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

I thank the Office of the Ceann Comhairle for selecting this important matter for discussion. I have received apologies for his absence from the Minister for Finance, Deputy Noonan, who I understand is attending a Cabinet meeting.

This important debate is essentially about jobs and employment because 99% of businesses in Ireland are Irish-owned SMEs. Some 70% of private sector employment in this country is accounted for by SMEs. Some 700,000 to 800,000 people are working daily in Irish SMEs, so this concerns jobs.

The issue of SME debt has largely been overshadowed by household debt and mortgage arrears, but both issues are inextricably linked. If an SME gets into financial difficulty due to a debt overhang it can cost jobs. If a family loses a job it will have a direct knock-on effect on their ability to pay the mortgage and other households bills.

Last year, Ms Fiona Muldoon, a director of the Central Bank, said that about half of the approximately €50 billion owed by Irish SMEs was in some form of distress. The alarm bells should have started to ring at that stage. I welcome the recent intervention of UCD's Professor Morgan Kelly on this issue, given his strong reputation. He has triggered an important public policy debate in this regard and it is essential to give it the attention it deserves.

At a political level, we have been raising the issue of the debt overhang facing Irish businesses. Some weeks ago, I was informed in a Dáil reply by the Minister, Deputy Noonan, that last year the Central Bank set some targets for banks to move SME customers with debt issues onto longer-term solutions. Unfortunately, however, those targets have not been published by the Central Bank and we have had no indication of the nature of those solutions. The Minister said the banks reported that they have complied with the targets. This is the same Minister who, less than two years ago, told this House that one cannot believe what the banks are saying.

As in the case of the mortgage arrears targets, the banks' compliance with these targets in respect of SME debt restructuring needs to be independently audited and verified. It is essential for that to be done. In addition, the targets that were set last year by the Central Bank exclude foreign-owned banks, including Ulster Bank which is a major player in the Irish SME market. It is important to deal with that issue.

Fundamentally, SMEs with a significant debt overhang should have their viable trading business separated from the debt which is probably related to property. In recent years, we have seen many good, viable trading businesses being contaminated by the property collapse. Many of those property investments were not directly related to the business and did not relate to property which the business was using in its day to day affairs, yet represented a property investment. That contamination has directly affected many good, viable businesses. Therefore, we need to separate both aspects and put more innovative solutions in place. The solutions will certainly be more complex and quite different to those for mortgage arrears cases, for example. Many of the solutions for SMEs will involve equity participation and a fundamental balance-sheet restructuring for these businesses.

I look forward to what the Minister of State has to say. This is an important debate which is essentially about jobs and preserving employment.

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