Kieran O'Donnell (Limerick City, Fine Gael) | Oireachtas source

I am delighted to contribute to the debate on the Bill, which I welcome. I have listened to some, although not all, of the debate. I want to put this issue in context, as we often discuss Bills without discussing the background and context. The context, from an Irish perspective, is that the taxpayer put €64 billion of hard-earned money into the banks. In June 2012 we sought to break the vicious cycle between the banks and sovereign debt. Accord was reached and it was agreed that, once the single supervisory mechanism was in place, the issue of bank recapitalisation, both current and retrospective or retroactive as it is now being called, could be considered. The relevant date, I understand, is 4 November.

The role of the Government is to ensure the taxpayer gets the best financial return from the €64 billion put into the banks. How can we achieve this and what routes are available to us? One of the routes is to sell the shares on the open market. If the position of the banks is improving - this will provide us with a mechanism to do this - that is obviously one feature. Another is retroactive or retrospective bank recapitalisation through the ESM. It all hinges on Article 3 of the ESM treaty which states: "The purpose of the ESM shall be to mobilise funding and provide stability support under strict conditionality, appropriate to the financial assistance instrument chosen, to the benefit of ESM Members which are experiencing, or are threatened by, severe financing problems, if indispensable to safeguard the financial stability of the euro area as a whole and of its Member States".

Furthermore, the context is also relevant in terms of breaking the link between sovereign and bank debt. The ESM guidelines state there should be support where "an ESM Member experiences acute difficulties with its financial sector that cannot be remedied without significantly endangering its fiscal sustainability due to a severe risk of contagion from the financial sector to the sovereign". In Ireland's case, we fit the criteria in that the banks were recapitalised over a number of years owing, first, to the risk to the Irish banking sector; second, to the risk of contagion to the Irish sovereign; and, third, to the risk of contagion in a European context. This has brought about a situation where Irish taxpayers have had to endure many years of austerity. I include all those who buy goods and pay VAT, despite perhaps being unemployed, not just those who are working. This needs to be recognised and it was recognised in the accord of June 2012.

The case I make calls for a range of measures. One aspect could be the selling of bank shares on the open market, with the taxpayer getting the money back in that fashion. It also could involve retroactive or retrospective recapitalisation or it could involve a suite of measures. We have played our part for the European Union and the euro. I note that the draft guidelines agreed to by the member states on 10 June 2014 include a specific provision relating to the retroactive application of the instrument.

Interestingly, guidelines have been laid out for dealing with recapitalisation of banks in a current context. Guidelines have not been laid down for dealing with retrospective or retroactive recapitalisation. That is something that needs to be fleshed out. The draft guidelines state potential retroactive application of recapitalisation for financial institutions should be decided by the ESM board of governors on a case-by-case basis by mutual agreement.

The economy is doing well again after many years owing to policies put in place by the Government and the hard work of the people, but our debt levels are still way too high. Our debt-to-GDP ratio is approximately 120%, which is too high. The normal level at which any country should be operating is about 90%, which would be a safe level. Even though we are experiencing reasonable growth rates, I would like them to be sustainable and of the order of 3%. We are seeing significant growth in job creation and a reduction in unemployment. We see this in the live register figures which have decreased by nearly 10% in the past 12 months. We are also seeing a narrowing of the deficit and will certainly meet our 3% target by the end of 2015. The upcoming budget must clearly factor in the difficulties facing people, particularly those with young families and the elderly. What we need is a carefully planned budget. A budget is not just about the amount of money involved in terms of savings to be made and tax raised. It is also about the types of measure one brings forward. This has been lost in the budget discussions in the media and the House. It is not just about the volume and amount of money involved; it is also about how one allocates it.

The fact still remains that the Irish sovereign, on the basis of taking on the burden of debt from the banks, is carrying too much of the load. This is due in no small measure to the level of debt it had to take on from the banks. I go back to my key point. The legislation provides for retroactive recapitalisation. In this context, the €60 million being provided for bank recapitalisation needs to be reviewed by the ESM with a view to increasing it. We should remember that we put €64 billion into the banks; therefore, in a European context €60 billion seems very small. The date of 4 November, in terms of the single supervisory mechanism, is fast approaching. We have a legitimate case as part of a suite of measures to get money back, given that €64 billion of taxpayers' money went into the banks, some of which we have got back. Under Article 3, the €64 billion was put in at a time when Ireland was experiencing severe financial problems. At the time recapitalising the banks was indispensable to safeguard the eurozone and its member states. Come 4 November, we will have a very strong argument in a European context for putting forward retroactive recapitalisation as one of the measures to be considered, with the banks improving their financial position and being able to go to the market to get back the taxpayers' money.

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