Dáil debates

Tuesday, 30 March 2010

5:00 pm

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

I move:

That Dáil Éireann:

— notes that the Government has taken bold and successful action to address funding problems in the Irish financial system through the introduction of the Bank Guarantee Schemes and to remove the riskiest loans from the balance sheets of the participating institutions through the NAMA process, which has the support of the IMF, the OECD, the ECB and the European Commission;

— affirms that the Irish economy needs a functioning banking system that enjoys the trust of depositors, international markets and the community at large in order to benefit from the global economic recovery;

— supports the Government in the measures it is announcing today for the final phase of the stabilisation process of the banking system;

— supports the Government in the actions it is taking to ensure that each participating institution in the NAMA process will meet the Financial Regulator's new capital standards by the end of 2010; and

— supports the Government's structured and measured approach to the issues facing the financial sector in general, which represents the best way to secure its interests and those of the recovering economy while keeping in mind the requirements of the EU."

The country has come a long way since we introduced the State bank guarantee 18 months ago.

Photo of Tom HayesTom Hayes (Tipperary South, Fine Gael)
Link to this: Individually | In context

That is what the Minister thinks.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

Back then, our banks were on the brink of financial collapse and our economy had gone into reverse. Revenue had fallen steeply and unemployment had risen sharply. For the first time in a quarter of a century, we were experiencing negative growth.

Economic activity remains weak and we face further difficult decisions. The crucial difference, however, is that we now have a credible fiscal position. That is because in the past two years, we have introduced budgetary adjustments of more than €15 billion. As a result, we are now in a position to stabilise the deficit and we are on a firm path to economic recovery.

This adjustment has imposed a heavy burden on our citizens. Taxes have increased, public sector workers have suffered significant reductions in their pay and social welfare payments have been reduced. It is regularly suggested in the House, and outside, that these painful measures have been necessitated by our banking crisis and the cuts in pay are funding a bailout of the banks. That is wrong. The reason we had to make substantial savings is because of the huge gap that opened up between the revenue we take in and the cost of running the State. We are borrowing for day-to-day expenses which all Members know is not sustainable.

Our determination to deal with this imbalance in our public finances through firm and decisive action has engendered real confidence in our economy on the international stage. The outside world believes in us and in our ability to work our way through our difficulties and return to growth.

Jean-Claude Trichet, president of the European Central Bank, recently said, "In the case of Ireland very, very tough decisions have been taken by the Government and rightly so". More recently, Mr Trichet's colleague, José Manuel González-Páramo of the European Central Bank's executive board, said, "The Irish measures are very courageous. They are going in the right direction". The French Minister of Finance, Christine Lagarde said, "Ireland has set the high standard the rest of us must follow". On a recent visit to Ireland, the German Minister for European Affairs, Dr. Werner Hoyer, said, "I think there is a deeply rooted trust and confidence in this country's ability to sort out its problems. ... There is a fundamental belief that the Irish are going to solve it".

Already, we have reaped the benefits of this growing confidence. Since last April's supplementary budget and the announcement of the decision to establish NAMA, borrowing costs have fallen and our bond spreads have halved. This trend was reinforced by last December's budget which outlined the next stage of our plans to return to a sustainable fiscal position. That is why we must retain our fiscal discipline.

Having stabilised our public finances, we must move to the final phase in stabilising our banking system. There has been much criticism of the length of time it has taken us to get to this point. I reject such criticism. Crucial pieces of the jigsaw had to fall into place before we could embark on this ultimate phase of our bank rescue.

First, we are in a position to do what we are doing today because as a sovereign State we are now fiscally stable and credible. Second, we now know the extent of the losses in our banks and the scale of the damage that has been done by the excessive lending and bad practices of recent years. Through its bottom-up valuation exercise, the National Asset Management Agency, NAMA, is progressively valuing and removing the most impaired loans from the system. Third, we now have in place a Financial Regulator of international standing who has independently and rigorously reviewed the capital requirements of the Irish banking system in accordance with best international practice.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

Is he better than the last one?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

The capital requirements that I will outline presently to the House have been set by the Financial Regulator and announced separately by him in the past hour. That is as it should be.

We now have in place a more stringent regulatory system overseen by the Central Bank Governor, Professor Patrick Honohan, and the Financial Regulator, Matthew Elderfield. The new fully integrated structures replacing the Central Bank and Financial Services Authority of Ireland will be established in law by the Central Bank Reform Bill which I published earlier today. The new Central Bank will be responsible for maintaining the stability of the financial system, the effective regulation of financial institutions and markets and safeguarding the interests of consumers and investors.

The Bill enhances accountability of the Central Bank and oversight by the Oireachtas of its regulatory performance. I have included in the Bill a provision that gives the bank new powers to ensure the fitness and probity of nominees to key positions within financial institutions. This key provision will, from the outset, reinforce the tone of the new regulatory regime. It will help to restore confidence in the management of the banks at home and in the international markets.

A further Bill to be published in the autumn will contain additional new and enhanced regulatory powers and functions of the restructured Central Bank. A third bill will consolidate all existing statutory arrangements. Further details of today's Bill are included in the information booklet that will be circulated to Members. There will be consultation with stakeholders and the legislation will be enacted as soon as possible after Easter.

The detailed information that has emerged from the banks in the course of the NAMA process is truly shocking. At every hand's turn our worst fears have been surpassed. Some institutions were worse than others but our banking system, to a greater or lesser extent, engaged in reckless property development lending. In far too many cases there were also shoddy banking practices. The banks played fast and loose with the economic interests of this country.

Our previous regulatory system failed abysmally and it is right that the role of the regulator, the Central Bank and the Government is now the subject of independent inquiry-----

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

A partial inquiry.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

-----but the fact remains that senior figures in Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come. As I said in this House last September during the debate on the NAMA legislation, the banks should be extremely grateful for the continued support and forbearance extended by the citizens. They must now repay that debt-----

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
Link to this: Individually | In context

By increasing interest rates.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

-----by facilitating the economic recovery widely forecast to get under way in the second half of this year. The Government will insist that they do so by supplying credit to viable businesses and households in this State.

Today, we are entering the ultimate phase in the resolution of our financial crisis. NAMA has determined the price to be paid for the first tranche of loans to be transferred to the agency, after detailed and painstaking loan by loan analysis. The Financial Regulator and the Central Bank have carried out their analysis of the appropriate capital requirements for financial institutions so as to ensure not just the bare regulatory minimum, but a prudent and adequate deployment of capital. I will outline in detail to the House the Government's response to these developments and explain the strategy for addressing the needs of the banking sector and individual banks.

The process of transferring the eligible loans from the designated financial institutions to NAMA has begun. The first tranche of loans has an original book value of approximately €16 billion. This tranche consists of just over 1,200 individual loans owed by the ten largest borrowers. This first tranche represents 20% of the anticipated total assets to transfer. The transfer of these loans should be completed for four institutions in the coming days, with Anglo Irish Bank following next week. NAMA has advised me the whole transfer process remains on target for completion by the final quarter of the year.

NAMA's work has enabled us to estimate with greater accuracy the overall discount to be applied to each institution and the likely total amount of loans to be transferred. The original value of the loans transferred in the first tranche is €3.29 billion for AIB from a total of €23 billion in eligible loans; for Bank of Ireland, €1.93 billion from a total of €12 billion; for Anglo Irish Bank, €10 billion from a total of €36 billion; for INBS, €670 million from a total of €9 billion; and for EBS, approximately €140 million from a total of €1 billion.

The difference between what NAMA has paid for these loans and the original value attributed to them by the institutions, or the so-called haircut, is as follows: AIB, 43%; Bank of Ireland, 35%; Anglo Irish Bank, about 50%; INBS, 58%;-----

Photo of Seymour CrawfordSeymour Crawford (Cavan-Monaghan, Fine Gael)
Link to this: Individually | In context

Who was involved in that?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

-----and EBS, 37%. The weighted average haircut across these institutions is 47%. These discounts have been calculated following loan-by-loan assessments, including legal due diligence, detailed valuation processes and internal and external checking processes, including external audit. The doubters have been proved wrong. NAMA has carried out its valuations in a hard-headed commercial manner. The interests of the taxpayer are paramount in this exercise.

The fall in value of the transferred loans means the banks will now have to recognise these losses up front. Decisions on the appropriate capital requirements are a matter for the Financial Regulator in conjunction with the Central Bank. A robust recapitalisation exercise will ensure that the banks are not just adequately but properly and prudently capitalised so they can absorb these losses and foreseeable future losses that may arise on remaining loans. The banks will then be in a better position to attract funding. The regulator has advised me that he will require an 8% core tier 1 capital requirement, of which 7% must be equity. This is a prudent capital provision consistent with emerging best practice internationally. The regulator has performed a detailed assessment of the capital requirements, current and under a stress scenario, over a three-year time horizon and has determined the additional capital requirement of each institution participating in NAMA. The capital to meet these new requirements must be in place in each of the institutions by the end of 2010.

I fully agree with the regulator's view that we do not want institutions to get by on a bare minimum of capital. This only prolongs their difficulties. The capital requirements are set by the new regulator and are being imposed on the banks. I will now outline the implications for each institution of the regulator's decisions and give details of their capital needs, proposed solutions and the anticipated Government ownership for each institution.

Bank of Ireland will transfer €1.93 billion of assets to NAMA in the first tranche, which represents 16% of its €12 billion NAMA assets. NAMA has confirmed it will buy the loans transferred in the first tranche at an average discount of 35%. Taking account of this and his broader assessment of the bank, the regulator has determined that Bank of Ireland must raise additional equity capital of €2.7 billion by the end of the year to meet the new capital standards. I have been advised that Bank of Ireland expects to be able to raise private capital and is well advanced in its actions to address its capital needs, which I believe underlines the strength of the institution. I fully support the bank's objective to meet a substantial amount of its capital requirement from private sources. I believe Bank of Ireland has a strong future. In conjunction with this private capital raising and to support it, the State will commit to converting part of its preference shares in Bank of Ireland into ordinary equity. This process requires no new investment of State funds. This conversion will be executed on market terms and the State will achieve full value for its investment in the bank.

Based on the current envisaged structure, the State expects to remain a minority shareholder in the bank. In recapitalising Bank of Ireland, we will secure an institution that will maintain a presence in the international capital markets, provide loan finance to individuals and businesses and support our economic recovery. These proposals are dependent upon the agreement to the bank's restructuring plan by the European Commission. I have discussed the main elements with Commissioner Almunia and I am satisfied there is the basis for agreement between us on the overall framework of the bank's plan but further discussions are required on all the details.

Allied Irish Banks will transfer €3.29 billion of assets to NAMA in the first tranche, which represents 14% of its €23 billion NAMA assets. NAMA has confirmed that it will buy the loans transferred in the first tranche at an average discount of 43%. Taking account of this and his broader assessment of the bank, the regulator has determined that Allied Irish Banks must raise additional equity capital of at least €7.4 billion by the end of the year to meet the new base case capital standards. In view of the extent of capital to be raised, Allied Irish Banks will be required by the regulator to produce a detailed capital plan by the end of April this year.

The basic elements of this plan are already clear. Allied Irish Banks is in a position to raise capital through the sale of overseas assets. As the first step in meeting its capital needs, the bank will immediately commence the process of sale of assets in the US, Poland and in Great Britain. The sale of these assets will be completed this year, subject to regulatory clearances. The disposal proceeds will provide significant capital but it will not be sufficient to address the full requirement. To the extent that the gap is not filled by the private sector, the State is willing to convert some or all of its preference shares as required on terms to be agreed that will provide full value for the State. Depending on the structure of the capital raising and the extent of private participation, it may be that no new Exchequer funding is required but if additional money is required it will be provided by way of ordinary equity. Any additional capital requirement will be met from the National Pensions Reserve Fund.

The private sector will have an opportunity to participate in Allied Irish Banks' capital raising. If sufficient private capital is not available, it is probable that the State will have a majority shareholding in Allied Irish Banks as a listed entity but this is much more preferable than an undercapitalised or only adequately capitalised entity. These proposals are dependent on agreement with the European Commission in the context of the assessment of the bank's restructuring plan. Finding a long-term solution for Anglo Irish Bank is by far the biggest challenge in resolving the banking crisis. The sheer size of the bank means there are no easy or low cost options, as often suggested. Winding up the bank is not and has never been a viable option. As the bank's new management and board have estimated, an immediate wind up would lead to a fire sale of assets resulting in a permanent additional and unnecessary loss of upwards of €30 billion. In addition, the State would have to provide, immediately and up-front, the large sum of €70 billion to meet the deposits, bondholders and liabilities due to the Eurosystem.

Similarly, a longer term wind down is not in the taxpayers' interest. The new management has provided me with figures, assessed by independent financial advisers, indicating that in addition to the capital losses that would be sustained, a long-term wind down of the bank over ten years could expose the State to funding obligations approaching €30 billion. I understand why many want us to close this bank. I understand also the impulse to obliterate it from the system. However, I cannot, as Minister for Finance, countenance such a course. The realisation of the costs involved and the wider disruption to the financial system would generate enormous instability for the State, with unforeseeable but potentially long-lasting damage to the overall economy. The unavoidable reality is that the bank has incurred losses from its large-scale property lending and needs substantial further capital. Unpalatable as it is, only the taxpayer can provide that capital. It is the least worst option. For this reason, I am this week providing €8.3 billion to support the capital position of the bank to take account of the bank's losses to date. Additional capital support is likely to be required depending on the NAMA discount on the first tranche of Anglo Irish Bank loans transferred to it. The bank will provide comprehensive information on its financial position in its annual report for the 15 month period to end 2009 which will be published later this week.

The bank will need further capital to cover future losses and accomplish the restructuring of the bank and its balance sheet. The current estimate is that this could be of the order of a further €10 billion over time.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Good Lord.

Photo of Olivia MitchellOlivia Mitchell (Dublin South, Fine Gael)
Link to this: Individually | In context

There is no end to this.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

However, notwithstanding very substantial work under way on the bank's restructuring plan, there are still significant uncertainties about this figure, including the size of the discount on all of its loans transferring to NAMA, the scale of future losses on its loans that are not transferred to NAMA and the exact nature and scope of any split of the bank under its plans and the EU Commission decision on the plan.

It is because of the heavy loan losses already incurred on a loan book of €72 billion and those in prospect that the injection of resources in this bank is so large. There is simply no alternative that meets the bank's unavoidable obligations at a lower cost consistent with the maintenance of the hard-won stability of the banking system in Ireland. The bank is expected to transfer approximately €10 billion of loans to NAMA in the first tranche. This tranche will not transfer until early April as the valuations have not been finalised. The latest available unaudited estimate of the discount is in the order of 50%.

The bank's capital support is being provided by the State in a way which spreads the cash requirements over an extended period. I am this week injecting the capital in the form of a promissory note payable over a number of years into the future. In essence, this means the amount will be paid over a period of ten to 15 years, thereby reducing the impact on the Exchequer this year and stretching the payments into the future.

Since nationalisation of the bank on 21 January 2009 there has been a wholesale replacement of key top executives and the board. The new chief executive and new senior management team have implemented rigorous and robust risk management processes and controls. There have been cost base reductions following a detailed cost review and a voluntary redundancy scheme. As part of this recapitalisation, the bank will reduce costs further. The bank's new senior management team is working closely with my Department to update and strengthen its restructuring plan as submitted to the EU Commission last November. Following a comprehensive evaluation of strategic restructuring options, the bank has identified as its preferred option, in terms of minimising the future cost to the taxpayer, to carve out a smaller and stronger bank, leaving the remainder in the form of an asset management and recovery company.

Photo of Olivia MitchellOlivia Mitchell (Dublin South, Fine Gael)
Link to this: Individually | In context

What about a bad bank?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

The new going concern entity would be prepared for sale in due course. This option is being evaluated and holds out the prospect of reducing the impact on the taxpayer and yielding some value in the future when the bank is sold out of State hands. The bank has estimated that the new bank could become profitable over the medium term and a target exit from State hands could take place in five to seven years' time.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Wishful thinking.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

This is a complex process but I am confident that by the end of the summer we will have a clear plan for the future of the bank approved by the Commission. The bank will give more details on the likely costs of various options for its future when it publishes its results. The sums required to rescue the bank are enormous but the costs of winding it down are even greater. The current bank strategy of seeking to devise a way to realise value for the taxpayer from the remains of the old bank means the State could at least get some return in time, recouping some of its assistance. I assure the House that the bank shares my overriding objective to maximise the potential return for the taxpayer in recognition of the State support.

Traditionally, building societies have played a vital role in providing residential mortgages in Ireland. In recent years the Educational Building Society, EBS and, in particular, Irish Nationwide Building Society, INBS, became involved in non-residential lending. In the case of INBS such lending became its primary focus, comprising approximately 80% of its lending business. As a result it has incurred significant losses on speculative lending for land and development and commercial investment loans. In the case of INBS, approximately €9 billion will have to transfer to NAMA while in the case of EBS approximately €1 billion will transfer.

Both societies have passed resolutions allowing them to issue new special investment shares to the State in return for its support. Both institutions have recently been subject to the Regulator's capital assessment process to determine their capital needs. Irish Nationwide Building Society, INBS, will transfer €670 million of assets to NAMA in the first tranche, which represents 7% of its €9 billion NAMA assets. NAMA has confirmed that it will buy the loans transferred in the first tranche at an average discount of 58%. Taking account of this and his broader assessment of the building society, the Regulator has determined that INBS will need an injection of €2.6 billion to remain compliant with its current regulatory capital requirements. This is a very large bill for the taxpayer but as in the case of Anglo Irish Bank, it is the least costly solution.

It is important to highlight that this level of capital support is required to maintain the institution's financial position in light of the large losses incurred on its loan portfolio. Without this capital injection, the taxpayer would have to shoulder the significant and immediate costs in meeting the deposits, bondholders and liabilities due to the European Central Bank. I intend to inject the necessary capital through a combination of €100 million in special investment shares in the society and a Promissory Note for €2.6 billion issued to the society, giving the society a small buffer.

Photo of Olivia MitchellOlivia Mitchell (Dublin South, Fine Gael)
Link to this: Individually | In context

It is considerably large.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

This note will be payable over ten to 15 years, which will reduce the impact on the Exchequer this year. Following the investment by means of the special investment shares, the State will have extensive powers as well as economic ownership of Irish Nationwide Building Society. As a result, the State will control the society.

Following the transfer of €9 billion of its loan book to NAMA, Irish Nationwide Building Society, INBS, will have a small mainly residential loan book of approximately €2 billion. In such circumstances, the institution does not have a future as an independent stand-alone entity. The Government's priority will be to secure a swift sale of the society or its integration with another entity. All options will be fully examined in the institution's EU restructuring plan which must be completed within three months. Deposits in the society are secure and it will continue to have adequate regulatory capital. As in the case of Anglo Irish Bank, a new management team is now in charge of Irish Nationwide Building Society, INBS. I will insist on board changes in the changed ownership circumstances.

The EBS will transfer approximately €140 million of assets to NAMA in the first tranche, which represents 14% of its €1 billion NAMA assets. The Agency has confirmed that it will buy the loans transferred in the first tranche at an average discount of 37%. Taking account of this and his broader assessment of the building society, the Regulator has determined that the society will need an injection of €875 million to meet the target sufficient to ensure 8% core tier 1 capital. To secure the Educational Building Society's immediate capital position, the State will provide it with €100 million of capital through the issuance of special investment shares in a manner consistent with the EU State aid rules. The issuance of these shares by EBS was approved by the society at its Extraordinary General Meeting in December 2009 and will give the State extensive powers and full economic ownership of EBS. The State will, therefore, have control over the future strategic direction of the society.

The EBS is currently exploring the availability of private market capital and has had an expression of interest from a private party. Any private capital transaction will need to comply with the relevant European Commission guidelines for an institution in the receipt of State aid. To the extent that private capital is not forthcoming, the remaining capital requirement will be met partly or fully through the issuance of a promissory note from the State to the institution which will enhance the society's core capital by the same amount. If the promissory note is used, it would again reduce the impact on the Exchequer this year as the cost of the note would be paid over a period of ten to 15 years. The EBS will be required to submit a restructuring plan to the European Commission that will examine all options for the direction of the society by the end of June.

Whatever outcomes emerge, there is no doubt that, notwithstanding the differences between them, each society must recognise the position they have gotten themselves into. They must focus on making themselves more efficient. Their future value will be enhanced by a committed drive to improving efficiencies in the coming months. I am strongly of the view, and I am committed to ensuring, that the residential mortgage sector in Ireland is competitive. We want to see an appropriate number of participants in the market in order to meet future demand. Irish Life & Permanent is not taking part in the NAMA process. The regulator is satisfied that Irish Life & Permanent has sufficient capital to meet its needs. The regulator will continue to monitor the capital needs of Irish Life & Permanent and is in discussion with it.

The burden on taxpayers stemming from the losses incurred in our banking system is horrifying. Unless we face up to these losses now, we will not have a functioning banking system and the economy will not recover. My overriding concern throughout this financial crisis has been to get credit to viable businesses, especially small and medium-sized enterprises, which will lead our way out of this recession. The actions I have announced today will put the banks in a much stronger position than before.

I am imposing specific lending targets on AIB and Bank of Ireland. They will make available for targeted lending not less than €3 billion each for new or increased credit facilities to SMEs in 2010 and 2011. This, in particular, must include funds for working capital for businesses. This will be a significant increase on the figures reported by the banks for 2009 and will help to sustain the economy and foster growth. They will be reviewed as the needs of the economy change. Bank of Ireland and AIB must also make available €20 million each for seed capital to be provided to Enterprise Ireland supported ventures, building on the very successful programme launched in 2009. They will each set up a fund of up to €100 million for environmental, clean energy and innovation projects, in addition to the €100 million provided under the recapitalisation last year.

Historically, Irish banking has focused too much on property-related lending. It is fair to say that our banks have not been very well acquainted with our modern economic sectors. This will have to change. For that reason, I am requiring the banks to commit resources to work with Enterprise Ireland and the IBF to develop sectoral expertise in the modern growth sectors of the Irish economy; to explore with Enterprise Ireland and the IBF how best to develop the range of banking services that Irish enterprises trading internationally will need; and to develop expertise and bring forward new credit products in areas where cashflow, rather than property or assets, is the basis for business lending.

In line with the renewed programme for Government, the two banks will be required to submit SME lending plans by geography and sector for 2010 and 2011 in light of the €3 billion target. These plans are to be submitted to my Department within six weeks. They will be reviewed by Mr. John Trethowan, an experienced banker with a demonstrated commitment to public and social service who will be examining bank lending policies as part of his remit as credit reviewer. It is important to stress that credit can only go to viable businesses. The last thing we need is for the banks to incur high losses on risky loans. That sort of imprudent lending must be a thing of the past. The Government will decide, following Mr Trethowan's review, whether further action on lending targets is needed, and what action should be taken.

AIB and Bank of Ireland will also be subject to a credit review process, headed by Mr Trethowan, which will allow individual enterprises, sole traders and farmers who have had credit refused or withdrawn to apply for an independent review of the bank's decision. Where the reviewer recommends that credit should be granted, the bank is required to comply with the recommendation or explain why it will not do so. This process will also provide me with an accurate assessment of banks' lending policies and procedures. The administrative arrangements are in place and the statutory instrument is being laid before the House today. Accordingly, applications for a review will be accepted from today. The credit review process will give viable businesses in all sectors an opportunity for an independent second opinion, where credit is refused or withdrawn. The review will ensure that the banks, which have been supported by the State and the taxpayer, comply with their responsibilities to our economy. Mr Trethowan will outline his work in this area later this week.

The prospect of a family losing its home is one the most appalling vistas in any recession. Those who find themselves in this position are likely to have lost their jobs as well. I do not need to tell anyone in this House the havoc and trauma such events can visit on the lives of those affected. The Government has taken a number of initiatives to support those having difficulty with their mortgages. It has introduced the statutory code of conduct on mortgage arrears for all lenders; extended the six-month moratorium on legal proceedings to 12 months; refocused mortgage interest relief on those who bought their homes at the peak of the market with extensions up to the end of 2017; provided financial help to over 15,000 families through the mortgage interest subsidy scheme; and increased the advisory services provided through the Money Advice and Budgeting Service.

In addition, the Irish Banking Federation has said where a satisfactory arrangement is reached and adhered to, its members will not take legal action against borrowers. The number of mortgage holders in arrears is still increasing, although more slowly than before. In general, repossession rates in Ireland remain extremely low. The guaranteed institutions told us that last year they sought and obtained orders for repossession through the courts in just 28 cases.

The question that has been asked in this House and outside is how banks that have been rescued by the State can be allowed to pursue homeowners experiencing difficulty with their mortgages. I acknowledge the anger and frustration of those who ask this question, but the Government's measures have been successful in minimising the number of repossessions and the institutions which have had most recourse to the courts are not covered by the guarantee. We must be careful that our efforts to help home owners do not store up more problems in the banking sector that will require further calls on the taxpayer. The revamped mortgage and debt group, which I announced recently, has started its examination of the extent of the problem of mortgage default and will report to me on a rolling basis on the most sensible and effective way to deal with this problem.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context

When?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

We have reviewed arrangements for the State's management of its investments in the banking system in anticipation of the potential changes in the State's interests in the banks. At present, the State's preference share investments in AIB and Bank of Ireland are funded and held on my behalf, as Minister, by the National Pensions Reserve Fund Commission. I have decided that it will be given the ongoing role of managing the State's financial investment in AIB and Bank of Ireland, as two banks listed on a stock exchange and operating at arm's length.

As Anglo Irish Bank is no longer listed, it is in a different position. Its shares are held directly and the NTMA will manage the State's ownership through a relationship framework. As they are not listed, I propose to hold directly any special investment shares in EBS and Irish Nationwide, and the NTMA will manage those interests on the basis of relationship frameworks which will ensure that each institution's board and management team will continue to run its business on an arm's length basis.

In September 2008, in response to the international financial crisis, Ireland introduced a two year blanket guarantee scheme for certain liabilities of covered institutions. A new, more targeted, scheme was introduced in December 2009 in order to facilitate the ability of credit institutions to issue debt securities and take deposits with a maturity post-September 2010 on either a guaranteed or unguaranteed basis. A key feature of the new scheme is access to longer-term funding, which is in line with the approach adopted elsewhere in the European Union and is expected to contribute significantly to supporting the funding needs of the banks and to securing their continued stability. In addition, banks can access unguaranteed funding under the new scheme.

Although the capital injections I am announcing today will greatly strengthen the position of the banks and serve to reassure their depositors, I am satisfied that it would be prudent to seek an extension of the guarantee in a more limited form until this confidence has been reliably restored. I will be seeking the Commission's agreement for a modified extension of the guarantee, consistent with a phasing out over a realistic period of time. As with the extended guarantee scheme, any new scheme will not cover subordinated debt. The existing subordinated debt guarantee will lapse at the end of September. This scheme is due to be reviewed by the Commission before 1 June and I intend to make an announcement about the future of the guarantee in advance of that date. I want to stress that the ordinary deposit guarantee scheme which covers €100,000 per depositor per institution is in place and will continue on a permanent basis. Nothing in today's announcement changes that position.

This evening, I have necessarily concentrated on the costs of resolving the banking crisis. There are upsides for the taxpayer who is funding these measures. First, we now have a clear path to fix the banking system and because of that we have safeguarded our economic future. Second,the aggressive valuations conducted by the National Asset Management Agency increase its prospects of securing a reasonable financial return for the taxpayer. Third, the NPRF will hold valuable shares in our two main banks which can realise gains for the citizens of this country. Fourth, there is the proven gain of €1 billion which will accrue to the taxpayer in six month's time from the bank guarantee scheme, and, finally, if a smaller and good bank can be carved out of Anglo Irish Bank's current loan book, we will recoup some of the taxpayers' assistance to that bank.

I began my statement by pointing out the widespread international confidence engendered by last December's budget. The citizens of this country have shown grit and determination in facing up to our severe budgetary difficulties and it has paid off.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

They had no choice.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

We are facing up to our banking difficulties. We have acknowledged the scale of our problems and we have taken the necessary actions to solve them. The banks have been forced to recognise their losses and this Government, on behalf of the taxpayer, has committed the capital that will ensure we have a banking system to serve this economy as it recovers.

The steps we are taking today will provide certainty to the people from whom we must borrow; certainty among our trading partners; and certainty to investors, both at home and overseas, who look to this country for opportunities. This certainty will further boost international confidence in our ability to recover. Others believe in us. We must now begin to believe in ourselves.

Deputies:

Hear, hear.

Photo of Paul KehoePaul Kehoe (Wexford, Fine Gael)
Link to this: Individually | In context

No clap today.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context

We must believe it ourselves.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

I move amendment No. 2:

To delete all words after "Dáil Éireann" and substitute the following:

"noting the complete failure of Government banking policy to support the provision of credit to personal and business banking customers;

suspends the transfer of toxic loans from all banks to NAMA and subsequent recapitalisations until:

— a costing of Fine Gael's alternative 'good bank/bad bank' plan for Anglo Irish Bank is commissioned from independent economic experts at the OECD;

— the detailed costings of other options that have been considered by Anglo Irish Bank and the Government are published;

— the merits of using the same resources for a new investment plan for the Irish economy in the areas of broadband, energy, water infrastructure and re-training are also assessed;

— all these options are assessed by independent experts and their findings are presented to the Oireachtas for debate;

— any further recapitalisation commitments to AIB, Bank of Ireland and EBS includes a watertight agreement on additional lending for small businesses and mortgage applicants; and

— greater tangible financial support is provided to existing mortgage holders from different providers experiencing financial difficulty."

The decisions we are taking today will at one stroke double the national debt. What the Government is asking us to decide today is of truly horrendous proportions. The evidence has not been offered by the Government to sustain the decisions we are being asked to make, which will convert the loans that were recklessly run up by the bankers into sovereign debt. This debt will now be on our generation and future generations. Today's decisions will bring to €40 billion the amount the taxpayer will be asked to put into Anglo Irish Bank, which was run in a truly buccaneering way by Seán FitzPatrick and his colleagues. This is real money; this is mortgaging our futures. This is the final bill for the reckless economic management we have had to put up with for ten years.

Today is not the day for allocating blame among those who caused this. I do not disagree with the Minister's statement that bankers must take enormous responsibility for what was done there, but I also believe he should have the grace to recognise that regulators and the Government parties failed dismally and that they pursued a strategy in which there was an interlocking embrace between the regulator, the banks and the Government which saw no evil, spoke no evil and heard no evil. That was how those who warned of this impending crisis were treated. They were treated with contempt by Ministers. The Minister and his colleagues in government must look to their own stewardship as well as pointing their guns at the banks on this momentous day.

Deputies:

Hear, hear.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

We are today crossing the Rubicon. There can be no turning back from this decision. It is a final step in the journey the Government has taken and it is of truly huge proportions. We have to reflect on the advice we have regarding the earlier steps along the road. When the guarantee was introduced, we were told this would be the cheapest bailout of a banking system of any country. How hollow those words look now. When the first €11 billion in recapitalisation funding was introduced in the House, we were told this would result in credit flowing. How hollow those words have been. When NAMA came along, we were told there would be a wall of money in the banks available for lending and within weeks we heard the chief executive officers of the banks explaining the reality to us.

The Government, therefore, does not have a record of success as it asks us to accept on trust that these decisions today should be taken without evidence being presented that stands up to independent scrutiny. This is a huge gamble. We are being asked to accept that this is the least worst of the options available, but where is the analysis to show that? As Colm McCarthy, a Government adviser, said regarding prudent spending of public money, the onus is on the Minister to demonstrate to the House that this is the least worst option and, to be brutally honest, while his script mentioned many numbers, it did not confront the root issue and it has not demonstrated that.

Deputies:

Hear, hear.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

The doubling of the national debt today is significant. A total of €11 billion has been put in to recapitalise the banks and later we will vote on NAMA spending €43 billion to acquire toxic loans. The Minister stated €11 billion will be used for recapitalisation, most of which will go to Anglo Irish Bank, and a further €10 billion will be paid to that bank later. We are, therefore, being presented with a debt of €75 billion. People outside the House are flabbergasted by the scale of what is happening and they have worry heaped upon worry. Today, bad practices in the Quinn Group have resulted in the new Financial Regulator going to court to put two of its companies into administration. This is another worry for taxpayers and another potential bill that will come home to them to pay.

These are troubling times and the onus is on us in the House to take great care about the decisions we take. That is what we must do in undertaking scrutiny of what is before us. Our economy is in deep crisis and recovery depends on the choices we make today. I believe the Government is choosing to nurse along the bad decisions of the past to protect professional investors whose risk capital helped to protect them from any loss and that choice will put a huge squeeze on the capacity of the Government, or any future Government, to carve out a recovery strategy. A sum of €75 billion, of which €40 billion will go to Anglo Irish Bank alone, will dramatically constrain our freedom of manoeuvre to invest in our future and that has to be acknowledged.

It is important that the debate be conducted on the basis of hard evidence and not on myths. I am appalled that I still hear myths from the Government, which I would like to nail now. I have heard it argued time and again by Government spokesmen that failure to protect bondholders in the banks would amount to a default by the Irish people on its obligations. That is simply not true and even the Taoiseach repeats that myth time and again in the House. The debts run up by Seán FitzPatrick in creating his buccaneering bank are not taxpayer commitments. They were not borrowed by the taxpayer.

Deputies:

Hear, hear.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

They are commitments made by a dysfunctional bank, which was not properly regulated and which was encouraged in its folly. The guarantee we offered in 2008 will expire next September and, therefore, we offered bondholders a temporary guarantee while the banks got their affairs in order. It is simply wrong for Ministers to come into the House and pretend the taxpayer has an obligation to pay off all that money.

I want to nail another myth peddled by Government spokesmen, which is that this is a paper transaction that does not involve real money - it is ECB money or Monopoly money or soft money - and it is not part of our debt. It is no such thing. It is hard cash that our grandchildren will be obliged to pay. It is not cheap money. It is being borrowed at a short-term rate, which is the same as, if not greater than, the rate at which the Government is able to borrow. We hear this time and again, as if the additional €64 billion we are putting in today is soft money. This is real hard cash and we have to get that into our heads. The decisions we take later will reduce our capacity to do many things to which our people rightly aspire. Now is the time to be clear about what it is we the taxpayers want from the banking system and what we are willing to pay for. We want a good banking system capable of lending. We want banks of systemic importance to the economy to emerge from the crisis cleansed of their toxic loans. The Minister did not answer the question of why Anglo Irish Bank is regarded as being of systemic importance to this country.

Photo of Michael D HigginsMichael D Higgins (Galway West, Labour)
Link to this: Individually | In context

Exactly.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

Where is the evidence that it is of systemic importance that would now justify injecting an additional €36 billion to add to the €4 billion we have already contributed? The appalling unwinding of Anglo Irish Bank has been revealed again today by the new figures. We now hear there is €36 billion of toxic developer loans, which is 25% more than we were led to believe just a few months ago. The quality of those loans is now being written down by 50%, which is 66% worse than we were led to believe a few months ago. The State's injection, which up to a week ago we were told would total €10 billion, will now be €22 billion for the required recapitalisation. That is 120% more than we were led to believe. Anglo Irish Bank will absorb 70% of the recapitalised money the Minister is investing to try to get our banks going. What will that produce? Will it deliver any lending? Will that 70% of the recapitalisation get credit flowing? Will it put someone back to work or help with a person's mortgage? It will not. That is the reality. The money has gone into a black hole.

Rapid deterioration is evident. The Minister has admitted that the details on Anglo Irish Bank get worse every day. Despite that rapid deterioration the policy remains the same. There is no budging in the Government's policy, which is that the taxpayer should be the first over the hill to rescue the bank, not those who invested in it. That is the essence of the policy. I cannot understand why the policy is not changing as the evidence emerges on what an abnormal bank Anglo Irish Bank was, to the extent that it is jeopardising our future as a nation. I heard spokespersons on behalf of the Government say this morning that Anglo Irish Bank is systemically important to the country. It is no more systemically important to this country-----

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

Seventy billion euro.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

The Minister is investing €40 billion in cash into the bank.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

Find it by the end of the week.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

The Minister has not considered the options.

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
Link to this: Individually | In context

It is treachery.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

Bad decisions in Anglo Irish Bank have been responsible for bringing this country to its knees. Its banking model is utterly broken and will not be revived. It is undertaking no lending to the sectors that can drive our economic recovery. Not one new loan or new job will be created by Anglo Irish Bank. The only purpose of putting money into the bank will be to repay the professional investors. I cannot see a sound economic or moral argument for turning to taxpayers and asking them to do that.

We have heard from Anglo Irish Bank that it believes closing the bank down in an orderly way over a decade or more would be more expensive. Let us be honest. It has not costed that approach. The only strategy that has been costed is one in which all the bond holders would be rescued and have to contribute nothing. There is another strategy with respect to Anglo Irish Bank, namely, what normally happens when a company of no systemic importance to the taxpayer gets into trouble, that its creditors take over and try to recover as much as they can from the debts, loans and assets of the company. That is what happens in capitalism. When people make investments that go sour, they take the consequences. That is not an option that was considered by Anglo Irish Bank, or if it was neither the Minister nor the bank presented the analysis to us. We need to see such an analysis and it has not been presented by the Minister to the House today. That is the nub of the decision we are being asked to make - whether, as the Minister indicated in his speech, this is the only way. I do not believe it is. I can understand how the management of Anglo Irish Bank would not cost that option, because at the end of the day it wants to see the bank as a going concern and to look after the bond holders. The question is whether taxpayers want to see that and if it is in their interests.

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
Link to this: Individually | In context

We cannot afford it.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

While I understand why Anglo Irish Bank did not cost that option it is inexplicable why the Government did not do so and explain to us in clear terms why it has chosen to bail out all those people rather than allow the normal principles of capitalism to apply in a bank that no one other than a few people in the Government parties believes is of systemic importance to this country. I repeat what Mr. Colm McCarthy said, the onus is on the Minister and the Government to explain why this is the right decision.

As far as I can see the calculation is that the bond markets looking at Ireland Incorporated would take a view that it would be far worse to invest in a country that decided a busted flush bank such as Anglo Irish Bank was not important. The implication is that investors would worry about a country that faces reality and says a bank run in a buccaneering way is of no importance. I believe the bond markets would not look on matters in that way. They would recognise that the country had accepted it had commitments to the people and to the future of the nation, not a busted flush bank, and that it wanted to put its scarce €40 billion, if it could pull it together, into building strong arteries for economic recovery. This is not a normal bank and these are not normal times. This is a bank that has behaved recklessly and does not deserve the commitment of the taxpayer for which, as the Minister indicated, the banks should be grateful.

We should not offer Anglo Irish Bank that cover. A different case could be made for the other banks, namely Allied Irish Banks and Bank of Ireland. I recognise that they are systemically important. They run our ATMs, pay our mortgages, keep bank accounts going and business flowing. I recognise that we have to do special things to face up to the difficulties experienced by those banks. There is an assumption that the Government should not apply the rules of capitalism and that we should bail out this bank. The Minister will cite learned bankers who would say that is correct but it is worth saying that the people who recognised the oncoming juggernaut of the property collapse are not on-side. Those who saw and issued the warnings do not believe this is the way to deal with Anglo Irish Bank. It is important that we take on board that view, which was not listened to at the time it was made. The fear of the contagion from not supporting Anglo Irish Bank and all its bond holders should be put under severe scrutiny.

Photo of Michael D HigginsMichael D Higgins (Galway West, Labour)
Link to this: Individually | In context

Hear, hear.

6:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

It has not been put under severe scrutiny in the Minister's speech. There was not even a reference to the possibility that the €2 billion of subordinated bond holders in Anglo Irish Bank might lose in this event. Why would we pay back that €2 billion? I do not understand why that has not been addressed in the Minister's speech.

I welcome the tough regulatory capital requirements that the new regulator has set in respect of the other banks. It is crucial that we are not continually coming back to the banking crisis and that we half cure it. The regulator is right to apply rigorous stress tests and to expect the banks to be able to fulfil them. The stress tests look convincing, although I am surprised there has been no reference to the impact of rising interest rates on the potential stress on the loans. Perhaps that is for us to take up another day.

I was surprised to read in the newspapers at the weekend that the attitude the Minister was taking to the banks was take it or quit, that he was going to confront them and firm decisions would be taken, that this was the moment of truth and that they would have to make their decisions at the same time as the taxpayer was facing up to the matter. That is not what has happened today. No decision has come forward from the banks that they are definitely disposing of non-core assets, that they intend to turn to other investors in their banks and expect them to bear some of the losses or that they will offer new shares for subscription.

I believed these were the subject of hard talking by the Minister and that he would bring across the line a package involving everyone making an effort together, even within Allied Irish Banks and Bank of Ireland. Instead, the issue is being kicked down the road like a can being kicked a bit farther. We will have to wait some more months before we see exactly what the banks will do. It will be the end of the year before we find out how the banks will meet their capital requirements. What will happen the banks and the banks' credit while we are waiting for decisions to be made? The banks will try to hoard every bit of capital and ration every loan they can to protect their independence from the Government.

I took heart when the Minister faced up to the take-it-or-quit approach. However, there is now a slow bicycle race that could extend right until the end of the year, at which time the banks will be freezing out people who depend on a flow of credit. Those individuals behind bankable business projects that perhaps could revive this economy will be refused credit by the banks, which will claim they are concentrating on meeting their capital requirements. The banks will say it is too bad they cannot talk to them. This is a real worry. I was misled by the headlines claiming we were finally facing up to this issue.

Let nobody be under any illusion that what we are doing today does not have implications for our capacity to get out of this economic difficulty. Deliberately overpaying for toxic assets is still at the core of the strategy. We have not heard today what the long-term economic value will be or the extent of the uplift over and above the market value. We will deliberately overpay for bank shares considering their value in the marketplace to avoid the majority shareholding. We are to set up a massive State monopoly, the biggest property company in the world, to manage a property portfolio. These decisions will undermine our capacity to do so many things this country needs. The Government's approach is not some inspired stride away from the brink but a step closer to it. The taxpayer will carry all the load for these bad decisions.

I welcome what the Minister has to say about lending but we must question whether we can believe what is now being said about it. When the Minister announced the recapitalisation plan in February last year, he told us the Government had decided on a new recapitalisation plan that would "reinforce stability" and "facilitate banks involved in lending to the economy" and get credit flowing again. He also stated, "The recapitalised banks have agreed to work closely with the IDA, Enterprise Ireland and with State agencies to ensure the supply of appropriate finance". The very same elements that were presented today as part of the credit agreement were presented in February of last year as if they were to be delivered between then and now. No one would agree with the Minister that the commitment of last year has been honoured. Can we believe the commitment of today will be honoured?

While I admit there is a statutory power and that the Minister has the power to issue directives if there is a failure, there is also the reality that the banks will hoard capital to try to defend their position over the coming months and avoid the State taking over. I am grievously worried about what is occurring.

NAMA was mentioned least of all in the Minister's speech today. We are creating the largest property management company in the world. The IMF has warned that State-run asset management companies are fraught with difficulties and that there is a real problem associated with their recovering money, because they become politicised.

We did not hear today about the Oireachtas oversight committee we were supposed to have to oversee the operations of NAMA. We are well past the deadline on which NAMA was to have produced protocols on risk management, its credit management function and its disposals policy. It was committed to providing all those by the end of March, yet none of them has been provided although we almost at the end of that month. We expected to see them so we could have confidence that NAMA, which was moving to take over all the loans, would be managed in a way that would protect the taxpayer. This has not occurred.

There is a genuine worry that NAMA, having paid too much for the assets, will freeze the property market. It will be scared out of its wits to dispose of any property that would show a loss. It is probably worried that the European Union will look over its shoulder stating that if it incurs a loss, it constitutes State aid. Is this a formula for getting the property market back into shape? This issue still has not been addressed.

We do not have the NAMA business plan. Most people who looked at the last version of the NAMA business plan would regard it as a work of fiction. It purported that 80% of the loans transferred to NAMA would perform fully and that everything would be paid back. Who believes that? The belief that the loans would perform fully underpinned the last business plan. We need to see the revised business plan because we are now crossing the Rubicon. There is no coming back or means of repairing our model or finding a new way of proceeding. We will have this on our balance sheet.

This is a time to be hard-headed in this House, a time to demand evidence from those who thrust this course of action upon us. Thus far, evidence has been in short supply. We need to see the revised business plan and the assessment of all the options, not just those preferred by Anglo Irish Bank. We need to see the independent audits of the various assessments being carried out and to see the risk governance in NAMA. We need to see the Oireachtas committee being established, with clear terms of reference, and a role for the Office of the Comptroller and Auditor General that would protect us.

I agree there is no risk-free approach. This is a difficult time. It is superficially attractive for any Government to throw its arms around everyone and tell them it will look after them and that they need not take a loss. However, we are not in a position now to take that approach. The decisions being taken are mortgaging the future of Irish taxpayers. The decisions are pretending the dream can continue such that we can in some way sort out the dreams of the past. Today's decision on where we go as a nation is very important.

The sum total of the Government's strategy seems to involve retrenchment in fiscal policy and writing whatever cheques are necessary to get the banks back in order. This is not a sufficiently good choice. It involves looking back at the mistakes we made, nursing solutions along and battening down the hatches to see whether we will get by. This is the time when we need to have the vision to strike out for a very different future and invent a different future for the country.

Today is a momentous day because the commitments we make, including today's doubling of the national debt and the investment of €4 billion in Anglo Irish Bank, restrict our capacity to reinvent ourselves as a nation. We must be very careful in scrutinising the evidence before we give the pass to them. I do not see the evidence and am gravely worried about what is proposed. We must rethink our approach.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
Link to this: Individually | In context

I propose amendment No. 2. Today will be regarded as an infamous day in Irish history. It is the day on which the costs and consequences of crony capitalism, Irish-style, have come home and on which the burden is to be laid on the shoulders of every man, woman and child here, in addition to future generations not yet born. Today is a day about socialism for bankers and developers. It is not for ordinary people because they will be the ones who will carry the €22,000 per head of taxpayer debt for the Anglo Irish Bank arrangement. Today is the day our national debt is likely to be doubled, thanks to the phrase first used by Dr. Peter Bacon, which the Minister for Finance employed last St. Patrick's Day in his Financial Times interview when he confessed that crony capitalism was inherent in Irish society. The Financial Times carried the headline on its billboards around the world, "Irish Minister confirms crony capitalism as part of the cause" of our banking collapse.

On Sunday, the Sunday Independent published an Irish rich list of several hundred, perhaps 1,000 rich. One person looking out from the bottom end of the rich list was "Mr. Fingers", Michael Fingleton, who was said to have about €30 million. Around the country a farmer, a doctor, a housewife, secretary or a low-paid civil servant will be conscious tomorrow that he or she is taking on a massive burden of debt gifted by Fianna Fáil while people such as "Mr. Fingers" can be on the published rich list. I do not know where now stands Mr. Seanie FitzPatrick. We know, however, that Mr. Derek Quinlan, who was a partner in the ill-fated Irish Glass Bottle site venture, is in Switzerland. We understand that Mr. David Drumm, the recent and former managing director is in somewhere such as Cape Cod in the north-eastern part of the United States. Mr. Johnny Ronan, after the rumble in Ranelagh, went for a pricey weekend to Marrakesh - €60,000 or €80,000 – and he announced afterwards that he was going to disappear out of view for a while.

Does the Taoiseach understand why people feel angry? Unlike other jurisdictions we have seen no justice in terms of the taxpayers taking the burden. Everybody in Ireland understands that our legal processes are slow. They have to be slow and thorough. However, how can the Taoiseach stand over what is being announced for these people today, in terms of a confirmed bail-out and at the same time we are giving up our schools and hospitals of the future? There is so much opportunity lost in terms of the fraction of the money we should like to have seen available, on this side of the House. That, in a way, is the tragedy of today's announcement. Like a Shakespearean tragedy it began in hubris and this has carried on – only in this case it has not destroyed the main characters, the bankers and developers. It is, however, helping to destroy so many ordinary people, and this is a peculiar Irish tragedy.

The Taoiseach may suggest that this is a tragedy for every country in the world and is due to failures of international capital, new financial instruments, derivatives and so on. However, it is not, rather it is due to an old-fashioned bust stoked by a series of Fianna Fáil Ministers. I understand and accept that he inherited a train that he could not stop when he was Minister for Finance, and indeed, when he became Taoiseach, but it is painful for ordinary people.

In a previous Budget Statement on an emergency budget, I recall the phrase which was popular among British and Irish soldiers during the First World War, namely, "lions led by donkeys". This is the sixth time today that the donkeys in Fianna Fáil have asked the lions of Irish taxpayers to leave the trenches to go over the top, face the withering fire – as Irish soldiers did in the First World War – and take on the chin the mess that Government has made of the banks and the economy.

This is not a formal Budget Statement, but let us be in no doubt that Deputy Brian Lenihan has today set the parameters for every budget for years to come, perhaps for as much as a decade. Every autumn from now on, whenever a Minister for Finance has to frame a budget, that will incorporate the true year by year cost of today's and previous announcements. Here is an example of one small thing that will pop up on the agenda of every Minister for Finance. Some €8.3 billion is going into Anglo Irish Bank today, as provided for by a 10-year promissory note. That means that every year for ten years a Minister for Finance will have €830 million as a given item being taken out of current spending and reserved for Anglo Irish Bank. If the later €10 billion the Minister talked about has also to be provided, that will mean an extra €1 billion a year. This means that within a few years a Minister for Finance will face an annual current transfer for Anglo of €1.8 billion a year for ten years, or €18 billion.

We will also have taken out €36 billion of its bad loans, at an average discount, yet to be confirmed of 15%. All this for one small bank which specialised in lending to developers and builders. It is not a systemic bank, and has very few branches around the country. It is now a fantasy bank, with a fantasy plan that will be re-resurrected for small and medium enterprises.

It would be better if we could move into levels of honesty as regards what the future is likely to hold. There is no future for the brand, Anglo Irish Bank. It is a destructive brand, which destroyed itself through greed, weak regulation and lack of compliance. Forget the fairy stories, there is no bright future and the people there are intelligent enough to know that.

What about Irish Nationwide Building Society? That is going to get €2.7 billion, again by promissory notes, in tranches of €270 million a year for ten years. Therefore, if I am an incoming Minister for Finance I shall see €830 million a year for Anglo Irish Banki and €270 million for Irish Nationwide for ten years. That is more than €1 billion a year and if the extra €10 billion the Minister has jotted in for Anglo Irish Bank is true, that will mean another €1 billion a year. This will be €2 billion a year. In addition to all the other costs, we are also facing annual costs of €5 billion from this year for payments because of increased interest costs along with the other elements of the packages that have to be financed.

Bear in mind that as a country this year Ireland hopes to take in something like €30 billion in revenue. This means that the Minister for Finance will find that some €7 billion has gone out of that €30 billion before the Government can even think of building a hospital or school or providing for old age pensions. That is the level of the financial depredation we are in.

The figures are awesome. We heard about "shock and awe" as regards the Iraq war, but these figures are on the same level, and I am shocked and awed. I did a table of the figures earlier as we were being briefed - €16.83 billion is being transferred in the first tranche involving ten developers. That is an average of €1.6 billion for each of them. Between the ten they have 1,200 loans, an average of 120 loans per developer.

The total transfer to NAMA will be €81 billion. It was originally estimated to be €77 billion but because of the rise in the Anglo Irish Bank figure and some small falls in the AIB and Bank of Ireland figures, it is now €81 billion. At an average transfer of 47%, that is a write-down, loss in value or black hole of roughly €40 billion.

Then there are the capital requirements listed by the Minister. I totted them up at €23 billion. It is €7.4 billion for AIB, €2.7 billion for Bank of Ireland, €8.3 billion for Anglo Irish Bank, €2.7 billion for Irish Nationwide Building Society and €875 million for EBS. Then there is the footnote that the Minister expects another €10 billion to be required later for Anglo Irish Bank. That is a total of €33 billion in addition to the losses of €40 billion on the NAMA transfers. The figures resemble monopoly money, and not just for Irish people. The Taoiseach spoke about levels of bank debt throughout the European Union and mentioned a figure of €300 billion. This is a small country among 27 and the Taoiseach should be aware that the figures we are discussing today are actually colossal in European terms for a small country. The Taoiseach suggests that Ireland is hardly a blip in the grand scheme of things. He should think again; he is simply not correct. I beg to differ with him.

This will be the top item in every budget for the next ten years. I expect that with future budgets there will be an inspector from the European Central Bank sitting in the Minister's office saying with a grim smile what can and cannot be done. If the ECB and the European Commission have acceded to this, it is only because they know that realism has finally begun to strike about the values. The Germans want their money back. They might have been foolish in lending to Irish banks but Frau Merkel wants her money back. That is what today is about. Frau Merkel wants her money back and this is Brian's arrangement to give it back. There will be a historical loss of national financial sovereignty that will infuriate all who value with pride the independence of our nation. One thing everybody in this House shares is a love of our country.

Greed has brought us to the point where recovering from this is possible but it will mean that every man, woman and child in the country will have to put their shoulders to the wheel. We will have to devise a political social framework that offers the little people something, as well as the bankers and the developers. It is all gain, care and consideration for the latter, with the little people left to shoulder the burdens. Recall the €4 billion adjustment last December. The Minister said he did not want a reference to that, but the adjustments today are multiples of that figure, regardless of whether they are in current spending, in banking, on balance sheet or off balance sheet.

The State is now the hapless and reluctant owner of dominant shareholdings in all the main financial institutions in the economy. "I own the banks" is a hollow boast. Every extra percentage of ownership is an admission of policy failure and, in their hearts, the Taoiseach and the Minister for Finance know this is the truth. It will be acknowledged internationally as a bitter truth. They do not own the banks, however. The truth of today is that the banks own them. They dictate every element of policy, their interests take precedence over everything else and financial resources that ought to be challenged into economic recovery are directed instead in particular at protecting two rogue institutions, the Irish Nationwide Building Society and Anglo Irish Bank. Consider that a tuppence ha'penny little building society has €9 billion in bad loan transfers and requires a €2.7 billion capital injection to be paid for each year from our annual budget.

Since late 2008 the Minister has thrown billions of precious public savings into bailing out these institutions from the consequences of their reckless casino operations. He did not spend much money rescuing indebted homeowners or indebted manufacturers or offering a lifeline of credit to small businesses. The announcements made by the Minister have been made in every budgetary statement. Of course, they are welcome but this is about the fifth time we have heard most of them. We heard in the last two Budget Statements about arrangements for people from Enterprise Ireland and so forth to meet with the bankers and tell them how to get credit flowing again. We have heard several times about the €100 million for innovation and the €100 million for green projects and so forth. This is recycling; we have heard it before.

The Minister has devoted the entire stock of family silver, even the curtains and carpets, to these banks because they told him they were too big to fail. He was panicked into believing them by their sinister threat to unleash Armageddon should he refuse to give in to them, particularly Anglo Irish Bank and Irish Nationwide Building Society. Today is end game day. The end game in chess occurs when there are only a few pieces left on the board and the remaining pawns take on a special importance. We are certainly close to the end game in this protracted chess game, which has gone on for two full years since the fateful St. Patrick's Day massacre of Anglo Irish Bank share values in March 2008. That event triggered the unwinding of that bank's business model, with all the consequences we now experience to our cost.

On St. Patrick's Day 2008, the Taoiseach was in Vietnam, on one of the annual St. Patrick's Day trips. Afterwards, he travelled to Malaysia. At that time, the country, and presumably Fianna Fáil, was intensely embroiled in considering the future of the then Taoiseach, Deputy Bertie Ahern, and whether he could continue in politics. Was that the reason the current Taoiseach took his eye off the ball on that St. Patrick's Day and afterwards? The share price of Anglo Irish Bank had collapsed. That was the time for the regulators to go in and sort out the bank. Had the Taoiseach done that, the collapse of the other banks might still have happened but not to the same degree. The Taoiseach lost a valuable six months. He will recall that he became Taoiseach-designate and then Taoiseach, after which people went off to celebrate. We then segued into the night of the guarantee.

In many ways the downfall of Anglo Irish Bank lay in a complex series of transactions. The Quinn family group took a 28% position in Anglo Irish Bank shares through contracts for difference. Two years earlier the Taoiseach and I had a rather bad tempered exchange about contracts for difference when I warned him about turning the Irish Stock Exchange into a casino for casino capitalism. However, it seemed like good business and the Taoiseach would not even put a 1% stamp duty on it. He withdrew the notice about the stamp duty which the Revenue Commissioners had drawn up.

I remind the Taoiseach that, according to the public record, on 24 April that year he went to a dinner at Heritage House on St. Stephen's Green, the then, and perhaps current, headquarters of Anglo Irish Bank. He cannot have been unaware that the shares in Anglo Irish Bank had collapsed in value. People in the Department of Finance, the Financial Regulator and the Central Bank had to know. They are not incompetent. They might not have great knowledge about banking in some cases but they had to know that the share price of the third largest Irish bank, bidding perhaps to be the first or second largest, had collapsed. We have no explanation yet as to who knew what when and to what extent the Minister was briefed and knew about it. However, the Minister is a clever person and a diligent politician; he had to know and the organisations that reported to him as Minister for Finance had to know.

We had the guarantee on 29 September and then the nationalisation of Anglo Irish Bank. The third event was the €7 billion recapitalisation for AIB and Bank of Ireland and another €4 billion then went into Anglo Irish Bank and was lost. We then had NAMA and everything to do with that. Following that, we had the recent announcement concerning the preference shares, which I remember those like Deputy Fahey sold on television and radio stations as being a wonderful investment because the preference shares carried a dividend or coupon rate of 8%. Those of us who suggested this was a bit of a chimera were laughed out of court. What has come to pass today? All of the preference shares are being held in reserve for use in the tier 1 capital of AIB and Bank of Ireland, which shows the truth of that suggestion. While the Minister tells us the promissory notes might carry a rate of interest of 4%, I suggest we will wait and see whether we will ever achieve that 4%.

Today, we have Fianna Fáil's final solution. One question stands out: is there the slightest shred of credibility left in this Government's banking policy? Today's massive bailout announcement is the natural consequence of decisions made that fateful night of 29 September 2008. We are exactly 18 months and one day on from that fateful night. That night, the Minister was surrounded by bankers and he took advice only from bankers. He meekly promised to jump through whatever hoops they put in front of him, and the Taoiseach even went on radio to say no cheque would be big enough for him to sign if it was necessary to meet the insatiable demands of the banks.

The "too big to fail" doctrine, applied with no economic justification even to Irish Nationwide and Anglo Irish Bank, has taken a savage toll on the economy according to the raw evidence highlighted in the Central Statistics Office information last week. This was supposed to be the cheapest bank rescue in the world. The Taoiseach said that no cheque was too big to write to save our banks. Today, we are beginning to get a more rounded picture of the cheque he is proposing to write today and over the next ten years - a €36 billion bank bailout package on top of NAMA, which is €50 billion plus or perhaps a little less because the discounts are higher, although we do not yet know.

Mr. Jim Kemmy, the late Labour Party Deputy, once joked that while politics might seem easy to some, others had to come by the scenic route. Fianna Fáil are certainly taking the scenic route to nationalisation, via a mega-NAMA bailout, as taxpayers look set to be full or majority shareholders in the four institutions listed today. All nationalisation projects are not created equal, of course. We had the panic nationalisation of Anglo, and now we have the belated nationalisation or part nationalisation of the rest.

The Labour Party proposed a different approach. Following the model of the successful Swedish bank rescue, and as articulated by Bo Lundgren when he spoke in Dublin, the Labour Party proposed taking our key banks - I repeat, our key banks - into temporary public ownership before cleansing their balance sheets for return to the private sector. The key attraction of this approach was that it would have eliminated the valuation risk and the bailout element of NAMA. That still stands. It is not too late to rethink NAMA. There would not have been any need for the fantasy of long-term economic value. There would have been a much higher prospect of an uplift and gain for the taxpayer at the end of the process, which is what happened in Sweden, as the Minister for Finance has confirmed on many occasions.

Having taken the scenic route, we will now be left with the worst of both worlds - a nationalised banking sector alongside the risky NAMA bailout. Not only was the scenic route the longest route, wasting 18 valuable months, it was also the most costly.

The failures of our financial system demonstrate the more general failures of our entire economic system. It is inevitable that changes will come from the events of recent years and the decisions of the new regulator are the first examples of a tighter regime that will move us into line with the more general regime that will now follow the new Basel approach. Nevertheless, there remains one fundamental issue that is only partially treated today. The Government has worked on the assumption that the banks are favoured institutions that must be secured at any cost, even when they become insolvent by their own decisions. This House will have to set out new rules in law for future bank collapses, and these laws will need to be among the toughest ever brought to this country. We have endured enough from bad banking behaviour in the 1980s and 1990s. I would not now take on trust anything the banks promise.

Ireland has paid and, from today's announcements, will go on paying an horrific price for the banking policy disasters of the Government. Youth unemployment in Ireland has risen 170% in the past two years. There are more than 85,000 people under the age of 25 on the dole. When he visited Dublin some time ago, Professor David Blanchflower, who was on the Bank of England monetary policy committee but who is also an expert on youth unemployment, spoke very feelingly in public, to me privately and possibly to the Government about youth unemployment. He suggested that all the research shows that for young men in particular - young women are not affected to the same degree - who become unemployed for more than six months and remain so for one or two years, the effects are not temporary but last for the rest of their lives. Young men lose intrinsic confidence, belief in themselves and the ability to get up and go if they face a prolonged period of unemployment. In many ways, the young men of Ireland are the principal victims of the banking disaster, not just now but into the future.

The Labour Party has offered a series of suggestions from different Labour spokespersons on, for example, internship schemes, training schemes and graduate employment schemes - anything to give the young people who are in this country, particularly young men facing long-term unemployment, an opportunity to get up and not have to give in to a kind of despair and loss of confidence that will affect them for two or three decades. The offer is still there. The Labour Party is willing to work with the Government to see that happen but it is getting very late. We are now two years into the building bust. So many young men who lost their jobs in the building industry, unless they had a chance to go abroad, which some had, are reaching a crisis because they have nothing to do other than collect unemployment assistance. Our country has had to experience an horrific recession involving lost jobs, lost pay, lost taxes, lost investments in infrastructure, lost prosperity and lost personal happiness for tens of thousands of our citizens.

The Minister began his contribution on the bank bailout today by referring to complimentary and encouraging remarks made by various international figures in regard to Ireland. In the eyes of market analysts, however, the announcements today exacerbate the fiscal problems faced by the Irish State. One question I have for the Minister, Deputy Brian Lenihan is: what is the impact of today's statements on the entire strategy agreed with the European Commission to reduce the deficit to 3% by 2014? For all practical purposes, the Government is about to issue bonds amounting to one third of our entire GDP for distressed bank assets of dubious or no intrinsic value. The Taoiseach may have negotiated an arrangement to keep this off the formal balance sheet but markets and rating agencies are not that easily misled. While the Minister, understandably, wanted to refer to people who were encouraging to Ireland in their public statements, key articles have been written in the past month, particularly by Simon Johnson, the former deputy head of the IMF, advising America not to become like Ireland. The Taoiseach must have seen this article because it was doing the rounds when he was in the United States. Paul Krugman wrote an article which was very understanding in a certain sense. He wanted to be favourable towards Ireland but he pointed out the serious difficulties we have inherited through the bank bust. He warned other countries to avoid being like us if possible. People in the ECB and in the European Commission want to encourage Ireland but we must be realistic about the impact of today. Ireland's sovereign debt to GDP will be over 100% during 2011. The Minister did not say but it is a fundamental indicator.

We have been very smug about Greece's problems and many commentators have been smug about the fact that we are not Greece. The interest rate we pay on our national debt is the second highest in the eurozone, higher than Spain, Portugal and Italy. The Taoiseach will know that Greece is one of the few good things to happen to Ireland. Because of the difficulties in Greece, the euro has been under pressure and has fallen somewhat against the dollar and sterling. One of the best things that can happen to Ireland would be a fall in the euro so that our exports and export of services would gain.

There is evidence of anxiety in the markets about Ireland's debt exposure, therefore, new borrowing and any debt that has to be re-financed may face higher interest rates. This will add to our day-to-day spending. I do not know if the Government has been open and up front about this aspect of today's decision.

What will be the long term impact of today's decision on the international rating of Irish sovereign debt? It begs the question as to who calls the shots in Irish public policy. All the banks, but in particular, Anglo and Nationwide, looked after the developers. In turn, the developers looked after Fianna Fáil, in the classic manner of crony politics. A powerful lobby of these same developers, the investors who bought the bank bonds and Government politicians with links to the failed developers, have conspired to have our taxpayers rather than the bank creditors, carry the cost.

I understand from the briefings we received today that the tier two subordinated debt is about €10 billion; €2 billion in the case of Anglo Irish Bank and possibly €4 billion each in the case of Allied Irish Bank and Bank of Ireland. Tier two subordinated debt is risk. These are investors looking for high rates of return with a very high level of risk. Yet, the Government guaranteed them all and €10 billion is outstanding. Why do we hear nothing about a negotiation with them?

Mr. Alan Dukes said to me the other night on television that a negotiation with the Anglo Irish Bank tier two subordinated debt of €2.4 billion would only save €1 billion. What is the crazy economics whereby €1 billion no longer counts as a saving? What is the rationale? Is this discussed between the members of the Government? As for the other €8 billion, the Taoiseach has not explained why it is not possible to sort out that tier two subordinated debt at a very heavily discounted rate. He has not told us whether the senior tier one bonds are €30 billion or €40 billion. Has he even attempted to suggest a negotiation with the senior bond holders?

If there is improved international sentiment towards Ireland, today's measures could put it all at severe risk as people wonder how a country facing so deep an economic crisis can casually add a vast sum to its national debt.

No details of the administration are as yet known, other than the legal announcements about the Quinn group. The Quinn group owes a possible €2.5 billion to Anglo Irish Bank. What happened in the case of the Quinn group was central to the fall of Anglo Irish Bank which in turn was central to the fall of the other banks. What are the consequences of the announcement today of the administrative process with regard to that €2.5 billion? Anglo Irish Bank will transfer €36 billion to NAMA. The €2.5 billion of the Quinn debt may be as much as 10% of Anglo's loan portfolio remaining. The Quinn group was trying to suggest it would pay Anglo over an eight to ten-year period. This was reported in the media and it was not denied so presumably there is some veracity to it. What is the Taoiseach's analysis of this situation? Is this another Pandora's box? The Financial Regulator indicated that half a billion was at issue with regard to the fall in the value of investments in the Quinn health and insurance group and has looked for administration. It is ironic that just as the Quinn group was involved at the start of the story its administration comes today as we hear the Government's final solution yet there has been no comment from Government. Perhaps this will happen tomorrow or on Thursday. The Taoiseach should make a detailed statement to the House about the Quinn group. It is an important employer with 5,000 or 6,000 employees. Several thousand of those jobs are in the insurance-related companies which are primarily affected by today's announcements.

The Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, spoke on radio last Saturday. He suggested that Ireland could be asked to leave the euro. Deputy Ryan is the link person for the Greens in the Cabinet group dealing with banking. Is this what the Cabinet group is suggesting to Fianna Fáil backbenchers? I do not think the average Fianna Fáil backbencher would believe that because it is not provided for anywhere in the treaties. That is economic illiteracy from the Green member on a Cabinet sub-committee dealing with the banks. I think we are entitled to know what the various Government parties believe to be the Irish situation.

We heard about hair cuts today. In the material given to us today we saw a new concept called CoCo - special instruments which may or may not be part of this rescue deal. I wondered if it was not so much a visit to a barber for a hair cut as a visit to a head shop that inspired some of the people judging by some of the fantasy economics we heard today and continue to hear. However, it is ordinary people of this generation and the next who will bear the brunt.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

I wish to share my time with Deputy Ó Snodaigh, by agreement.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Is that agreed? Agreed.

7:00 pm

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

I thank the Minister for Finance and his officials for the useful and practical briefing they gave to Opposition parties this morning. It is unfortunate that the Government does not demonstrate this type of constructive and practical approach more often because it would be more conducive to the work we do in this House. Had the Government brought forward a reasonable and practical plan to deal with the banking crisis and the broader economic problems we face, Sinn Féin would have been happy to support it. Unfortunately, that is not what we have this evening. We can demonstrate a record of supporting Government initiatives such as the guarantee scheme. We set terms and conditions for our support of that measure but because the Government did not meet them we were left with no option but to withdraw our support. I am glad we did so. The Government always has the opportunity to approach the House in a democratic manner and make it work more effectively in the interest of our public.

This afternoon the Minister for Finance told us once again that he is presenting us with the least worst option. That is patently untrue, however, because the measures he proposes represent the worst option possible. My party has proposed a substantial plan of action around nationalisation of the two major banks which would have been substantially less costly to the taxpayer than the option chosen by the Government. The Labour Party's plans contained broadly similar proposals to ours and should at least have been considered. Perhaps I should implore the grace of God when I say that even the Fine Gael option would have been substantially better than the Government's proposals for curing the banks. Again, however, we face a steamroller which the Government calls democracy. Democracy my backside. We certainly are not holding the proper parliamentary deliberations which would allow us to tease out these matters or holding a rational debate on how we can do what is best for the public and the taxpayers whose money is being shovelled into these dysfunctional banks.

The Minister does not have the authority to implement a bank bailout of this scale. Technically, he could argue in the same way as one could for a half legal moneylender who is squeezing his her victims, that a narrow technical point allows him to proceed but there is no moral basis for his course of action. If the Government has any confidence in the proposal, it should put it before the people as its election platform in a general election. These proposals would impose a huge financial burden on Irish people for generations to come and that is grossly unfair even if it is technically legal in a parliamentary sense.

The Minister is introducing the harshest cuts in decades in an attempt to reduce a €20 billion deficit while simultaneously adding hugely to Government borrowing for this bank bailout. The financial ramifications of what is happening today will be felt by generations to come. Why is the Government spending all its energy on the banking crisis when so little effort is being put into getting the rest of the economy back on track? Why is so little being done to tackle unemployment? We are spending hours on a discussion of the Government's mishandling of the banking crisis instead of debating solutions to unemployment. For the economy to get back on track we need a functioning banking system but 18 months after the bank guarantee scheme we are no nearer to achieving this objective. The Minister admitted that we face many more years of pouring billions of euros of taxpayers' money into these banks. The Government opposed nationalisation and, as many predicted, is now being forced to nationalise by stealth.

During the past 18 months it has completely taken its eye off the ball when it comes to job creation and stemming the rise of unemployment. During that period Sinn Féin put forward a range of proposals to retain and create jobs. In recent weeks we put forward a specific set of proposals to deal with unemployment among the under 25s on the live register. This fully costed and constructive plan would offer hope to members of our population who are essential to future economic growth and stability. Instead, however, the Government is set on a disastrous course for employed and unemployed citizens.

Think of the productive use that could be made of the money the Government is throwing into the black hole that is our banks. The €22 billion being spent on the banks could purchase a youth jobs fund to create 20,000 or more jobs; the delivery of key infrastructure such as universal broadband, the western rail corridor, cancer centres north of the Dublin-Galway line and class sizes of 20 or fewer; a reversal in the pay cut for public sector workers on low and average incomes and cuts to social welfare, including the Christmas bonus; some 10,000 new community employment places; investment in key sectors of the economy such as information technology, tourism, agri-food and green technologies; a free preschool education system; an end to social housing waiting lists; conversion courses for graduates; a future in their own country for the young unemployed; and a functioning health system with adequate numbers of doctors, nurses and other front line staff to meet patients' needs.

The scale of the mess that Fianna Fail must take responsibility for is astounding. It should not be forgotten how vociferously Ministers rejected criticisms from those of us who warned that the economy was not built on solid foundations, that a property bubble was developing and that the Exchequer was overly dependent on taxes from construction and consumption. There was time to act and to turn things around but there was no will to do so. If we could see these issues, how can those who were in Cabinet during that period claim not to have known? Why did they turn a blind eye to the actions of bankers and developers? Does a party that has such close ties to many of those at the top of Anglo Irish Bank really expect us to believe it knew nothing of what was going on?

It is time to overthrow a culture that has existed in this State for far too long. A wealthy elite have been pandered to by successive Governments and has for decades enjoyed a position of privilege and undue influence over Government policies. People want answers to how and why the Government policies which fuelled the property bubble were allowed to continue when the damage they were doing was obvious. This is not about a rogue group of bankers and developers; it is about a parasitical section of our society wedded to the two largest political parties in this State and Fianna Fáil in particular. We will not get rid of this culture of exploiting ordinary people, like those who were injured or killed on the unsafe building sites owned by Liam Carroll as he lined his own pockets, until we get beyond Fianna Fáil and Fine Gael led Governments. Let us be absolutely clear: the elite, those who made up the golden circles and stuffed their pockets at the expense of ordinary workers, are now in self preservation mode and have the Government doing their dirty work. This is what NAMA and the bank bailouts are all about. Nothing has changed. The people this Government pandered to when it implemented policies that created the current crisis are still being pandered to. This is the true reason the Government would rather cut dole payments than introduce a wealth tax. Will Liam Carroll experience life on the dole or live in one of the sub-standard, shoe-box flats he sold to desperate first time buyers? Those at the top of the Civil Service are part of this elite group as well, such as Rody Molloy who, despite wasting vast amounts of public money, will never pay any price for his actions. In fact, he has been further rewarded for his actions.

The Dublin Docklands Development Authority is an example of the rot that existed in the State during the Celtic tiger years. Fianna Fáil cannot distance itself from this debacle and it must be held to account. Among those involved in the debacle relating to the Irish Glass Bottle Company site was Joe Burke, one of the closest associates of the then Taoiseach, Deputy Bertie Ahern. The authority is a microcosm of all that went wrong in this economy, comprising a toxic mix of Fianna Fáil and cronies around the then Taoiseach such as Mr. Burke and Bernard McNamara and Anglo Irish bankers such as Seán FitzPatrick and Lar Bradshaw, who were co-opted on to the board of the authority.

We have yet to get the full information regarding the murky goings on in these affairs but in all of this one thing should not be forgotten: a productive business, the Irish Glass Bottle Company factory, could have been saved with Government intervention. Jobs could have been saved. Now, having paid a much higher price than it would otherwise have had to pay to save those jobs, the State has a plot of derelict land which is worth a fraction of what was paid for it. The former Taoiseach should be forced to make a statement to the House outlining exactly what he knew about all of this. I challenge the Taoiseach to instruct Deputy Ahern to make such a statement without further delay. What took place at the Dublin Docklands Authority is the reason we are where we are and in the mess in which we find ourselves today. Almost half a million people are out of work and billions of euros in taxpayers' money is being put into the banks while public services and welfare are being cut. This is crazy.

It has taken the Minister too long to resolve the banking crisis, which first came to the fore in the summer of 2008. Since then, the real economy has plummeted and the banks have played no small part in this as a result of their refusal or inability to extend credit. Businesses have closed their doors and householders face repossession. The only action banks have managed to take is to hike up charges and interest rates and to fight off calls for cost-cutting among their higher paid staff members. The 0.5% mortgage interest increase from AIB yesterday, at a time when the ECB's rates remain stable, is testament to that. The bank may be borrowing at a higher rate on the wholesale market but what has it done to ensure security for its customers? When people referred to the State taking a higher stake after recapitalisation, all of a sudden the bank suggested it could sell its foreign assets. Should it not have done so before push came to shove? The failure of the Government to put a stop to the rate increase is shameful.

The banks may be borrowing at a higher rate on the wholesale market but if they squeeze already under-pressure mortgage holders, we will be looking at another tranche of bad loans in the residential property market further down the line. This domino effect will grip the Irish financial sector and taxpayers will be hit doubly for the failures of the Irish banking system. This will take place not only through the cost of recapitalisation, but through the increase in mortgage interest rates and personal loan and overdraft rates. What fruits will be borne on the other side? Will there be a nationalised State bank capable of offering individuals and businesses credit at a fair rate? Only partially. The people will be offered more or less the same. Slowly the system, if left to commercial devices, will slip back to its old unregulated ways. The banks will continue to refuse to accept responsibility for what they have done. The only stakeholder that should be given due consideration is the taxpayer. Whatever the banks wish for is completely irrelevant at this point. In any other sphere of business these banks would be in receivership or liquidated at this stage. The attitude of self-importance is the same as that which prevailed in the lead up to the crisis and there is no basis for it to be allowed to continue.

Let us consider what the banks did to bring us to this point. They were not alone; the Government and the regulators, which effectively looked the other way, were cheerleading them. The details emerging now reveal a banking system where lenders had casual and personal relationships with borrowers, where documentation was frequently incomplete or ignored and where basic financial calculations were overridden by bank strategies based on winning market share. For example, during a court action last year Bernard McNamara claimed he was actively pursued by banks to borrow money from them on exceptionally generous terms. The financier Niall McFadden, who is facing judgments running to tens of millions of euros, claimed in court that National Irish Bank accepted a personal guarantee for a €6.3 million loan without ever meeting him. Personal guarantees were the currency of Irish borrowing during that time.

These incidents highlight the lackadaisical approach the banks took in respect of security for loans. Most of the big property deals were funded by groups of banks and now total confusion is emerging over which bank controls which assets. This emerged today in discussions with the Department. This is clear from NAMA and one of the reasons the agency has not functioned up to this point. It simply has not been able to get down to the root and branch details of where responsibility for these loans rests. During the boom AIB lent €550 million to Liam Carroll with only a solicitor's letter and the deposit of title deeds as security. Let us imagine what business people who approach the banks these days must be thinking when they hear that. Court actions have also exposed flaws in the valuation of property assets by basing transactions on a loan-to-value ratio that was too high. The banks did not allow themselves any wriggle room in case property values fell.

The Government has bent over backwards to prevent the nationalisation of the two larger banks. Given the guarantee, the initial recapitalisation, the establishment of NAMA and further recapitalisation now, we have almost spent the past two years witnessing the Department of Finance create policy the sole intent of which is to prevent the banks being nationalised. The only bank the State leapt to nationalise is the only bank that nobody wanted nationalised. There can be no doubt that the speed with which Anglo Irish Bank was dealt with was a reflection of the Government's desire to hide the machinations at the bank, which would have come to light a good deal quicker and in greater detail had the bank been allowed to fold. Instead, we are getting a drip-feed of information from a bank no longer functioning as such but which is costing the State billions of euros. The bank could require a further €9 billion in recapitalisation in the coming months, twice what the Government attempted to cut from the deficit last December. It was disgraceful when the Government chopped social welfare payments and mercilessly took away the Christmas bonus from pensioners but this is what it gives to its bailout friends.

The Minister for Finance stated that the country is in a better financial position now to deal with the funding needs of the banks, which is astonishing. The State is carrying a €20 billion plus deficit, which the EU has ordered us to reduce dramatically. According to the Government, we do not have a red cent for investment purposes, but we can use the National Pension Reserve Fund, NPRF, to recapitalise the banks after NAMA takes the bad loans off their books at an even sharper deal. At the last count, the NPRF had a value of approximately €13 billion and a further €7 billion has already been taken from the fund by the Government to recapitalise AIB and Bank of Ireland. If the Government has its way, the entire National Pension Reserve Fund will be made up of bank shares. It would be ironic if the State, after all its procrastinating, is forced to fully nationalise the banks but the largest shareholder to get burned at that point would be the Irish taxpayer.

These banks are not being hard-balled by the State. They would be defunct had the State not stepped in. They have a Government content to do everything to help them while allowing them to remain in private ownership, a Government willing to socialise their debts while allowing them to continue to privatise their profits. This is the Government that lifted the bank levy, that allowed regulation to become lax. It is the political system that bailed out AIB in the 1980s and turned a blind eye again in the 1990s. Some 70% of AIB is a majority stake in that bank, but it is not full nationalisation. How much influence the State will use while holding that stake is unclear. Certainly, we got no more clarity from the Minister this afternoon. To date, the Government has shown nothing but reluctance to interfere, as they call it, in banking conduct.

Over the past three weeks we have seen revelations that the Government's convoluted and complicated approach to the banks is also mired in secrets and unfairness. The revelation that 78 employees of Anglo Irish Bank had been awarded pay increases is the second of its kind in the past few weeks. This news comes against the backdrop of a 70% pay increase for the chairperson of the board of NAMA. When the public servants all across this land, front-line workers, are having their salaries slashed, there is this 70% increase and significant increases for other board members. Simultaneously, the Government is pushing through pay cuts and attacks on public services. It is clear that the Government values the work of the banking sector over the work of other front-line public sector workers such as gardaí, nurses, teachers.

We must look now at what reform we will get. For example, the Financial Regulator has waived capital rules for EBS, allowing the building society to fall below the threshold dictating the minimum amount of capital that a financial institution must hold in reserve. The so-called new, improved and harder-headed regulation has granted the building society a temporary derogation until 31 May, allowing it to hold less than the minimum core tier 1 capital ratio of 1%.

Any literature on the financial crisis points to the absence of these thresholds as central to the magnitude of the collapse of the banking system. This seems to be the first step in a clawback to the old system. Some might say it is only a temporary measure, propagated by the need to discount the loans. However, when the Government and the Minister for Finance signed Ireland and each and every person of this State to NAMA and bank recapitalisation, reform was promised. Now it seems reform has been short-lived.

The worst of it is that we do not have the full facts of what this will all end up costing us. The loans being taken by NAMA have received an even further discount since the legislation was announced, in recognition of the falling property values. They are falling, which means there is no guarantee that this is the best deal for the State. The Minister is pushing the State down a path of debt and we do not know where it will end. The Minister is opening Pandora's box. Today will go down in history , and the Minister and the Government will not come out of this well.

I do not know what it will take to completely overhaul the culture that persists here. It is not fair, reasonable or rational that at the biggest crisis of generations the Government simply comes in here with a proposal on a banking crisis largely ignoring all of the other fault lines in the economy to bail out these banks in this fashion. It is time the Government at least listened to some of the debate, took on board some of the points that were being made by the Opposition and we all tried to ensure that there is a proper system put in place which will not cost future generations billions of euros through the disgraceful bailout of these bankers and their friends, the developers.

Photo of Aengus Ó SnodaighAengus Ó Snodaigh (Dublin South Central, Sinn Fein)
Link to this: Individually | In context

Gabhaim buíochas leis an Teachta Morgan as a chuid ama a roinnt liom chun déileáil leis an cheist ríthábhachtach seo. Ceist é nach bhfuil tacaíocht ag an Rialtas: níor sheas sé i dtoghchán, agus níl sé sásta seasamh i dtoghchán chun tacaíocht a fháil don chinneadh atá sé tar éis glacadh agus atá sé ag glacadh inniu. Is scannal é sin, agus tá sé ag tógáil céim mhídhaonlathach inniu, go háirithe toisc go bhfuil an Rialtas ag ceangal an oiread sin de thodhchaí an Stáit seo le dul chun cinn na mbanc agus leis an sealúchas atá tar éis dul isteach i NAMA go dtí seo.

It is rare that I speak on finance motions. In a way, like many other citizens, I found it difficult to get to grips with the full scale of the horror that emerged when the banking crisis began to unfold.

Like many others on the left, I raised the fact that the State and its economy was dependent upon the property bubble continuing and that such was not a position that could be sustained. Two years on from the initial emergence of the crisis, I want to give the two Brians, Deputies Brian Cowen and Brian Lenihan, a lesson in the real world to put into context the giveaway or present that they are giving to bankers and property speculators. The sum of what is intended here is that they are bailing out the banks, through a nice present of taxpayers' money, to help them recover from speculation.

I remember when people invested in eircom shares and many of them got burnt and there were cries for bailouts and help at the time. I was not one of those who believed that a bailout was realistic in that case because I, and the thousands and others who bought eircom shares, had gambled. We took a punt on shares on a market and as one is always told, there is a possibility of losing money or of gaining money. The same can be said about everyone who gambled in the property market and on bank shares and who are now looking to be bailed out. The Government is bailing them out and giving them guarantees. I will deal with one such group, for instance, the subordinated bondholders in Anglo Irish Bank.

The debts of Anglo Irish Bank include the investments of subordinated bondholders. Anglo Irish Bank, and hence the taxpayer, owes that group €2 billion at a conservative estimate. Those bondholders took a risk when they invested, of which they were fully aware and which they had taken day in and day out in other institutions for many years, and they earned high rates of interest during the so-called good times. They gambled, they lost and they should have dealt with it, but the Government stepped in and gave them a guarantee. When that guarantee is up in September, I believe that is the end of it. They should suffer the consequences of their loss. They should have suffered it when the loss occurred, but rather than that, we gave them a guarantee. That is an ongoing scandal, but there are many others.

The Chair of Anglo Irish Bank, Alan Dukes, thinks that it is alright to hand out taxpayers' hard-earned money to those risk takers who, themselves, helped create the financial mess we are in. He also suggests that it is alright for the Government to pay increases to selected employees in that bizarre dysfunctional bank. It is bizarre considering that this is the bank that should have been closed, lock, stock and barrel, two years ago, and it should still be closed today. There is no reason for us to bail out a dysfunctional bank.

Nobody in the Government called a halt at any stage, or even attempted to rein in the obscene property speculation that went on for many years. The Government facilitated it by giving tax breaks and reliefs to those gambling with the economy's future. It facilitated the banks gambling on a three-legged horse. When that horse fell at the first hurdle, the Government expected us, the taxpayer, to suffer the consequences. Those in banking circles and the Government, meanwhile, were too busy congratulating themselves on the so-called success of the Celtic tiger to care about the ordinary people and their future.

Their future now is repossession. I have heard Members on the Government benches claim home repossession is not occurring when Dublin City Council recently made repossession orders against people in its affordable housing scheme who cannot meet their repayments. Banks are calling in clients telling them they will repossess their property unless they start to pay off their arrears. Those are arrears they have been landed in because the Government has no job creation policy. Up to 500,000 people are unemployed and cannot afford their mortgage repayments. Where is the bailout for those who are paying over the odds on interest rates for fixed-rate mortgages on what were overpriced houses? Where is the protection and bailout for those in arrears? Their future and that of the many young people who will leave university later this year and the unemployed will be poverty and emigration.

It is a pity the Minister for Finance is not in the Chamber to tell us what his representatives in AIB were doing yesterday when they gave the two fingers to mortgage holders and small businesses with loans with an interest rate hike. Now with its majority shareholding in the bank, does it actually suit the Government to get more money out of the taxpayer this way? Does the Government intend to oppose any future interest rate increases by AIB and the other banks it controls? Or will the taxpayer get the dividends he is due in worthless bank shares?

The Government is seeking another blank cheque for the banks. Earlier, the Minister for Finance gave this and that vast figure, figures more like those used in Monopoly and difficult to comprehend. He finished his speech with a promise that even more taxpayers' money, not just that announced today, billions of euros, will be used to bail out the banks.

We must also look back at the some of those property transactions in question. The Irish Glass Bottle Company site in Ringsend, before the Dublin Docklands Development Authority became involved, contained a viable and functioning company which made an annual profit of €40 million. The workers at Ardagh Glass created the profit for the company, who earn a wage on which they pay taxes and spend in the local economy. Yet all those workers were sent to the dole queue, a signal of what was to come.

The Minister of State with responsibility for housing, Deputy Finneran, is in the Chamber. He will know Bernard McNamara was mentioned earlier. Many people in Dublin city had much hope in Bernard McNamara because he bid for many of the local authority housing scheme regeneration projects. He was also one of the speculators who has had to step aside with the crash. The Government has not stepped into his place to recreate the hope many inner city communities in wasteland estates such as St. Michael's, Inchicore, Dominick Street, St. Teresa's Gardens and Dolphin House, had of a return to what they once were - thriving communities with businesses and homes. The Minister should visit the wasteland with no hope that is South Hill in Limerick because he and his Government have dashed the hopes of regeneration for thousands of families.

The Government refused to step in to nationalise SR Technics, a viable company making millions of euros which had previously been a State company thereby guaranteeing 500 jobs. It would have been saved at a fraction of the cost of some of the bailout paid for the minor banks.

Since this crisis began two years ago, we have been presented with an opportunity to create a State bank to support small and medium-sized enterprises. To date this opportunity has been ignored. Every day small businesses across the country go to the wall with their employees becoming dependent on the State. A simple economic lesson from this is that if people get back to work, they earn money, pay taxes – even at the penal rate the Government has in place for the low paid. They also spend money which boosts employment in the retail sector and means the Exchequer wins with increased VAT and employee tax returns. This, in turn, allows more money to be invested in public services which means everyone wins in the long term.

Instead, the Government's model is to have fewer people in work with less income to the Exchequer while giving more money to the banks. This creates a cycle whereby more unemployment is created. Unless this cycle is broken, we will go further down the hole the Minister and his cronies have dug.

The economy needs to be refocused on policies of equality, job creation and investment in education. If we want to come out of this recession, we must create a sustainable and viable knowledge-based economy. We never properly invested in education. Doing so now will give a return of a knowledge-based economy. Such investment also needs to be coupled with investment in broadband infrastructure, our public services and in repairing the roads and water services networks. Investment must also be made in energy security. We can no longer depend on imported energy, particularly when our natural resources in the Corrib gas field are sold to a foreign company, making us bid for them against England and the rest of Europe. We need a solid base and proposals have been made in regard to the Spirit of Ireland. If invested to the hilt, this proposal would cost less than what the Minister proposed today to bail out Anglo Irish Bank.

We talk about the property crisis in Ireland. Apartment blocks and estates are in receivership up and down the country. These are now in the State's possession yet people are homeless and thousands of people are on local authority housing lists. There is no logic to having apartment blocks sitting empty for two or three years when people are in overcrowded, cramped and unsuitable accommodation. The economic model is wrong and the Minister needs to change it. This needs to happen now; otherwise, the Minister will send us further and further into the black hole he has dug.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

Today we take a tough but necessary step to recovery as a nation. The work done in the past year and a half on Ireland's public finances has greatly improved the world's view of Ireland. The cost of borrowing to fund our day-to-day enterprises has reduced markedly and we are now in a position to recover and grow the economy on a more sustainable basis. Many prominent commentators on the world stage see our efforts as being the model for others to follow. For example, the influential www.bloomberg.com notes today that Ireland's bonds are poised to outperform those of every other eurozone member except Austria this quarter, as investors have confidence that Ireland will be more successful than other European countries in cutting its budget deficit. Furthermore, Ireland's bonds are the second-best performing of all EU countries this quarter, returning 3.5%. External confidence in Ireland is returning. It is the same confidence shown by those who invest in our capacity as a country by buying Government bonds. We need this confidence to attract investment and to raise money on the international market. The international community has positively noted the measures we took to restructure our economy. This point was strongly made to me in recent visits to the United States, when the Secretary of State, Hillary Clinton, praised the difficult but essential decisions Government is making.

The measures we have outlined will set our banking system on the road to recovery. While the cost of facing up to our problems is very significant, the alternative is a recipe for stagnation and decay. In addition, the lending targets outlined today will provide a welcome boost to the productive sectors of the economy. Allied to that is the proposal that banks will be required to realign their business practices with the needs of the modern Irish economy. We are restructuring our economy so that in future Ireland will grow through the hard work and innovation that will come. The improvements we are making to our banking system will facilitate growth and bolster the advances made to date.

Just as a stable banking system is crucial to our economic renewal, so too is industrial peace. I warmly welcome the outcome of discussions between the Government and public sector unions. It is good news for the Irish economy and for our country. It can send a very strong signal at home and abroad that we will work together to come through these difficulties. I thank those involved for their positive and proactive contribution and I especially thank the two facilitators, Mr. Kieran Mulvey and Mr. Kevin Foley. They all put in long hours of negotiation to achieve a consensus that will help underpin economic recovery. This agreement is good news because it will help restore stability to the public service after a period of uncertainty. I look forward to and hope for its ratification by the constituent unions concerned. This agreement will mean no further reductions in pay rates for public servants, flexible redeployment within the public service and changes in work practices that will deliver savings and help to make the public sector more efficient. It will give us a public sector fit for purpose in the 21st century and will provide better and more effective public services to the public we serve. I urge all public servants on the basis of this good agreement - all our doctors, teachers, nurses, gardaí, those who do much day in and day out to provide people with essential services - to give this agreement their careful consideration. Everyone must judge the proposals on the benefits they will bring to themselves and to the public in the long term. I have made the point previously that in order for Ireland to prosper we must transform our public services. This agreement has the potential to do that.

I have also made it clear that for Ireland to prosper again, we must get our public finances back on a sustainable basis. Those foundations are being put in place by the resolute action of the Government. Revenue and expenditure measures amounting to 5% of GDP were taken to improve the 2009 deficit. The recent budget for 2010 contained spending adjustments amounting to 2.5% of GDP. As a result we have stabilised the deficit at 11.25% of GDP this year, a fact no amount of distortion or spin can undermine. We have a credible multiannual framework to restore order to public finances, which has met with strong international approval. The European Commission, the European Central Bank, the International Monetary Fund, the OECD and respected international commentators are among those who welcomed Ireland's fiscal consolidation framework. The ECB president, Jean-Claude Trichet, described the measures as bold and courageous decisions taken to put the economy back on its feet in difficult and demanding circumstances. Our strategy has attracted praise because it is working and will meet our target of restoring our deficit to a sustainable level by 2013-14. The Minister for Finance has outlined the Government's detailed course of action in this debate. The crisis in banking has taken up much of our time as a Government and we have had to take momentous decisions. We are one of the first Governments to introduce a state guarantee of the banking system, one of the first to set up an asset management agency in the current banking crisis and we know that without a healthy and functioning banking system, our businesses and service providers will not be able to grow and develop products for our main markets and sustain employment, which is what it is all about.

We need credit to flow for business and jobs and that is why today we are imposing specific lending targets on AIB and Bank of Ireland. They will make available to SMEs not less than €3 billion each for targeted lending through new or increased credit facilities in 2010 and 2011. Those working capital arrangements, provided for in the legal framework announced by the Minister of Finance, are in addition to the EIB situation, which speaks about new projects. We are ensuring existing credit facilities to businesses are catered for in this situation. From the outset, I have said our motivation in establishing NAMA was to provide credit to small businesses in order that they can grow and thrive. We are taking a further step on that road. The simplistic argument will be made that today is about bailing out banks. It is about bailing out the economy and creating the right environment for enterprise and employment, facing up to problems and dealing with them decisively and firmly. While no one would wish that these steps would be needed, I am proud the Government I am leading has shown the resolve to do what is necessary in leading the battle for public solvency and prosperity for families in Ireland.

As has been made clear, the Government is committed to recapitalising each of the institutions involved in the NAMA process so the system as a whole can return to its rightful role as provider of credit to the real economy. This course of action will necessarily involve a substantial investment by the State and the taxpayer in the institutions. We will structure our payments in a way that eases the burden on taxpayers. We are forcing the banks to recognise their losses upfront and once and for all rid the system of the scourge of speculative loans and mismanagement in the banking system. It is right we should approach the issue in this way, as all other courses of action would not result in a swift return by the banking sector to its function as a provider of finance to productive enterprises. While the State is committed to making up any shortfall in the capital needs of the institutions, it will not be called upon until other avenues of private capital raising have been explored.

Our new Central Bank legislation, which was outlined today, offers greater protection to the economy from the reckless practices of banks in recent times. The combined regulator and Central Bank will scrutinise more closely the work of banks in our economy. It will have stronger powers and will be set up to use them more often than in the past. In turn, the Central Bank will be subject to enhanced Oireachtas scrutiny. The newly appointed Governor, Professor Patrick Honohan, and the new head of the Financial Regulator, Matthew Elderfield, have shown their independence and commitment to putting the financial system here on a sounder footing. While it cannot be denied there are large costs to resolving our banking crisis, there are significant benefits to the State and its taxpayers from these moves.

As the Minister has already explained, our economy is likely to grow faster as we have now set the banking system to rights again. It is likely that NAMA will in the end deliver a net gain for the taxpayer owing to the robust valuation process it has pursued. The National Pensions Reserve Fund, NPRF, will have in the two main banks valuable investments that have the potential to realise gains. There is a proven gain of €1 billion which will accrue to taxpayers in six months time from the guarantee schemes put in place. Reforming Anglo Irish Bank into a reduced but sound credit institution which can be sold to private investors at a later date and carving out a good bank from what currently exists will go some way towards recouping the taxpayers' assistance to that bank at this time.

The steps we are taking today will provide certainty to the people from whom we must borrow, certainty among our trading partners and, as the Minister stated, certainty to those who will invest in the country. This certainty will further boost international confidence in the country, our people and the economy and will inevitably smooth our path to recovery. Our actions here today mean that we can now begin to live up to a renewed promise for growth and success in the Irish economy, which is the key objective of Government and one that we are resolved to achieve.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
Link to this: Individually | In context

I had thought the Taoiseach would come in here this evening to spell out in clear and understandable English the reason the Government has chosen to put a further approximately €20 billion into Anglo Irish Bank. The announcement made today measures approximately 8.5 on the financial Richter scale. The epicentre of this financial earthquake is Anglo Irish Bank on St. Stephen's Green under an incompetent Fianna Fáil Government in Merrion Street for the past number of years. I have no doubt but that the officials advising the Taoiseach today are the same officials who were advising him when Minister for Finance that our economy was heading in the wrong direction and into a bubble, a bubble which burst under his stewardship. These people who are advising the Taoiseach today are in charge while the public servants of whom he spoke - I welcome the conclusion of the public sector talks - are having their salaries cut and will be forced to pay for the actions of the Government for many years.

The financial after shock of today's announcement, with particular reference to Anglo Irish Bank, will be felt not for one or two years but for a full generation. This is the result of an incompetent, careless, mismanaging Government of which the Taoiseach was formerly Minister for Finance and is now Leader. This doubling of the national debt with the stroke of a pen has pauperised a rising generation. The figures bandied about today are so large they pass over the heads of the vast majority of people in this country and are couched in financial language which will ensure they will not come home to roost until the lack of infrastructural facilities, cuts in pay and increases in taxes for which they will have to fork out, becomes evident.

The banks continue to stand, systemic or otherwise. The Government has put €40 billion into a dead bank. For this House to do its job properly the Government would have had to have come into this House to explain to the nation the justification for this plan. If one asks a person to invest €1,000 in a project and then returns six months later seeking a further €1,000 investment and a third time seeking another €1,000 such person would want to see the plan which would ensure a return on his or her investment.

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Fine Gael)
Link to this: Individually | In context

Hear, hear.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
Link to this: Individually | In context

There is no plan from the Government. The banks have sent their plans, with Government input, to Europe. What is the justification for this €40 billion investment in Anglo Irish Bank, including €8 billion today, a further €10 billion in the future and €18 billion that will go into NAMA? I would have thought the choices here are pretty stark. I do not understand why in respect of the subordinated loans, of risk-takers who invested because they knew the risk existed, the Government has given a cast iron guarantee that it will write whatever cheque is necessary. That cheque whether or not we like it will come out of the pockets and salaries of Irish workers. That is what will happen. This is not mythical money, it is real. Anglo Irish Bank is not a systemically important bank; it does not have a network around the country, it has no ATM machines and it does not lend money.

What is happening now in terms of the allocation made today with a further €10 billion to come is money over the cliff. This money is to cover the losses in Anglo Irish Bank with no return to the Irish taxpayer. The Taoiseach in his current capacity or previously as Minister for Finance had to decide on the equation of using €18 billion to buy out or pay for the bad, reckless management systems of Anglo Irish Bank or to put it to some other use such as the NewERA programme costed and put forward by the Fine Gael Party which would result in the creation of 100,000 jobs in the areas of renewables, broadband, water services and delivery of telecommunications, an opportunity to ensure the provision of real jobs with real money and real careers, but it blithely swept it off the end of the table into the black hole of Anglo Irish Bank which will never result in the return of one single job, salary or career opportunity. That is the choice the Government made.

I accept we need a strong working banking system. When the Minister for Finance telephoned me early on the morning of the announcement of the bank guarantee scheme to ask if I would support it, I agreed I would support it under certain conditions. Obviously, business needs a banking system that works. We have been told on three or four occasions by Government that every decision it took from the guarantee scheme to recapitalisation and NAMA would provide a wall of cash and credit moving through the system. The Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, publicly stated last Saturday that if Ireland did not pay its bond holders it would be forced out of the euro. I have never before heard such nonsense. Perhaps the Minister got carried away when down around Reginald's Tower in Waterford.

Photo of Pádraic McCormackPádraic McCormack (Galway West, Fine Gael)
Link to this: Individually | In context

It was the horses that did it.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
Link to this: Individually | In context

No bank manager in the country is in a position to authorise the lending of money. Bank managers at Allied Irish Bank or Bank of Ireland cannot and do not have the authority to lend money. A constituent of mine seeking to top up by €5,000 an €18,000 loan already in place was refused that loan despite his business having had a €500,000 turnover less than 18 months ago. The Government has come in here and boasted about the extra money being loaned to the banks. Allied Irish Bank and Bank of Ireland were last year lending €2.5 billion each. The Government says they will lend an extra €1 billion this year, which is fair enough. We will wait and see what happens on a regional basis in terms of what is actually approved.

In respect of loans below €5 million which are not going into NAMA, the banks are now beginning to liquidate many of these using the same criteria as applies when an entity fails and is wound up. The banks, in particular Anglo Irish Bank with its massive black hole, are not being wound up but are getting a bail out from the taxpayer despite the fact that the same principle applies, namely, a commercial entity that does not measure up must close.

The position in respect of distressed mortgages will worsen. Allied Irish Bank recently announced it is to raise its mortgage interest rates. The European Central Bank may raise its rates by the end of this year. The Bank of Ireland will probably follow this practice fairly soon. This will put more pressure on thousands of people around the country yet there is but a fleeting reference to distressed mortgages in the Minister's speech. The Government is putting €40 billion into Anglo Irish Bank, a vote in respect of which will take place in the House tonight. Tomorrow those Deputies who vote in support of this motion will walk up the steps of this House and vote to take special needs assistants from children with special needs. The public are seeing nothing but destruction. In cases where families have been focused since their children were born on attempting to deal with their special needs, they now see the Government being able to raise without difficulty €20 billion for Anglo Irish Bank and a further €20 billion for NAMA, with no plan to have a job stimulus in order to provide opportunities and careers for their sons and daughters in this country, if that is what they want to do.

Tomorrow evening the Government will, by vote, will take away special needs assistants from schools all over the country and children who need them. The Taoiseach knows this. As the former Minister for Finance, the Taoiseach failed to act on the advice which was undoubtedly given to him, namely, that our economy was heading down a one-way street, that we were losing our sense of competitiveness, our focus on exports and our capacity to keep our costs down and that we were heading into the bubble room of development which burst and now has serious consequences for hundreds of thousands of people.

The end result is that, whether we like it, the Government has the numbers pro tem and will force this through. I understand the Financial Regulator has to do its job and Mr. Matthew Elderfield can be very good. He set down his standards and principles. It is about time there was some regulation of the banking system which became reckless and crazy, and which led to the destruction of so many lives in Ireland.

There was and is a better way. I do not accept that, with $80 trillion to lend internationally by bond investors, we should get hung up on a situation whereby the Taoiseach is now allowing subordinated bond holders to be given a guarantee, as happened in the case of Anglo Irish Bank. Last year $80 trillion was available for investment worldwide. Yet, we now have a situation whereby the Government will screw Irish taxpayers, workers and people by imposing a serious levy on every one of the 1.6 million families in the country.

Anglo Irish Bank has proven to be a cancer in the financial world. It has links to the disruption of Quinn Direct and persons on the board of Anglo Irish Bank were also on the board of the Dublin Docklands Development Authority, which had consequences for the Irish Glass Bottle site. The Taoiseach approved the measures for borrowing-----

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

I did not approve anything. That is a scurrilous statement.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
Link to this: Individually | In context

-----in a very short period of time, right up to the limit. There are consequences for the Irish Glass Bottle site and what it means for the taxpayer.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Deputy, we are heavily into borrowed time.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
Link to this: Individually | In context

It is indicative of the way the Taoiseach has allowed Anglo Irish Bank to be saved, without explaining to the House or the nation, how he can justify it in the interests of the taxpayer and the Irish people. He will rue the day this decision was made in respect of Anglo Irish Bank, in which the taxpayer is made to take all the pain and those who invested in the knowledge that they were taking a risk have been given a cast-iron guarantee.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

This is the worst market failure in the history of the State. It is not the first in the banking area. We had ICI, the DIRT scandal and the Rusnak scandal, and perhaps there was a moral hazard in the failure of the banks to learn that such scandals would not be tolerated or accepted and led them and us into this crisis. We now have to face up to the problem, take control of it and deal with it. We do not serve the Irish people if we try to ignore it. If one examines the international experience, in terms of how one handles property crises and bubbles which lead to banking crashes - there have been many - it is clear there is a standard procedure which is followed in most cases.

One puts in place a guarantee to try to stabilise the banks, one has to have some vehicle to manage the assets which are the problem and one has to solve the capital problem of the banks. It is a fairly standard set of procedures which we saw in the United States recently and in any other similar banking scandal. It is what we have been doing. It is not popular or easy, but it has to be done for the sake of the future of this country.

Deputy Kenny used the word "cancer" and he is correct. Anglo Irish Bank has done that level of damage to this country. Shame on the people involved. The sense of regret and anger is palpable and correct, in particular because Anglo Irish Bank is such a small bank and the crisis happened in a short period of time and grew quickly in recent times when the real damage was done.

Deputy Bruton asked about the term "systemic importance". The first time I heard the term used was when the Treasury Secretary in the United States of America, Mr. Henry Paulson used it October last year in reference to, I understand, Wachovia bank. There was a possibility it would go bust and a realisation by the United States authorities that they could not allow that to happen. Obviously they had learned a lesson from Lehman Brothers, which accounted for some 4% of American GDP. Anglo Irish Bank comprised approximately 50% of Irish GDP. They had learned the lesson that a bank the size of Lehman Brothers was of systemic importance for the overall economy. The size of Anglo Irish Bank is unfortunate and deeply regretted. It should never have been allowed to grow that big and was a false, fraudulent banking model.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Regulation.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

When one examines it, it clearly is systemic within the definition given by Mr. Paulson, and that is why something had to be done about it. How mutual building societies such as Irish Nationwide could have engaged in such fraudulent banking practice is beyond belief. Deputy Kenny can point, but there are people on all sides who bear responsibility. I remember in 2006-----

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
Link to this: Individually | In context

Only some contributed.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

-----at the height of the property bubble politicians on all sides said we had to do something, the market fundamentals were right, we had to keep the property bubble going and cut stamp duty and so on. There were political failings.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

That was to give people a break from their mortgages.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

The political system let us down but we need to move on now and examine how we can solve the problem.

The figures today are shocking because they show a very sharp discount and show up the nature of the fraudulent banking which went on. They also give us a certain comfort. Deputy Bruton said the Irish people will recover from this. It will require us to make sure we change society for the better as we do it-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

It takes money. You have spent it.

8:00 pm

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

------in order that we learn the lessons from history.

We took a very harsh approach and examined the banks, and said we said we do not accept their figures any more, that we are giving the figures, in terms of what we see as the potential losses, and are using a much sharper discount than anyone expected. The figures show that our two main banks, namely, AIB and Bank of Ireland, are truly of systemic importance. While they may have made terrible mistakes, in particular AIB, they can survive this. By putting in capital we can get them working again. It is of fundamental economic importance to this country that the two banks which are the bedrock of our economic system can be turned around and get out of their current situation.

While the figures for Anglo Irish Bank are, understandably, shocking, the international perception will be that its assumption of the figures for AIB and Bank of Ireland were far worse. When they hear the regulator, who has real authority and independence, or the Governor of the Central Bank, who has real expertise in this area, say it is worst case scenario in our two main banks it will restore a certain amount of confidence in this country.

We could have, should have and did examine other options. The first thing I did when I went to the Minister for Finance a year and a half ago was tell him we had to nationalise all the banks. I am now glad we did not, because we were not in a fit shape to do anything at that time as we were grappling with such a difficult situation regarding the funding of finance for the State. We did not know what the situation was. It was far better to go through the process we have gone through, whereby we got loan valuations in order to know what was going on.

There are differences between the situations in Bank of Ireland and AIB. Had we gone in and nationalised everything, as some people at the time argued we should, we would not have had a true sense of the reality. Under European regulations, we would have had to go in and do the valuations which we have done over a recent period of time and for which we have legislated. I do not believe a blanket nationalisation would have served this country well. It would have cost us more in higher interest rates, among other problems I have mentioned.

In terms of the default option, I will explain to Deputy Kenny what I said at the weekend because I have examined the issue in detail. I have no love of bond holders or the capitalist system which it underpins. However, it exists and it is the reality within which we as a country must operate and trade. I am concerned about that and I want to be careful to get it right.

Last weekend I referred to going to the bond markets and saying we will not pay our debt on the senior bonds. The subordinated debts are different. Those who hold them have taken a hit and they will take a further hit. However, if we default on senior debt, which is effectively money on deposit in our banks, as seems to have been suggested by some Members-----

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The Government should negotiate. There is a difference.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

I refer to David McWilliams's argument about doing that and giving up on our reputation in that sense but we might as well go the whole hog, leave the euro and use the opportunity to devalue to get out of the economic difficulties.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
Link to this: Individually | In context

The Minister is mixing up Anglo Irish Bank and Ireland.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

He cannot even understand this himself, which is scary.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

The certainty of that as an approach is driven by an analysis which does not consider the fact that the European Central Bank is one of the main depositors or bondholders in Anglo Irish Bank. If we take the option of defaulting on those who have money on deposit in Anglo Irish Bank, we would have to say to the ECB that we will not pay it back.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
Link to this: Individually | In context

That is absolute nonsense.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

One cannot differentiate between bondholders and the ECB in that section of the balance sheet.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The senior bondholders are hedge funds.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

It would be difficult legally to differentiate between them and say we will not touch the ECB but we will touch Deutsche Bank or whichever bank is involved.

Having examined this inside out and having tried to determine what is the easiest way for us to get out of this, the default option is the more expensive and risky. It would require us to take the hugely risky step for which David McWilliams argues. While I respect his opinion and I understand his analysis - he has a certain credibility having called some of the problems in the first place - I do not agree with him that this is the right approach for the country because our problem is on a scale we can manage. It is a lower cost solution, as shocking as it is and as difficult as the figures are, to managing this in the way we are.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

A total of €80 billion.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

No other country has taken the default option and the ECB has set itself against banks of this scale defaulting in any member state.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

At what cost? No more schools and so on.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

That is what I tried to say at the weekend and it may have been misunderstood in certain quarters.

I am proud of the Green Party's role in trying to do the right thing in the past year and that we introduced a risk sharing component in order that the banks would take the hit on subordinated debt.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

It equates to only 5% and the Governor of the Central Bank said it should have been higher.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

I am also proud that we insisted on and pushed for the highest haircut possible to makes sure we reflected-----

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The EU ensured that happened.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

It was not just the EU. If people had cared to listen, all along we said we would insist on a loan by loan valuation, we would not do favours to the banks, we would force them to recognise their losses and that is what has happened today.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The Anglo Irish Bank losses are only an estimate.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

I am proud we have consistently recognised that the culture and people within our banking system are culpable and we called for them to be cleared out from the very start, particularly at board level, where they had responsibility for the strategic errors make.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

And gave them wage increases.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

I am also proud we pushed for further support for the taxpayer through the introduction of a levy on the banks to cover any losses incurred. In addition, we pushed for the Government to give support to those who have been caught in this downturn with debt problems. It is important that we look after particular groups within our country who have been left in serious debt difficulties.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

What is the result of that? There is nothing there.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

The Green Party has engaged in several difficult actions. First, we faced up to this problem and we have tried to take control of it in a way we think is the least costly for the taxpayer. However, it is more important that we learn lessons to change the culture in the banking system and in our markets in order that such failures do not happen again and that the State is not left with the task of holding the country together when the market fails and we can move on to recovery.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

I wish to share time with Deputy Noonan.

The Minister is living on a parallel universe. He is trying to see what he wants to see rather than the reality. Anglo Irish Bank will cost the taxpayer more than €40 billion. The bank will receive €22 billion in recapitalisation and it will account for 70% of the €32 billion set aside for recapitalisation of the banks.

Senior bondholders are professional investors and they took the risk. Senior debt is not like deposits and it can be traded. How can the Minister justify voting for something that will cost the taxpayer €40 billion?

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

How has the Deputy arrived at that figure?

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

By adding €22 billion through recapitalisation and €18 billion in loans transferred to NAMA.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

Those loans now have the value they should have.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

Following a 65% discount.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The figures relating to Anglo Irish Banks are estimates. The loans have yet to be audited and discounted.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

There has been a 50% discount.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

What has been proposed is an estimate.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

This was done by the Regulator, who is an independent international expert.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Can the Minister justify putting €22 billion into Anglo Irish Bank? It is equivalent of the health and education budgets rolled into one. Deputy Kenny asked whether the Minister would go through the lobbies tomorrow evening to vote against a motion regarding SNAs who will no longer be provided for children with special needs.

Photo of Eamon RyanEamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
Link to this: Individually | In context

Every Member deeply regrets it but we should not confuse the people by saying the cost of this is €40 billion when it is closer to €20 billion.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

We have no idea how much NAMA will make. We all want a banking system that works. Allied Irish Banks and Bank of Ireland have been given time. Their losses to date have not been crystallised. If the Government wants private investors to put money into these banks, it should have outlined earlier their losses to date and how they will come up with funding. However, we will not know that for another six months. That would have encouraged private investors. We have had no justification for putting €8 billion into Anglo Irish Bank today or for putting in a further €10 billion down the line, which is extremely regrettable.

The Minister referred to sovereign debt. International capital markets will see the Government parties dealing specifically with a non-systemic bank such as Anglo Irish Bank when they should be encouraging lending into the economy going forward. Instead, for the next ten years, almost 25% of our annual tax take will be used to fund banks with €2 billion going into Anglo Irish Bank and INBS annually and the taxpayer will never secure a return. A sum of €4 billion will be paid in interest on the money borrowed to fund NAMA and the recapitalisation of the banks. Every year €6 billion of the more than €30 billion taken in in taxes will go into a black hole. How can the Minister vote in favour of that?

The Taoiseach said what the Government proposes will not result in stagnancy and decay. The Government parties have sat on this for the past year. No credit has been extended and all they have secured from AIB and Bank of Ireland is a statement that they will examine targets. They have made no firm commitments on lending. The banks have provided €500 million in additional lending, which is grossly inadequate. We need a proper, revised and updated plan for NAMA and we need to see the Government's advice on putting money into Anglo Irish Bank. The draft plan for NAMA states that more than 80% of the loans involved are performing, which is impossible. We need a proper debate and value for the taxpayer. Recapitalising Anglo Irish Bank to the tune of €22 billion does not represent value.

Photo of Michael NoonanMichael Noonan (Limerick East, Fine Gael)
Link to this: Individually | In context

It is an appalling debate in which to be involved. The situation is far worse than any of us thought even a week ago. It is difficult to find anything optimistic to say or to support the Government in its difficulty. It is good that Bank of Ireland is not in deep trouble. It looks as if it can be helped out of its difficulty fairly easily without much cost to the taxpayer. Bank of Ireland has always been a bulwark of the economy. Allied Irish Banks, through mismanagement, followed the lead of Anglo Irish Bank. It came to property speculation late but when it did get involved it did so with a vengeance. It has found itself in a difficult situation and it is a costly rescue. We should congratulate Irish Life & Permanent for not being involved at all and not making any call on taxpayers' money tonight. Beyond that, the situation of Anglo Irish Bank is an absolute disaster.

In the various banking debates in the past two years, we in the Opposition have been generally supportive of the Government's difficulties. We supported the guarantee in the first instance. However, I have lost faith in the Government's ability to provide us with the facts. Ministers no longer have credibility. The reason is that when the guarantee was made on 30 September 2008 we had a new Minister for Finance who had no background in finance or economics. He has learned fast and has proven to be effective since but at that time he was new to the area. We should consider who were his advisers - the then Governor of the Central Bank, the then regulator, and the then senior officials in the Department of Finance, all of whom were incompetent. They did not protect the public interest and on the night when they were advising the Minister, they were hiding their mistakes.

Then the Minister invited in the key bankers who gave him financial advice. Who were they? Mr. Seán FitzPatrick, and the then chief executive and chairman of Allied Irish Banks and Bank of Ireland and Mr. Fingleton was on the telephone. Their advice was to give the banks a guarantee to rescue them and they said that everything was fine. It was only three weeks previously that both the regulators and the senior bankers assured committees of the House that they had tested the loan portfolios in their banks and that they were the soundest banks in Europe. They said there was no problem. There was no question of insolvency. The Minister was caught in a situation where everyone advising him had a vested interest, to say the least of it. If lying was an Olympic sport we would win gold every year if we togged out four bankers. There would be no problem in that regard. On that night the truth was not being told in Merrion Street by the senior bankers. The Minister, Deputy Martin, knows that well.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

We would have to hand back the medals in due course after the doping tests.

Photo of Michael NoonanMichael Noonan (Limerick East, Fine Gael)
Link to this: Individually | In context

The Minister is agreeing with me. That was the situation. At every step of the way we have got false information. Reference was made to the valuation and the fact that the haircut was originally to be 25% and then 30%. That was in the business plan for NAMA. The Oireachtas Library & Research Service produced a paper in the same week as the NAMA business plan was published. It had four different ways of valuing assets and each of them pointed to a haircut of at least 40%. If the resources of the Oireachtas Library & Research Service in Leinster House was able to come up with a figure, what were the regulators, the Central Bank and officials in the Department of Finance doing when they came up with those extravagant figures? Even as late as last week the suggested liability that was being leaked to the newspapers was a great deal less than we are faced with tonight. This is an appalling situation.

On that night on 30 September the guarantee to the bond holders should not have been given. It was sufficient to guarantee the depositors. That was the mistake and since then the Government has been chasing itself. It has been tardy in acting as well. The guarantee was made approximately 18 months ago. A similar crisis was evident in the United States. The US Government moved to sort it out and the banks are trading profitably now and supporting a growing economy. A similar problem occurred in the United Kingdom. The result was absolute trauma. It looked for a time as if the UK Government of Mr. Gordon Brown would collapse but it moved quickly to recapitalise the banks in the first couple of months and got them trading again. Now they are underpinning a growing economy.

We have been horsing around with matters for too long. The Government is still doing it. Deputy Bruton made a key point today. In the Opposition we often vote because we have to vote but I will vote with conviction tonight because no one on the Government side has answered the question. No one has made the case for why we have to rescue Anglo Irish Bank when all we are doing is putting money into a black hole. It will never operate as a bank again or lend to anyone again. It will never put up an ATM machine again, not that it had them anyway. It will not open further branches. It is not a bank that is necessary. Why mortgage our children and our grandchildren for the next 15 to 20 years by pouring money into that black hole? It all runs from the original decision. The Minister was misled on the night and action should be taken. Dawn raids by the Garda before a serious Dáil debate is not an answer to an intensive inquiry by the fraud squad into the activities of Anglo Irish Bank.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

I wish to make a number of comments. Much has been said in the debate. I concur with the comments of the Minister for Finance who described the figures involved as horrifying. The steps the Government has taken and those proposed by the Minister today represent policy of substance in leading our way out of the banking crisis. I have been disappointed by the quality and substance of the response from the Opposition today.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The Minister does not like the message. Deputy Bruton's contribution was excellent.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The overall NAMA solution has received significant national and international endorsement. Commissioner Almunia, in his previous role as Commissioner for Economic and Monetary Affairs, stated that NAMA should be approved as quickly as possible. That was in October last. In his current role as Competition Commissioner he approved NAMA last Friday. Of the investment community 80% of respondents to a Bloxham survey agreed that NAMA has and will continue to improve sentiment towards the Irish economy. The European Central Bank has approved NAMA and will be an integral stakeholder in its operation. The Secretary General of the OECD indicated that we must stabilise the financial system and take out the toxic assets that are eating the good credit and put those aside, then we can recapitalise the banks so they can continue to lend to businesses. The recent comments of the Governor of the Central Bank, Mr. Patrick Honohan, not the previous governor but the present one, were that he had said all along that NAMA is an essential part of the strategy, that it does a number of things; provides the banks with capital as a buffer against future risks and provides them with liquidity so that if they want to make loans they can do so.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

In his first speech he said NAMA needed to have the right haircut. He said it was very important how much it paid for the loans.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The list goes on. The International Monetary Fund, for example, was supportive of the efforts to restructure the financial sector, including the decision to establish the National Asset Management Agency. Other leading commentators who have stated their support include Mr. Kevin Gardiner of Barclay's Wealth who said, contrary to what Deputy Noonan indicated, that the Government has acted speedily in comparison to other governments. The economist, Mr. Philip Lane, said on "The Last Word" yesterday that the Government's approach to resolving the financial crisis is an internally coherent approach. He said there was much concern a year and a half ago about the Government's financial stability but that the Government has more capability in terms of dealing with the banks. He said that the fact that we have stabilised our fiscal situation allows the Government to be more confident that the separation between banks and the Government can be kept.

There is a range of solid opinion from policy makers, economists and institutions who have endorsed and supported the NAMA approach.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

With respect, there are as many on the other side as well.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

I did not interrupt anyone from across the floor.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

There are as many commentators on the other side as well. Let us not kid ourselves.

Photo of Seán ArdaghSeán Ardagh (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

Deputy English. Fine Gael has its own time. It is the Minister's time now. The Deputy should explain his point to the next contributor and he can respond in that way.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The Minister can handle it. He is a big boy.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

I pose the question to the Opposition spokespersons. Have all of those people got it wrong in terms of the correct solution to the banking crisis? What has been absent from the Opposition has been any substantial policy alternative to the NAMA vehicle.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

That is untrue.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

That is not true.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

I listened extensively, without interruption, to Deputy Bruton's contribution.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

It was guillotined.

Photo of Seán ArdaghSeán Ardagh (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

Deputy English should mention his point in Deputy Naughten's ear.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The Minister is rising us. He wants to be interrupted.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

I hope I get extra time. This tactic is going on and on and it is ridiculous.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The Minister is asking for it.

Photo of Seán ArdaghSeán Ardagh (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

I always give injury time.

Photo of Michael NoonanMichael Noonan (Limerick East, Fine Gael)
Link to this: Individually | In context

If the Minister does not like the heat he should get out of the kitchen.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

We could all do with injury time.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The only comfort in the interruptions is the knowledge that what I say rings true and is hurting. I listened to both Deputy Bruton and Deputy Burton. Deputy Bruton focused on the situation in Anglo Irish Bank. Fine Gael needs to recall it supported the State guarantee at that point and did so as it saw a need for safeguarding. Considering that it supported the guarantee and voted for it, it should realise, as the Minister for Finance pointed out today,-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

We did not support the recapitalisation of Anglo Irish Bank.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

-----that any immediate wind-up would lead to a fire sale of assets resulting in a permanent additional and unnecessary loss of upwards of €30 billion. In addition, the State would have to provide a large sum of cash in the order of €70 billion up-front "to meet the deposits, bondholders and liabilities due to the Eurosystem". That is a fact.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

That is not a fact.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The guarantee is in place until September.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

That is the one fact Deputy Bruton avoided in his contribution. In his entire contribution, he ignored the reality-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The guarantee is in place until September.

Photo of Seán ArdaghSeán Ardagh (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

The Deputy should not try to shout the Minister down.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

-----of what would happen if today-----

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

He has not got a clue what he is talking about.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The critique is about today's proposals-----

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

One negotiates one's debt with the bondholders.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

He studiously avoided the core point, namely, the cost of winding up Anglo Irish Bank, forgetting it and endeavouring to pretend one can go on-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

No.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

-----apart entirely from the default situation.

Photo of Seán ArdaghSeán Ardagh (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

I ask the Minister to address the Chair rather than the Opposition.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

He is being disorderly.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

I am addressing the Chair and am looking at the Acting Chairman intently.

Economists have known since the Great Depression of the 1930s that the meltdown of any bank, a large bank in particular, can have catastrophic effects on the economy and citizens' welfare.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

They did not tell us that when it was going wrong.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

Anglo Irish Bank was much larger relative to the Irish economy than Lehman Brothers was relative to the US economy. The disorderly failure of Lehman Brothers brought the global financial system to its knees-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Anglo Irish Bank is a property company.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

-----and the disorderly failure of Anglo Irish Bank two weeks later would have had the same effect on the entire Irish banking system. The President of the European Central Bank, Mr. Jean-Claude Trichet, stated on numerous occasions that allowing Lehman Brothers to collapse was a critical mistake in the global financial crisis. The president of the Bundesbank, Mr. Axel Weber, said on a recent visit to this country that in the aftermath of the collapse of Lehman Brothers, allowing a large bank to fail in Europe would have been catastrophic for the entire economy. The French Finance Minister, Ms Christine Lagarde, who has praised Ireland's fiscal policy, called the decision to let Lehman Brothers fail horrendous and a genuine mistake as it triggered panic in its markets and brought banks to the brink of a 1929-style financial meltdown.

I endorse what the Minister said today. While we all understand the impulse to obliterate Anglo Irish Bank from the system, the Minister said he could not countenance such an action. He was telling the truth and stating the honest position.

Unfortunately, Deputy Burton's contribution was 90% critique and she said very little about solutions. The advices we have received show temporary nationalisation would have been the wrong option at the time in question. The Deputy's speech was about political sloganeering and political felon-setting, which is no substitute for a substantial policy option.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

Felon-setting.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

Absolutely.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

Felon-setting, get off.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

Deputy Stagg knows all about it.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

What will Anglo Irish Bank do?

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

Felon-setting.

Photo of Seán ArdaghSeán Ardagh (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

This is not Question Time.

(Interruptions).

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

What will we get for the €22 billion?

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

Felon-setting.

Photo of Seán ArdaghSeán Ardagh (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

I am sorry, the Minister wants to respond to Deputy Stagg.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

We are all sorry.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

Perhaps the Minister will withdraw his stupidity about felon-setting.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

Through the Chair, I would like to continue my speech without interruption. I listened for a good hour to Deputies Bruton and Burton and did not interrupt.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

The Minister is lucky she is not here.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

We are all lucky in that respect.

The point I am making in terms of felon-setting and political sloganeering is that there is a lovely political line coming from the Labour Party that is popular, about electoral appeal and winning votes but not grounded on an honest assessment of the situation-----

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

We learned a lot of lessons from Fianna Fáil.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

-----or on viable solutions to the banking crisis.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

The Minister would not do anything like that.

Photo of Seán ArdaghSeán Ardagh (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

Order, please.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

That is the charge I would make. The guarantee was the beginning of the rot for the Labour Party in terms of policy of substance.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

The Minister was criticising Fine Gael for agreeing with it.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

Perhaps it was fine from the perspective of electoral politics but, from the perspective of creating solutions, it was the beginning of the rot. The Labour Party bottled it on the guarantee and did the easy thing in the days and weeks after it was given, namely lump everything together on popular grounds, including property speculation and tax reliefs.

Photo of Jan O'SullivanJan O'Sullivan (Limerick East, Labour)
Link to this: Individually | In context

The Minister cannot have it both ways. He criticised Fine Gael for supporting it.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

If one wants to talk about tax reliefs, one must remember it was its Government that introduced the seaside resort relief. The argument that the property market was stoked by a Fianna Fáil Government is erroneous.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

The Minister's time is up.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

Nobody gave Mr. Sean Dunne a tax relief to buy certain hotels on the south side of Dublin to try to make a profit. We had a free market and the fundamental flaw was with regulation.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The Government had control over it. It was its responsibility. Does the Minister accept that?

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

I will deal with that.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

The Minister's time is up.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Will Deputy O'Donnell allow the Minister to continue without interruption?

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The problem with regulation in any crisis concerns who guards the guards.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The Government does. The regulator would be the Government.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The point is that the conventional wisdom for decades was that politicians should be kept-----

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

Yes, from Deputy Bertie Ahern.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

Irrespective of who was in Government, the conventional wisdom was that politicians should be kept out of regulation and that there should be independent regulation that could not be compromised by the political system.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The Government introduced the legislation.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

That is what went wrong. Deputy Bertie Ahern in Government-----

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The bottom line was that the independent regulatory system collapsed and failed abysmally, as I have acknowledged.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The current Taoiseach is using the term "build on".

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

I do not accept the simplistic propositions of the Opposition in regard to this entire crisis.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

They are very well thought out. The Minister knows that.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

There are many underlying factors. As the Taoiseach said today, we have witnessed the worst global recession since 1929. The challenge is to chart the right pathways out of that recession.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Ours was created primarily by a collapse in the building industry.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

As Minister for Foreign Affairs, I know international opinion suggests Ireland has demonstrated the capacity to take itself out of the fiscal crisis.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

The Minister has exceeded 15 minutes.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

In terms of NAMA and the special purpose vehicle, the international opinion is that Ireland has created a pathway to enable the country to come out of the banking crisis and help economic recovery.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

The Government is doubling the national debt.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The third pillar relates to the enterprise economy, the indigenous sector, which is still quite resilient in terms of export orientation and inward investment. There is still investment coming into the country. We need some positive thinking. The Government is at least focused on a pathway out of the crisis.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

Out of office.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

The Opposition is focused on electoral gain to the detriment of sound policy.

(Interruptions).

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

Are the slots now 13 minutes?

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

No.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

That one was.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

There has been a slippage on both sides of the House.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

No.

Photo of Micheál MartinMicheál Martin (Minister, Department of Foreign Affairs; Cork South Central, Fianna Fail)
Link to this: Individually | In context

If one had an orderly Opposition, there could be ten-minute slots.

Photo of Michael D HigginsMichael D Higgins (Galway West, Labour)
Link to this: Individually | In context

I will be very glad to achieve an equivalence of slippage for the Ceann Comhairle.

I want to make some points of public economy. The Minister for Foreign Affairs referred specifically to the Labour Party. Last Thursday, we launched a policy document about a strategic investment bank that would be funded with €2 billion from the National Pensions Reserve Fund. The document specified a number of ways in which we could create employment. This is relevant to the speeches I have heard because the real issue is the question of what we could have been doing with money the State could have guaranteed and provided.

Last Sunday week, in another capacity, I was presenting medals at a soccer final attended by a couple of hundred children. Their community had built an all-weather pitch for €900,000. The cost of running it is approximately €20,000 and the income is approximately €97,000. Instead of charging, those who run the facility make sure it is available to all the local schools for free. Effectively, the cost was less than €1 million. This creates a capital provision for a facility. Since the annual cost of running the facility is €20,000, there is a surplus of €70,000 or €80,000, which can be used for other purposes. A free facility is provided for schoolchildren that addresses the national problem of obesity.

There are dozens of such projects that could benefit from immediate investment. Lest people believe we are not real in the Labour Party, they should note that every €1 million spent in construction creates 9.1 jobs of full-time equivalence. This is relevant because the Government is transferring what it accepts are astronomically large sums to keep in existence Anglo Irish Bank, the case for whose systemic status has never been made. Consider the Labour Party's position last September when we argued against a blanket guarantee that regarded Anglo Irish Bank as systemic. One did not need to be a genius to see the difference between the gamblers' club that was Anglo Irish Bank and Bank of Ireland and AIB. I challenge the Ministers to say in their replies whether it was not the case that the documents prepared by the Department of Finance to brief the Minister acknowledged that difference and the Department had prepared alternative strategies for the future of Anglo Irish Bank.

I have listened to the Minister for Finance talk, in effect, about the great things they supposedly are saying about us around the world. This type of Ireland's Own approach to the Irish economy is very interesting because they were not saying great things about us when the Government was flying. A friend of mine describes the reputation that Anglo Irish Bank and Irish Nationwide had in London as the building societies on crack cocaine. The Government is rightly concerned about reputation management, but can it answer this question. If it were to calculate the consequences of the different decisions available to it on that September night, did it not take into account the difference of allowing Anglo Irish Bank to be phased down and the calculated reputational responses?

If one believes one must not frighten anybody, even those investors taking a high yield from subordinated debt, one has to justify it by saying, in effect, that such investors are so nervous and highly tuned on their high yield that the slightest action from the Irish Government would upset them. If that is what the Government believes, it is a genuine position. It may be compared with other positions, however, for example, the fact that such investors have regularly taken discounts.

I am glad the Minister for Communications, Energy and Natural Resources, Deputy Ryan, has returned because I want to address something else to him. I regret that he was not in the Chamber for my previous example of what investment will not take place because we have had to give such a high proportion of our income towards keeping the ratio right in the banks. That is the choice. The flexibility we had in terms of the proportion of borrowing relative to gross national product is, in fact, the flexibility one has, and that is where the politics plays a part in how to do something different. That is the argument in Greece as well, and it is a political one.

Let us discuss it in a sane manner in that regard. One of the documents floating around today from the National Asset Management Agency suggests that the agency has secured a combined investment of €51 million from three institutions, €17 million each for a 51% shareholding in National Asset Management Agency Investment Limited, the NAMA special purpose vehicle. I was in the House during the long night when we debated all this and one of the points the Minister for Finance seemed to accept was the social dividend. In the loans being transferred and the heavy discount being applied to those, where precisely is the social dividend? Going back to the example I gave about the all-weather pitches, this could be achieved with lighting, security and management for about €900,000. If these were to be on public lands, where is the transfer of assets to build all those facilities – the community halls, libraries and schools - and the social dividend that was at the heart of the argument we made when we were debating this issue in the House during that night?

How can this be squared with the three bodies I have just mentioned and can it be put on the record of the House that there is not the slightest suggestion of a conflict of interest between these bodies and, for example, Allied Irish Banks investment managers and the banks that are being released by taxpayers' money? These are basic issues that are very important, rather than getting the lecture we have just had to the effect that we are going to bring Ireland back to 1929. I am glad the Minister for Foreign Affairs, Deputy Martin, mentioned 1929. Had he remained in the Chamber, I would have reminded him that in May 1929 the concept of rational markets was introduced by an economist in Chicago. Two weeks later the crash happened and he died many years later in poverty, getting food vouchers through his relatives. The debate about rational markets went on and on through many different distinguished economists. Towards the time just before the most recent crash, it was suggested that there was no such thing and if sufficient resources were fired into the system – a continual expansion in a cosmic-type manner – a type of order might emerge. That is what has gone down.

If the Ministers, Deputy Martin or Deputy Ryan want to do something, they can promote the Tobin tax which the Green Party favoured along with me a long time ago. They can deal with the international side of things, but at the moment the Minister for Foreign Affairs is just travelling the world picking up opinions to the effect that they said in France we are great. In this manner, when it comes to explaining the cuts where special needs assistants posts should be created, more carers employed, etc., the Government will be able to say they think we are great in Germany too. Such mantras may be kept up, but they are nonsense. The fact is that there are political choices to be made.

It is necessary to be real in a way that anyone can understand. I believe I am being fair to every ministerial speech I have heard in saying that the only construction to be taken from what they said is, in effect, that when the banking system is stable, we shall then get on with the other matters, that the demands of the real economy are somehow residual to all this. Meanwhile, small retailers throughout the country are having their arrangements with local banks changed. Why should the banks do otherwise, since they can take Government bonds, exchange them for real money with the European Central Bank and get about 2% above anything that may be had in the national economy? There is neither compulsion nor attraction for the banks to put any money into the Irish economy, so let us get real.

We are always being told this about Labour's practical proposals. These entail recognising the liquidity needs of the real economy, having a strategic investment bank and using some of the National Pensions Reserve Fund before it is eroded in the mad caper that was Anglo Irish Bank. At the same time the real economy should be restored to the banking sector, as should a version of political economy that recognises real political choices.

Every speech today on the Government side had the same message, to the effect that they are all impressed abroad at the grief we have been able to visit, fairly silently, on the people at home. That is a miserable argument. It is Dickensian and is illiterate in its economics. What we are listening to is, in fact, the justification of the consequences of a bad night at the casino.

Photo of Michael MulcahyMichael Mulcahy (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

I wish to share my time with Deputy Paul Gogarty, with the permission of the House. As the famous saying goes, those who do not learn from their mistakes are condemned to repeat them. This is, without doubt, the most serious financial crisis in the history of the State, brought about by a combination of factors which all occurred in a relatively short period of time: an international financial crisis, an international recession, a property bubble in Ireland, the failure of financial regulation in Ireland, and a completely reckless spending spree carried out by some of our banks. That is why I welcome the banking inquiry which has been set in train by this Government and which is now in its first phase. I understand that first phase, which is doing the preparatory work, will report some time during the summer. The second phase of that inquiry will be a fully sworn commission of inquiry under the commission of inquiry legislation. I believe such an inquiry is extremely important. The people deserve to know exactly how this crisis came about. That is the least we owe them.

The figures given today by the Minister for Finance were truly horrendous. There is up to €18.3 billion for Anglo Irish Bank, which does not include the €4 billion already given, €2.6 billion for the INBS, the money already invested in Bank of Ireland and AIB and the further moneys that might have to be invested in those companies. These are extraordinarily large amounts of money. The public is correctly concerned about this and has every right to be concerned. The Minister echoed that concern in his speech. However, as the Minister for Foreign Affairs said, there must be a proper pathway out of this crisis and, in fairness to the Government, it has produced that pathway.

If one examines in detail the legislation passed by the Government since September 2008 when the crisis first started, one will notice that the preamble to each measure sets out clearly that the background to each Act is the severity of the economic crisis. In rough chronological order the measures taken were the bank guarantee announced on 30 September 2008, various budgetary cuts, the pension levy, the NAMA legislation, the recapitalisation of the banks and the banking inquiry which I have mentioned. Earlier, I heard Deputy Michael Noonan chastising the Minister for Finance for being tardy. I reject that.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

He was right.

Photo of Michael MulcahyMichael Mulcahy (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

Given the amount of legislation, the complex nature of the problems the State is grappling with and the depth of the recession, the Minister for Finance and the Government have done exceptionally well in this area. I sat through the Second and Committee Stage debates on the NAMA legislation, as Deputy Higgins can testify, and although some good and genuine points were made by the Opposition, there was a great deal of time wasting by the Opposition throughout that process as well.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

We do not agree with it. Get that into your head.

Photo of Michael MulcahyMichael Mulcahy (Dublin South Central, Fianna Fail)
Link to this: Individually | In context

The Opposition cannot have it both ways. It cannot expect the State and the Government to act quickly yet delay and hobble it at every opportunity and in every procedure in the Dáil. That is inconsistent. What has the Opposition proposed? Fine Gael at least supported the bank guarantee but inconsistently does not support the NAMA process. The Labour Party is consistent. It does not support NAMA, nor did it support the bank guarantee. In fact, Deputy Joan Burton, when responding to the budget in 2004 said all the money in the National Pensions Reserve Fund should be used on existing projects.

I strongly commend the Government's actions. I welcome the Minister's speech today. This is a very difficult day but, to echo the famous quote, this is perhaps the end of the beginning.

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
Link to this: Individually | In context

In September 2008, the Irish banking system was about to be rolled over as a result of bad business decisions, lax banking practices particularly with regard to lending, a related political system unduly influenced by vested interests at both national and local level, to which I have alluded in previous contributions, as well as poor regulation. It was brought to the brink by its incapacity to deal with what was, admittedly, a global recession. Opinion still differs as to whether Anglo Irish Bank could be described as a systemic bank. The risk was that if Anglo Irish Bank fell, the rest of the Irish banking system would collapse. The Minister for Finance made a judgment call that Anglo Irish Bank needed to be protected, first by inclusion in the bank guarantee scheme and, later, through its nationalisation. It was an educated decision because the risk in letting Anglo Irish Bank fail was far greater than the risk in trying to manage its debt portfolio in an incremental manner through a national asset management agency.

Others both inside and outside these Houses may seek solace from the comforting security of inconsequential responsibility. The suggestions put forward have ranged from pulling out of the euro through letting the banks collapse to nationalising them. That would all be at a much higher cost to the taxpayer than a partial and temporary equity stake. The Minister, Deputy Brian Lenihan, as the line Minister could not afford to take those risks and just put forward ideas. He had to find something that balanced innovation and conservatism simultaneously. That is what NAMA is, and the Green Party agreed with this and fed into the process.

Much has happened since September 2008. There is a new Governor of the Central Bank and a new Financial Regulator. We now own Anglo Irish Bank and this process has begun, for better or for worse. It should be allowed to continue to minimise the cost to the taxpayer and maximise the returns from the good bank element in the future. There is a new chief executive in Anglo Irish Bank whose responsibility is to the Irish people, not to cronies and vested interests. I am disappointed that some say it is still more cost effective to let Anglo Irish Bank fail and leave its debts uncovered. The argument has moved on. We cannot realistically default on those debts without increasing the cost of borrowing and risking a Greek style financial tragedy. Moving forward is the only game in town.

There also appears to be confusion about where the money is coming from and whether there is an alternative way to spend the huge sums going into NAMA and bank recapitalisation. This is not our wish list. We had to put our banking and economic system on a sound footing and put the money into the banks. This money is coming from different sources, not a wish fund which one can spend on health, education and wages. It comes from a preferential ECB rate which is designed only to cover our bank rescue and NAMA. It would not be available otherwise. If one believes that getting our banking system up and running again is crucial to our economy, there is no other option and this is the cheapest method available. Other criticisms regarding lack of spending on capital projects or covering current annual State bills are spurious.

Today, we have been given the figures relating to the loans transferred to NAMA, comprising 20% of the entire portfolio. The average discount of 47% is far higher than the original guesstimate of 30% and puts paid to the suggestion that this would amount to favours for cronies. This is a decision made on commercial grounds and putting the public interest first. We now own significant shareholdings in the larger banks. This will balance the risks associated with NAMA to ensure a return in future for the Exchequer.

I welcome the measures to protect those at risk of losing their homes, which were announced previously. I also welcome the statement of intent by the Minister to provide additional support to SMEs in particular, with regard to providing cashflow and the credit review process. One sector that could do with help from the State is the printing sector. It is experiencing huge cashflow problems at present. There is scope for the State to act. It could cut up its contracts into contracts of under €50,000 and ensure that Irish printers are provided with good business, rather than the current practice of giving it to contract operations to divvy out the printing to companies in other EU countries that are not covered by the same stringent regulations. Think Irish first where that is possible and help speed up the economic recovery.

Photo of Denis NaughtenDenis Naughten (Roscommon-South Leitrim, Fine Gael)
Link to this: Individually | In context

I wish to share time with Deputy Deenihan.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

That is agreed.

Photo of Denis NaughtenDenis Naughten (Roscommon-South Leitrim, Fine Gael)
Link to this: Individually | In context

I welcome the opportunity to speak on the motion before us. The bank bailout that has been presented to the Dáil today is a gambler's nirvana. Sean Fitzpatrick and the big developers of this country gambled on the Irish property market, and that was funded by the banks. The gamble dramatically inflated property values. The banks then supported these untenable prices by providing mortgages of 100% and more to young couples, whom they knew would find it impossible to make their repayments if there was a downturn in the economy. The developers and the bankers gambled, they lost and now the taxpayer is being asked to repay these losses - some €16,500 for every man, woman and child in this country. This is what we are debating today. This is the bailout for which every single individual living in this country will have to put their hand in their pocket. Some 70% of that money will go directly to bail out Anglo Irish Bank, which will not create one job or support one small business.

Legitimate questions that have been put forward in the House and elsewhere by Deputy Richard Bruton have been ignored by the Government, which cannot provide answers to them. The Government attitude is that we must spend another €36.3 billion to protect the €4 billion we have already wasted on Anglo Irish Bank. This is nothing but roulette economics. It is €36 billion that could take half the unemployed off the live register and save the €4 billion in cuts which were announced last December.

As speaker after speaker on this side of the House has said, there is €2 billion in subordinated debt that is held by hedge funds, whose job is to run high risk funds with potential high risk of gains and losses. There is no reason the Irish taxpayer should have to bankroll those hedge funds yet the Government is guaranteeing everything. This goes back to the Taoiseach's commitment in the House that whatever cheques are necessary will be written to bail out the banks. It is threatening the country with national bankruptcy, the doubling of our national debt and the jeopardising of the future of our children and their children purely on a hunch that cannot and will not be backed up by the Government.

And all for what? To protect against reputational damage, we are told, because if we do not bail out the septic bank which is Anglo Irish Bank, it will damage the reputation of this country. While it may damage the reputation of the Minister for Finance when he meets his colleagues at ECOFIN meetings, Seánie Fitzpatrick was not too worried about reputational damage when he had secret loans of up to €129 million from Anglo Irish Bank. The Government needs to decide whether it wants to protect against reputational damage or against the long-term economic damage that can be caused to this country.

Deputy Richard Bruton pointed out that today's decision will freeze credit in this country for at least another eight months. Not one red cent will come out of the banks in the next eight months as they try to protect their shareholders. If we have a basket economy with more than 500,000 people unemployed, what reputation will we have at that stage? We must use the money that is being used to bail out Anglo Irish Bank to restructure our economy, to support business, to create jobs and to make Ireland an attractive investment. Will anyone remember Anglo Irish Bank in the future? If we can get our act together and build up our economy, no one will. Our reputation has to be based on getting people back to work and getting this economy off its knees.

Photo of Jimmy DeenihanJimmy Deenihan (Kerry North, Fine Gael)
Link to this: Individually | In context

This is the fourth time we have come back to the House to discuss this crisis. First, there was the guarantee, next came the capitalisation, next was NAMA and now we have this chapter. I ask whether this is the last chapter, but I doubt it is.

The Minister and the Government give the spin that Ireland has been recognised internationally for taking corrective action. The Minister of State, Deputy Barry Andrews, and I were in America recently and that is the line being taken there. While the Opposition does not deny this is the case, those in America making that commentary are not living in Ireland, do not realise there are nearly 500,000 unemployed and that we have major difficulties across the spectrum, be it in education, health or otherwise. The spin that is given abroad is not the reality on the ground in this country.

There are no guarantees whatsoever in today's process. I know the Government has asked the banks to lend €3 billion to small business but there is no guarantee this will happen. The regulator has put pressure on the banks in regard to core tier 1 capital requirements. From where will that money come? The only possibility is that it will come from the Government because it will not come from anywhere else. The banks will be saving money, not giving it out - that will be the pressure on them, and it will not change. Small businesses will close every day. It is only since January that this pressure has really come on. I know of viable businesses that were depending on overdrafts but these have been withdrawn and they are simply closing their front doors. There is nothing in today's statement that convinces me there will be any change after today.

While I note ISME has welcomed the proposals by the Minister, it too has expressed concern that this may not mean there will be an increase in lending to small businesses throughout the country. A number of tourism enterprises are currently gearing up for the summer but they need cash flow and overdraft facilities because it is normally at the end of the year they come into profit. If they do not get these guarantees from the banks, they will not be able to start up business.

Following today's announcement, the taxpayer is facing a bill of €40 billion and counting, mainly for bailing out Anglo Irish Bank. It is difficult to explain to people how those who were involved in Anglo Irish Bank can have property all over the world and enjoy their summer in the Mediterranean, South Africa and elsewhere when the people here must suffer in paying that debt. The people are not fools. They know how they are being penalised and public servants know they have had their salaries reduced. Much of the public service dispute was an expression of anger at what has happened, as much as anything else. People cannot understand why 70% of the taxpayers' money which is being allocated to recapitalise the banks is going to one bank which is a dead end, will not lend money to anybody and will do nothing for this economy. It is difficult to explain how this is so and why the Government must prop up Anglo Irish Bank.

As Deputy Richard Bruton said earlier, the Government is throwing good money after bad with Anglo Irish Bank. Fine Gael's policy to wind up Anglo in an orderly fashion and allow the creditors to recover whatever value they can is now becoming more and more relevant. The Government's argument against such a course of action is based on trying to scare people into believing that any option but its own is too costly, which simply is not true. The Minister, Deputy Brian Lenihan, should publish the evidence on which he is basing his decision regarding Anglo so the public and relevant experts can make an informed judgment on the Government's strategy.

This is what we have been asking for but information from the Government is not forthcoming. It is frightening when one considers that, through this action, we are doubling the national debt to €115 billion. How will we and the next generation cope with this into the future? Today will go down as a watershed in the economic history of this country. This decision will be there to fester and to affect our economy, taxpayers and services for the future and will reflect very poorly on this Government.

Photo of Noel O'FlynnNoel O'Flynn (Cork North Central, Fianna Fail)
Link to this: Individually | In context

I wish to share time with Deputy Edward O'Keeffe.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Is that agreed? Agreed.

Photo of Noel O'FlynnNoel O'Flynn (Cork North Central, Fianna Fail)
Link to this: Individually | In context

I speak tonight as one of the thousands of small and medium-size enterprises who need a voice in this Chamber. I also speak for the people who have mortgages and personal loans but who, because of this downturn in the economy and because they may have lost their jobs, need our help in dealing with the financial institutions. I speak tonight not only as a Deputy but as a businessman with a small business who started business on 1 April 1985, 25 years ago. The date is April fool's day and people said I was mad to begin on that date but I was not mad because it worked out well. It was in the middle of a recession and over the years my business has managed to do as well as possible.

We are still in business but the past two years have been difficult for any business in the SME sector. The motor industry business is down between 30% and 60% in many places with many closures and loss of jobs. Small and medium-sized enterprises need finance and working capital. We need confidence in business to trade, to purchase, to support credit and to trade in a safe environment. The difference in 1985 was that the banks were not broke and had money to lend but there was a world-wide recession. This confidence has not been evident in the country in the past two years, due to the lack of capital from the financial and banking systems.

I welcome the Government's decision today that AIB and Bank of Ireland will make €3 billion each available to the SME sector to kick-start economic activity. This will be monitored by an independent body with an appeals process to allow those unable to obtain finance to appeal that decision. No one is asking the banks to fund or lend to businesses which are not sustainable or profitable but we ask for fair play. Banks lend money, it is their business, their trade. They make money from this activity. Businesses make goods and supply goods and services, that is their business. They make money to reinvest and that is the nature of their business. The banks were recklessly lending money. Now they need our help but they have not been lending money. They are reducing overdrafts for business and personal accounts and putting pressure on people to pay their outstanding balances, driving some people to depression and even worse. They are putting sound, profitable businesses at risk by starving them of working capital. These businesses did not contribute to the banking crisis and to breaking the banks.

Those in the banks who loaned recklessly for land and buildings must now be removed from our banking systems. The Minister has started the job and he should finish it. Loans, charges and account costs must not be prohibitive by means of indirect charges and increases. Stealth charges have been introduced and charges imposed on direct debits. I could go on all night about this issue. If we do not monitor and challenge the banks and ensure the capital they are receiving and the bonds they will cash for the loans going to NAMA are used for productive lending to the business and personal borrowers, they will go back to their old ways of banking. They must be forced to concentrate on lending to get this economy back on its feet.

The bank guarantee is worth €1 billion to the Exchequer this year. The taxpayer must know that this money will be available this year. We must ensure that when AIB and Bank of Ireland shares are sold in years to come, the State will make a profit. Unfortunately, I agree with the Opposition. The fate of Anglo Irish Bank, EBS and Irish Nationwide, will cost the State money. The alternative is liquidation which would cost the State more. The investigations in the banking sector must be concluded and the Oireachtas investigation must start. Those responsible for wrong-doing must be brought to justice and punished.

Photo of Ned O'KeeffeNed O'Keeffe (Cork East, Fianna Fail)
Link to this: Individually | In context

I am pleased to speak in this important debate. I speak as a Deputy for Cork East and I speak on behalf of my party which has been to the forefront in Irish politics. I cannot understand people who attack the banks. This is one of the great world recessions but it will not be fixed by bashing the banks and criticising them. The SMEs are getting money from the banks. The economy has shrunk by 20% and SMEs are distressed but there is only a 2% shortage in credit, according to the business newspapers I read every day. There is no point in putting pressure and stress on our Irish banks to fund SMEs when the foreign banks who came here and caused aggressive lending which led to the current problem, will not be asked to do the same. There will be cherry-picking of the best SMEs by the foreign banks and the Irish banks will try to manage and look after distressed SMEs.

I wish to address the issue of Anglo Irish Bank. I am a farming businessman. I would not hold Anglo Irish Bank in my portfolio but I would have it liquidated tomorrow morning and sold off. It is going to be a sore and a boil on the Irish Government and the financial system of this country so long as it is left in existence. It has been a disgrace to Irish banking, to the Government and to the Fianna Fáil Party. Along with other colleagues, I was one of the first to say that this bank would cause great trouble in the days and years ahead. I also said that the construction industry would bring tears to the people and the families involved and how right I was. My then Taoiseach, Deputy Bertie Ahern, said that people saying those things should commit suicide. I did not commit suicide and I probably never will but it was an outrageous statement when our whole economy was falling apart.

I want an answer to a question. Mr. Matthew Elderfield has been appointed as head of financial supervision. Mr. Elderfield worked in the financial services in the United Kingdom. In 2006 he went to Bermuda which was a British colony at one time. He has been in Ireland since last November. What was he doing in London when Northern Rock was on the eve of going bust? He is adopting a Draconian approach to the banking system.

Bank of Ireland and Allied Irish Banks have stood the test of time in this country and have served us well and honourably. They are in distress and difficulty now. Bank of Ireland seemed to have been given a bit more support from the Government and from Mr. Elderfield than has AIB. AIB has been more successful in serving our community on this island for many decades and will continue to do so. It has a number of assets abroad which are worth a lot. Fair play to the bank because it had the foresight to invest. It has banks in America, Poland and London. These are all worth €5 billion or €6 billion. Why make them sell in the next 30 days if there is going to be buoyancy-----

Photo of Michael RingMichael Ring (Mayo, Fine Gael)
Link to this: Individually | In context

What is the Deputy talking about? We had to bail them out.

Photo of Ned O'KeeffeNed O'Keeffe (Cork East, Fianna Fail)
Link to this: Individually | In context

Deputy Ring does not know the first thing about banking and he can shut up. He should shut up, coming from-----

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Please, Deputy O'Keeffe.

Photo of Ned O'KeeffeNed O'Keeffe (Cork East, Fianna Fail)
Link to this: Individually | In context

I am being interrupted by an ignoramus from the west of Ireland.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

We are endeavouring to get some control back to the House.

Photo of Michael RingMichael Ring (Mayo, Fine Gael)
Link to this: Individually | In context

I could not listen to that nonsense.

Photo of Ned O'KeeffeNed O'Keeffe (Cork East, Fianna Fail)
Link to this: Individually | In context

Why should AIB be told to sell its assets in the next 30 days? It should be given space to sell its assets and they will get more on the market. If the world economy is on the up - which it is - the bank will make substantial money on those assets. AIB may then become the free bank in our society and may not be dependent on the State and Mr. Elderfield telling us what to do. We do not want foreigners in here. Michael Collins, Liam Lynch, Patrick Pearse, James Connolly, would not have those foreigners running our business. It is about time we looked after our Irish people who are well educated.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

The Deputy's five minutes have expired.

Photo of Ned O'KeeffeNed O'Keeffe (Cork East, Fianna Fail)
Link to this: Individually | In context

I am sorry I was interrupted by that man from Mayo, who knows nothing about banking but a bit about leaving cakes in a van.

Photo of Michael RingMichael Ring (Mayo, Fine Gael)
Link to this: Individually | In context

I know more about banking than Deputy Edward O'Keeffe. All he cares about are his bloody shares. He says one thing on RTE and another in here.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Deputy Ring, please.

Photo of Ned O'KeeffeNed O'Keeffe (Cork East, Fianna Fail)
Link to this: Individually | In context

Go home and bake some buns.

Photo of Seymour CrawfordSeymour Crawford (Cavan-Monaghan, Fine Gael)
Link to this: Individually | In context

I wish to share my time with Deputies Ring and Durkan.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Is that agreed? Agreed.

Photo of Ned O'KeeffeNed O'Keeffe (Cork East, Fianna Fail)
Link to this: Individually | In context

I want my questions answered.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Deputy O'Keeffe, please.

Photo of Seymour CrawfordSeymour Crawford (Cavan-Monaghan, Fine Gael)
Link to this: Individually | In context

Today is a dramatic and traumatic day for the Irish people and especially the taxpayers. Quinn Group, which is much admired in my constituency, has been put into administration by the regulator and at the same time Anglo Irish Bank has been given a handout of €8.3 billion with a promise that it will get a further €10 billion when necessary. The Anglo Irish Bank loans being transferred to NAMA will be discounted by at least 50% and the transfers from the Irish Nationwide Building Society loans will on average be discounted by 58%.

It is unforgivable that the Taoiseach and the Minister for Finance have asked the taxpayer to bail out these two institutions after their management caused havoc in this country through their irrational and unbelievable lending structures. While other banks were also careless it is clear that Anglo Irish Bank and the Irish Nationwide Building Society will cripple the Irish taxpayer for the next several decades.

Unfortunately, the Minister has put off a final decision on AIB and Bank of Ireland. This means there is no guarantee for businesses on when normal banking structures will once again be in place. Clearly these banks will use the time provided to them to strengthen their own structures rather than provide normal lending to viable projects.

I was disappointed that the Presbyterian Mutual Society was not even mentioned. This is an all-Ireland institution which was forced into administration when Governments North and South provided guarantees to other banks. The issue was discussed at the time of the Hillsborough Agreement and although the €100 million required for it, including a 2% involvement by the Irish Government, is chicken feed compared to Anglo Irish Bank or the other institutions, it would be enormously important to the investors concerned. I urge that recognition be given to the issue even at this late stage.

The fact that Quinn Group has been put into administration has caused shockwaves across the Cavan-Monaghan region and further afield. Seán Quinn created thousands of jobs in an area the Government and the IDA ignored. Without him, I do not know what would have happened to the region. Regulation is important but we must not over regulate. I hope for everybody's sake that Seán Quinn and his companies can weather this storm and that the job they have done for the Irish people will be recognised.

Photo of Michael RingMichael Ring (Mayo, Fine Gael)
Link to this: Individually | In context

My blood boiled when I heard a previous speaker congratulate the banks on the wonderful job they have done. The legislation we should be debating this evening would allow us to detain these fellows in the Curragh Camp for what they have done to this country. This is not the first time we have had to save banks. The taxpayer had to pick up the tab when our banks invested in America and elsewhere and bail out the messers in PMPA, most of whom were associated with Fianna Fáil.

The people of this country do not understand what €40 billion means. People who are sitting at home unemployed are paying for Seanie FitzPatrick and the other guys in Anglo Irish Bank. They were every bit as bad in AIB. Tonight, however, a Deputy claimed we have a wonderful banking system. They destroyed the economy and the country and have put us back 100 years. I do not hear any outrage from the Taoiseach or the Green Party at the destruction of our economy or at bailing them out again even though we cannot afford to do so.

I am sick and tired of the rich being protected by Fianna Fáil and, now, the Green Party. If Green Party Deputies had any backbone, they would say "No, we will not vote on this. We will give the people of the country an opportunity to decide." If the people decide to give money to AIB, Bank of Ireland and Anglo Irish Bank, fine, but they will not want to do so. Small businessmen all over the country are coming into our clinics because they cannot get credit. These are the people who will create jobs.

Deputy Edward O'Keeffe wants to know what we are doing for the bankers. I want to know when we are going to see some of them put behind bars, where they belong, for destroying the country and the economy. They are friends of Fianna Fáil and that is how we have paid for the Galway tent. Most of the people of this country will finish up living in tents because of Fianna Fáil. The sooner we get that party out, the bloody better for the sake of living in an honest and decent country.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context

In his opening statement, the Minister stated:

The country has come a long way since we introduced the State bank guarantee 18 months ago...Back then, our banks were on the brink of financial collapse and our economy had gone into reverse. Revenue had fallen steeply and unemployment had risen sharply. For the first time in a quarter of a century, we were experiencing negative growth.

I know he has a sense of humour and I think he grinned to himself when he penned those lines. Everybody in this House is aware that we are contemplating a truly appalling vista.

As Deputy Ring pointed out, the uncontrolled operation of the banking and property systems has burdened the public, including those with new or old mortgages and business owners who cannot get sufficient credit, with the bill. The people behind these problems claimed to know better than anyone else and that they were worth every penny they cost us. They were wrong about everything. The economy has not been run well since 2002 because, as anybody could have attested, the fundamentals were wrong.

We have encouraged competition in the banking sector. Anybody who moves a deposit from one bank to another can increase significantly the interest earned, whereas he or she would earn nothing by leaving the money in one place. In theory, it would be better for people to move their deposits to a different institution but given the instability of the banks over the past couple of years, they are understandably slow to do so.

Reference is regularly made to people who borrowed unwisely to purchase houses. However, they were told that they had to get onto the bottom rung of the property ladder. Many sincere people who are now caught by negative equity have to pay for the banks' codology on the property market.

Deputy Edward O'Keeffe claimed the world economy is on the up but the problems that affect our economy are deeper than anywhere else in the world because nothing was done to address the issues on time. Let us remember that those paying for it are the citizens of Ireland. The citizens, who are already shouldering their own burden of debt incurred as a result of banking and economic policy, must now carry the burden for the banking system as well, which is a sad day for this Republic.

Photo of Martin ManserghMartin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
Link to this: Individually | In context

I refer to the statement made by Deputy Ring and I wonder whether his decibel levels sometimes breach health and safety standards, especially for those sitting next to him. I am long enough in the building to remember the support the Fine Gael and Labour Party Government had to give AIB in 1985 in respect of the ICI operation. That was supported by the then Opposition.

I welcome the setting out by the Minister for Finance of a comprehensive statement of strategy and decisions in regard to the opening phase of NAMA operations and the recapitalisation of the banks. While it is often a natural, human, not to say political instinct to put off facing up to difficult problems, the Minister and the Government have taken the bull by the horns and set out the full extent of the problem, however unpalatable - it is extremely so - and how it must be tackled. Concealing problems is not the road to recovery either for banks or this society.

NAMA has continued to be hotly debated ever since the legislation was passed. It has been claimed or otherwise implied that what the Government is doing now will put future generations in hock. However, it is the irresponsibility of property developers and lending institutions that has done this. The Government and other authorities have been criticised for not having done enough to stop the madness and sometimes for adding to it. From time to time, we all had political or partial insights into the dangers but none of us consistently so. Prominent Labour Party Deputies frequently boasted that we were the second richest country in Europe, which was true on paper, but only on paper, and that the country was awash with money. Those who wished to restrain over-lending or development were cast aside.

We have many lessons to learn about the recent past, not least about not putting all our eggs in one or two baskets, the need to opt for a more cautious or sustainable approach to development, which will inevitably mean less exciting policies in some cases, and learning to say "No" to schemes that appear to promise large jobs and profits. Problems were greatly exacerbated by the international crisis in banking confidence. Deputy Burton was correct to state the problem built up slowly but then crystalised with the collapse of the Lehman Brothers. It is risk-free to make suggestions with regard to alternative acts or courses of action that should have been taken, whether such suggestions come from the Opposition or the media. However, the Government of the day alone carries responsibility for the consequences of its decisions in an emergency. Perhaps this is why the changes made last week were cautious. Only the Government has any recent experience of the pressures of crisis management, although there are still some on benches opposite who have experience of the crisis of the 1980s.

Repeated allegations are made about the proximity of the main Government party to bankers and developers. Perhaps someone would like to explain what in today's statement or in NAMA's decisions represents favours to either group.

Creating confidence at home and abroad is vital to our recovery. Today's statement represents strong Government decisions, not those of a Government short of either strategy or ideas. The decisions create a greater degree of certainty. They free up the banks' ability to lend, which will be as important in the time of recovery as it is in today's depressed circumstances.

Like others, I welcome the direction to the two main banks to lend €3 billion as part of a seed capital fund and for environmental, clean energy and other projects. The credit review or appeals process to address firms denied necessary credit is very valuable. The Minister has explained why Anglo Irish Bank was systemic and why it would not be a good option to close it down either in the shorter or longer term because that would greatly increase the liabilities faced by the taxpayer. The Government is pragmatic about the ownership of banks. It is not an ideological principle.

Deputy Crawford called on me to meet the Irish Presbyterian Mutual Society and I have done so. However, 98% of its assets and holdings are in the UK and it is the responsibility of that country. In this matter there is a dimension of defending the economic independence and viability of the State, whether in budgetary or banking decisions. I welcome the realistic draft agreement reached last night.

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

I am pleased but somewhat saddened to speak on this issue. It is a disgraceful situation in which we find ourselves. My message to the bankers and the small cabal of developers who caused this problem is, to misquote Shakespeare and a former Taoiseach, that they have done the State some mis-service and we know it. Unfortunately, the taxpayer knows it and the taxpayer must get on with things.

Photo of Frank FeighanFrank Feighan (Roscommon-South Leitrim, Fine Gael)
Link to this: Individually | In context

We will let that go.

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

The taxpayer must get the best possible deal for this country from now on. I refer to the chart of bond spreads. The actions taken by the Government since this time last year have saved approximately €1.5 billion in interest payments. This is equivalent to another pay cut for the entire public service saved by this Government having the most effective policies to reduce the interest rate we pay on the national debt, which is at a serious level.

Photo of Frank FeighanFrank Feighan (Roscommon-South Leitrim, Fine Gael)
Link to this: Individually | In context

That is fantastic.

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

We have been above Greece in terms of the fees on our interest for some time because of the actions the Government has taken, unpalatable though they have been. It is disgraceful that we are in this situation. These actions have stabilised the situation and have saved the country significant sums of money.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

What about the €4 billion?

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

We must continue to do this. No one likes what we must do with Anglo Irish Bank.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Tell us about Anglo Irish Bank.

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

I am disgusted and angry that we must do it but there is no point sitting on the sidelines and making up arguments for the sake of it. Why does the Opposition not come with us and agree that we are right and that they would do the same if they were in Government?

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

We do not agree with the Deputy.

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

This morning on the radio the Fine Gael finance spokesman stated the bank has brought the country to its knees, an indication of how systemically important this disastrous bank was. It was systemically important.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

I was never of systemic importance.

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

Why did the Fine Gael spokesman say it brought the country to its knees? If one wished to describe systemic importance in plain man's language that was a very good example and the Deputy's finance spokesman did a good job of it. Unfortunately, we are in this situation and we must do this, but it is the least worst option. If we do what the Opposition suggested we would pay many tens of billions of euro more.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

What are we suggesting?

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

Much as I hate to be here supporting this, I believe the Government must do it and I compliment the Government for its resolution and determination to get this through.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

I welcome the opportunity to comment briefly on the motion. The reckless management of our banks in recent years is a national scandal and a bitter pill for taxpayers and Irish citizens generally. It was difficult to hear today the level of bailout required by the Government and the State in respect of our financial institutions. The reality is that we may not like banks or senior bankers but we need them to meet the needs of the economy and if we are to have any prospect of coming out of this recession and, in line with forecasts, begin to grow the economy again later this year.

When families get into financial difficulty one of the first pieces of advice MABS gives is the need to face up to their problems, to confront their loans and to deal with the reality of their situation. The bottom line is that in recent months the Irish banks have not been facing up to the extent of the losses they face. Today, we witnessed a comprehensive package of measures which forced the banks, once and for all, to face up to the extent of losses with which they must deal. The Minister and the Financial Regulator showed clearly today who is in charge. The Financial Regulator set a very high level of capital requirement for the banks, in line with best international practice, and did the State some service by requiring the banks to impose a level of capital far beyond the level of anticipated losses and NAMA loans. He has factored in losses on non-NAMA loans, both commercial and personal.

One of the criticisms of NAMA when it was introduced was that it would somehow go soft on the banks and let them off the hook. Today, we have seen evidence that this is not the case. NAMA has imposed a high level of discount, at an average of 47% across the loan book, which, in fact, improves its capacity to at least break even and, one hopes, make some money for the taxpayer over the ten-year period.

What we saw also today is a clear commitment on behalf of the Minister and the Government to compel the banks to provide an adequate level of lending to the economy, in particular to SMEs. We will see €12 billion worth of lending to SMEs by AIB and Bank of Ireland between now and the end of 2011, and that is a particularly welcome development. The regulator and the Government must be rigorous in ensuring such level of credit is extended because the banks will endeavour not to provide the level of required lending to the economy. It will be rigorously monitored.

The success of NAMA and recapitalisation will be judged ultimately on the basis of whether the banks meet the credit needs of the economy. The measures which have been taken today are necessary and unpalatable, as the Minister stated and as they undoubtedly are. They will put the economy in a position where it is served by a banking system which, once and for all, has faced up in an honest way to the extent of its losses and to the recent reckless and irresponsible management of its banks which now must be bailed out by the taxpayer but which will meet the needs of the economy in the future. I note that both ISME and Chambers Ireland have welcomed today's package of measures as an essential step by the Government in dealing with the banking crisis.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

I am glad to have the opportunity to speak in this debate. I trust those Members who hold bank shares and who have come out strongly against some of the banks or in favour of some of the other banks have declared their interests before speaking in this debate.

Photo of Thomas ByrneThomas Byrne (Meath East, Fianna Fail)
Link to this: Individually | In context

Do not look at us.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

I thought Deputy Edward O'Keeffe made many interesting points and I certainly would completely agree with a number of those. I trust he will have the sincerity to follow through with voting with the Opposition tonight. It is easy to come into this Chamber and shout one's mouth off. It is another matter to have the courage of one's convictions and to vote accordingly. I look forward to seeing what he does in a half an hour's time.

Today, 30 March 2010, is a day that will be etched on the minds of every citizen of this country because it is the day on which Fianna Fáil and the Green Party saddled each taxpayer with a massive debt in order that rogue developers, rogue builders and rogue bankers can be bailed out. Today, we are all paying the price for bad Government policies and for a situation where weak and often compromised Fianna Fáil Ministers remained in power for far too long.

This is the legacy of that trio, Deputy Bertie Ahern, former Deputy Charlie McCreevy and, to a large extent, Deputy Cowen, all of whom were Ministers who were happy to facilitate the golden circle in enriching themselves at the expense of ordinary people. Rather than having housing policies that viewed decent housing as an essential social good and, therefore, something that needed to be regulated by Government, these Ministers were happy to allow their developer and builder friends to control the market to maintain land at grossly inflated prices, leading to a frenzy in house buying. Prices soared, ever more people were forced and, indeed, encouraged to get in over their heads, and ever more foreign workers were drafted in to keep the building boom going. This inflated demand and, finally and inevitably, the pyramid collapsed. All of this madness was stoked by the financial institutions which threw out the rule book on lending. As the Minister, Deputy Brian Lenihan, stated earlier today, the banks played fast and loose with the economy. They were allowed to do so by the weak and compromised Fianna Fáil Ministers, Ahern, McCreevy and Cowen, the three disciples of light-touch regulation who presided over the destruction of the economy.

It is important that people know who is responsible for the financial disaster in which we find ourselves today. There were significant international factors but there is no doubt the recession is far deeper and will be much longer lasting in Ireland than almost anywhere else in the world, and that is as a result of Fianna Fáil's mismanagement of the economy.

It is also important that people realise that had they voted differently in 2007, we would not be in this devastating position today. Not only did Fianna Fáil facilitate the conditions that led to the property bubble's creation and its subsequent destruction, when the collapse happened, they failed utterly to deal with it properly. Rather than taking action when serious problems began to emerge, the Government exacerbated the difficulties. As Deputy Edward O'Keeffe stated, we all remember Deputy Bertie Ahern's message to those who urged caution. Shamefully and pathetically, Deputy Ahern advised them to commit suicide. I do not know how Deputy Ahern has the neck to be in this House today. He has a great deal to answer for.

While problems were mounting in the banks, it was not until that other faithful date, 29 September 2008, that the Government took action. It took that action, it would seem, solely on the basis of advice from those bankers and those so-called public servants who themselves had contributed so much to the perilous state of the banks and our economy. It seemed, for ideological reasons, the Government was not prepared to countenance nationalisation and, instead, provided a blanket guarantee. Today's appalling vista can be traced back directly to that decision.

Having given this extraordinary blanket guarantee, the Government was in a position to dictate absolute terms to the banks but, yet again, it showed its complete weakness. There should have been a complete clear-out of senior executives and the entire boards in all of the covered institutions. There would have been no difficulty in doing this in light of the scope of the guarantee. Instead of that, however, the Ministers continued to kowtow to these people. The continuing bloated salaries, with increases as recently as last week, are an affront to decent people. Nobody has been sacked, nobody has been penalised and I doubt very much if anyone will end up behind bars. What else would one expect Fianna Fáil to do but to protect its golden circle friends?

Equally, the Government has failed miserably to do what it promised it would on getting credit flowing to small business. This, after all, was one of the main arguments it used for the guarantee. How many tens of thousands of jobs have been lost since then owing to SMEs being squeezed dry by the banks while all the time Ministers stood idly by? It is quite clear a separate national investment bank is needed and far too much precious time has been lost by the Government. Those who have lost their jobs in the meantime have paid a heavy price for that delay. It is hardly surprising, given the Government's central role, that it has refused to investigate adequately the circumstances leading up to the banking crisis. The paying public must await a change in Government to discover what actually happened over recent years.

The details of the proposals as unveiled today show an unprecedented crisis of far greater scale than had been indicated by Government or, indeed, than had been expected.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Deputy Shortall's time is rapidly running out.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

I will take my last minute, if that is all right with the Ceann Comhairle.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

It is not. Her time started at two minutes past half-past nine. She had ten minutes and, therefore, she has three more minutes left.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

I do not think she has three.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

I have at least two.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

I will allow the Deputy to conclude.

Photo of Emmet StaggEmmet Stagg (Kildare North, Labour)
Link to this: Individually | In context

She has three more minutes left.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

I have at least two. It is not running out, though. As I stated, the details of the proposals are far greater in scale than had been indicated by Government. The harsh unpalatable reality for the taxpayers, their children and grandchildren is that they have been lumbered with a huge debt for the foreseeable future as a direct result of the failure of Government policy. The Government's incompetence in handling the banks means the crisis is much deeper than it needs to be.

At no stage has the Minister for Finance, Deputy Brian Lenihan, taken charge. Given that he had provided a State bank guarantee scheme with such a wide scope, he was in a position to deal with the bondholders. There was a need to share the risk with the subordinated tier-two bondholders. He could have easily indicated he was considering nationalisation or letting Anglo Irish Bank go altogether. In that context, he was in a strong position to negotiate with the tier-two bondholders. The Government should have also negotiated with the tier-one bondholders; the ones who took the highest risks must realise there is a price to be paid. If the Minister had dealt with the crisis adequately, he could have told them he would not have bailed them out and sought a sharing of risk.

We are told there is a guarantee of a 4% return on the promissory notes for Anglo Irish Bank and Irish Nationwide. There is absolutely no guarantee of such a return, like we saw with last year's recapitalisation.

The Minister for Finance denied cuts in public sector pay are funding a bailout for the banks. This is simply untrue as for the next 15 years the State will face an annual bill for €1 billion to bail out Anglo Irish Bank and Irish Nationwide.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Deputy Shortall, we are into borrowed time now.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

The Fianna Fáil Party completely buckled to the pressure from its developer and banker friends. Meanwhile, the Greens remain silent preferring to do nothing while Fianna Fáil commits one of the gravest policy mistakes in Irish economic history. What is the point in a party having five Members as Ministers when they make no difference whatsoever to the most crucial decision facing the country?

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

Deputy Shortall has seriously exceeded her time and should finish in fairness to other Members who wish to speak.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

The electorate will have an opportunity, sooner rather than later I hope, to pass judgment on this.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister, Department of Enterprise, Trade and Employment; Cork North West, Fianna Fail)
Link to this: Individually | In context

The Government's actions today are the culmination of painstaking analysis and detailed consideration of the measures necessary to restore our banks to fit-for-purpose institutions that can support economic development and the growth of enterprise.

Our actions today are necessary for the longer term economic stability of our nation which has been recklessly undermined by irresponsible property lending practices and corporate sector greed. I commend the efforts and hard work of my colleague, the Minister for Finance, and his officials, in bringing these banking solutions before the House.

The parallel announcements earlier today by the National Asset Management Agency, NAMA, and the Financial Regulator set the full context in which the Government is making extra resources available to some banks. No Irish person wants to carry the burden placed upon us by reckless bankers. However, without a functioning banking system, our full economic recovery would not be possible. We need adequately resourced and financially sound banks to support the financial needs of businesses and householders.

Similar to the earlier recapitalisation scheme, the Government has again included in this recapitalisation plan explicit provisions targeted directly at supporting our enterprise sector, especially small to medium-sized enterprises.

Under the terms of today's recapitalisation plan, Bank of Ireland and AIB will be required to make available more than €3 billion in lending to new small and medium-sized enterprises, SME, to include working capital this year and next year. This figure will be reviewed as the needs of the economy change. The two banks must each produce a plan that includes a sectorial and geographic breakdown of how they intend to divide up this new lending.

As part of his remit, the credit reviewer, Mr. John Trethowan, will assess these plans following which the Government will decide whether further action on sectorial targets is required.

The two banks will also need to make available €20 million each for seed capital to be provided to Enterprise Ireland-supported ventures and to make up to €100 million each available for environmental, clean energy and innovation funds. That is in addition to the €100 million each made available in accordance with the previous recapitalisation scheme.

The two banks will be required to commit resources to work with Enterprise Ireland and the Irish Banking Federation to develop sectorial expertise in the modern growth sectors of the economy, how best to develop the range of banking services that Irish SMEs trading internationally will need to develop and bring forward new credit products in areas where expected cash flow, rather than property or assets, will be the basis for business lending.

I welcome the formal appointment of Mr. Trethowan as credit reviewer to provide for an independent review of decisions by participating institutions to refuse or withhold credit to SMEs, farm enterprises and sole traders. This facility should afford individual businesses an opportunity for third-party review of bank refusals to grant credit. Participating institutions are required to comply with the recommendation of the reviewer or explain why this would not be appropriate. Statistical outcomes for each bank will be made public.

These measures and more reinforce the Government's commitment to supporting businesses, especially SMEs, a key priority for me as Minister for Enterprise, Trade and Employment. Last year and this, my Department has made approximately €1 billion available in the capital budgets of the enterprise development agencies to fund financial supports to enterprises, including SMEs.

Enterprise development agencies such as Enterprise Ireland, IDA and the county and city enterprise boards have continued to help businesses through their grant and advisory schemes.

Last year, the enterprise stabilisation fund was introduced which aims to support viable but vulnerable companies in financial difficulty as a result of these unprecedented economic times.

Companies receive funding to support a range of activities, including market development, productivity improvements and development. Last year, €58 million was spent on 181 projects supporting approximately 7,500 jobs. The fund continues to attract a high volume of applications this year.

The employment subsidy scheme was launched last August to keep in jobs workers who might otherwise have been made redundant. Other initiatives included developing intellectual property assets; mandating comprehensive strategy reviews in IDA Ireland, Enterprise Ireland and Shannon Development; establishing a code of conduct for business lending to SMEs; and setting up a credit supply clearing group.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

The Minister should begin to wrap up as we need to conclude by 10 o'clock.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister, Department of Enterprise, Trade and Employment; Cork North West, Fianna Fail)
Link to this: Individually | In context

I was supposed to have ten minutes in my slot.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

I will give way for a minute or two.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister, Department of Enterprise, Trade and Employment; Cork North West, Fianna Fail)
Link to this: Individually | In context

Work is ongoing on a targeted loan guarantee scheme and we have secured a commitment by central government to pay its debts to businesses in 15 rather than 30 days.

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
Link to this: Individually | In context

That was introduced two years ago.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister, Department of Enterprise, Trade and Employment; Cork North West, Fianna Fail)
Link to this: Individually | In context

We have secured the introduction of a pay-related social insurance exemption for employers creating new jobs this year.

Fine Gael wants a national recovery bank which would have no way of generating funds because the good loans it is supposed to buy from the banks are already being used as collateral for funding from the European Central Bank and international markets.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

It is about new loans.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

Please start again. The Minister should go back and read his brief.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister, Department of Enterprise, Trade and Employment; Cork North West, Fianna Fail)
Link to this: Individually | In context

No country in the world has established a bank such as that proposed by Fine Gael because it would be folly, even for Deputy Enda Kenny, to set up a bank that cannot fund itself.

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
Link to this: Individually | In context

No country did what Ireland did. Fianna Fáil supported it.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister, Department of Enterprise, Trade and Employment; Cork North West, Fianna Fail)
Link to this: Individually | In context

The question Deputies opposite must answer is how they propose to get credit flowing to businesses and householders. We all know that banks have curtailed lending, mainly because banks are finding it hard to access funds.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

Deputy O'Keeffe should return to his former position as Minister for Education and Science. He might learn something.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister, Department of Enterprise, Trade and Employment; Cork North West, Fianna Fail)
Link to this: Individually | In context

Our banks should be extremely grateful for the resolve of the Irish people to intervene to save the economy and ensure a return to growth.

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
Link to this: Individually | In context

The Government would not listen to Deputy Richard Bruton in 2005, nor would it listen to him today.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister, Department of Enterprise, Trade and Employment; Cork North West, Fianna Fail)
Link to this: Individually | In context

Their forbearance and the courageous actions of this Government is putting this country on the road to recovery. When this period of Irish history comes to be written, it will be recorded in favour of those courageous enough to do the right thing in the national interest.

Photo of Shane McEnteeShane McEntee (Meath East, Fine Gael)
Link to this: Individually | In context

All of our kids will be outside the country. They will be in the US and Australia.

Photo of Frank FeighanFrank Feighan (Roscommon-South Leitrim, Fine Gael)
Link to this: Individually | In context

I genuinely hope this works out. There are some flaws in it. Anglo Irish Bank should not have been protected. I refer to bond holders. Those who buy shares may win and pay their taxes but if they lose they take the loss. They should not be protected.

The banks under the banking guarantee should be protected. We should pay tribute to them. Unfortunately, there are many outside banks here, such as National Irish Bank, Ulster Bank and other UK banks. They are going after Irish deposit holders. We must wear the green jersey. We must put our money into the banks under the Government guarantee scheme because that money is going back to the economy. I ask the Minister to raise this matter. He should let unions and schools put their money into the banks under the Irish guarantee scheme.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

I commend the new Governor of the Central Bank, Professor Patrick Honohan and the new Financial Regulator, Matthew Elderfield on their work in this process. They are independent of the Government in the exercise of their functions and that is as it should be. When Deputy Bruton criticised the Government for giving the banks too much time for capitalisation, he missed the crucial point. The requirements on capitalisation are now laid down by the regulator. As a result of the decision made by the regulator today, Allied Irish Banks have until the end of April to draw a definitive capital plan. The time available is quite limited. I commend the NAMA management team who have proven the critics wrong by operating in a hard-headed and commercial manner in the best interests of the taxpayer.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The EU made NAMA do that.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

I thank my officials as well.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

The Minister should thank the Commission.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

They operated under a statutory mandate laid down by this House. I thank the Members for the work they put into that legislation. These agencies worked with my Department and the NTMA to resolve our banking crisis. We now know the problems we have, we have faced up to them and we have put in place a pathway out of them. Today provides for once and for all a solid basis for confidence in the future of our financial system.

The Government is recapitalising the financial institutions so that the system as a whole may return to its rightful role as provider of credit to the real economy. Inevitably, there is an upfront investment by the State because we have forced the banks to recognise their losses upfront and to rid the system of the scourge of these speculative loans and the mismanagement of the banking system.

Deputy Bruton questioned why, as an alternative to recapitalisation, the Government does not just let Anglo Irish Bank fail. Many other Deputies questioned the systemic importance of Anglo Irish Bank and why it was guaranteed at all. Anglo Irish Bank was much larger relative to the Irish economy than Lehman Brothers was relative to the US economy. The disorderly failure of Lehman Brothers brought the global financial system to its knees. The disorderly failure of Anglo Irish Bank two weeks later would have had the same effect on the entire Irish banking system. I understand Deputy Bruton referred to Washington Mutual. The resolution mechanism in that bank cannot be applied to a bank in this country because the bank's senior bonds were issued not by the bank itself but by a separate holding company. That corporate structure allowed the US authorities to treat senior bondholders and depositors differently.

Deputies raised points concerning the treatment of bondholders. When talking about this jurisdiction, it is important to bear in mind that those who provide funds to Irish banks are not exclusively from other countries.

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
Link to this: Individually | In context

What about Quinn?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

Approximately half of the funds advanced to the Irish banks to support the Irish economy are derived from domestic sources. When people talk about defaulting on bondholders, they are talking about defaulting on themselves, Irish credit unions, Irish enterprises and Irish pension funds.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

Has the Minister tried negotiating?

10:00 pm

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
Link to this: Individually | In context

If Deputy Shortall wants to negotiate with her local credit union about a reduction in the amount of deposits and wishes to advise her constituents in Dublin North West of her banking policy, I encourage her to do so immediately. She should see what their reaction will be. This is a fundamental issue for the country. If there is any suggestion the Government would lose the vote tonight and there would be a change of Government in a few days time, it would be extremely serious for this country in light of some of the comments made about bondholders in this country and in current opinion polls. Happily, that will not happen tonight and I hope that by the next election we will realise the realities of this issue.

Deputy Bruton noted that Anglo Irish Bank retains approximately €2 billion in subordinated debt. The vast bulk of these bonds are dated bonds, meaning they are covered by the guarantee scheme until September 2010. The treatment of that remaining subordinated debt in the future will be considered as part of the process for agreeing a restructuring plan for Anglo Irish Bank with the EU Commission over the coming months. In assessing the options to deal with bondholders it is important to note the lending base of the Irish economy. It is 50% funded from international sources and 50% funded from domestic sources. Interestingly, Irish sovereign borrowing is 80% funded from international sources. The Labour Party has not advocated this policy but the suggestion made by Deputy Bruton is that there would be no read through from a default on bank debt to a default on sovereign debt; it is erroneous when 80% of our funding derives from foreign sources. The maintenance of international confidence in the Irish financial system is of critical importance to our economy. Despite the many figures bandied about this afternoon our bond spreads have not moved an inch. This is signal testimony to the international confidence in the common sense of the announcement made today and the capacity we demonstrate to tackle our problems.

Deputy Burton suggested that if we nationalised Allied Irish Banks and Bank of Ireland, it would have eliminated the valuation risk around NAMA, and as a result there would have been no need for the concept of long-term economic value. She suggested the approach the Government followed is more costly. I stress that if we had done this the losses crystallised at Allied Irish Banks and Bank of Ireland would still have to be fully recognised and real capital would been required. It is appropriate that we have an asset management agency going through the banks on a bottom-up basis and establishing where were the vulnerabilites in each institution and the degree of culpability for excessive lending in each institution.

Deputies Bruton and Burton questioned when we would see a revised NAMA business plan and NAMA codes of practice. There are substantial provisions in the Act dealing with transparent reporting by NAMA. The board proposes to review the draft business plan published in October 2009 and will publish a revised business plan by 30 June 2010. NAMA has met its obligation to submit such codes of practice and my Department is working with NAMA to ensure these codes fully meet the standard expected.

Deputies have queried the uplift factor on the assets transferred to NAMA today. The uplift factor reflects the difference between the current market value of the asset and what NAMA believes it can achieve for the asset over time, or the long-term economic value. NAMA reports this was 11.3% in the first tranche. Previous estimates had been that this figure would be approximately 15%, which was based on aggregate data provided by the institutions. There are a number of reasons the initial estimate was reduced massively in subsequent discounts. One was the overoptimistic assumptions by the institutions about the loan to value ratios. A further factor was the bottom-up valuation process and another factor was the securitisation and a degree of securitisation for particular loans. The revised uplift is the result of individual loan valuations following extensive due diligence and individual property valuations.

There has been little comment in the debate on the most important steps I have taken to secure further provision of credit to the business community. The specific lending targets are backed up by legal sanctions. If further legal sanctions are required, they will be insisted upon. I acknowledge the work of all parties on this subject in the course of the debate on NAMA. This represents a considerable increase on lending last year and in particular must include funds for working capital for businesses. The two banks will be required to submit SME lending plans both by geography and sector for each year. Mr. John Trethowan as the new credit reviewer will review bank lending policies as part of his remit.

I again emphasise that there is now a renewed international confidence in Ireland because of our determined moves to place our public finances on a more sustainable footing. Today's actions will place the banking system on a robust footing too. My colleague, the Minister for Foreign Affairs, Deputy Martin, today described to the House the positive international reaction to our fiscal and banking correction matters. Contrary to what the Opposition allege there is no doubt that relative to other countries we have moved speedily to deal with our banking problems. The banks have been forced to recognise their losses and the Government has committed the capital that will ensure we have a banking system to serve our economy as it recovers.

We have many other steps to take. We must work on public sector reform. In this context, I welcome the decision of the public service unions to conclude a public service pay agreement with Government to put those conclusions to their membership. We must continue to address our competitiveness, which has improved in the past year. We must examine every sector of the economy to identify wherein there is scope for growth and stimulus. All of these steps must be taken.

The essential precondition to economic recovery is that we have viable public finances and a viable banking system. We have taken those decisions in the heat of intense battle. The Government will ensure it takes the necessary decisions required to put this country on the road to recovery and to ensure all of the jobs we want to see created again in this economy are created so that every Irish man and woman can have a stake in this country.

Photo of Seán ConnickSeán Connick (Minister of State with special responsibility for Fisheries and Forestry, Department of Agriculture, Fisheries and Food; Wexford, Fianna Fail)
Link to this: Individually | In context

Hear, hear.

Photo of Séamus KirkSéamus Kirk (Ceann Comhairle; Louth, Ceann Comhairle)
Link to this: Individually | In context

In accordance with the Order of the Dáil I am must now put the question on amendment No. 2.

Question put: "That the words proposed to be deleted stand."

The Dail Divided:

For the motion: 83 (Bertie Ahern, Dermot Ahern, Michael Ahern, Noel Ahern, Barry Andrews, Chris Andrews, Seán Ardagh, Bobby Aylward, Joe Behan, Niall Blaney, Áine Brady, Cyprian Brady, Johnny Brady, John Browne, Thomas Byrne, Dara Calleary, Pat Carey, Niall Collins, Margaret Conlon, Seán Connick, Mary Coughlan, Brian Cowen, John Cregan, Ciarán Cuffe, John Curran, Noel Dempsey, Jimmy Devins, Timmy Dooley, Frank Fahey, Michael Finneran, Michael Fitzpatrick, Seán Fleming, Beverley Flynn, Paul Gogarty, John Gormley, Noel Grealish, Mary Hanafin, Mary Harney, Seán Haughey, Jackie Healy-Rae, Máire Hoctor, Billy Kelleher, Peter Kelly, Brendan Kenneally, Michael Kennedy, Tony Killeen, Michael Kitt, Tom Kitt, Brian Lenihan Jnr, Conor Lenihan, Michael Lowry, Tom McEllistrim, Finian McGrath, Mattie McGrath, Michael McGrath, John McGuinness, Martin Mansergh, Micheál Martin, John Moloney, Michael Moynihan, Michael Mulcahy, M J Nolan, Éamon Ó Cuív, Seán Ó Fearghaíl, Darragh O'Brien, Charlie O'Connor, Willie O'Dea, John O'Donoghue, Noel O'Flynn, Rory O'Hanlon, Batt O'Keeffe, Ned O'Keeffe, Mary O'Rourke, Christy O'Sullivan, Seán Power, Eamon Ryan, Trevor Sargent, Eamon Scanlon, Brendan Smith, Noel Treacy, Mary Wallace, Mary White, Michael Woods)

Against the motion: 69 (Bernard Allen, James Bannon, Seán Barrett, Tommy Broughan, Richard Bruton, Ulick Burke, Joan Burton, Catherine Byrne, Joe Carey, Deirdre Clune, Paul Connaughton, Joe Costello, Simon Coveney, Seymour Crawford, Michael Creed, Lucinda Creighton, Michael D'Arcy, John Deasy, Jimmy Deenihan, Andrew Doyle, Bernard Durkan, Damien English, Olwyn Enright, Frank Feighan, Martin Ferris, Charles Flanagan, Terence Flanagan, Eamon Gilmore, Brian Hayes, Tom Hayes, Michael D Higgins, Phil Hogan, Paul Kehoe, Enda Kenny, Ciarán Lynch, Kathleen Lynch, Pádraic McCormack, Shane McEntee, Dinny McGinley, Joe McHugh, Liz McManus, Olivia Mitchell, Arthur Morgan, Denis Naughten, Dan Neville, Michael Noonan, Caoimhghín Ó Caoláin, Aengus Ó Snodaigh, Kieran O'Donnell, Fergus O'Dowd, Jim O'Keeffe, John O'Mahony, Brian O'Shea, Jan O'Sullivan, Maureen O'Sullivan, Willie Penrose, John Perry, Michael Ring, Tom Sheahan, P J Sheehan, Seán Sherlock, Róisín Shortall, Emmet Stagg, David Stanton, Billy Timmins, Joanna Tuffy, Mary Upton, Leo Varadkar, Jack Wall)

Tellers: Tá, Deputies John Curran and John Cregan; Níl, Deputies Paul Kehoe and Emmet Stagg.

Question delcared carried.

Amendment declared lost.

Question, "That the motion is hereby agreed to", put.

The Dail Divided:

For the motion: 83 (Bertie Ahern, Dermot Ahern, Michael Ahern, Noel Ahern, Barry Andrews, Chris Andrews, Seán Ardagh, Bobby Aylward, Joe Behan, Niall Blaney, Áine Brady, Cyprian Brady, Johnny Brady, John Browne, Thomas Byrne, Dara Calleary, Pat Carey, Niall Collins, Margaret Conlon, Seán Connick, Mary Coughlan, Brian Cowen, John Cregan, Ciarán Cuffe, John Curran, Noel Dempsey, Jimmy Devins, Timmy Dooley, Frank Fahey, Michael Finneran, Michael Fitzpatrick, Seán Fleming, Beverley Flynn, Paul Gogarty, John Gormley, Noel Grealish, Mary Hanafin, Mary Harney, Seán Haughey, Jackie Healy-Rae, Máire Hoctor, Billy Kelleher, Peter Kelly, Brendan Kenneally, Michael Kennedy, Tony Killeen, Michael Kitt, Tom Kitt, Brian Lenihan Jnr, Conor Lenihan, Michael Lowry, Martin Mansergh, Micheál Martin, Tom McEllistrim, Finian McGrath, Mattie McGrath, Michael McGrath, John McGuinness, John Moloney, Michael Moynihan, Michael Mulcahy, M J Nolan, Éamon Ó Cuív, Seán Ó Fearghaíl, Darragh O'Brien, Charlie O'Connor, Willie O'Dea, John O'Donoghue, Noel O'Flynn, Rory O'Hanlon, Batt O'Keeffe, Ned O'Keeffe, Mary O'Rourke, Christy O'Sullivan, Seán Power, Eamon Ryan, Trevor Sargent, Eamon Scanlon, Brendan Smith, Noel Treacy, Mary Wallace, Mary White, Michael Woods)

Against the motion: 68 (Bernard Allen, James Bannon, Seán Barrett, Tommy Broughan, Ulick Burke, Joan Burton, Catherine Byrne, Joe Carey, Deirdre Clune, Paul Connaughton, Joe Costello, Simon Coveney, Seymour Crawford, Michael Creed, Lucinda Creighton, Michael D'Arcy, John Deasy, Jimmy Deenihan, Andrew Doyle, Bernard Durkan, Damien English, Olwyn Enright, Frank Feighan, Martin Ferris, Charles Flanagan, Terence Flanagan, Eamon Gilmore, Brian Hayes, Tom Hayes, Michael D Higgins, Phil Hogan, Paul Kehoe, Enda Kenny, Ciarán Lynch, Kathleen Lynch, Pádraic McCormack, Shane McEntee, Dinny McGinley, Joe McHugh, Liz McManus, Olivia Mitchell, Arthur Morgan, Denis Naughten, Dan Neville, Michael Noonan, Caoimhghín Ó Caoláin, Aengus Ó Snodaigh, Kieran O'Donnell, Fergus O'Dowd, Jim O'Keeffe, John O'Mahony, Brian O'Shea, Jan O'Sullivan, Maureen O'Sullivan, Willie Penrose, John Perry, Michael Ring, Tom Sheahan, P J Sheehan, Seán Sherlock, Róisín Shortall, Emmet Stagg, David Stanton, Billy Timmins, Joanna Tuffy, Mary Upton, Leo Varadkar, Jack Wall)

Tellers: Tá, Deputies John Curran and John Cregan; Níl, Deputies Paul Kehoe and Emmet Stagg

Question declared carried.