Peter Mathews (Dublin South, Fine Gael) | Oireachtas source

I thank my colleague, Deputy Terence Flanagan, for outlining the technical aspects of the Fiscal Responsibility Bill 2012. Public finances are in meltdown in Ireland, across the eurozone and around the globe. The ballooning of sovereign debt in the last three years is due to the conversion of private banking sector losses which have not yet been fully recognised into national debt. At a conference held in Wyoming in August 2011 it was pointed out that the economies of developing nations with combinations of sovereign, household and non-financial business debt exceeding an aggregate of 300% would be suffocated and become depressed, sometimes for a long period, as has happened in Japan.

Many wise and highly qualified experts in economics and finance have pointed out that it is the debt burden across nations that is causing the problem. It is good that governments address their own fiscal responsibilities and the generation and spending of revenue in a balanced way across the sectors of the economy, including health, pensions, education and social welfare supports for people who become unemployed or who need extra help and assistance. These are the main sectors that governments have become involved in over the last number of years, particularly since the Second World War.

When the financial system ran amok due to the lack of regulation of prudential operation and greed in the industry across the globe, the financial infrastructure - savings and pensions - of nations became imperilled and governments were strong-armed and frightened into taking on the huge liabilities and losses of these sectors. We are right to examine fiscal responsibility and to address the current budget controls in Article 3 of the treaty, and it is right for governments to consider the controls on debt-to-GDP ratios under Article 4. However, I lose my confidence in the bureaucrats and the establishment when I see that even in the drafting of Article 4 there is a contradiction. The fiscal advisory council, which is being institutionalised by means of this Bill, got a fright when I pointed this out to it when it came before the Oireachtas Joint Committee on Finance, Public Expenditure and Reform. We should read this again so we can think about it. When bureaucrats do not get it right, where does it leave us with regard to getting overall direction and strategy right? Article 4 states:

When the ratio of a Contracting Party's general government debt to gross domestic product exceeds the 60% reference value referred to in Article 1 of the Protocol (No 12) on the excessive deficit procedure, annexed to the European Union Treaties, that Contracting Party shall reduce it at an average rate of one twentieth per year as a benchmark, as provided for in Article 2 of Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure, as amended by Council Regulation (EU) No 1177/2011 of 8 November 2011.

This contains a contradiction in terms, but some ground is retrieved in the second part of what is a long and clumsy sentence by the use of the phrase "as provided for" in a previous Article. This is messy and undermines confidence in the bureaucrats.

For the next 18 months, we as a Parliament must set aside the partisan petty politics of the past. We must put them aside and spearhead a well focused and well directed effort towards the recovery of this nation. We must examine where we are in terms of debt. Our household debt, our non-financial business or corporate debt and our sovereign debt are the highest in the developed world. However, the penny has not dropped - or rather, the cent has not dropped - in Brussels. We must keep hammering this point home. Hungary, which was damaged due to low interest rates in the EU region, is now struggling under an IMF programme. The Government there is publishing one-page advertisements in the country's newspapers pointing out to the IMF the situation in Hungary and how it will not be pushed around but will talk raw horse to the IMF. We need to do that and to keep doing that.

Our vote in favour of the treaty was 60:40, but we should remember that 60% was because of the fear that we would not have access to the ESM. That was the main driving force behind the 60% vote. The driving force was not what was contained in the fiscal stability algebra of fiscal balance in an annual budget and debt-to-GDP ratios, but whether we would have access or be left hanging out to dry or left in the quicksands of a financial burden. As Deputies, we all know that households are in difficulty. People come to us in tears and distress because they cannot handle the debt. This is the message we must get across.

Basel III had all to do with financial regulation and I commend it, along with the book Guardians of Finance, to the House. It talks about the sentinel and the regulators of the financial world. We need a qualified and articulate sentinel that will be able to assess and monitor the regulators in the financial system. That is where the problem lies.

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