Fergus O'Dowd (Louth, Fine Gael)

The motion before the House is both timely and appropriate. Having listened to the contributions and debate, the Minister for Finance is of the view that there is considerable common ground on all sides of the House. All Members are agreed that every effort must be made to reduce the cost to the Exchequer of the promissory note. They are also agreed, to various degrees, that the State should continue discussions with its international partners on how this can be achieved and, in general terms, that the State should not act unilaterally in this regard.

There is a clear recognition that the situation with regard to the eurozone is evolving and that developments in this respect may provide opportunities for the State to revisit certain matters, including the cost to the State of the Irish Bank Resolution Corporation, IBRC, arrangements that were entered into by the previous Government. As an independent State, Ireland has taken the initiative to deal with its problems. The Government has taken the hard decisions and will take whatever other decisions are necessary to get the country back on track as quickly as possible. The Government must ensure, and our international partners must have regard to the need to ensure, that Ireland's capacity to repay its debts is maintained and enhanced.

The Minister accepts the necessary adjustments in State expenditure have affected and will affect the level of services and the living standards of people. The Minister accepts the impact of the adjustments must be fair and proportionate. The Minister accepts it is galling to be obliged to pump State resources into supporting the financial sector. These actions are, however, necessary as our economy will not operate without a banking system. Moreover, we must get back to the financial markets for funding, we must re-establish our financial credibility and we must return to growth and prosperity for the good of our people. We must do all these things in order to exit the programme of financial assistance from the EU-IMF at the earliest possible date to avoid this country being hamstrung for years or even decades by an enforced regime of austerity. The Government is committed to delivering a return to a successful vibrant economy. In this context, the Minister has indicated there is no private sector involvement for senior bank paper or Irish sovereign debt without the agreement of our external partners. This commitment has been agreed with our external partners and is now the basis on which Ireland's future financing strategy is built.

There appears to be a suggestion that it may be possible simply to make the promissory note go away and that the Central Bank or the ECB would continue to fund the institution through the working out of the remaining loan book. The Minister refers Deputies to the balance sheet of the bank. In the first instance, the Central bank and the ECB are effectively funding the bank. If the promissory note was removed from the balance sheet, there would be certain consequences, namely, the gap on the asset side of the balance sheet would still have to be filled; in the absence of this asset, the bank would fail, leading to insolvency and a requirement to repay all amounts due under all contracts; the Central Bank and the ECB could not continue to fund the bank under their own rules because the institution would no longer be a going concern or a licensed bank; the Central Bank-ECB funding of approximately €40 billion would have to be repaid and, as this is State backed, it would fall to the Government to repay it; and the assets of the bank would have to be disposed of in a fire sale, which would increase the losses to the taxpayer. Is it realistic, in the current environment, to consider default as an option or to assume that the Central Bank or the ECB would continue to fund the bank in the circumstances I have outlined?

As indicated, the Minister is committed to reviewing the approach to the promissory notes with a view to reducing the overall cost to the State. The troika has agreed to engage with Irish officials in a process to produce a common paper in which all options for restructuring the notes in terms of the source of funding, the duration of the notes, the interest rate, etc., would be considered. In tandem with this technical review, the Government has commenced an intensive campaign at political level to garner support for an approach which would be more beneficial to the State. The Minister met Commissioner Rehn and the President of the European Central Bank this week to progress the matter.

The Government is committed to restoring sustainability to the public finances. Clearly, this presents challenges for policymakers. However, we must remain steadfast in our commitment to reduce the deficit below 3% of GDP by 2015. To this end, the Government has committed to increase the tax base and reduce expenditure as part of an overall budgetary strategy which is fair and measured. It is essential, in conjunction with this approach, that productivity and efficiencies are achieved in the delivery of public services.

The Minister thanks Deputies for this constructive and helpful debate and I ask them to support the Government's amendment.

See this speech in context