Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Ceann Comhairle for selecting this important issue for debate. The statement last night by the Finance Ministers of Germany, the Netherlands and Finland can only be seen as a major setback to the efforts to secure an overall deal on this country's bank debt. It is all very fine for the Taoiseach to insist that the summit statement from last June still stands, but that is no good to Ireland unless it is implemented. The bottom line is that the June summit agreement will not be implemented without the support of the Germans, Dutch and Finns. That is why we must treat last night's statement with extreme seriousness.

The noises coming from Berlin, in particular, have not been favourable for some time. Last month the German Finance Minister, Mr. Wolfgang Schäuble, indicated that Germany would oppose any Irish debt-relief proposal which would, in its view, send a negative signal to financial markets. Earlier this month the Chancellor, Mrs. Angela Merkel, expressed the view that Ireland was on a good path to recovery and she saw no need for changes to the bailout programme. If the statement issued by the three Finance Ministers last night accurately reflects the current views of the German, Dutch and Finnish Governments, it is devastating news for Ireland. A failure to do a deal on bank debt changes everything. Such a failure jeopardises our ability to exit the bailout and return to the markets. It means tougher budgets in the years ahead. Above all, it means that Ireland's debt position will become unsustainable in the absence of economic growth.

The statement sets out the position that direct European Stability Mechanism, ESM, recapitalisation can only take place once the "single supervisory mechanism is established and its effectiveness has been determined". Although we more or less knew this to be the case, it underlines the fact that a timely deal is unlikely. The statement indicates that while the ESM may take direct responsibility for problems that occur under the new supervision regime, legacy assets should remain the responsibility of national authorities. That is the key issue, as well as the stipulation that recapitalisation should occur using estimated real economic values. In other words, there will be no free lunch from the ESM.

What most concerns me is the impression among our European colleagues that everything is fine in this country, that we are back in the markets, meeting all the requirements under the bailout programme and ticking all the boxes. We must offer our colleagues a more honest assessment of where we are at. Such an assessment would acknowledge that day-to-day life for many Irish people is miserable because of the prevailing economic conditions. Without a deal on bank debt, the prospects for recovery will be nowhere near as favourable as they could be. That is the bottom line.

Last March the Minister for Finance, Deputy Michael Noonan, while on a visit to the United States, said that if the world economy were to pick up, the Irish economy would take off like a rocket. Unfortunately, the world economy has not revived and the Irish economy has not taken off like a rocket. In fact, the domestic economy continues to shrink. I am all for speaking positively about the economy, but all such talk must be grounded in reality. In May the Minister told a Bloomberg economic summit that the economy was in a much better position now than it was last year. That is not borne out by the statistics for unemployment, emigration, projected economic growth and tax receipts. In recent months, for example, tax receipts have been below what they were in the same period last year.

Will the Minister give his honest response to what was said last night? Is he disappointed by it? Where does it leave us in terms of negotiating and securing an overall deal on bank debt? I accept that he is genuinely seeking to secure such a deal, as evidenced by his travels to the various European capitals to meet his ministerial counterparts. However, we must call a spade a spade and acknowledge that last night's statement is a major setback. I look forward to hearing the Minister's honest assessment of the situation.

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