progress has since been made. We must address the question of how our banks are funded. Drawing down money on a short-term basis created instability in the banking system because banks had to renew their funding arrangements every week or month. Thanks to the agreement reached over the weekend, our banks will now be able to access money based on commitment periods of between two and three years. This will be valuable for our banking system.

Issues also arise with some of banking debt, such as the Anglo Irish Bank promissory notes. I differ from many of the Members opposite regarding the way in which our total debt should be managed. I do not believe we should seek to write down or default on sovereign debt because even the short-term consequences could be catastrophic. I do not agree with the claim that our difficulties were caused by the near collapse of our banking system. The cost of bailing out our banking system is only a portion of the national debt. The remainder arises from the huge difference between what we took in taxes and what we were spending. We are trying to deal with the terrible mistakes made by previous Governments. However, we must review the rate of interest charged on the promissory notes for Anglo Irish Bank's debts. The manner in which the rate of interest was negotiated and structured to protect that bank has caused major difficulties for the State and the country. The only way we can address this issue, however, is by means of multilateral negotiations.

We must work with the people who are providing this money. We have to fund a budget of €17 billion every year and our core banks need €110 billion in liquidity funding. Rather than contemplate reneging on a portion of Anglo Irish Bank's debts, we must continue to negotiate an agreement that would reduce the rate of interest. Such a strategy will bring us significantly closer to exiting the programme.

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