Micheál Martin (Cork South Central, Fianna Fail)

Last week the European Council and the euro group issued conclusions which gave us all some cause for hope. A new and more credible approach to addressing bank recapitalisation has been agreed in principle. A joint regulatory framework for the financial system will emerge at some point, although the scope of this is unknown. These are substantial moves forward. They mark a welcome departure from months of aimless activity which helped to renew the crisis in the sovereign debt market and bring the euro to the edge of collapse. The reductions in bond yields this week show that the summit has had some positive impact. However, let us not be fooled into thinking that it has finally dealt with the crisis or that the actions required to stop an escalation of the recession have been taken. This summit was only decisive if one sets it in comparison to what went before.

In light of the declarations of decisive action having been taken and of Europe having turned a corner, people should stop for a moment and consider the statements issued after last July's emergency summit or, for that matter, after any one of over a dozen crisis meetings held in the past four years. If one examines the record of this House for the past 18 months, one will find the Taoiseach repeatedly informing us about how decisive action has been agreed. After the December and March meetings he talked at length about how leaders had agreed moves which were already restoring confidence and which would deliver jobs and growth. There is not even the merest hint of understanding of the scale and escalation of the crisis. What one will also find is a systematic pattern of exaggeration about the Taoiseach's influence and that of the Government. At one point, he informed the House about having held negotiations with the former French President, Mr. Nicolas Sarkozy, but subsequently had to admit that this was little more than an informal greeting at the side of the Council Chamber. Last June he actually claimed to have put the Greek debt crisis on the summit's agenda. Of course his biggest exaggeration before Thursday's summit was when he claimed to have negotiated last July's reduced interest rate on loans to Ireland. Speaking notes were circulated to all Government backbenchers in which the claim was made that the Taoiseach had heroically delivered enormous savings for Ireland because of the deep diplomatic negotiations in which he was involved. The truth, acknowledged everywhere with the exception of Merrion Street, is that Ireland benefited from a deal which was negotiated for Greece and which was automatically extended to all countries. That deal was worth four times what the Government admitted it had sought.

This addiction to self-praise and exaggeration has become much worse. In that context, the Government seems to have forgotten what it said as late as last Wednesday. It should consider the record. On the day in question, the Taoiseach repeatedly stated that he would not be raising the issue of Irish banking debt at the summit. He was true to his word. On Thursday evening he and the Tánaiste sided with the majority that wanted to quietly agree the summit conclusions and move on. In fact, the Tánaiste got on a plane and headed home. In contrast, the Italian and Spanish Prime Ministers said there would be no deal on anything until urgent issues were addressed. The situations in their respective countries were giving grave cause for concern last week, particularly that of Mr. Mario Monti in Italy. Everyone in Europe welcomed the latter's arrival on the scene but he was being undermined by the lack of action in respect of the sovereign debt crisis and the intransigence that was displayed prior to the summit. The situation in Italy was becoming extremely perilous. The deal won by Spain and Italy in the early hours of last Friday morning is very important. This is because at every stage during the past four years the Council and the euro group have adopted a consistent approach of extending the principle of agreements to all countries.

The performance of the Government since last Friday has been so brazen it would make John Terry blush. Both the Taoiseach and Tánaiste have been praising themselves for having tirelessly executed a cunning plan. Brief handshakes when entering the meeting room have been elevated to the level of in-depth consultations. Apparently the Taoiseach showed a masterful command of tactics by agreeing to move on to other business and not co-ordinating with the Spanish and Italian delegations. Spain got a definite deal in respect of bank recapitalisation, while Italy obtained a deal on sovereign bonds. Ireland was granted an examination of its banking debt. That examination is welcome but I wish to ask the Taoiseach a number of questions in respect of the advanced discussions relating to our banking debt about which the House has been informed during the past 12 months. We were informed this time last year that a joint working paper on this issue was being drafted. One would have obtained the impression that a great deal of detailed work was to be done in respect of the technical paper, etc., in the interim. Two weeks ago, the Taoiseach indicated that he had not read the technical paper. Will that paper be published in order that we might glean some information in respect of what Ireland is actually seeking?

The difficulty for us is that we do not want merely what has been done for Spain. In the case of the latter, bank recapitalisation has yet to happen. As a result, the ESM money will go directly towards the purchase of new equity in Spanish banks. If the same core principles hold for Ireland, then the ESM may purchase from us our shares in Bank of Ireland and AIB. It appears the key factor is that the ESM must have an asset in return for its investment. It would be highly unlikely - and of little help - if all that happened was that those shares were purchased from us at current values. Until Friday last it was the Taoiseach's position that the Government's sole priority was the cost of the promissory notes. Earlier this year the Government declared victory on the basis of a deal which actually increased the cost of the first tranche of money relating to those notes and converted it into normal sovereign debt. The promissory notes should remain our absolute priority in the context of the bank debt. As the Taoiseach has finally been willing to admit, these notes were agreed because Ireland was being responsible towards a Europe which was scared of contagion and which lacked any alternative. This debt should under no circumstance simply be converted to standard sovereign debt on the ESM terms available to all. The promissory notes are a unique instrument, developed at an exceptional time, and have no implications for wider policy. An entirely separate approach is required in respect of them. A much longer-term and nominal interest rate is what should be considered in that context.

The reference to the ECB's support for Ireland in the statement issued in the aftermath of last week's summit is no surprise. The bank's core negotiating objective has been to transfer the promissory notes into standard sovereign debt and walk away. Its hard-line opposition to genuine relief on the promissory notes has not been changed by this deal; rather, it has been confirmed. In light of the policy of systematic exaggeration that has characterised everything the Government has done during the past 18 months, if it wants people to believe that a major breakthrough has been made then it is time to start producing some details. The Taoiseach should do what his Spanish and Portuguese counterparts did, namely, publish his detailed demands and then meet people to discuss them.

With the exception of the bank-debt element of the deal, nothing was agreed at the summit that fundamentally changes the dynamic of the crisis or addresses the core design faults of the euro. The introduction of joint banking supervision is absolutely essential. The linking of such supervision to the disbursal of ESM money to Spain suggests that it will be watered down to meet the demands of Germany's regional banks. It is highly unlikely that agreement will be reached in time for the October deadline.

A central dynamic of the crisis has been the fear among investors with regard to the lack of a lender of last resort. The ESM was supposed to ease this fear by showing how the resources were in place to rescue anyone. With €100 million to go to Spain's banks and the other commitments, the ESM simply is not large enough to give the required confidence to investors. If it becomes involved in buying Italian bonds on the secondary market, the ESM may bring forward the date of the next crisis. When it spent a much larger amount on similar purchases, it provided short-term relief, increased its own risks and failed to save Greece, Ireland or Portugal. Why should the dynamic change now because it is the ESM and not the ECB buying the bonds? The monetary ideologues insist on the purity of their vision for the ECB. They also insist that ESM funding cannot be leveraged to deliver firepower which can outlast a further run on the bond market. The failure to challenge this means that the single biggest driver of the sovereign debt crisis remains in place and will probably come to the fore again. I refer the Taoiseach to a newspaper article by Colm McCarthy in which he makes the intelligent point that the devil is actually in the principle and focuses on this specific issue of concern.

Europe also requires investment if it is to get out of the recession. This summit again failed to deliver anything which could honestly be called a growth agenda, and in today's edition of The Irish Times, Martin Wolf describes what is proposed as "a mere bagatelle". Giving money to the European Investment Bank and reallocating structural funds are good ideas but they fall down in two major ways. First, there is no detailed agreement to use the money being allocated exclusively for regions most in need. Second - this is a most important point - the co-financing rules have not been changed. As a result, the money, if it materialises, is actually likely to further strengthen stronger regions at the expense of weaker ones that cannot afford co-financing. If the entire allocation actually happened, it would provide a stimulus of less than 1% of the income of the European Union over more than two years.

We must be honest about this matter. People have engaged in a great deal of spin in order to cover the French situation, talk up the supposed growth pact and so on. However, what is proposed is not a growth pact. Something that amounts to only 1% of the overall European Union budget is not a growth pact. This is particularly evident when one considers that unemployment across the Union now stands at 11.1%, the highest it has been since the introduction of the euro in 1999. Too little attention has been given to the effectiveness and capacity of the growth pact. It is not in any shape or form a real growth pact. A real growth pact is urgent and needs a direct transfer from regions in surplus to regions in deficit. Nothing agreed last week delivers that. The full summit talks at length about moving to what is termed a genuine economic and monetary union. What has been agreed is to look for areas to agree on rather than starting with a clear view of what is required. The text gives very little reason to believe the leaders understand this.

The agenda is about control, not creating a genuine Union. It is full of measures which originated in the pre-crisis period and involve neither ambition or reflection. I heard the Taoiseach's speech and he said he will play a full and active part, whatever that means.

See this speech in context