Timmy Dooley (Clare, Fianna Fail)

I welcome the opportunity to contribute on this Bill. It is the second part of a two part process and we had the opportunity yesterday to deal with some of the technical aspects of the underpinning and enactment of the legislation as part of the Treaty on the Functioning of the European Union. Today is an opportunity to concentrate on the provisions in the legislation that establishes the ESM and how we might examine the impact of its development and capacity to play a major role in dealing with the economic crisis that has bedevilled Europe for the past three and a half years.

There is little doubt the establishment and creation of the ESM was a fundamental reason for the people to give such a resounding positive vote for the fiscal treaty. It was right and appropriate that the treaty that set out the necessity for the delivery of discipline in the way we manage our budgetary process was juxtaposed against the question that if we were prepared to take the pain to recalibrate the Irish economy from a debt and deficit perspective, at the same time we will receive the support of our partners in Europe to assist in the event of our not attaining the growth levels that will be such a fundamental part of our economic recovery. It was right the two were put together. As others have pointed out, the "No" side wanted to separate the two; they wanted the ESM to be set up without being prepared to take the necessary medicine in the recalibration of our economy to meet the needs of a much changed world economy.

It is an important insurance policy and a vital tool to deal with the crisis but we must be careful. The current model seeks to address the crisis that has evolved to date but I am not sure the ESM as it is currently proposed looks far enough ahead to the potential pitfalls and crises that still lie ahead. That is one of my criticisms generally of the way Europe has responded to the economic crisis. We tend to arrive late with the solution to the problem as we envisage it at any particular time, not realising that in many cases, by the time we put in place a solution, the problem has shifted and expanded to a greater extent.

That applies to an Irish perspective. At the time, the then Minister for Finance, the late Brian Lenihan, would say, as he said in an interview with the BBC, that he was bounced into a bailout to protect the euro, recognising that Ireland was well funded for the foreseeable future and did not have an immediate requirement to go to the markets. Notwithstanding that, in an effort to show solidarity with our European partners, he put in place a programme to prevent the contagion that was rapidly emerging. Regardless of what Ireland did at the time, the contagion has continued to this day. Spain is in a similar position, although it presents a greater problem to the eurozone and Europe generally. Notwithstanding that, the solution, which was to put Ireland into a programme for a number of years, did not manage to contain the crisis and not everything is being done now to address where the problem will emerge next. We are fighting a rearguard action rather than being progressive, taking a leap of faith and putting in place the necessary solutions and mechanism to deal with the scale of the problem.

I refer to whether the ESM facility will have adequate capacity to deal with the needs that have the potential to be placed on it. How often have we heard the phrase, "The euro is back from the brink", only to find ourselves back at the same crisis point? That happens almost on a daily basis. This highlights that the Union and eurozone are operating with a flawed infrastructure. In designing the ESM as a permanent rescue mechanism, there is an opportunity once and for all to deal with the design flaws in the euro that have become evident during the crisis. Yesterday's comments by Mario Draghi where he set out his views to investors not to underestimate the resolve of EU authorities to defend the single currency were welcome. The currency has increased in value since his statements and markets have stabilised. My concern is this will be short-lived. Market sentiment is based on the latest rumour circulating. These fine words and strong commitments are not enough in themselves to address the crisis adequately.

To stabilise Spain and Italy, the eurozone should make it clear it will do whatever it takes to quell the self-fulfilling debt crisis and, therefore, consideration needs to be given to whether the proposed availability of €500 billion in lending capacity to the eurozone will be sufficient. I am not sure it will be adequate to take on the additional responsibilities the ESM might be tasked with if the situation in Spain or Italy becomes serious. The intention is that the fund will be able to raise €700 billion on the basis of initial seed capital of €80 billion while retaining €200 billion to secure its triple A rating. That is welcome but if pressure is applied I wonder if the ESM will have the capacity to deal with it. What eventualities could the ESM be called on to fund? Will it only be in place to aid Greece, Ireland and Portugal or should consideration be given to it undertaking the massive bond purchases that would be required to stabilise the market should Spain or Italy need funds for their banks, which is the focus of consideration in Spain currently or to meet their day to day requirements? These issues need to be addressed.

The ESM should be granted a banking licence and the right to borrow directly from the ECB. This could supplement its normal bond purchasing activities. Suggestions have been elsewhere that if the size of the fund was increased to €2 trillion, it would have the firepower it needs to deal with what might be considered to be a worst case scenario of Spain and Italy being shut out of the sovereign bond markets. I recall the US Secretary of the Treasury, Timothy Geithner, referring to this last year. Europe listened to him in the past when the then Government sought to address the banking crisis here by issuing haircuts to senior bondholders. He expressed a view at the time, which became the prevailing view across Europe. I would welcome it if some of our Union partners were as quick to accept his views when they might have a positive impact on the Union generally.

If the ESM can be strengthened to meet most eventualities, it will only be required as a backstop or insurance policy. That would provide the security the markets need. In the event of a crisis, they will not be left without, which is the current position, and that is why bond spreads are where they are. If Mr. Draghi believes that the Union will do whatever it takes to defend the currency, then the ESM, as the centrepiece of the strategy in that regard, needs to be fit for purpose. I recall him saying over the past number of days that this is an issue for eurozone leaders and politicians to take charge and control of and not one for him, the ECB or its governors. Reference is often made during these debates to the democratic deficit. Much noise was made during the recent referendum campaign about the Government ceding responsibility to unelected bureaucrats. This represents an opportunity to take back the mantle of governance. It is an opportunity for political leaders across Europe to clearly give direction to the mandarins. Mr. Draghi is crying out for that.

I call on the Minister of State to have a direct conversation with the Taoiseach. Over the past few days, we found it difficult to extract from him what position he has put to Chancellor Merkel and what her response has been. I accept that in a negotiation, one does not need or want to make public what one is looking for. However, in this instance, the people deserve to know what the Government is seeking in negotiations. By doing so, it would show respect to them on the basis that the Government sought their support to allow it and the Parliament, by extension, to negotiate on their behalf with our European leaders. It is a fair trade off to have a more open and frank conversation with the people to let them know what the Government is trading. This is not a game of poker. The other 26 member states clearly know Ireland's position. Why not let the people know what the Government is seeking?

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