Thomas Pringle (Donegal South West, Independent) | Oireachtas source

I thank Deputy Richard Boyd Barrett for agreeing to share some of his time with me to discuss this Bill.

The Bill deals with the amendment of the treaty we signed up to through legislation in 2012. It is important to bear in mind that we are actually amending an international treaty that we signed up to without the approval of the people.

The ESM is an independent legal entity. It has legal immunity from all courts across the European Union and the world. It is not subject to regulation under any EU laws or any EU state. The body is a law unto itself, and we are amending a treaty today to give it the so-called power of direct recapitalisation of financial institutions in the euro area. We are to amend an international treaty for a very powerful secret body. Although the Minister for Finance is a director of the ESM, the ESM is not subject to freedom of information guidelines, and its meetings are secret. Its directors are bound by the privacy rules governing the institution. Thus, citizens have no means of knowing the discussions taking place within the ESM except when it decides to tell them. That is very dangerous.

We have already paid over €1 billion into the ESM as part of our capital call. The treaty we signed up to in 2012 gives the ESM the right at any time to call for a further €10 billion from us as a nation, which sum would be paid into its capital fund. If that is not enough, it can, by its own decision, alter its requirement for capital and increase the sum infinitely. It can use the funding to leverage unlimited borrowing on the international markets at its discretion without any input from any member state of the European Union or euro area. We are bound by the treaty to amend our laws and pay capital as the ESM asks for it, without question and without considering the impact it could have on us.

The ESM is a very dangerous institution. This has all been thrashed out before, but it is important in describing the context. We have been told the purpose of the legislation is to put into effect a decision that was made by the Eurogroup in June 2012. I refer to the famous seismic shift in which it was affirmed that it is imperative to break the vicious circle involving banks and sovereigns. We have seen nothing but rowing back on that since June 2012. As said by other speakers, the Taoiseach and Tánaiste lauded the shift as a game changer that would change everything for us as a nation and put us back on track. They have rowed back continuously, right up to June 2014 when the President of the Eurogroup stated that the direct recapitalisation instrument might be activated where a bank failed to attract sufficient capital from private sources, and if the ESM member concerned were unable to recapitalise it, including through the instrument of indirect recapitalisation of the ESM. He also stated the financial assistance would be provided in accordance with EU state aid rules and the ESM member would be asked to invest alongside the ESM. Even if one gets over all the hurdles involving direct recapitalisation of one's banks by the ESM, one must go along with it and fund it in parallel.

Other speakers have mentioned the so-called liability cascade and the decision-making processes that will have to be gone through before direct recapitalisation can take place.

It is useful to look at this in the context of our guarantees in regard to the banks and the bailout that took place. At that time, the estimated liabilities of the banks amounted to approximately €440 billion. If we look at the liability here, the first step is that the first 8%, at a minimum, must be provided by equity bond holders, uninsured depositors, which in our case would have amounted to approximately €35 billion. The next step is that national resolution funds must cover up to a maximum of 5%, which in our case at the time would have amounted to €22 billion. This brings us to a total of €57 billion that would be required to be invested before we could even look at using the direct recapitalisation instrument through the ESM. We have already put €64 billion into the banks, so that would leave €7 billion that could be covered by direct recapitalisation. The President of the Eurogroup says that any recapitalisation must be done in conjunction with the ESM member putting in funds. If this were done on a 50:50 basis, it would leave approximately €3.5 billion that we could expect in direct recapitalisation.

One could make the argument in our case that the 8% provides for equity from bondholders and uninsured depositors and that we have stepped up to the mark in that regard. However, if this happened today and we had to get access to the mechanism, we would be looking at recapitalisation of approximately €3.5 billion out of the €64 billion we invested in the banks to save them. Therefore, this direct recapitalisation is not a panacea or resolution. I think of it as a charade that the ESM has added into the treaty to make it look as though it wants to break the link between sovereigns and banks.

Much of the time, we on this side of the House operate under the false idea that what the Government, Europe and the ESM want to do is to look after European citizens, but that is not the case. What the Government, Europe and the ESM want to do is to look after the banks. We on this side of the House are coming from the wrong starting point, and that is why we cannot understand what the Minister is doing here. We need to look at the Bill in the context of what the Minister is trying to achieve, which is to financialise the whole of society and Europe and make all the citizens of Europe responsible for the banks. That is what the ESM hopes to achieve. It is not about looking after and protecting citizens from financial crashes and catastrophe. It is about making citizens responsible. The ESM is the instrument being used to copperfasten that responsibility and ensure we give unlimited power to a secret body operating out of Luxembourg which has the right to access unlimited borrowing and place unlimited demands on member states to underwrite that borrowing. This is what the ESM is putting in place.

We are going to rush this legislation through this House and sign up slavishly to it, quite happily, without any guarantees from Europe in regard to our banks and our recapitalisation. We might, if the Minister decides, make an application to the ESM. I expect that if he does make an application, we will be lucky to get €3 billion or €4 billion in direct recapitalisation. The suggestion has been made that this will be done through an equity swap in AIB, but in my estimation this is the level of funding we can expect to get. This estimate is as good as any that anybody else has come up with, because we have heard nothing from the Government side of the House as to what it hopes to achieve from the mechanism.

Deputy Boyd Barrett was right in saying that the €60 billion earmarked under the ESM for direct recapitalisation is not a serious figure. It is a figure that has been chosen to sell this con to everybody in Europe - that the ESM is prepared to do this and break the link for citizens - because €60 billion would only be a drop in the ocean if any financial institution in Europe was in serious need of direct recapitalisation. The ESM could, in five minutes, decide at a board meeting to increase that €60 billion. It could be increased by an unlimited amount. However, the signal it is sending out is that this is not something it is serious about or that it seriously considers using. It is something that is being proposed as a sop to people across Europe who are concerned about the mechanism. That is the real problem with this legislation.

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