Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

Members of the Joint Committee on Finance, Public Expenditure and Reform first saw the heads of this Bill, which is quite technical, last week. I am still trawling through the detail because there is much to digest. It is important, in this Second Stage debate, to make clear to members of the public, using language they understand, what is at stake. When we speak of the European Stability Mechanism we are referring to the response of the European Union to a catastrophic crash in the European banking and financial sector which has beggared citizens here and elsewhere in Europe and for which we are still paying a terrible price.

It is appropriate that we are discussing Europe's response to the economic crash on the day that water charges are being introduced. The reason citizens must, for the first time in the history of the State, pay to access a basic human right is that the banks and financial institutions, through greed, gambling and speculation, wrecked the European economy. Six years after the banks crashed the economy, citizens are still paying the bill and will continue to do so through water charges and other charges which they never had to pay previously. I should add that people always paid for water through taxes but must now also pay charges. The previous Fianna Fáil led Government and the current Government agreed to these charges as one of the conditions of the so-called bailout. Hard-pressed, struggling families, many of whom cannot pay their bills as matters stand, are picking up the tab for the gambling and speculation of bankers, financiers and bondholders and the abysmal failure of European Union and Irish political and regulatory authorities to prevent them from doing so in the first place.

If it means anything, the Bill is supposed to ensure some degree of retroactive justice for the great injustice that has been done to citizens of this country and establish a mechanism that will ensure it never happens again. The Government suggested, in its famous landmark announcement of June 2012, that some retroactive justice would be done. There would be, it stated, a game changer and we would secure retroactive recapitalisation. Translated into layperson's terms, it meant that Europe would give us back some, or perhaps all, of the money citizens were forced to pump into the banks to prop them up and Europe and the political authorities in this State would establish a mechanism that would prevent it happening all over again.

Viewed in those terms, one must ask whether the Bill will achieve either of these ends and it is absolutely clear that it will not do so. On the issue of so-called retroactive recapitalisation, we get virtually nothing.

The matter will be dealt with on a case-by-case basis. The ECB board of governors will decide, but there are no guarantees that we will get some or all of the €64 billion that we - the ordinary working people and citizens of this country - put into the banks and paid for with cruel austerity for six years, as well as unemployment and emigration. Nothing in the Bill suggests there is any firm commitment to get that money back. Is there anything in it that suggests there is a reasonable chance that we will get the money back? If not a firm commitment, is there some evidence of, or room for, optimism based on the Bill? One has to say the opposite is true. Of the €500 billion firepower of this mechanism, only €60 billion - just over 10% of the fund - is to be set aside for recapitalisation of any description, whether it be retroactive or in the future. As we put in €64 billion, a lesser amount has been earmarked in the fund for recapitalisation of banks for the whole of Europe than what this country put in to save its own banking system.

The Minister might say - it was said at the committee - that the board of governors could decide to change the figure if we needed more than €60 billion. The fact that it has set aside €60 billion, however, strongly indicates that there is no intention of giving us back €64 billion, or even a substantial portion of that sum. If there was a serious commitment on its part to do so, the figure would be considerably bigger than it is. There is no inclination or suggestion in the legislation that we will get anything like all, or a substantial amount, of the money we pumped into the banks. That much is clear. That is why since the landmark game-changer announcements and all the rhetoric and hyperbole, we have really had nothing. All the evidence from the European Union is that it will not happen.

There is further evidence in the eligibility criteria to access the fund which has consequences both for our call for retroactive recapitalisation and the fund's future application or the ability of states to access it. Most people expect us to ensure ordinary citizens will not be put on the hook again. In fact, however, the so-called waterfall of access or eligibility criteria for the fund suggests the opposite. There is a very high threshold to access it. The first call - I welcome this to some extent - is on the bondholders in financial institutions. Let us remember, however, that in some of the biggest institutions about which we are talking we are the bondholders. We were forced to bail out the people concerned and become the owners of the banks. The first call, therefore, will again be on us. The second call will also be on us because after one has exhausted the 8% requirement of the institution, which amounts to only a fraction, 8% of the liabilities have to be paid by the financial institution itself from bondholders or deposits.

The next call is on the State which has to prove that it needs to access ESM funds only if there is a systemic risk and it has exhausted all other avenues through its own resources to bail out and recapitalise the financial institution concerned. Therefore, there is quite a high threshold to access the fund.

Deputy Thomas ringle mentioned figures which he will go through later. If one looks at our bailout, in this scenario we would still be paying the vast majority. It would be paid out by us before we could seek money from the ESM.

We are also on another hook as we have already put €1 billion into the fund, while the total call on the State is €11 billion and possibly more because that figure can be revised upwards. It is alarming when one considers there are serious questions about the firepower capacity of this €500 billion fund for the whole of the European Union when one considers that just one bank - Anglo Irish Bank, a relatively small bank by European standards - cost €30 billion alone to bail it out. There is a serious risk that we could be on the hook for massive amounts of money if there is a crash elsewhere in Europe.

There is an additional point concerning retroactive recapitalisation. If this is the threshold, they are saying that in order to access the fund, one must do it primarily within one's own state. The first call might be on bondholders who, to a large extent, are us. The second call is on the State. Will they, therefore, not apply the same criteria when we ask for retroactive recapitalisation? If we seek this, they will say: "No. We think you are doing okay now. If the banks have a hole in them, we think you have the resources to do it. You have got to call on your own resources first, so we do not believe there is a systemic risk. We do not believe there is a wider risk to the eurozone, so sorry lads, you are going to have to cover the cost again, not this wonderful mechanism."

Like so many insurance scams, that is just what it is - a scam. One pays a high premium of €1 billion and possibly €11 billion and God only knows to what it will go up. When one makes a claim, however, they will fight it every step of the way to ensure they will not have to pay anything back. Looking at the Bill, they will certainly not even entertain any serious back-payment for the money we have already forked out and which beggared the country.

The legislation is not serious either in dealing with the problem we have or the likely problems we will have to deal with in the future. Therefore, we cannot vote for it. Quite a few of us on these benches voted against the ESM and I do not think we can support the Bill for the reasons I have outlined. It is often said on the Government side of the House that we are very good at criticising, but we do not offer an alternative. We have offered an alternative and I have a few minutes to spell it out. Both here and at ECB level we must examine banks' mandates and ask what they are for. Back in 2008, in its response to the initial financial crash, the ECB spelled out explicitly that whatever states had to do to prop up the banking system, they could not divert from profit maximisation. I am paraphrasing, but that message was set out in the ECB's guidelines and that mentality has been pursued ever since. Profit maximisation is what banks seek and, according to the ECB, they should not divert from it. That is the problem and it led us into the mess in which we find ourselves and it will lead us back into it again. We have absolutely no chance of achieving retroactive recapitalisation because it is all about profit maximisation.

As others and I pointed out in this House, even the Federal Reserve in the United States, the heart of capitalism, has a wider mandate than that. Its mandate includes making sure people have a roof over their heads, and employment in the jurisdiction is a key priority. It also deals with issues such as inflation. Therefore, the narrow profit-oriented mandate given by the ECB, which filters right through the banking system, is the problem and needs to be changed.

Banking authorities, including the ECB and pillar banks especially, should be under real public control and their priorities should be set according to the needs of the wider economy and society. Banks are supposed to be the lubricant of the economy as a whole and to account for the general interest of citizens and economic stability rather than engaging solely in the cutthroat business of making money at all costs. The latter always puts pressure on the wider macroeconomic considerations.

When one sees the property bubble inflating again, one just wants to weep. Once again, property, including housing and commercial office space, are becoming subject to speculation. What will prevent a recurrence? What mechanisms are being put in place? Where is the stability mechanism to stop this madness and prevent us from treating as commodities the things and infrastructure people require in order to live, regardless of the consequences for the wider economy? Bearing these consequences in mind is required if one wants stability. None of this is in the legislation. I cannot believe, after everything that has happened, that there has been no discussion on changing the mandate, focus or priorities of banks, at both European and national levels. As Deputy Pearse Doherty stated, we are in extraordinary circumstances in which we are nursing the banks. We have nursed them back or nearly back to profitability, yet we carry the can. As soon as they start to make money again, at which time they could actually give something back to the society that has been beggared bailing them out, we will hand them back to the vultures so that what occurred can happen all over again. I find it incomprehensible.

Ultimately, this is an ideological argument. It should not be, however, because there is sufficient evidence. One could argue about the merits of competition and profit and how trickle-down effects will work for all of us, but when we see where that thinking got us, I am amazed that we cannot draw the obvious conclusion that there has to be far greater public control and oversight over banks and their priorities and objectives. Instead, we are going back to square one. As this legislation clearly sets out, we could be beggared again if that happens.

The only slight, marginal change is that there is a bit of a levy on the banks, so we have some money set aside in case what occurred happens again. Of course, it may not be enough, and we will be on the hook if it is not. As I stated, we are the bondholders to a large extent. Therefore, what is proposed is not good enough and I do not believe we can stand over it. It will be a shame for any Government if, in the aftermath of the awful crash and the suffering endured by this country, it fails to learn lessons and does not at least ensure that if we cannot retroactively secure justice for the people who were wronged as a result of the crisis, it will put in place structures to ensure it will never happen again. Sadly, those reassurances and structures are not in place, and we will almost certainly be going down the same road again.

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