Matt Shanahan (Waterford, Independent) | Oireachtas source

As a member of the Regional Group, I would like our group to be associated with the comments of the previous speaker, Deputy Devlin, in respect of Mr. Currie.

The purpose of the Bill is to ratify amendments to the European Stability Mechanism and the introduction of the common backstop to the Single Resolution Fund. The policy paper suggests that the agreement represents a significant political breakthrough and is a crucial stepping stone on the path to strengthen Europe's economic and monetary union. Based on the amount of borrowing all European countries are doing at the moment, there is no doubt that we are in a very cohesive monetary alliance.

It is proposed that approving these changes will strengthen the resilience of the euro area and help with future crisis management. That is to be commended. It has been agreed to give the ESM an enhanced mandate with improvements to its toolkit of financial instruments' and a stronger role in future economic adjustment programmes. The question is how that will play out in terms of future fiscal rules and frameworks.

Although many people in Ireland might not have interest or regard for the technical nature of this Bill, they will certainly understand and probably have an intimate history with many aspects, namely, our request for European support funding back in 2010 as part of our application to the IMF and the subsequent visits of the troika here to rechart our national economic management post 2010, when we saw the institutionally-imposed austerity which has scarred so many of us in this society and continues to do so.

This agreement has pledged to address a crucial gap in the banking union by empowering the ESM to act as the common backstop to the Single Resolution Fund and, therefore, it assumes that the common backstop can provide a financial safety net for bank resolutions within the banking union. Based on our history, that is certainly something we could have done with in the past, although, hopefully, we will not have need of it in the future. The size of the credit line will be aligned with the SRF funds, with a target level of 1% of covered EU deposits in the banking union and with a cap of €68 billion, so there is significant firepower there, without a doubt.

There are elements within the treaty reform that are technical in nature. The common backstop to the Single Resolution Fund and reform of the precautionary conditioned credit line will ensure the fund is made up of contributions from credit institutions and investment firms in the 19 participating member states within the banking union and, therefore, ensures the financial industry as a whole ensures the financial stabilisation of the system. That brings up the question that, if we were back in 2010, would we have had to cover bank debts and, ultimately, would every citizen in Ireland have paid a price for covering the bondholders. I am not sure where that lies. I presume that when this legislation goes before a committee, some of these issues will be addressed.

There is no doubt we are in a very important monetary cohesion system and we are very grateful for it in terms of the borrowing we are doing to facilitate spending on Covid in particular. However, I would ask at what cost. We know the national Government is certainly borrowing cheaply from the European framework but that is not cheap when it comes to things like mortgages, and we are still supplementing mortgages with interest rates to potentially restore our own banks' balance sheets, which were wiped out through the banking crisis. The question has to be asked as to how long more will borrowers in Ireland continue to pay rates that are significantly, sometimes 50%, above what our European peers are paying. This is a competitiveness threat and an ongoing competitive disadvantage to the businesses in this country.

We also question the oversight that is at present being implemented in terms of our national bank borrowing arrangements. Given the State is borrowing at a very low rate, it makes it very easy, first, to borrow but, second, it often derives very poor value for money. The best time to make a borrowing application is when a person does not have the money and badly needs it. When there are onerous terms to the lending, it will make people look long and hard about the spending they are going to do and the proposed oversight that is going to be implemented. This is an area that Ireland Inc. has to be very careful about.

As I said, there is no doubt we need European stability at the moment, particularly in light of where Brexit is at and where it is potentially heading to. European borrowing frameworks are required but Ireland has probably suffered quite a bit under them, and other Deputies have outlined our inability to go beyond structural frameworks in terms of investment in transport infrastructure, for instance. We will have to see the new direction and where these frameworks are going to take us. We do not have a choice but to support and pass this proposed legislation. There are benefits, as has been outlined, but there are probably some shortcomings and I hope these will be identified in committee.

More importantly, as I said, the fact we have access to cheap borrowing rates is not a reason for us to go out and essentially throw money everywhere without significant oversight. I have brought up in the House before the lack of clarity on the spending that Deputies are asked to vote on. We come in here periodically and we are asked to vote in favour of voted expenditure without seeing where the money is spent. We have a significant situation in this country all of the time where we do not have sight of all of the spending, rather than the borrowing, that we are doing in this country. I wish to see that rectified into the future.

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