Eamon Gilmore (Dún Laoghaire, Labour)

Deputy Boyd Barrett is correct that the country is substantially indebted and faces a large deficit. Treaty or no treaty we will have to reduce that deficit because the only way we can at present bridge the gap between what we are taking in and what we are spending is by borrowing. In order to borrow we have to find people who will lend to us. Since the previous Government put us into the EU-IMF programme nobody in the private financial markets will lend to this country. We have to get the money to pay wages and social welfare payments and keep the schools and hospitals open through the programme that has been agreed with the EU and the IMF. Over time the new European Stability Mechanism will come into play. We hope we will not need to access it but it is an important safety net or insurance policy. For these reasons it is important that we pass the treaty to access the emergency funding. If we do not have access to that kind of borrowing we will have to make huge cuts in pay, social welfare payments and the services we provide to our people.

The Government's objective is to reduce the debt-to-GDP ratio over time by growing the economy. That is what happened in the 1990s. Between 1991 and 2000 the country's debt to GDP ratio was reduced from 95% to 35% even though the actual size of the borrowings in monetary terms increased from £36 billion to £40 billion. That was possible because the economy grew. This is why the Government's strategy is, on the one hand, to ensure discipline in our budgets and prudent management of the public finances in order to reduce our deficit and, on the other, to grow the economy by attracting investment to create jobs and by pursuing a growth strategy.

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