Seán Fleming (Laois-Offaly, Fianna Fail)

I welcome the opportunity to contribute to the debate. The purpose of the legislation is to enable Ireland to confirm its acceptance of the second amendment to the Greek loan facility as part of the proposed new programme of assistance for Greece and to facilitate, in the public interest, with which all of us will agree, the financial stability of the EU and the safeguarding and financial stability of the eurozone.

It was agreed on foot of an intergovernmental treaty in May 2010 to set up the Greek loan facility to provide bilateral loans totalling €80 billion to Greece from eurozone member states in conjunction with an IMF assistance programme of €30 billion over a three-year period. This was a few short months before Ireland had to enter a similar agreement with the IMF, the EU and the ECB. All signatories to the Greek loan facility agreement have been requested to provide their acceptance to this amendment to the facility by 13 March. This was finalised only on 27 February. The Bill has been presented to the House at the first available opportunity and we are happy on this side of the House to facilitate its passage. I understand the President will sign the legislation as a matter of urgency in order that there is no hiccup regarding the deadline.

One of the Bill's provisions reflects agreement among the Eurogroup ministers on 20 February that there would be a reduction in the margin payable under this loan facility of 150 basis points. The Minister made it clear last night that Ireland provided €345.7 million to Greece through the original loan facility before it entered the EU-IMF programme. When we entered the programme, we left the Greek loan facility because countries in an IMF programme are not expected to contribute and, therefore, we are relying on countries that are not in such programmes to carry the can. However, it is important that quarterly interest payments are made by Greece. The reduction in the interest rate by 150 basis points will mean the Exchequer will receive €5.2 million per annum throughout the lifetime of the agreement.

An extension of the grace period from four and a half to ten years before Greece begins to repay the loan principal is provided for and the maturity of the loan will be extended from 7.5 to 15 years. Is it possible for Ireland to exit the agreement and seek early repayment of the €345.7 million we put in in good faith before we entered the IMF programme? I am not sure of the status of such a proposal but if there is a reduction in the interest repayment the Exchequer receives on an annual basis, I assume the capital amount we put in before we entered our IMF programme is still in this loan facility. Could a mechanism be agreed as part of the Minister's discussions with the troika to retain the €345.7 million for at least the next ten years? Everybody knows the difficult position Ireland is in and would agree that this amount would be beneficial in the context of dealing with our own debts. I recognise we provided the money in good faith but events overtook us quickly and, perhaps, it is an issue that should be tabled for future discussions with the troika to ascertain whether a mechanism could be provided for Ireland to regain that funding to use it for its own purposes.

The agreement has not been arrived at without the people of Greece suffering a great deal of pain. We see Greek people on the streets almost every night. A new government and Prime Minister are in place but it must be recognised the government is not democratically elected. The democratically elected government had to be replaced at the insistence of the people who were owed money by Greece and I look forward to the return of democratically elected governments in Greece and Italy at the first available opportunity.

To achieve greater compliance, new efforts are under way to install "an enhanced and permanent troika presence on the ground" in Greece. I do not like this phrase used by the troika because it is too similar to "troops on the ground". In addition, the troika will open an escrow account for Greece. In other words, from now on the troika will pay off Greek bondholders and withhold funds to the Greek Government. It is taking charge of banks accounts on behalf of the state and Greek acceptance of the new account was the greatest surrender of fiscal sovereignty by an industrialised country in recent history. A government, which was not democratically elected, has agreed to the troika taking control of its bank accounts and the troika will pay the bondholders and meet Greece's international commitments before paying for health and social services. Apart from having people on the ground, the troika is taking full control. This is the equivalent of a company going into receivership with the receiver in situ on the ground.

Ireland is not Greece, as the Minister has stated several times, and it is important to restate that. Greece is in a much worse position. Part of the problem is people could not accept or believe some of the figures coming out of the country. An element of the agreement is private sector involvement. It will be different from all previous agreements because it provides for a bail-in where Greece's private sector creditors, albeit on a voluntary basis, will be encouraged to exchange their existing bonds for new ones with a lower nominal value. If this is done voluntarily, it will avoid triggering a credit default. Those who issue credit default insurance will not consider this to be a default and there will not be a payout. Some people in the private sector would prefer to trigger a default in order that they could cash in their insurance policies. However, under this agreement, they will voluntarily agree to exchange bonds under pressure from various governments. Private sector involvement will result in the value of debt held by Greek bondholders being reduced by 75% and with the additional participation of external bondholders, the debt burden will reduce by approximately €100 billion.

The ECB and the central banks of eurozone members are not included in the private sector deal. The ECB is the largest holder of Greek debt with some saying it is of the order of €40 billion. It was acquired as part of the securities markets programme last year. In the past year, because people were concerned about a Greek default, senior bondholders were selling off Greek debt because they were afraid they would take a hit in the long term and the ECB through various mechanisms purchased them at a reduced price. This means the bank will make a killing in due course.

Recently, the European Commission President, José Manuel Barroso, said more than €20 billion in Structural Funds are available to Greece under the 2007 to 2013 programme. To date, €8 billion has been released but there is scope to do much more between now and next year. Another €7 billion could be released. The Structural Funds are part of a long-standing set up where money is spread around the EU according to economic need.

In response to concerns about Greece's history of mismanagement of EU funds, President Barroso stated, "Now the sense of urgency is completely different," and hoped Greece would manage the structural funds properly from now on in the interest of achieving some level of growth in the economy. The head of the group of eurozone finance Ministers, Jean-Claude Juncker, said only a week ago - this is possibly the troubling aspect of what we are talking about - that Greece might need a third bailout. He also said, however, that he wanted to concentrate on the second bailout of €130 billion, which we are facilitating in this legislation and which aims to cut Greece's debt to 121% of GDP by 2020. We must bear in mind that our debt is expected to be of that magnitude in the next few years. If Mr. Juncker is saying that a certain level of debt could lead to a further bailout, although he was not speaking about Ireland, it is not unreasonable to extrapolate that his comments could also apply to countries in similar financial situations. The Irish financial situation is not a whole lot different because our debt-to-GDP ratio will be of the order of 120%. In this regard, it is important that the Government seek a reduction in the bank debt portion of our overall Government debt. Overall, the banking crisis has cost us €60 billion to €70 billion, which represents about 40% of our total debt as a State. Most people will accept that a debt-to-GDP ratio of 120% is too high and too close to the Greek figure that is causing alarm. Those who are owed money as part of our bank debt must reduce this bank debt to Ireland. Our debt must be sustainable in the future. As I have just mentioned, Jean-Claude Juncker is afraid that a debt of 120%, which could be owed by Greece by 2020, might not be sustainable and might necessitate a further bailout. The view is that such a debt-to-GDP ratio is a particular difficulty. Our debt must be sustainable, but at that level it is on the edge of unsustainability.

I welcome the Government's action, as mentioned in reports on RTE recently, on promissory notes. It should not be a matter of restructuring interest rates and schedules of repayment; there must be a reduction in the actual debt. I am separating the 40% or so of our total debt that relates to the banking collapse from the amount of money the State ran up in deficits on an annual basis and that are still being run up, albeit at a lower rate, to pay for basic public services. Nobody can dispute that we did that to pay our doctors, nurses, teachers and social welfare recipients. We cannot get away from that. However, there must be a reduction in the bank debt. Those people who lent to Ireland for this purpose must agree to reducing the level of debt. They must be asked to do this by the Government and they must be genuinely pressed to reduce the amount. They must agree to an actual reduction in the debt and not just a jiggling around of rates of interest and schedules of repayment. Movement around the edges is not sufficient on this important issue. There have been bailouts in various countries, and these creditors must be now asked to bail in and be part of the solution. It is in their own financial interest to do this. They must, as part of this process, reduce the bank debt they are holding on behalf of the Irish State, which accounts for approximately 40% of the total Government debt. We can go nowhere in terms of revitalising the economy unless there is an actual reduction in the level of bank debt.

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