Micheál Martin (Cork South Central, Fianna Fail) | Oireachtas source

We welcome this deal as a significant improvement on the previous situation. It delivers important benefits, particularly in terms of the profile of Irish debt over coming decades. In the medium term it relieves some of the pressure on the budget. What the deal absolutely does not do, however, is deliver the final answer. It marks progress but it is not a fundamental game change. The justice of Ireland’s case for relief has only been partly addressed.

In the midst of the rising tide of self-congratulation from the Government, what it has not done is to provide a detailed analysis of the full impact of the deal. It has exaggerated benefits and ignored major areas of uncertainty in the deal. A defining part of the strategy is to put politics first. We saw this last Thursday, when the Taoiseach and Tánaiste spoke for 20 minutes and gave about 20 seconds to explaining the detail of the deal. It should be noted that the Minister, Deputy Noonan, has taken a very different approach to that followed by his colleagues. Last week, he was open and constructive and has continued that policy into this debate. His speech yesterday avoided the partisan claims of other speakers.

Remarkably, the actual text of the deal is not available to us for this debate. We have received technical briefings about the Government’s interpretation of the deal, but we have not been given the opportunity to examine the actual text. As has been shown time and again, the last thing one should do with this Government is to take its claims at face value.

Last Thursday, the Department of Finance published a detailed analysis of the deal’s impact only up to the end of 2015. It appears that, as far as the Government is concerned, all we need to know is what happens up to the next election. Everything beyond that point has been left to general statements. This matters, because the uncertainty in key elements of the deal involves up to €32 billion across the full term of these new bonds. The provisions of the deal relating to interest rates and the length of time the Central Bank will hold the bonds are not some side issue. They go to the heart of the level of relief Ireland will receive.

While the Government has withheld significant details of the negotiations, the evidence suggests this is the issue where the ECB rejected Ireland’s proposal last month.

At all stages in the discussion of this issue, Fianna Fáil has focused on being constructive. As we demonstrated again last week, we have rejected the Gilmore model of opposition still being followed by others, which involves attacking everything and never accepting the limits within which public policy is developed. However, this debate has been structured by the Government to be three days of self-praise with as little genuine engagement as possible. It has proposed a motion which goes well beyond welcoming the deal and asks us to support a much wider range of Government policies. Equally, the Government continues to use a set of arguments at home which are completely contradictory to the arguments that secured this deal. We will respond to the ridiculous grandstanding and exaggeration coming from the Government but, equally, we believe that this debate have should more substance to it. A new agenda needs to be set out. This debate has been promoted as marking the decisive end of a process. We cannot support that idea.

Ireland's case for further significant relief from the impact of its bank-related debt remains strong. Over the last week, there has been a very selective presentation of the past. Remarkably, the Government has used many arguments in this debate which undermine our case for further relief. This should be a debate about the future but the speeches from the Government require a response to their distorted picture of the background to this deal. During the period 2008 to 2010, the world experienced its biggest financial crisis in 80 years. Within Europe, the crisis was most acute because it involved a still-young currency union built with profound faults in its basic design. History already records that this was a period of dramatic uncertainty combined with an acute fear that contagion was about to swamp the European financial system and, in turn, the wider European economy. The absence of key policies and rigid application of damaging ones made a bad situation much worse, caused a succession of runs on the sovereign bonds of eurozone countries and continue to undermine recovery to this day.

Over the last two years, a series of major developments have helped to restore some stability and have removed the once-all-consuming fear of contagion. Different countries have begun to benefit from these developments. Debt write-downs, ECB intervention, shared funding of bank recapitalisation and a lender-of-last-resort fund have given countries options not available before and certainly not available in 2008-2010. When confronted with its own financial crisis, Ireland did not have these options. Ireland was effectively pushed into tackling the situation with little or no room to reduce its liabilities or receive assistance. These facts are often ignored but they have provided the entire case for the deal just agreed. Every time the Government indulges its partisan instincts to claim that everything was purely the responsibility of the last Government, it is directly contradicting the case that entitles Ireland to relief.

It is correct to say that the bank guarantee of September 2008 marks the formal start of the chain of events that created these debts, but it is entirely wrong to say that the guarantee made them inevitable. There is a lot to be learned from that event, none of which will be learned if Ministers keep up their current tactics. Given that they constantly ignore this fact, the record shows that ten out of 15 members of the current Government voted for the guarantee and all 15 voted to renew it subsequently. The Labour Party proposal of the time was not to let banks go bust but to immediately nationalise everything. It is basic fact that some of the guarantees' strongest proponents now claim to have been against it all along.

In the decade leading up to the guarantee and in particular from the point at which we formally joined the euro, bad practice and abuse within the financial system occurred on an enormous scale. This is primarily the fault of those involved, but there were major failures in the regulatory and political oversight of the banks. The ECB, the central banks of member states, governments and parliaments all failed. It is a reality that the only debates in this House about banks concerned how to get them to lend even more and no serious debate about regulation took place until the system was in turmoil.

In the period after the guarantee, the need to recapitalise the system was established. It has been well proven that at different stages, efforts to burn significant proportions of bank bondholders were opposed by key international players whose support was required to keep the financial system functioning. In effect, Ireland was denied the opportunity to reduce the debt impact of the banks. On top of this, Ireland was initially given no assistance in funding this impact and was then given funding at a high rate. My late colleague Brian Lenihan did begin a programme of writing down the debts of certain types of unsecured bondholder, but this was well below the level sought by him. It was agreed that the impact of the debt needed to be reduced, and the published record of the European Council for the period from December 2010 to February 2011 shows that the need to address Irish debt sustainability was already in the draft conclusions for the summit that our new Taoiseach attended soon after taking up office.

It was entirely right that bondholders were a major issue in the general election. My party took the brunt of justified public anger about these debts. What was entirely wrong was the cynicism with which certain parties campaigned on the issue. They talked tough while looking for votes but abandoned their posturing almost immediately. The attempt by the Labour Party and Fine Gael in this debate to redefine what their positions were is fooling no one. The Labour Party has had most of the heat because of how effective the Tánaiste was in claiming that he would be dictating terms to Frankfurt. Fine Gael was more specific, promising that "not a red cent more" would be paid for the banks. In government, however, these parties have paid billions of euro to unguaranteed, unsecured bondholders of banks. This was nothing to do with the guarantee. They did not burn those bondholders but they did burn their election promises.

What has happened since 2010 is that Europe has slowly - in fact, not yet fully - started to address the need for policy change. The escalating Greek crisis has twice led to significant reductions in the interest rates on existing loans to all countries. The fiscal treaty was enacted to give some greater credibility to the Stability and Growth Pact and, far more importantly, it creates a larger and permanent fund not just for bailouts but also to try to prevent them from being necessary in the first place. The principle of no write-downs which we faced has been abandoned. Greece has twice effectively written down its debt and the package currently being negotiated with Cyprus includes an aggressive "bail-in" of bank bondholders in order to dramatically reduce the public cost of saving banks. European banks are still going bust and being recapitalised with public money but bondholders are now sharing the pain.

Most important of all has been the changed leadership of the ECB. Under Jean-Claude Trichet, the ECB became obsessed with being a hardline enforcer of orthodox policy, even to the extent of threatening the very existence of the common currency. His successor, Mario Draghi, has adopted a radically different approach, summed up by him last year as "Whatever it takes". He has restored confidence in the banking system and signalled support for sovereign debt, stretching the limits of the bank's legal remit further than anyone had imagined. Mario Draghi has shown more imagination and bravery than any of the European Union's political leaders and without him there would be much greater austerity and a much more profound crisis across Europe. From Ireland's point of view, his impact has been undoubted - something that is highly ironic given the fact that the Taoiseach has confirmed that he held no discussions with Mr. Draghi before agreeing to his appointment.

The Government is today presenting the picture of a visionary negotiating strategy executed with determination over two years. The truth is very different. Initially, the Government said it was concerned with the interest rate on the existing loans. This was dropped when it finally accepted that the interest was returning to the Exchequer and was irrelevant. The strategy was then to come up with an agreed technical paper, but this never materialised. The next strategy was to say that Ireland deserved something for being the best boy in the class. Saying that Ireland was doing fine and should be allowed to do even better did not work either. Following the latest Greece-inspired deal, the Government finally agreed to start using Ireland's strongest case - that we incurred these debts because of European failures as well as Irish failures and deserve relief because of basic principles of equity.

While he continued to refuse to commit to this strategy in the Dáil, because he enjoys political attacks too much, the Taoiseach made this case outside the country from October onwards. As I said last week, the strength of Ireland’s case post the June 2012 Greece deal meant that a deal was highly likely and its broad outlines were always likely to be similar to the final outcome. The Tánaiste has copied the Taoiseach’s habit of directly misrepresenting my comments on this deal. For the record, among repeated comments about the likelihood of a deal, I stated in this House on 19 December:

I believe that there will be a deal in relation to the promissory note. The justice of the Irish case demands an outcome which would lengthen the term and reduce the rate to halve the impact of repayments on the Irish deficit across a few decades.

The success of the negotiations is welcome and is substantially to the credit of the Governor of the Central Bank, Mr. Honohan. The weekend briefing by Ministers eager to boost their standing that he was given a dressing down by the Taoiseach, was wrong. That briefing should not have happened. The Taoiseach should have the decency to correct the record. It is worth noting that on 16 January, the Governor told the finance committee that the framework for a deal was essentially in place.

The Government has given us no detail about what was asked for during the negotiations or, more important, what changes the ECB secured in the final weeks. There is no doubt that the deal is an improvement on the previous situation. It will be easier for Ireland to borrow and this borrowing will be at a lower rate. In the next few years there is a guarantee of some improvement in the impact of the debt on both our deficit and the overall public debt. According to the Department of Finance there will be no deficit saving this year and there will be a saving of roughly €1 billion or 0.6% of national income in 2014 and 2015. Overall debt will initially go up and then fall by 0.4% in 2015. This is not a game-changer but it helps.

Nothing has been published by the Government to show the specific impact of the deal in subsequent years. While general claims are being made about savings there are many areas of doubt. The most important issue relates to how long the bonds will be held by the Central Bank. It is in Ireland’s interests that the Central Bank hold them for as long as possible because it returns most of the interest to the Exchequer and it avoids using up private sector demand for Irish bonds. This would appear to have been the issue about which problems arose over the past month. It can be surmised that the ECB said that the holding had to be limited to helping restore the stability of the financial system or it might be termed monetary financing of government in contravention of the treaties. This is where the ECB played hardball and introduced major uncertainty into the deal. The only statement on the deal issued by the Central Bank states: "The bonds will be placed in the Central Bank’s trading portfolio and sold as soon as possible, provided that conditions of financial stability permit." A series of minimum sell-offs have been outlined but it has been confirmed that the Central Bank is free to sell its entire holding at any stage. This is potentially a major problem. The interest rate is equally uncertain. For the moment it is at a variable rate off the Euribor plus 2.6%. This is a good rate but likely to rise significantly. The deal allows the Central Bank to convert the bonds to a fixed rate at any time, bringing extra uncertainty.

The Government has included figures for returned profit from the Central Bank over the next few years and has implied the basic figures will continue through the deal. Professor Karl Whelan of UCD, who predicted the shape of the deal four months ago, has estimated that on basic assumptions, almost €47 billion will be paid in interest on these bonds. Of this, €32 billion will be lost in payments to the private sector. The answer to the statement that the deal is as good as we could want is, "No". A better deal is possible. We could save billions and avoid diluting private sector demand for Irish bonds if the Central Bank were to hold the bonds to maturity. Instead of running the victory flag up the pole and consigning this debt to history, we need to make it clear that Ireland seeks and deserves further assistance. It is not clear that the ESM taking our share of the pillar banks would help – in fact it could be worse than the current situation. We should work for full justice on the IBRC-related debts and a guaranteed long-term benefit for our budget.

During last Wednesday’s emergency sitting, we argued that the interests of the IBRC staff needed to be considered. Since then it has become clear that the only people for whom the Government had no plans were the staff of IBRC. They have been treated appallingly and are being subject to a grave injustice. The Irish based staff have seen their redundancy entitlements halved and with little or no assistance available from the State to help them. In contrast, the 200 staff in Northern Ireland and the UK have retained their jobs and their redundancy entitlements. I think it is wrong and it should not stand.

People are looking at claims of a game change on debt and comparing that with their rising household debt. The mortgage crisis, in particular, is now an emergency. It is not being addressed by the banks or the by Government. It must now become the absolute priority. We must also speak up for a proper banking union with common rules and funding for closing banks and guaranteeing deposits, as well as eurozone-wide regulation. Anything else will leave unchanged the fundamental dynamics which caused this crisis in the first place.

This deal is a step forward but it is nowhere near the end of Ireland’s case for being treated justly with regard to bank-related debt. The burden remains too big and its impact on our people too severe. Further significant improvement in the deal is possible over time. We need to let it be known that we will seek this improvement.

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