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

I am glad to have an opportunity on behalf of Fianna Fáil to address the motion before the House and I compliment Deputy Catherine Murphy and others on putting it forward to ensure we have an important debate on the issue. Fianna Fáil supports the idea of a European debt conference which would examine both the sustainability and fairness of the sovereign debt burden currently borne by the most indebted countries in Europe. It is disappointing that the parliamentary replies of the Minister for Finance to date indicate that there are no plans for such a conference to take place nor does he intend to put it on the agenda himself notwithstanding his signal at one stage that he was reasonably disposed to the idea. He seems to have moved away from that position.

There is no need for the calling of a conference to cause a market panic. I suspect that is one of the reasons those opposed to a conference believe it should not happen. They do not want to cause instability in the financial markets at a time when the cost of borrowing for Ireland and other countries has reduced very substantially. However, it could be done in a managed way with the express aim of achieving an outcome that is fair to both debtor and creditor countries. Ireland's direct need from a debt conference or any other form of talks that take place would be very different from that of Greece. I am the first person to acknowledge that we are in a very different space to Greece despite having also come through a very difficult period. We are in a stronger position than the Greeks in so many different ways. We have a very open trading economy which is market based. Ours is a strong export oriented economy in a way that Greece's is not, which poses a real difficulty for it in terms of growing its way out of a very large national debt. Greece's economy has deep structural problems.

Our focus as a country should be on the unresolved issue of the legacy bank debt. The Government seems to have given up on pursuing the option of a retroactive recapitalisation of the Irish banks by the ESM. It favours instead the possible sale of a stake in AIB on the open market. It remains to be seen to what extent that course of action will result in the State being repaid a substantial amount of the €21 billion which was pumped into AIB. Ideally, it will all be repaid. A debt conference at which both the sustainability and fairness of the debt burden being shouldered by European states would be considered has the possibility of providing a new impetus for dealing with this issue. The European Stability Mechanism has been open for business for a number of months now but it appears that while the theoretical possibility of retroactive recapitalisation of the banks via this route exists, the Government has no intention of pursuing this option.

I note that we have singularly failed as a country to ensure the delivery of the June 2012 summit agreement. The summit and the Taoiseach's declaration now seem a very long way away. He said: "The agreement that we have now brought about here allows the European Stability Mechanism to be used directly in capitalising banks and that represents a seismic shift in European policy and it is one I have been advocating for several months." He went on to say:

To those the naysayers who say you should be beating the Lambeg drum up and down the streets of Europe, there is another way of getting results and that's what interests me. I'm a hard grafter and as some of them found out, they shouldn't tangle with me too often.

Two and a half years later, his words are ringing very hollow indeed. It was not only he Taoiseach who talked up the implications of the summit communiqué. The Minister for Finance, Deputy Michael Noonan said:

Our negotiating position up to now was to put arrangements in place to lessen the burden of bank debts, but it would still remain on the sovereign balance sheet. This agreement takes this further in terms of policy and the intention now is to separate certain bank debt completely from the sovereign balance sheet.

It is hard to see any action on the part of the European authorities in the intervening period which will give any practical effect to the Minister's interpretation of the June 2012 agreement.

To use the phrase of Brian Hayes MEP, who referred to the matter at the weekend, the promissory note arrangement of February 2013 put the Anglo and Nationwide debt on the "never-never". However, even this is being unravelled as we speak. While we will have to wait for the Central Bank annual report for 2014 for confirmation, all the indications are that the sale of the bonds held by the Central Bank is taking place much faster than the minimum pace prescribed in February 2013. This is diluting the benefit of the arrangement as the interest on Government bonds, which was being paid to the Central Bank and back to the Exchequer via the Central Bank surplus, is now being paid to third parties instead. While the Taoiseach lauded at the weekend the €50 billion reduction in debt payments, I would like to see an actual breakdown of this figure.

I take issue with one aspect of the motion, namely the statement of certainty that the Irish debt burden is unsustainable.

Our argument must be that the debt burden was unfairly levied, not that is it inherently unsustainable. It is possible that our debt burden will become unsustainable if economic growth does not continue. We are meeting our debt obligations as they fall due. The annual interest bill is a considerable burden at approximately €8 billion. A reply to a parliamentary question indicated that, in so far as it can be estimated with accuracy, the banking related element of this is approximately €1.6 billion with about half of it being paid in interest to the Irish Central Bank so that the net interest bill is about €800 million, which will increase if the Central Bank continues to sell the bonds. This is a huge sum of money which could be put to many important uses, such as reducing the hospital waiting lists or improving the water infrastructure. It would be wrong to claim with absolute certainty that our debt is unsustainable. Although our debt burden is making life much more difficult, we will not default on our debts and it is important that message is delivered.

I turn to the situation faced by the Greek people. When the Euro Area Loan Facility (Amendment) Bill was being debated in the Dail in 2013, I stated that while I supported the bailout measures for Greece contained in it, I doubted they would be successful in restoring the Greek economy. I noted the significant risk that, having got a third round of support, it was very possible that Greece would need a fourth, fifth or sixth bailout if the underlying weakness in the Greek economy was not tackled. We are heading into this territory because the deals done for Greece were hopelessly unrealistic and were based on unrealistic assumptions. The immediate situation is urgent for Greece and the wider eurozone. Its bailout programme expires at the end of February and it must make over €7 billion in payments before the end of the summer. The Greek Government has proposed a number of suggestions on how it will deal with it.

Having benefited from the programme, Ireland should pledge itself to assist Greece, in a spirit of European solidarity. Greece needs something akin to the Marshall aid plan which the US extended to Europe after the Second World war and from which Ireland benefited. The plight of the Greek people requires decisive European action. While there are no quick fixes, we should signal our determination to be part of the process and a European debt conference which would examine the sustainability of sovereign debt across the eurozone would be a good start.

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