Richard Bruton (Dublin North Central, Fine Gael)
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Question 1: To ask the Minister for Finance his assessment of whether there is a flow of credit to Irish business; and his strategy to deal with this problem. [45544/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Nobody wants viable businesses to fail because banks will not lend them money. At my meetings with representatives of the various financial institutions over recent weeks, I asked the institutions covered by the guarantee scheme to consider the contributions they can make to the economy by offering appropriate credit initiatives to small and medium-sized businesses and others. Therefore, I welcome the fact that certain institutions have announced initiatives in this regard.

The Deputy may be interested to know that I recently met the vice-president of the European Investment Bank, Mr. Plutarchos Sakellaris. The bank recently announced that it intends to provide additional funding through its lending facility to small and medium-sized enterprises in the EU. Mr. Sakellaris confirmed that the European Investment Bank has been in discussions with a number of Irish financial institutions about participating in this facility for small and medium-sized enterprises. The bank hopes that agreement on providing such loan facilities can be finalised as soon as possible. I have urged the Irish banks to utilise this facility to the maximum extent possible, with a view to making additional funding available to small and medium-sized enterprises quickly. I am pleased that a number of banks have announced their intention to do so.

Along with my colleague, the Tánaiste and Minister for Enterprise, Trade and Employment, I have been in regular contact with the banks to discuss the flow of lending to small businesses. The Central Bank's monthly statistics for October showed that lending to the Irish economy was essentially flat in that month. While this is a matter of concern, we should be cautious about drawing strong conclusions from data pertaining to a single month. Forfás and Enterprise Ireland are surveying 200 businesses, which are supported by county enterprise boards and Enterprise Ireland, to gather more detailed information.

Richard Bruton (Dublin North Central, Fine Gael)
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I find the Minister's complacency in the face of these statistics quite alarming. The figures show that there has been a sharp contraction in the level of lending to non-financial institutions. People outside the finance and development land sectors are having their credit squeezed. The number of undrawn overdrafts has decreased by 25%. I can give the Minister examples of businesses that had overdrafts but are now seeing them curtailed. As a result, they are having to lay people off. That is the reality on the ground.

Has the Minister moved beyond urging the institutions to take action during his discussions with them, to the extent that the credit figures that were published in October are about to be reversed? Does he support an approach that allows the banks to play for time by stringing out this process? I am deeply concerned that the experience of other countries will be replicated here. The impact of the banking crisis on real businesses has been deeper and more profound in countries where the necessary action has been delayed. I am worried that the Government's approach, which sees getting involved as a last resort, is allowing the credit freeze to persist, with serious consequences for jobs. That is the reality on the ground.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am far from complacent on this subject. I referred in my response to the numerous meetings I have had with the financial institutions. At my request and insistence, the various financial institutions have submitted different plans for assisting small and medium-sized enterprises. I do not accept for one moment that my attitude is complacent. I am very concerned about this matter.

The implicit assumption in the remainder of Deputy Bruton's contribution was that the capitalisation of the banking sector, whether by the State or otherwise, would automatically lead to an increase in lending in the real economy. That has not been the experience in the United Kingdom, where an extensive state-sponsored process of capitalisation has taken place. I assure Deputy Bruton that there is no delay in the ongoing discussions with the financial sector about the reflections I invited the banks to make on their own capital positions.

Richard Bruton (Dublin North Central, Fine Gael)
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Two and a half months have passed since the Government introduced the guarantee scheme. Where is the Minister's strategy? He is saying there will be a credit flow. He mentioned that other strategies, in the UK and elsewhere, have failed. What is his strategy to get credit flowing? That is the question everyone wants answered. If the strategy does not involve the recapitalisation of the banks, what will it involve? He has had these plans for weeks. The ten-day deadline within which this issue was supposed to have been cracked has passed. The plans have been submitted, but there is no solution.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy Bruton is not in a position to say there is no solution. The plans were submitted in the last ten days. We do not yet have a detailed assessment of whether they have been implemented. It is not correct to say there is no solution.

Richard Bruton (Dublin North Central, Fine Gael)
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Is the Minister saying he has a solution?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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At my insistence the banks submitted plans to protect small and medium sized businesses in the weeks ahead. On recapitalisation, I was simply drawing the Deputy's attention to the fact that the recapitalisation that has taken place in the United Kingdom has not succeeded in ensuring that banks lend into the economy.

Richard Bruton (Dublin North Central, Fine Gael)
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What is the Minister's strategy for success two and a half months on?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Two and a half months ago we secured the position of the Irish banks and a great deal of liquidity went into the Irish banks throughout October. The liquidity of Irish banks was repaired in that month. Let us not talk about two and a half months. I have had the PricewaterhouseCoopers report for a far shorter period than that. The first step taken after the introduction of the guarantee was to carry out a detailed analysis of the asset quality of the Irish banks. That report was only available later in November. Since then I have been in a constant structured dialogue with the Irish banks to ensure they are in a sound position for the months and years ahead.

Richard Bruton (Dublin North Central, Fine Gael)
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There is no mention of credit in that solution.