Dáil debates
Wednesday, 24 November 2010
Leaders' Questions
10:30 am
Enda Kenny (Mayo, Fine Gael)
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One of the hallmarks of the Cowen Government has been undue delays in making decisions, which has cost taxpayers a lot of money. On the recapitalisation of the banks, the Government delayed on the nationalisation and wind-up of Anglo Irish Bank, which has cost €30 billion. Yesterday, I made a constructive suggestion to the Taoiseach and the Government that it would be possible to bring forward to next week the 2011 budget and that it would be possible to have the essential measures of the finance Bill passed, as is the Taoiseach's duty and responsibility, before Christmas, which would bring a measure of certainty to the Government's proposals. However, the Taoiseach rejected this and I was disappointed to say the least.
I spoke to the European Commission yesterday, which made it perfectly clear that every hour that passes, every day that goes by and every week that moves along makes the position more drastic for the Irish taxpayer and people and, as a consequence, the package will be all the more rigorous with even stricter conditions. Bringing forward the budget would have been an answer in part to this issue.
Enda Kenny (Mayo, Fine Gael)
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Authoritative sources now reveal it will be necessary to draw down a further €85 billion. To clarify, how much of this figure is for the banks, how much for the running of the country and what are the interest rates involved?
Brian Cowen (Laois-Offaly, Fianna Fail)
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In respect of Deputy Kenny's remarks, I outlined the position yesterday regarding the timeline for the budget, which has been a matter of agreement between the Commissioner and the Minister for Finance. It is a timeline they obviously find to be acceptable and the Government now must proceed with the four-year plan that is being published today. It is not a question of there being further, more rigorous, conditions as a result of the budget's introduction on 7 December and that is not the position. Obviously, were there to be an election or were a situation to arise whereby a budget was not introduced until the new year without full-year effects, that would be a more difficult situation. However, the Government is moving along the timelines that have already been agreed between the parties concerned.
In respect of the other matters, the Deputy will agree and understand that negotiations continue with regard to this matter. Although the size of any programme is not finally decided, an amount in the order of €85 billion has been discussed and the Minister has made clear from the outset that it will not be a three-figure sum. However, those talks are continuing. The fund for banking includes an amount for immediate further recapitalisation of the banks and a contingency in case of further losses. As this contingency is sufficiently big to deal with all possible outcomes, it is not expected that it will all be drawn down. We are talking about an overdraft here, as was mentioned by a commentator this morning. It is a contingency that is available to us as required. On the basis of the State's requirements beyond July, up to which we are pre-funded, it also is available for drawdown for that purpose. Furthermore, the Deputy will appreciate that all these issues can be market sensitive and negotiations are continuing. I can only state to the Deputy that these talks are proceeding as quickly as possible but obviously one must ascertain how this can be finalised before the Government considers the matter further.
Enda Kenny (Mayo, Fine Gael)
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I am sure that in the talks that are proceeding, from the Government point of view the figures to be determined are being discussed. The figure of €85 billion is being bandied about and I again ask approximately what, from the Government's point of view, are we talking about in this regard? Is it €60 billion or €65 billion for banks and the rest for running services? In addition, surely there must have been some fix as to what will be the approximate interest rate.
Members read today that the State is to take over a majority shareholding in the Bank of Ireland, despite the comments a few weeks ago by the Minister for Tourism, Culture and Sport that all was well there. All Members can agree on the urgency of the need to repair, restructure and adequately capitalise the banking system in order that it can provide for the lifeblood of the economy and get credit flowing again to business. There is now serious concern about the scale of debt the country is incurring. How does the Taoiseach propose to ensure a fair sharing of the costs between the taxpayer and investors in the banks, including some of the bond holders, in a way that protects the Irish State from bankruptcy? This is a very serious question that is now on the minds of thousands of people.
Brian Cowen (Laois-Offaly, Fianna Fail)
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We must all be responsible in relation to this matter. To allay any fears, worries or concerns the public may have, I point out to the Deputy that our banking system is fully supported by the European Central Bank in respect of its funding. On the question of capital, we have seen capitalisation provided to the banks heretofore. The Deputy will also be aware that any increase in capitalisation is a matter for discussion and negotiation and is not finalised in any sense at this point. It is important, given that these are market sensitive issues, that we not seek to suggest that ongoing discussions have been finalised or that we are in a position to outline a full package, if approved by Government. I ask that we all act in a responsible manner.
With regard to our future funding requirements, we would be making provision for drawing down further national borrowings in any event. Therefore, withdrawals from this fund - if we were to take it and approve it - would replace borrowings done for the Exchequer in any event. So the whole question of interest rates is a matter under negotiation, as the Deputy would appreciate. There are various sources of funds for this facility. That is an important matter that is yet to be finalised, and anything being mentioned is speculative at this time.
It is important that we allow negotiations to proceed and not affect them in any way, and I do not suggest this is the Deputy's intention. It is obvious that we should not affect the negotiations in a way that would not be good for the country. Let the negotiations and discussions take place. If we have an outcome that can be put to and approved by Government, it will, of course, be brought to the attention of the Parliament and the people thereafter.
Enda Kenny (Mayo, Fine Gael)
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Will the Taoiseach respond to my second question about the sharing of costs between the taxpayer and bank shareholders?
Séamus Kirk (Louth, Ceann Comhairle)
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Deputy Kenny, there is no provision for a supplementary question from leaders.
Enda Kenny (Mayo, Fine Gael)
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The second half of my question has not been answered.
Brian Cowen (Laois-Offaly, Fianna Fail)
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I will respond to the second half of Deputy Kenny's question. The sustainability of our debt burden is an important part of how we proceed. I am confident that if we get an outcome we will be in a position to manage that situation. Again, that remains part of the negotiations and we need to await the outcome of those negotiations.
Eamon Gilmore (Dún Laoghaire, Labour)
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We are in very exceptional times. Unprecedented uncertainty and instability surrounds the Government. The Government itself is in its last days. The only thing we do not know is how long Fianna Fáil intends to prolong the life of the Government. The Green Party says it will be January. Yesterday, the Taoiseach seemed to indicate it would be February. Deputy Collins told a radio station this morning that it would be March and I understand a Minister told another radio yesterday that it would be May. It would appear the Government is trying to drag things out for as long as possible. Meanwhile, the Taoiseach will not commit to shortening the budgetary process. Last year, the Finance Bill was debated until the end of March. All of that process could be shortened if the Government chose to do so.
Now, we have continuing uncertainty regarding the banks. The Taoiseach will remember that when the Labour Party proposed, in early 2009, that the main banks be temporarily taken into public ownership, he rubbished that proposal. The Government is now having the banks nationalised anyway, but at a very expensive cost.
The Taoiseach is now in the process of applying to the European institutions and the IMF for a massive loan. He describes it as an overdraft. It is one hell of an overdraft. We are now told it will amount to €85,000 million. I have never heard of anyone applying for an overdraft they did not know the size of. The Taoiseach mentioned, in passing, that the figure of €85 billion was mentioned. Is that the size of the overdraft the State is applying for from the European institutions? He says the interest rate is being negotiated. Can he, at least, indicate the parameters of that negotiation? What is the highest level of interest being asked for? What is this overdraft likely to cost? What is the distribution of the overdraft between what the banks will require and what the State will require? Again, anyone applying for an overdraft would know the elements making up such an overdraft, what it is being required for and what would inform it.
Séamus Kirk (Louth, Ceann Comhairle)
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A question, Deputy Gilmore, please.
Eamon Gilmore (Dún Laoghaire, Labour)
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I have already asked two questions, a Cheann Comhairle. Please bear with me and, perhaps, listen to what I am saying. I have asked two questions already and I am coming to the final one. Can the Taoiseach indicate to the House the distribution of the amount of the overdraft between the banks and the State?
Brian Cowen (Laois-Offaly, Fianna Fail)
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We are in the midst of discussions with the partners regarding these matters. The discussions are not finalised. It would be wrong of me to pre-empt the outcome of those negotiations at this time, but I will be as helpful as I can in the circumstances, consistent with the right interests of the country and the negotiations as they stand. That is all I can do.
With regard to the temporary nationalisation of the banks, had it occurred at that time Bank of Ireland, which subsequently got capital on the markets, would not have been able to get that capital. It would have had to come from the taxpayer because the bank would have been nationalised. As a fully funded State bank, that capital would have had to be funded by the State. Being able to raise capital on the markets in some measure has been helpful and effective in avoiding a further imposition on the taxpayer.
With regard to Deputy Gilmore's second point, we must wait to see the outcome of the present arrangements and what further capitalisation may be required. This will depend on a number of factors not yet decided, including the amount of capital and whether any of it can be got from other sources. That issue is not resolved. It is part of the discussions and I am not in a position to go any further with that today.
I was asked about amounts. It is not finally decided but a sum of the order of €85 billion has been discussed. The Minister for Finance has already said it is not a three figure sum. That is as far as I can go in relation to that matter.
On this being regarded as an overdraft, I simply used that term for illustrative purposes to indicate that it can be drawn down as required. We do not have to take on a loan of that size with full interest being charged thereon ab initio from day one. Having a facility raises issues but there will be a charging mechanism in the provision of the facility. That has to be worked out. That is technical and complicated work that is not yet completed. Given that there are different sources of funds for these facilities to be provided, it would be an average rate given the different rates which will apply to the funds from different sources. The current position is that any interest rate mentioned by anyone at present is speculative. I believe my comments answer the questions.
Giving Deputies a breakdown today depends on a range of factors that have not yet been decided upon, including the rate of drawdown were one to provide for more capital in the banks and the final position thereon. Given that we are pre-funded until July, the question arises as to the making of some contribution from our own resources, which is also under discussion in respect of how we deal with this matter. The negotiated facility will also result in a contribution. When the negotiations are completed and approved by the Government, the full details on all these matters will be made available to the House.
Eamon Gilmore (Dún Laoghaire, Labour)
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What is wrong with that reply is that we must drag the information out of the Taoiseach. This is not private business but public business. We are in an unusual position in that the Government, in its final days, is in the process of negotiating what the Taoiseach now calls a very big overdraft on behalf of the people of the country. As late as a week ago, the Taoiseach was denying he was applying for such an overdraft. What he is providing us with here is just incremental information. He is telling us that the figure of €85 billion has been mentioned and that the Minister for Finance said the figure will be less than €100 billion, which gives some indication of the range the Taoiseach is talking about.
Let us concentrate on the bank element. I accept that the interest rate and other matters are being negotiated and that, in order to achieve the best outcome in the interests of the country and taxpayer, the Taoiseach will not go into detail in this regard. I understand that and will not push him on it. However, I will push him about the banks because he has given the House and country a bum steer on them for a very long time. The Taoiseach states in the House that if we had gone down the route of temporary nationalisation, which the Labour Party advocated at the beginning of 2009, everything would be worse. If we had gone down that route, we would be coming out of the problem now and our banks would not be mired in the NAMA process that the Taoiseach got us into.
Séamus Kirk (Louth, Ceann Comhairle)
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Has the Deputy a question?
Eamon Gilmore (Dún Laoghaire, Labour)
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On the banks issue, the newspapers are full of talk about restructuring of the banks and about the extent to which the banks will be in public ownership. We were told some months ago that we had the final recapitalisation figure. It was a lot of money and was in the order of €50 billion, but we are now being told a loan or overdraft will have to be drawn down from the European Union in order to put money into the banks.
I will not come back to the Taoiseach if the figure he provides is not spot-on but I believe the House and people are entitled to hear at least the ballpark figure for what will be required by the banks out of the €85 billion. I and most commentators assume that most of the €85 billion will be required for the banks. It would be preferable and helpful and would add a little certainty to the public discussion if the Taoiseach gave at least give a ballpark figure for what the banks will require rather than having commentators here and elsewhere speculating today and over the weekend on the amount required, given that this is the last day on which the Taoiseach will be answering questions in the House before next week.
Brian Cowen (Laois-Offaly, Fianna Fail)
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I am in no way seeking to avoid my responsibility to keep the public informed. The Deputy has acknowledged that there are ongoing negotiations and acknowledged this in respect of the interest rate and other matters.
No decisions on bank restructuring have yet taken place. I am not holding back with regard to any issue. The Deputy may consider various scenarios. They have been discussed in the financial press and other media. The Deputy is aware that these matters have an impact in terms of market sentiment and it would be irresponsible of me to give the Deputy a figure when decisions have not been made in this area. We know from the statements made by the EU Finance Ministers that we need to build upon and intensify the measures we have already taken, which have been supported. It is far from the case that our European partners, who are prepared to sit down with us to underpin financial and banking stability for the future through the provision of the facility, are suggesting we have given a bum steer. Rather, they are supportive of all the initiatives we have taken and believe we must build further upon them, recognising as they do the capacity of a small state to source all the funding required. That is the position. The Deputy's assertion that there are bum steers being given is blown away by the fact that our European partners, the banks with which we deal and the institutions are supportive and agree that the decisions we have taken on this matter have been the right ones. That is the truth of the matter and if one looks at the statements one will note that is the fact. Deputy Gilmore continues to suggest that temporary nationalisation of the banks would not have resulted in NAMA-----
Joan BurtonBrian Cowen (Laois-Offaly, Fianna Fail)
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-----that he would kick it further down the road. We would not get the segregation of assets, we would not get the transparency, we would not get the cost of the distressed assets, and we would not have parked them somewhere else outside the banking system, enabling the banks in some way to try to get to the market on the basis of having the ability to fund themselves given the level of losses. With all due respect, the Deputy's suggestion is a bum steer.
Emmet Stagg (Kildare North, Labour)
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What the Taoiseach has done worked extremely well.
Séamus Kirk (Louth, Ceann Comhairle)
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Deputy Stagg should not interrupt.
Brian Cowen (Laois-Offaly, Fianna Fail)
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It is precisely a bum steer. This is where Deputy Gilmore's policy falls apart. He does not have a banking policy that is supported by anybody. No guarantee at the time-----
Brian Cowen (Laois-Offaly, Fianna Fail)
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Shouting me down will not win the argument. Not putting in place a guarantee at the time would have resulted in the implosion of the economy and the closure of the banks within days, as confirmed in the Honohan report.
Brian Cowen (Laois-Offaly, Fianna Fail)
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That is what the report says. The Deputies should read it.
The Labour Party revised its view in order to gain some respectability by stating it was only talking about subordinated debt, which it stated should not have been guaranteed on the basis that it constituted only 3% of the total volume. The view is that if one were not supposed to guarantee 3%, one should not have guaranteed 97%. We are told there would not have been an implosion; of course there would have been.
The second point the Labour Party makes - I am glad it is outlining this policy - pertains to temporary nationalisation, which would at the time have deprived Bank of Ireland from obtaining money on private markets, as it did subsequently. It would have had to have been paid for by the taxpayer.
Brendan HowlinBrian Cowen (Laois-Offaly, Fianna Fail)
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All recapitalisation would have had to have been achieved by the taxpayer in that case. We are now told the Labour Party does not support the NAMA process, that it would keep the losses in the banking system, kick the matter down the road and get through it somehow, and that, hey presto, because Deputy Gilmore would be in charge, the banks would be repaired and all would be well.
Emmet Stagg (Kildare North, Labour)
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When the Taoiseach was in charge, he got it right-----
Brian Cowen (Laois-Offaly, Fianna Fail)
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That is not a policy; that is what I would define as a bum steer considering the very difficult circumstances the country is in.
Brian Cowen (Laois-Offaly, Fianna Fail)
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That is the truth of the matter.
We are building on policies that are being supported by those who are prepared to support the country now precisely because they believe the difficult initiatives we have taken were the right ones to take.
Emmet Stagg (Kildare North, Labour)
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The mess the Government made of banking-----
11:00 am
Brian Cowen (Laois-Offaly, Fianna Fail)
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None of us in the House is in a position to say that, while those decisions were necessary, they have not proved sufficient. There are abnormal market conditions and we are out of the markets.
We must establish a means by which we can return to the markets at some stage.
As Members are aware, in the context of the ongoing discussions on Basel lll, the question of the further capitalisation of banks has been mentioned. The Financial Regulator came forward with a very robust capital ratio of 8% in respect of the banks. That ratio is certainly as robust as any in Europe. The Financial Regulator also brought forward a very transparent process regarding the segregation of assets and stated that, in his view, the losses in the banks were of the order of €35 billion. That analysis remains as valid today as it was then. The issue that arises relates to stress testing the banks again to see if there is any further action we can take to convince the markets that we are on the right track. If further capitalisation of the banking sector is required to assist this process, it can be provided.
We must build on the existing policy framework. It is not the case that the European Union or the relevant institutions are approaching Ireland and asking that we adopt the policies of the Irish Labour Party. The position is quite the contrary. They are stating that we should build on the policies of the Government.
Pat Rabbitte (Dublin South West, Labour)
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They are coming here-----
Séamus Kirk (Louth, Ceann Comhairle)
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That concludes Leaders' Questions.