Peter Mathews (Dublin South, Independent) | Oireachtas source

For the record, it is. As referred to, it is a non-party grouping and I am speaking in its time slot.

I thank the Minister of State for his attendance. I have listened to the majority of the contributions. The first point to mention is that the Title of the Bill - European Stability Mechanism (Amendment) Bill 2014 - has been framed in such a way as to almost mislead citizens across the European Union, including Ireland. The reason is that it is cobbled together complex legislation to create an illusion that stability will be promoted by it. It is so complex that the first sentence of the explanatory memorandum states:

The first purpose is to make provision for the introduction by the ESM Board of Governors, through Article 19 of the ESM Treaty, of the ESM's Direct Recapitalisation Instrument as one of the financial instruments envisaged under Articles 14 to 18 of the Treaty.And also through allowing for the creation of subsidiary bodies which will implement the Direct Recapitalisation Instrument.

The latter is not even a sentence.

Deputy Kieran O'Donnell said he wanted to provide the background to why we were discussing this legislation and put some framework on the figures, which figures would be expandable or retractable in secrecy, as Deputy Thomas Pringle pointed out. The legislation is so unsafe that it should not even be considered seriously.

The matter is very simple. Seán and Mary Citizen understand, starting in 2001 through to 2008, that the domestic banking system in Ireland amounted to a Ponzi credit pyramid. This is shown in a review of the balance sheets of all licensed deposit-taking institutions, excluding the IFSC. At the outset the domestic banking system was about three times the size of national income and over five times the size of national income when the bubble burst and the Ponzi schemes crashed. We have had three reports and I would say that, at most, possibly 2,000 people have read them. However, Seán and Mary Citizen did not read them because they are written in technical language and miss the point. The first point I have made is that the domestic banking system grew at such a level through reckless funding. One cannot have reckless lending without funds which were provided recklessly using all sorts of financial prudential scales on the balance sheets of the banks which were completely ignored.

When it was certain that there were going to be losses in the banking system - let us forget about Ulster Bank, Danske Bank, ACC and any other foreign bank such as KBC - the Irish-owned banks and building societies had losses not of the order of €64 billion that is repeated but of about €100 billion. Some of these losses are still latent in the banks which are paralysed in carrying on effective business for the households and businesses of Ireland. They are engaging in a pattern of pretence which involves a refusal to use the option of capitalisation they were granted to restructure the loans of their clients - small businesses and households.

That is very wrong. When the music stopped and the pyramid collapsed in 2008, to prevent an instant outflow of deposits from the banking system, a guarantee was entered into by the State and the previous Government. That guarantee, unfortunately, was based on fraudulent or false information on the balance sheets of the banks and entered into under duress, indirectly, from the euro system. There was overt and express duress when Brian Lenihan dealt with Jean-Claude Trichet.

What happens when a contract of insurance is entered into by persons who do not tell the truth about the risk involved in the contract? It is void. The previous and current Governments have been gutless, in the interests of the people, in not using that fact as the main justifiable reason for ensuring the secondary market holders of bonds in Irish banks covered their losses. Of the €64 billion mentioned by several people, at least €31 billion of it is gone forever. We cannot get that money back. It is not Anglo Irish Bank debt, rather it is losses. The euro system, at the point when the promissory note was created, forced the previous Government to create an asset which would be a noose around the necks of the people in the form of a sum of €31 billion or €32 billion which would be paid by them to meet the losses in that bank which had no resources to pay the secondary market speculator bondholders at the time. The euro system knew something had to be done to prevent the contagion of a financial conflagration which was on the point of happening around the world. Lehman Brothers, AIG and Bear Stearns had gone and Bank of America had to take over Merrill Lynch. Some French and German institutions were holding bonds, not just in Anglo Irish Bank but also in the other two so-called pillar banks.

I want to give some figures to show how out of control was the funding of Irish banks. In September 2008 Bank of Ireland had €61 billion in senior secured bonds on its balance sheet. That is reckless, crazy funding. It also had subordinated bonds. AIB had approximately €42 billion in senior secured bonds. By the time the troika came to rescue Ireland, €140 billion in funding from the euro system had materialised to pay for the exit of an awful lot of senior and subordinated bonds.

I only hope Seán and Mary citizen who may be listening believe I am making the effort to tell the true story behind the jargon they have been fed for the past five years. Losses of €31 billion or €32 billion for one bank alone have been converted into national debt. The forced Dáil debate and passing of the IBRC liquidation Act entailed the substitution of a promissory note for a series of what are now called promissory bonds, the balance of which is about €25 billion. They are the bonds which, if there is to be a fair spreading of the losses across the euro system, should be extinguished. I read in The Irish Timeslast week what would be a naive, if not stupid, front page headline that €500 million of the nominal value of Anglo Irish Bank's debt was on the point of being sold in accordance with the wishes of the euro system, that is, the ECB, as part of the figure of €25 billion. If that happens, gone will be the chances of securing a just and final settlement to heal the scar on the people of the losses of a defunct bank. If €500 million worth of bonds are sold, they will be held by third parties and will have to be redeemed in 20, 30 or 40 years. In the meantime, the coupon will have to be paid. There will be a cashflow drain on the Exchequer.

There has been too much smoke and mirrors, gutless posturing and self-congratulation on the part of the Government for what has been a failure to represent the people. About 1.25 million people have had their lives ripped apart and some have been taken by suicide. There have been health problems and marriage and family break-ups. Some 350,000 people are long-term unemployed on the live register. The figure was higher, at 450,000. There are 170,000 households in severe mortgage distress and arrears - at three people per household, that is 520,000 people. There are 90,000 households, or 270,000 people, on housing waiting lists. There are many more besides; these are just the base figures and if one tots them up, one will find it comes to a lot of people.

There was a failure to robustly make the case to the European authorities. If Ireland stated the €25 billion in promissory bonds would be extinguished, rather than sold, it would have given Mr. Draghi something to do, rather than talking about and mutualising the debt. That is what should be done if our leaders had the courage to do so. Instead, we find the two so-called pillar banks are failing to restructure the loans of their clients which originated in a credit pyramid Ponzi scheme as a result of the reckless funding and expansion of the domestic banking system.

Who is afraid to negotiate? What a waste of the largest Government majority in the history of the State. Deputies Richard Boyd Barrett, Pearse Doherty and Thomas Pringle made concrete points that I will not repeat. The European Stability Mechanism is such a complex, qualification-riddled framework that it is almost meaningless. Besides this, it is far too little. Does the Minister of State know how much Citigroup has paid in penalties, fines and settlements since the end of 2008? It has paid almost $70 billion. Does he know what the leverage of Deutsche Bank is on the most recent balance sheets? The ratio is about 50:1 on a balance sheet of €2 trillion.

When Lehman Brothers went bust, it was just a little over $40 billion. The stability mechanism is a secret mechanism which is expandable or retractable. It is a mechanism that does not have sufficient cascade-down regulation to banking operations in Europe. It is illusory.

In terms of the number of people whose lives have been ripped apart, I forgot to mention the 250,000 emigrants. What has been the experience of those who have remained in the country as a result of the losses? It includes water charges as a broadening of the tax base. That does not broaden the tax base, it just gives a different label to an income tax. How does the Minister of State think individuals will pay for it? Will they take some of the capital from the houses in which they live to pay it? No, it will come from income. It is the same with the property tax. What about the cuts to the numbers of carers, nurses and doctors and in schools? The Minister of State should read the article by Martin Wolf of the Financial Timeswhich was published today in The Irish Times. He states that inequality does not work in economics. That is patently clear because inequality undermines and corrodes education systems and destroys the spending capacity of households living in normalised conditions. He is demonstrating in that short article what Joseph Stiglitz expanded on in the book The Price of Inequalitywhich I gave to the Taoiseach before Christmas last year and which I asked him seriously and solemnly to read. It would be helpful in order that the right philosophy and arithmetic could be used in the budget. These are important.

We talk about what was happening in Europe in 2008 and the bank guarantee and the consequences and destruction that followed. It was like the forest fires in Australia the year before when 300 people died. The fires were out of control. The financial system was like that. When a forest fire is out of control, one must move ahead of the fire and burn its pathway in order that it exhausts itself. That is where Ireland was. That is what happened to us. The scar is the €30 billion worth of losses in Anglo Irish Bank that is being borne by citizens today and will be for the next 40 years. I did not vote on the IBRC liquidation Bill because of all it contained, because it failed to face up to the realities and because it was brought forward here with half an hour's warning. The voting took place at 1 a.m. On the third attempt, I was paired by the Taoiseach because I did not know if it was time to stand up and be counted for a fairer society in Ireland. However, I was paired as I was not going to put my finger on a green button for it. It was wrong. The amendment Bill is a tarnished consequence. It is tarnished by the source and the origin in so far as Ireland is concerned.

As Deputy Thomas Pringle pointed out, this is a day to use the leverage. The idea of the 2012 seismic shift is rubbish. The initiative is in our hands, but it will take men and women of courage and guts to act for the people. We will get real respect then. If one wants to broaden the tax base - it is now beginning to happen - one should ask the MNCs the profits of which have surged since 2008 to put their shoulder to the wheel of national recovery with a 3% levy. The Minister for Finance said that was not in the programme for Government when I mentioned the idea three years ago. There are many things which are not in the programme for Government that should be. Add them in; do not be feeble; do not be wimps; be men for the people, 1.25 million of whom deserve to have the Government with the largest ever majority on their side and show leadership. The Bill is unsafe and I will not support it.

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