Tuesday, 30 November 2010
EU-IMF Programme for Ireland and National Recovery Plan 2011-14: Statements
I rise this evening to seek to bring to the attention of the House the agreement reached in relation to a financial package with our EU partners and the IMF. The key message I would like to convey is that as things stand Ireland is funded until the middle of next year but the current cost of new borrowing is not affordable for us. This agreement ensures that Ireland has secure access to the funding it needs as it sets about stabilising its finances and building confidence that the banks are well capitalised and able to meet the economy's needs. It is money that we would have had to borrow in any case. This deal provides money at a lower cost than is currently available in the market. That is the key point to make when we discuss all of the politics around this issue, and there has been much politics in this regard.
Deputy Gilmore asked me during Leaders' Questions if I was not ashamed of myself. What I am ashamed of is commentary in relation to important matters of public debate, such as that our economy is banjaxed and is an economic corpse. These are high rhetorical tones which basically seep confidence from the country, internally and internationally. Everything that is said in this country is being looked at very closely. I do not see how that could be regarded as either an accurate or responsible statement. Those statements have unfortunately come from the Opposition in the past 48 hours.
I am making my contribution now and will listen attentively later to what Deputy Gilmore has to say. I do not believe it is in the interests of this country that we conduct political debate at that level on issues of such urgent public importance. There is a lot more in us and far more substantive critiques to be made than simply heading for the cheapest jibe or the biggest headline that can be got by way of what I regard as the tabloidisation of a very serious matter, a matter which we can discuss here and have a decent debate on and on which people can offer different views. It will not serve this or future Governments or this country now or in the future to conduct our affairs in that way. There are plenty of points that can be made and plenty of issues that can be raised, but I do not think that is the way in which we have to conduct ourselves. I do not care whether people agree with me on that point, but I wish to put that on the record.
We do not appear to have the capacity to deal with these matters in a calm and measured way, as people are entitled to expect at a time when we are trying to build confidence, avoid flights of deposits or people going into a different currency area and trying to ensure we can convey to the people outside and at home a sense of direction in terms of where the country is going, how we can deal with this situation and find the time and space to plan our way through what is a difficult crisis for whoever is in Government at this time. It is true that we have great difficulties and that families are worried but, thankfully, some 1.8 million people in this country are in work. Those people cannot be told they are living in a country described as an economic corpse. That does a great disservice to people who are trying to keep businesses going and provide employment. We all know there are many people sitting down with the owners of small and medium-sized enterprises discussing having to work one day less a week so as to prevent two or three colleagues being made redundant. There is much solidarity up and down the country. All I am saying is, let us have a debate but let us have a debate that recognises where the real economy is, what the funding problems are and what are the real alternatives and choices for this country in the face of what we are confronting.
I reiterate the point I made earlier, namely, what alternative is being put forward by the Opposition? What constructive alternative is being put forward to address our funding issues in relation to the economy, State finances and banking in the months and years ahead? Three issues arise, namely, whether one obtains funds at a more affordable price, whether one takes them at an unaffordable and prohibitive price or whether one decides to ensure one's revenues and spending are brought into line more quickly, in respect of which one is prepared to enforce deeper cuts, higher taxes, put more enterprises at risk and not use the adjustment period in a sensible, responsible and rational manner. Those are the choices. The same issues face any Government led by me or anyone else in the next quarter, year or the next three or four years, namely, how are we to fund this State's requirements beyond July of next year? The only way to do this is on the basis of the financial package set out and the basis of the calculation for the interest on which and the creditworthiness of this country being set out as outlined by me in Leaders' Questions.
We have a draw-down facility of â¬85 billion, consisting of â¬12.5 billion from the National Pensions Reserve Fund and â¬5 billion cash reserves. It has been mentioned in the critique that this is an unfortunate aspect of the agreement. How strong a position would we be in if we did not have our own domestic cash resources to contribute to such a package? Do people expect that we would have lower interest rates or that we would have to borrow less money, that in relation to money we have built up, which are not earning the type of interest which it would cost us to borrow on the market, that we should borrow more money while holding onto it? Clearly, that does not make sense in terms of the funding requirements of the State. Do people expect in the international arena that we will have access to funds from the IMF and EU while allowing our own cash reserves to be left unattended as a means of contributing to reducing our borrowing and funding costs? It is not realistic to put forward such a proposition. There is no Government of any composition that would be able to come forward and say that the â¬85 billion should be all borrowing and that we should not use â¬17.5 billion of our own resources towards ensuring we deal with these problems and put our economy back on a sounder footing. That is the contention that is being made. For some reason, it is being suggested that we had a weaker hand because we did that. We had a stronger hand because we did it. Had we conducted the policies suggested by other parties - they are on the record and I will not refer them now - over the past ten years in relation to that fund we would not have had these reserves in place. They would have contributed to the spend of the country and would not be available to us now. Those are the facts.
Another issue raised is that of senior bondholders, in respect of which the default argument has been put forward. I have only two points to make in this regard, the first of which is a more general point. Do people suggest that the default option is a consequence-free option, namely, that there are no consequences for this country should that be decided? As part of a wider currency area which goes beyond our own jurisdiction, do people suggest we have a unilateral ability to make that decision without consequences? If it is the view, as it was of other institutions such as the Central Bank and Commission, that it was not option upon which they were prepared to provide financial support for the country, are people on the Opposition benches saying they would have pressed that button anyway and would have forfeited the opportunity of getting the funding that is required? Perhaps the Opposition would like to outline what the consequences of that might be.
We are saying that, in the absence of agreement with our partners, this is an option that could not be effected. That is the situation To suggest otherwise is to suggest that it would be free of consequences. As has been said, in the considered view of the bank and others, it would affect the stability of the European banking system generally at a time of great dislocation in the markets, and add greater turbulence to them. It refers to 5% of the total debt, the unguaranteed senior bondholders. We have already been involved in, as a matter of policy, discounts in relation to junior bank bondholding debt for Anglo Irish Bank and others. This can have wider application in current circumstances as well.
All of those issues can be considered but to state at the end of the day that it is the solution to the problem is to fail to recognise what the consequences of those actions would be and what power Government would have unilaterally. Let us be clear about what is Labour Party policy. As I understand it, it is that we should never have had a guarantee and should have let the economy implode in 2008. Deputy Gilmore moved and said we should not have an asset management agency either and, therefore, the assets would not be segregated. He then said the bondholders should be burned and one senior Labour Party member said over the past 48 hours this should include senior bondholders. If that is his policy, he should state it and state what the consequences are in his considered opinion, state why he considers that to be a better policy and state why everyone in the European Union and the eurozone disagrees with him but he is right anyway. Everyone else is saying the policies of capitalisation, reorganisation, resolution and so on put forward have to be accelerated and more funds have to be provided to do that. That will contribute to greater stability. I cannot predict everything that will happen but all I can say is the balance of evidence is far more on the side of the Government than on the Opposition on these matters. If we never had a banking crisis, the people with whom we are dealing in the currency area make those points as well.
The Labour Party then suggested the European Central Bank should provide money at an interest rate of 1%. That is a totally unrealistic option. The ECB does not lend directly to member states. Again, that is nice populist argument that will find favour with people and leave it out there. Deputy Gilmore argues about the need for credibility. Where is the credibility in that argument when money is clearly not available to any country let alone Ireland at that interest rate? That is not the way central banks operate in the first place.
With regard to the circumstances in which all this happened, we had to make sure the parameters of the discussion were such that were we to apply, we were in a position to say, "Yes, this could be in our interest to do that". The suggestion is there were vested interests. Of course there were interests who were trying to suggest Ireland had opened negotiations when it clearly had not. When we indicated talks were going on in regard to wider currency issues, we had nothing to hide in this regard. It was only when the Minister for Finance with a mandate from the Government on the Tuesday went to the Eurogroup meeting and we agreed to short focus discussions with the IMF, the EU, and funds people in the Union and the Commission, that things moved along to the point where the following Sunday we formally applied because we believed that would be the best option available to us based on previous discussions.
There is no reference to a change in the 12.5% corporation tax rate in the agreements and the adjustments of â¬6 billion and â¬15 billion still form a central part of the correction programme but if in 2014 we have not reached the target of 3% of GDP, an additional year will be available to reach it. That is in the interest of the country and whatever Government will have the tough job of implementing what is necessary to bring this country back to financial stability, growth, jobs and investment in the future. Surely we should be able in the context of our discussions to acknowledge those as positives for whatever Governments will have to implement policies to bring about these options.
I have stated in the context of the four year plan the differences that exist in the tax and expenditure policies as best I can glean from the policy positions of the Opposition parties. The Labour Party said the ratio should be 50:50, â¬7.5 billion in tax and â¬7.5 billion in expenditure. Fine Gael says it should be 3:1 rather than 2:1 which is our position, which means 75% cuts and 25% on tax increases. I understand from Sinn FÃ©in's submission that it wants 80% taxes and 20% cuts in the â¬15 billion adjustment. It would raise â¬12 billion in taxes and â¬3 billion in cuts. The Government's position, which we believe is consistent with maximising and retaining to the greatest extent possible jobs and providing for job creation in the future, as has been done in much documentation that has been issued in regard to the dynamics of the economy, is that the ratio should be approximately two thirds expenditure cuts to one third taxation increases, and we have put that forward.
With regard to the agreement, we know why we had to borrow if we are going be honest. We know what the options were and we know the details of the programme. Debt sustainability is then a big issue for the country. How do we make sure we have a sustainable debt position and that we are in a position to pay back the debt? That is outlined based on how the country performs and how the international economic environment works out but if one takes the central forecast in the plan, one will see prior to the programme being agreed the debt to GDP ratio would increase to 102% in 2013 and then fall in subsequent years. In other words, there will be a slight increase in borrowing as a percentage of what we produce as a country every year and then a reduction after 2013.
Even if one were making a sufficiently conservative and prudent assumption that the requirement of the banks is â¬25 billion out of the â¬35 billion contingency fund - I do not suggest that nor has the Governor of the Central Bank - then the debt to GDP ratio would rise to approximately 113% on the basis of the central forecast in 2013 and then reduce. The debt interest payment relative to the total tax take is 20 cent in the euro in the plan and it could rise to 23 cent in the euro at the peak point given the increase in the debt-GDP ratio as borrowing increases over coming years and then reduces. That compares with the debt interest payments we made in this economy in 1992 and 1993. We had a serious deficit and debt crisis in the mid-1980s for other reasons and we had a repayment of approximately 35% in terms of debt interest as a proportion of tax take. That gives an indication of the debt sustainability issues, which are challenging, tough and difficult, and we make no bones about that but we believe it is the right course of action.
Let us be clear. The main part of the facility is for ongoing funding of public services. If we never had a banking crisis, we would have had this difference between our revenue and expenditure and that has to be closed over the next number of years. We have to fund those reducing deficits and that is what this facility provides for us. That would not be affordable for us on the markets, which is the normal place the NTMA sources such funding on behalf of the State. If during the plan, normality returns to the markets, it will be open to future Governments to return to them and, therefore, we are not tied in to use the facility regardless of our circumstances but its availability provides us with the space and time we need to plan and provide for recovery in our economy. If we did not have that time and space, it would be most difficult for any Government to confirm both domestically and internationally that there is sufficient confidence in the funding of the State, let alone in regard to ensuring we can invest in growth.
The second part of the package relates to the banking facility. The Minister for Finance and others will go into that in detail but I make the same point about this. We need to have the markets acknowledge, understand and accept that the work being done has validity and that we are prepared to accelerate and deepen that work. The question, therefore, of capitalisation of the banks and doing what we can to reorganise them emerges. Reference is made to core and non-core activity. It is clear the priority of the Irish banking system should be to provide for Ireland's needs and if that means banks having to divest themselves of activities that benefit other economies as a result of previous expansion policies and the commercial presence individual banks had in other jurisdictions, then that will have to take second order to the primary responsibility they have, which is to serve the needs of the economy at this critical time. That is precisely what deleveraging and downsizing the banks is about, thereby making sure the exclusive focus of the banking system on the basis of further capitalisation is about providing the credit businesses need and getting themselves back to a position to be funded by the markets rather than through short-term funding available from the European Central Bank. It is true that the European Central Bank has been providing important liquidity funding for the Irish banking system since this crisis began because it is fundamental to making sure that business can continue to be conducted and that businesses can keep people in work. Had we seen an implosion in the banking system, which could have occurred and which was set out in reports far more dispassionate than any speech I can make, we would not have the numbers employed in our economy that we have today. The many difficult decisions that were taken by this Government were done exclusively in the public interest, and for no other interest, and we took those decisions based on advice given to us at the time.
Much has been said, but none of it has been withdrawn, in spite of the content of reports that can be brought to the Deputy's attention, but I do not expect to see anything withdrawn, because the Deputy might have to acknowledge that he crossed the line on a particular occasion. I am thick skinned enough to take it and I do not expect it to be retracted. It is part of the game.
According to those with whom we operate in the euro currency area, we must intensify our efforts on banking policy initiatives. For all the criticism made, the fact is that the balance of evidence is more in favour of this Government than the Opposition in respect of how we try to get a viable banking system up and running. The Deputy stated that one of the Labour Party initiatives is to set up a strategic investment bank and take â¬2 billion out of the National Pensions Reserve Fund. That will not be sufficient to fund the bank. I presume he will be looking for deposits. Deposits in the Irish banking system are where they are.
We will have an increasing measure of ownership by the Irish public in our existing banking system, following whatever capitalisation that emerges. We will have to wait and see how that works out in the coming weeks and months. To suggest that we set up another bank to take funds from existing Irish banks, and weaken the banks that we are trying to ensure do not falter, is not a very convincing critique. I am sure the Deputy will go into far greater detail at some stage than just mentioning the â¬2 billion he will get from the NPRF. We await the development of that with eager ears.
The aim of the facility we have brought forward is to make sure that we have an adequate funding mechanism so that this economy, which is stabilising, can provide growth and jobs for the future. Without that, there are no prospects for us to achieve those objectives. If the Opposition's view is that there is a better deal available and it wishes to paint that picture, I would like to hear in detail the outcome it suggests was available. If the Opposition suggests that there was a different interest rate available, I would like to hear the detail of it. Opposition Members can make all the populist gestures they like, but the bottom line is that this country needs this package at this time. This is the best available package for this country at this time. I believe there is a great challenge facing our country in the coming years that will involve the consolidation and adjustment of our public finances. The record will show that there was nothing to suggest in the policy positions of the Opposition throughout this crisis, apart from using funds for more spending, that this was an avoidable consequence.
We must have an effective and viable banking system, and we must have a recovering economy. We must engender confidence and we can do that in our political debate, regardless of elections. We do not have to consign our vocabulary to one of "banjaxery" or "economic corpses" or depicting the country in a way that is not accurate. I accept that we are in difficulty. I do not for one moment underestimate the challenges that face the country, but let us portray the country with its strengths as well as its weaknesses. To magnify weaknesses and to forget about strengths is to do the country a disservice. We need to be prepared to talk about the country in a far better way than is currently the case. We all know there is an election in the air when we finalise our post-budgetary arrangements and put in whatever legislation is necessary. If people feel it is more important to play that game than to deal with the issues of the day, then that is fair enough. We have brought forward a proposal which we believe serves the interests of this country and into the future. We believe it provides the time and space for growth in the economy to return.
The export-led recovery is under way and has brought a stabilisation in the last 18 months and is now proceeding next year on the basis of policies that we have brought forward that have improved competitiveness, lowered costs and enabled exporters to be more successful in markets in a more difficult trading environments, since the huge hit to this country in the autumn of 2008. We are now seeing signs of stabilisation, both in terms of export performance, moving to balance of payments surpluses and a stabilisation in the live register. The current rate of unemployment at 13.5% is very high and I do not for a moment suggest that any of us in this House are satisfied with that, but we must pursue the policies outlined in the four year plan that can bring our unemployment down to less than 10%, which was the case in 1997 when we came into office. We can do that if we stick to the plans and if we are prepared to do the most important confidence building measure that this DÃ¡il can achieve in the next week, which is to pass the budget.
We have a four year plan. We have this deal in place and we have a budget to pass. If the DÃ¡il passes that budget and gets on with the business of making the corrections that we must make, then we will provide the prospect of a good future for our people and we will demonstrate to ourselves and to the international community that we are taking on a responsible role that will make sure that this country gets back on its feet sooner rather than later.
I hope the Taoiseach is not accusing me or the Fine Gael Party of introducing language such as "banjaxery" or "morbid corpses" in respect of our country. I spoke the truth when I said that the decision made last weekend has foisted upon the shoulders of every single person in the country a debt that will not be paid off for a generation or more. That is the truth of the Ireland that we live in now.
The Taoiseach also spoke about having a rational debate about serious issues, and I think that is true. However, the Taoiseach should recall sitting on these benches when issues of extradition were being discussed and other sensitive issues in respect of Northern Ireland were being discussed between ourselves and Great Britain. Every day, one Opposition spokesperson after another created holy hell in the 1990s in respect of issues that were sensitive at the time. I am not using that as a justification for what is happening now. The reason there is anger and viciousness out there is that people do not believe the Government. The reason they do not believe the Government is based on sound history. For the past few years, Minister after Minister, but especially the Taoiseach and the Minister for Finance, came in here and spoke elsewhere outside this House. They stated that green shoots were appearing, that we had turned the corner, that NAMA would provide a wall of cash, that credit would be available for small businesses and that this was the cheapest bailout in history on which the people actually would make a profit. Did I or did I not hear those words? I think I heard them from Minister after Minister.
The reason the population now is angry and quite vicious is that there has been no clarity of agenda on the part of the Government as to where we are headed. This was epitomised by the Taoiseach's own words this evening when he stated the Government was bringing forward a proposal. This is not a proposal from the Government but is a capitulated statement because it has been put together by technicians and civil servants and adopted by the political process. The Taoiseach is aware that politicians are not technocrats but are elected representatives of the people and, as such, have two fundamental responsibilities to carry through. First, they must identify solutions and, second, they must make decisions.
In this case, what happened was that this statement, decision and deal was put together by people who are not elected. They tossed it around for a number of weeks and eventually came to a conclusion that was endorsed and accepted by the Minister for Finance on behalf of the Irish people and Government.
This was not done in my name because I do not understand the negotiations that were conducted here. I note the Taoiseach is an experienced campaigner. This was a situation in which one was told by the Minister for Finance and other Ministers that no negotiations were under way about any bailout, that no representatives from the IMF were in Ireland, that no representatives from the European Central Bank or the European Commission had been over in the Department of Finance for a number of weeks and that there were no discussions between the Chancellor of the Exchequer in Britain and Irish civil servants from the Department of Finance on a bilateral contribution from Great Britain. One subsequently found out all these things were happening when eventually the Governor of the Central Bank, while standing on a street in Frankfurt, decided to ring the national broadcaster and state the discussions pertained to tens of billions of euro being drawn down as a loan at a then undetermined interest rate, which subsequently has been set at 5.83%.
These are some of the reasons the population is as angry as it is. I do not understand the reason the Government was not in a position to place political bargaining at the centre of matters. Whatever the respected academic, regulator and civil servants were able to put together, surely one ultimately must introduce politics and politicians to decide what is the best deal, given the circumstances we face. The reason Ireland is in this position is that the Government would not listen. Two and a half years ago, the Fine Gael Party proposed that Anglo Irish Bank be wound down but was scoffed at. The Fine Gael Party proposed that subordinated bondholders should make their contribution as part of the solution but again was scoffed at. Eventually, however, such things have come to pass. Chancellor Merkel stated there should be a bank resolution legislation system whereby senior bondholders certainly could be part of the negotiations for a winding down of banks when such an event took place. Commissioner Almunia wrote to me this week and stated he is pursuing this element of legislation within the Commission at present but that until then, we are bound by existing regulations.
I was struck by the announcement or admission on RTE yesterday by the Governor of the Central Bank that, in his words, what has happened was not his preferred option. He wanted a form of insurance scheme whereby were there to be drawdowns or difficulties with banks, a scheme would be put in place.
However, what has happened is not what he would have preferred. Instead, the Irish taxpayer will be obliged to bail out these banks to pay off banks in Frankfurt or France.
I heard him state this solution was not his preferred option. While he is a respected Governor of the Central Bank for me, the absence of political negotiation in this regard has resulted in the people being forced to stump up billions and billions yet again. They cannot see any jobs being created and the attendant despair and disillusionment among a huge segment of our population is the cause of all this angst and anxiety. Moreover, again following on from the Governor's statement yesterday, that Anglo Irish Bank will no longer be a bank, what will happen to senior bondholders who remain locked into their investment in Anglo Irish Bank when it no longer is a bank? Will such bondholders, who invested in Anglo Irish Bank, be party to or the subject of a discussion in respect of a contribution they can make?
The Taoiseach states this is a proposal from the Government. However, if he looks back over the Governments spanning the past decade of which his own party has been the lead party, surely he can see that Ireland should not be in this position in the first place? Had the Government listened to advice from my party and others, as well as from objective commentators from outside the House, or had it taken some of it, the position would not be as bad or as serious as it is at present. However, given our current position, the people have good reason not to believe the Government and it is evident, no matter where one goes nationwide, that the time for decision is nigh. I regret the failure of the Government to have real heavyweight political negotiations in this respect. When the Taoiseach asks what is Fine Gael's alternative, my response is that we should not be in this position in the first instance. The reason we are in this position is because of reckless trading that was allowed to happen under the watch both of this Administration and its predecessor. It is clear that unfairness crept into the system and was allowed to spread its wings across all segments of every kind of lending.
The question that must be asked and that is being asked is who was in charge of all this? I thank the Taoiseach for the telephone call he made to me in which he stated that he would allow other parties to have access to the financial advice the Government was receiving and that it would be appropriate to meet the delegation from the IMF, the European Central Bank and the Commission. I did meet them, together with Fine Gael's finance spokespersons and others. The point they made was that this was a deal for Ireland and that it was being put together by civil servants, that is, between the delegation and the Department of Finance and the Central Bank. We asked them what flexibility might exist for a future Government, in the event that the people decided to change the Government, in the context of a deal being done. I state quite openly they made the point that, within the parameters of the overall target being achieved, which then was 3% by 2014 and now is 3% by 2015, they would be happy to hear other programmes that might be stronger in respect of incentive or investment for job creation, which would improve growth rates for the country, which would improve competitiveness or which would improve the capacity of our people and our island to generate further wealth with a view to being able to get back to the bond market is at an earlier time. They also made the point that within the four year plan adopted or put forward by the Government, some elements of which appear to have the thumbprints of the Commission on them, there also was room for consideration of some of its aspects. However, what has happened has been and will be a constraint on whatever Government the people decide to elect for the future.
People note the British Chancellor of the Exchequer has stated the British Government also intends to give Ireland money. Chancellor Osborne has stated that Ireland is Britain's nearest trading partner, that it is very important for Ireland to have sound public finances and that good trading relationships should be maintained. This is correct and goes without saying. However, it also is a fact of life that this loan is being given in order that money can be returned to banks in Britain, which must be paid for by the Irish taxpayer. That is the principal reason the Chancellor made this offer. No clarity of agenda about what has been going on has been transmitted to the Irish people. The message has been confused and woolly. All they know is that they are drowning in billions of euro that have been borrowed to pay banks that appear to have a never-ending chasm, which will be opening in front of the Irish electorate for the foreseeable future.
I agree with the Taoiseach that some fine things are happening in this country. When one talks to those involved in the export business, they say their projections are strong and their productivity has increased significantly. They are happy with the quality of the graduates and other young people available to them. There are problems in the indigenous manufacturing sector, however. Small businesses have been scalded by being refused access to credit. Thousands of retail outlets have real concerns. It is difficult for people to get employment. Many qualified graduates are sick of going for interview after interview without anything happening.
The real concerns and problems I have mentioned, which are affecting huge swathes of Irish life, are being compounded by the black cloud represented by the borrowing of billions of euro at exceptionally high interest rates that will be difficult to manage. The European Commission said yesterday that the Government's projected growth rates will not stand up. If that is the case, it will make it even more difficult for us to manage. I appreciate that the Taoiseach said on Leaders' Questions that there are always differing views on projected growth rates. Given that the Commission, like the ECB and the IMF, was represented on the delegation during the week, further difficulties will be created by its suggestion that the growth rates projected by Ireland will not stand up.
I have been informed by Deputy Coveney that there was a row at the European Parliament today about Ireland's 12.5% corporation tax rate. It appears that eight German and French MEPs, who are co-ordinators of political groupings, are trying to get up to 350 MEPs to sign a petition that recommends a minimum corporation tax rate of 25% should apply across the EU. That will become the position of the European Parliament if 350 signatures are achieved. Irish MEPs from all parties are objecting strenuously to this proposal. The Irish people gave their approval of the Lisbon treaty to the EU, at the second attempt. The matter had been discussed vigorously inside the European People's Party on many occasions. The big issue for EU member states was that EU institutions should be able to do what was intended under the Lisbon treaty. After much debate, the Irish people decided to give the EU that right, distinction and responsibility.
I reject completely the attempt by eight German and French MEPs to thwart the clear provision in the Lisbon treaty that taxation is a matter for each individual country. If their efforts were to succeed, it would represent a massive breach of trust. Every Deputy will recognise that foreign direct investment in this country has always been a cornerstone of Irish job creation policy. We need to be able to attract jobs to this country from overseas. We need to speak well of our country. I do not see why we cannot demonstrate and prove that this country, by 2016, will be the best small country in the world in which to do business. That will involve dealing with red tape and bureaucracy and clearing the obstacles that prevent employers from employing or retaining employees. In that way, we can restore the pride, confidence and hope of our people. All of these things can be done. The people have been beaten down by disillusionment and lack of confidence. There has been no clarity of agenda or clarity of outcome. This deal only adds to that.
I would like to emphasise a crucial point that has been lost in the middle of the financial row that has blown across Ireland for the last two years. Ireland is not this Government. The people have lost faith, confidence and belief in this Government. Ireland is not the Taoiseach or the individual Ministers. It is gone. It is over. It is practically at an end. The people will eventually have their say. Ireland is not the parties that comprise this Government, which is supported by Deputies from Fianna FÃ¡il, the Green Party and the Independent benches. The Ireland I know is the Ireland of people across all walks of life who want a reasonable standard of living and a roof over their heads. The Irish people want the members of their families to have an opportunity to receive a decent education that sends them out with the competence and confidence to stand against anyone else from any part of the world. They want a working health system that is based on one's medical needs, rather than what one has in one's pockets. They want to be able to get on with living the lives they expected to live. Instead, they are encountering a constant barrage of disillusionment and despair, caused by the inability of the Government to set a clear agenda for the future. The Ireland I know will always remain a sovereign and independent nation. People feel very aggrieved about the recent loss of sovereignty.
I do not understand the Government's clear failure to protect the serious amount of money that has been invested in the National Pensions Reserve Fund. It was put there by the people, for the use of the people. It was not put there to be handed over as a contribution to the banks. I recognise the argument that says one must have a contribution if one has savings. In light of the plethora of ideas that have been proposed, some of which are first-class and excellent, I do not understand why the Government has not decided to invest in a strong programme for the provision of infrastructural facilities and jobs. Such a programme would aid the perception and reputation of this country if it were extended to areas like water, communications, renewables and people going to work. It would make the place much more attractive to local and foreign direct investment than it is in many cases at present. It has not happened, however. All of these things emphasise the fact that it is not the people of Ireland, or the British Chancellor of the Exchequer, who have lost this country's sovereignty. It has resulted from the failure of the Government to address and understand its responsibility to lead the people and the nation to the future I know we can have.
During the hiatus between this disastrous deal and the election, the people are waiting for the opportunity to give their verdict on those who stand for election all over the country. We should not have arrived at the point at which a deal had to be done. My belief, from a political perspective, is that when that point came, political negotiations in here would have delivered a better deal in the interests of Ireland because of the fact that we had to get money. I was told that this deal was conducted by civil servants with civil servants. When the Minister for Finance flew to Brussels to meet all the other Ministers, they said, "That is it, take it or leave it". If I had been there, I would have expected somebody to say, "This is about politics, ladies and gentlemen, and if you don't give me a better deal than what the civil servants have put together, I am going home". Ireland has a problem and Europe has a problem. I understand this evening that the contagion is alleged to have spread to other countries.
The fact of the matter is that political negotiations were absent from this deal. Political negotiations were left behind in Ireland. The failure to engage in political negotiations has resulted in a bad deal for our country and its people.
The subject of this debate is the agreement the Government has concluded with the EU and the IMF. I consider it to be a sell-out for the country, a failure of negotiation, a failure of diplomacy and a failure of nerve. I expected the Taoiseach to come here to explain the deal and set out its terms for us. Instead, he came here to give us a lecture. He started by telling us all to be responsible. He then said that rather than engaging in a political debate, we should conduct it as a debate that goes above politics and electoral considerations. Instead of providing an explanation for the agreement, the Taoiseach makes what is in effect his first election speech of this election campaign and it is a blunderbuss approach to the Opposition in general. He fires a few missiles in the direction of the Labour Party and does not explain the deal to us. He takes issue with a couple of comments made by Opposition spokespersons over the weekend and suggests that somehow, these are the cause of the damage to Ireland's reputation abroad. The cause of the damage to Ireland's reputation abroad is the way in which he and his Government have mismanaged the Irish economy. He calls on us to articulate the alternative yet repeatedly over the past two to three years, when the alternative was put to him, he rubbished and rejected it. He was wrong about the bank guarantee; he told us that the bank guarantee would cost the taxpayer nothing and now we know. I remember on the day of the bank guarantee, we asked him specifically if he would remove the people who were in charge of the Irish banks but instead he left them in place and he did not begin to remove them until the skeletons started to hop out of the cupboards of Mr. FitzPatrick and others.
When we suggested to the Taoiseach different ways of reorganising and restructuring the Irish banks, such as the establishment of a banking commission, he rubbished that suggestion in the early stages of the banking crisis. We suggested to him a different approach to dealing with the bad debts of the banks rather than going down the NAMA route. We suggested taking the banks into temporary public ownership and dealing with the restructuring of the banks at that stage. He said he could not do so because the banks could not be taken into public ownership but they are now being taken into public ownership by a far more scenic and far more expensive route.
The Taoiseach has given us all of these political assaults or comebacks which perhaps makes for a good election speech but it does not tell us very much about the deal that he has just concluded with the EU and the IMF. I understand there are three sets of documents that have to be agreed and that a memorandum of financial and economic policy has to be concluded with the IMF, with the EU and with the ECB. He has told us nothing about what is to be contained in it and what he has agreed with regard to it. I understand there is to be a memorandum of understanding to be concluded with the European institutions in respect of the European portion of the funds to be made available. I understand further that this memorandum of understanding is to be quite detailed in respect of the measures and conditions attached to the money being provided. He has told us absolutely nothing about that and he has not told us about what way it will relate to the four-year plan. On top of that I understand there are to be some operational agreements dealing with, for example, the way in which the moneys are to be reviewed. It is reported in the public press that there is to be a quarterly review carried out with regard to drawing down the money and the attached conditions and the Taoiseach has told us nothing about those arrangements. The reason he has not told us anything is that he is ashamed of the agreement he has concluded. He has done nothing here this evening either to defend it, to explain it, to provide the rationale for it or to provide the House with any additional information.
This is a deal done by a broken Government with no friends left in Europe. It is a deal that hangs the Irish people out to dry. The deal is an agreement by the Irish Government to accept a loan from the IMF and the European Union to bail out the European banking system and to ensure that the Irish taxpayer picks up the tab. It is a deal to ensure that European banks, who contributed to the property bubble in Ireland by lending to our banks, will not pay a penalty for their folly. That burden will be borne by this country for decades to come. It is also a deal to provide funding to the Irish State to fund its deficit, provided that an enormous fiscal hit is first inflicted on the Irish economy. It is a deal to borrow money from our European neighbours at a higher rate than is being offered by the IMF. It is not a good deal for Ireland but rather it is a lousy deal for Ireland. While the first responsibility for it lies with the Government, we have been let down by our partners in Europe also. Because for all that they may want to punish the Taoiseach and Fianna FÃ¡il, it is the Irish people who are paying the price. The Irish people did not create this problem; Fianna FÃ¡il and the banks did.
Saying this is a bad deal does not mean this is not an Irish problem because it clearly is. However, it is an Irish problem set in the context of a broader European problem. Ireland has duties as a member of the eurozone, but European solidarity is a two-way street. The Irish people feel very let down by the European Union, in particular by the Commission. The attitude taken has been unduly punitive and does not fit with the founding principles of the European Union.
We must be clear about what has happened. The Taoiseach and the Minister for Finance are fond of telling us that their policies have been fully endorsed by their European partners, going back to the night of the blanket guarantee. I wish to nail that nonsense here and now. The policies of this Government have caused significant annoyance and frustration in Europe. The blanket guarantee, in particular, caused outrage in several European capitals, precisely because of its blanket nature and because it forced other European countries to follow. They did not emulate it - as Fianna FÃ¡il like to claim - they were forced to follow it although none were as stupid as our Government. The diplomatic fallout for Ireland has been enormous.
Throughout this crisis, Fianna FÃ¡il has over-promised and under-delivered insofar as our European partners are concerned. The losses in the banking system have mounted and just as it has over-promised to the Irish people, Fianna FÃ¡il has over-promised to Europe. With market confidence plummeting and when it came to framing the budget for 2011, Fianna FÃ¡il had no cards left to play. It is pretty obvious that the highest budget adjustment that the Department of Finance thought possible was in the region of â¬4.5 billion. The Department's figures, as supplied to the Labour Party, show that the Department was arguing that going above â¬4.5 billion would be essentially self-defeating.
The scenarios presented to us were intended to show that front-loading beyond â¬4.5 billion actually made the problem worse, but the Government caved in. In the last frantic attempt to convince the bond market to lend money to Ireland, the Government capitulated to the Commission and shifted the amount up to â¬6 billion. Then, when that gambit failed, it was forced to call in the IMF and to apply to the stabilisation fund. Having announced â¬6 billion, the Government and the Commission would lose face if the amount were any less. It is striking that the EU Commission and Commissioner Rehn, while trenchantly demanding a â¬6 billion adjustment, have taken the precaution of lowering their growth forecast for Irish GDP growth in 2011 to 0.9%. Having come to Dublin only three weeks ago to endorse the budget strategy and the Government's forecast, they have now changed their tune. It is an admission, if admission were needed, that they do not regard growth in the Irish economy as a priority. They are content to allow activity and employment in Ireland to stagnate, provided that their â¬6 billion adjustment is implemented. They have also taken the precaution of moving the target for achieving the 3% deficit target from 2014 to 2015. In doing so, they are effectively endorsing the Labour Party's view that â¬6 billion is too much and that it risks doing damage to the fabric of the Irish economy. It is confirmation that they do not believe in the confidence fairy either.
Today's debate is a farce. It is one further ignominy that the Irish Parliament should be reduced to talking about a deal that has not yet been published and on which no vote is to be permitted. It is little more than a set of press releases, setting out the outlines of a deal. There is a lot of information we do not have, particularly with regard to the banking system. We know the Irish Government must pump â¬10 billion into the banks, but we do not know how it will be used. We know that we will have to liquidate much of the National Pensions Reserve Fund as a contingency for the banks, but we still do not know what kind of banking system will result. We do not know how the extra capital will be used and whether it will guarantee a flow of credit to Irish business to help the Irish economy grow.
It is deeply ironic that Fianna FÃ¡il, which argued that we could not take money out of the NPRF to capitalise a strategic investment bank, now says we can take most of what is left to underwrite losses in existing banks, with no guarantee of credit flow to the domestic economy. The Labour Party's proposal for a strategic investment bank was designed to ensure precisely this objective - that when the downsizing and restructuring was completed, Ireland would still have an indigenous banking capacity that understood the strategic needs of the Irish economy. Yet we do not know whether this objective will even form part of the strategy being followed as a result of this deal.
As we watch the NPRF being cleared out for the banks, it is more than a little ironic to remember the hysterical reaction of Fianna FÃ¡il - repeated again today by the Taoiseach - when Labour first suggested it could be used to support investment in Ireland. Where are the people who screamed about raiding the pension fund now? What we do know is that our limited national treasure is being handed over to the banks and senior bondholders are to be left unscathed. This, we are told, is to avoid contagion - which is another way of saying that profits are private but losses are public.
If the European Commission and the ECB want to insist on this point, where is their contribution to this end of the problem? Yes, they are offering a line of credit, but at what interest rate? An average of 5.8%, with the IMF money being the cheapest. In what sense is that a contribution to solving the problem, rather than shifting the problem back to the Irish taxpayer? It is symptomatic of an ostrich-like approach to the whole crisis. It stands in contrast to the approach taken by other partners that have come forward with bilateral loans. The loans from the UK, Sweden and Denmark, which are not members of the eurozone, are primarily a recognition by those countries of mutual interdependence and solidarity.
For the Irish people, the interest rate being charged is the clearest indication of the unwillingness of the Commission to approach this issue in anything other than a punitive way. In doing so, they are threatening core principles of the European Union in a manner that will be noted not just in Ireland but also in other small European member states. Yesterday, Deputy Rabbitte, on behalf of the Labour Party, called on the Government to clarify the exact status of the proposed bailout deal in Irish and international law. He said that uncertainty about the status of the agreement would give rise to challenges in the courts and lead to further instability.
Let us be clear on what we are talking about here. There is to be external provision of â¬67.5 billion of financial support to Ireland, from four sources, namely, the European financial stabilisation mechanism, the European Financial Stability Facility, the International Monetary Fund, and bilateral loans from the UK, Sweden and Denmark. Contrary to the impression given yesterday by the Minister of State, Deputy Barry Andrews, just the first of these - the stability mechanism - derives from regulations made by the Council of Ministers under the EU treaties. The stability mechanism is a short-term response for cases in which a member state is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control. The funds available to meet all contingencies throughout the Union are limited to just â¬60 billion. The only short-term disaster beyond this country's control is that we still have a Fianna FÃ¡il Government, which has outstayed its welcome by more than two years and is propped up by a partner that knows they both should go but cannot find the courage to leave.
The Minister must know that the legality of the stability mechanism has been questioned, most notably in a case pending in the German Federal Constitutional Court. It has been argued that the sovereign debt crisis cannot be dealt with under a natural-disaster-type provision of the treaties. It is also argued that, because the stability mechanism involves all member states' being party to a guarantee for the full amount loaned, if one state defaults, the other states must step in to cover its responsibilities, and that this is a breach Article 125 of the Lisbon treaty, which states that a member state, "shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State".
The second proposed source of funds is the EFSF. This is also the name of the special purpose vehicle, a limited company set up in Luxembourg, managed by Klaus Regling and owned by the eurozone states, to make loans to one of their own up to an amount of â¬440 billion. Unlike the stability mechanism, the EFSF was not set up by Council regulation or under any article of the treaties. It was set up by just the 16 eurozone countries and, although the Commission acts as agent for the members, it is not an EU institution or governed by the treaties. It is clear that the EFSF was set up pursuant to an international agreement between some member states of the EU. It is also clear that the international agreement was never laid before the DÃ¡il and that DÃ¡il approval for its terms was never sought. Exactly the same can be said of the framework agreement, negotiated between the same states, that governs the working of the EFSF. Yet the Government still insists that the original EFSF agreement and the proposed bailout, to be finalised next week, are not international agreements. Of course, it is also entirely silent about the three bilateral international agreements, with the UK, Sweden and Denmark, none of which, apparently, is to be laid before the DÃ¡il. This argument suits a Government in retreat, which will do all in its power to avoid a debate and vote on its actions and which, in particular, will not submit this shameful bailout to a DÃ¡il vote.
Ours is not the only Government in retreat from Parliament. Some will unite in their efforts to prevent the European Parliament from debating and voting on the Irish bailout. However, if no aspect of the bailout and the accompanying agreements amount to an international agreement, then it is either an ordinary contract or simply a statement of future policy, having much the same status in law as an election manifesto or a programme for government. As we pointed out yesterday, the problem here is that the courts have severely restricted the ability of a Government to enter into a binding contract which deprives it and its successors of the sovereign right to alter policies in the future.
Of course the Government can borrow money on behalf of the State and negotiate terms and conditions for repayment, but it is not entitled to contract away, on its own behalf and that of its successors, the discretion to shape future policies differently. Nor does it have complete freedom to take away by contract the sovereign rights of the Oireachtas to legislate on future taxes, future expenditure and future laws on a raft of disparate issues including, for example, advertising by GPs. As the Supreme Court has made clear, it is not within the competence of the Government to fetter its future executive action, which must necessarily be determined by the needs of the community when they arise. It cannot by contract hamper its freedom of action in matters that concern the welfare of the State. That was the reasoning that led to the Supreme Court judgment in the Crotty case in 1987. Mr Justice Walsh held that the freedom of action conferred on the Government to decide issues of policy does not carry with it the power to abdicate that freedom, or to enter into binding agreements with other states to exercise powers in a particular way, and so to bind the State in its freedom of action. To do that, a referendum to amend the Constitution would be needed.
The bailout deal will be signed by the Government and the other EU Governments some time next week. However, despite the reply of the Minister of State, Deputy Andrews, yesterday, neither we nor they know what its legal status will be. It is clearly not done under the EU treaties or necessitated by membership of the Union. It seems the Government does not regard it as a treaty. Is it an ordinary contract, binding in its terms, or just a statement of intent?
The Government, in its response, seems to be trying to have it both ways. Although the bailout is a legal agreement and legally binding, a future Government, according to the Minister of State, is not obliged to draw down any funds and so the actions of a future Government are not fettered. His argument ignores the point that the memorandum of understanding setting out economic policy conditions and a fiscal adjustment programme applies from the time it is signed and the conditions attached to the loans apply from the very first draw-down. It is entirely specious to argue that the Government can walk us down this fiscal cul-de-sac, sign us up to these disastrous terms and conditions, impose on us a ruinous four year plan and then insist its successors have complete freedom of action to deal with the mess they have created. One might as well argue that a child dropped into the polar bear's pit at the zoo is free to find his or her own way out. It may be that this is the best deal Fianna FÃ¡il can get but it is not the best deal that Ireland can get. That is something which must be pursued by the incoming Government which, I hope, will succeed the current Government sooner rather than later.
The decision to support the EU IMF programme is remarkably difficult but we believe it to be absolutely necessary and unavoidable. In the first instance, there is no other realistic option. Ireland is funded into the middle of next year, but it will need to borrow more money. We will need that money to make the social welfare payments, the old age pension payments and the carers payments to the most needy in our society. We must borrow to pay the wages of our doctors, nurses, gardaÃ and prison officers. We must borrow to ensure that our transport infrastructure continues.
The agreement will be for a facility of â¬85 billion. Several key points should be borne in mind with regard to the facility. The provision of an â¬85 billion facility does not mean that the State will use all of the funds. The State will likely re-enter the bond markets as early as possible. The funds identified for the financial sector are in the form of contingency capital, which will only be drawn down if required. The State will contribute â¬17.5 billion towards the â¬85 billion from its own resources, including some of the National Pensions Reserve Fund. The bulk of the funds are provided for the financing of the State's budget deficit, which has already been factored into the budgetary projections.
The reality is that the interest rates currently demanded by the markets are too high, meaning the EU-IMF mechanism is unavoidable. We believe the alternative is a good deal worse. With the bonds markets effectively closed off to us, the only other option to the current programme is to reduce our deficit to come into line with our taxation income. If we could not access these funds on the bond markets, we would be obliged to immediately balance our public expenditure against the tax we raise. In 2010, we are borrowing â¬19 billion of the â¬50 billion that we spend. This would necessitate immediate cuts in pay and social welfare of 38% to balance the books, something that cannot be contemplated or countenanced.
The interest rate agreed in the programme must also be considered in terms of relative cost. The projected average interest rate of 5.8% should be compared with the rates currently available on the international bond markets, which are significantly higher for Irish and Portuguese bonds. This deal is for a far longer period than that arranged with Greece and therefore compares favourably with it. The liquidity of our banking system has been dependent on the European Central Bank funding of more than â¬100 billion at remarkably low rates.
There has been much comment on whether the senior bondholders in the banks should be "burned". I fully favour the idea that those who made bad lending decisions in respect of our reckless banks should also share the consequences. However, many commentators and politicians have presented the concept of senior bondholders sharing the burden of bank debt as an easy "get-out-of-jail" card that the State could play. The reality is that such a decision is not one Ireland could ever make unilaterally. It was pointed out at the launch on Sunday last that such a move would have consequences for the entire eurozone and far beyond. Its knock-on effects in terms of the future of the euro would be very severe. For our own economy, the consequences would be even greater and we would risk an effective drying up of funding for Ireland and our banks. The consequences of such a unilateral move are unthinkable for people seeking access to their cash and for businesses in need of ongoing credit. No individual or person would remain unaffected. It would threaten the very functioning of our economy.
The EU-IMF programme provides us with an opportunity to achieve a properly function banking system. It will involve an intensification of the measures already adopted by the Government to reform our banking system, which will be fundamental in getting our banks lending again. The programme provides for a fundamental downsizing and reorganisation of the banking sector such that it is proportionate to the size of the economy. This will lead to a smaller banking system, capitalised to the highest international standards with renewed access to normal market sources of funding and focused on supporting the recovery of the economy.
The EU-IMF programme combined with the national recovery plan contains many painful measures. However, there are also reforms in the programmes that offer us an opportunity to restructure our economy and put it on a more sustainable footing. We must seize this opportunity to deliver further on the reforms necessary to create a strong and sustainable economy in which the needs of our people are placed above those of interest groups.
During the debate in recent days several points have been made which must be addressed because some of them have been unfair. It has been put that the negotiators who carried out such sterling work on our behalf gave us a bad deal and that we should not have supported their recommendation. None of those who were negotiating on our behalf, including Patrick Honohan, Mr. Cardiff and Mr. Corrigan, are attached in any way to any political party. They are independent people. Deputy Gilmore suggested his party may be in Government soon. That may well be the case but in that instance he would have to work with these individuals. I believe these individuals are people of calibre, commitment and integrity. If Deputy Gilmore found himself in exactly the same situation where these people made a recommendation to him while looking out for the best interests of the country, what would he have done? Would he have rejected it out of hand? I believe he would not have done so. They found themselves in a very difficult situation as did the Government. This was not something anyone would wish to contemplate before entering Government.
There has been much debate on whether it was the guarantee or NAMA that sparked this problem. As far as I know there was no such guarantee in Greece or Portugal. I do not believe there has been any equivalent to NAMA in those countries. In any case, the debate on the NAMA issue has changed. At the time, we were told NAMA would not pursue the builders. Certainly, it has done so. We were told it would pay over the odds. That is not the case. The criticism levelled at NAMA now is that it has led to the crystallisation of losses in the banks. The debate has changed. I do not believe these things led to the problems we face now.
Let us be honest with ourselves. What has led to this problem is the fact that the ECB has lent money in a reckless way to reckless banks. That is a fact and we must ask ourselves some difficult questions in this Chamber about the nature of the ECB and the euro project at this stage. I recall vividly the debate that occurred in this Chamber and the whole question of what Hans Tietmeyer of the Bundesbank termed an asymmetric shock. He stated that if there were an asymmetric shock in the eurozone it could not survive. This is what we are now experiencing. We must ask ourselves these questions. What should we do now at this stage with regard to the euro? This question is far bigger than anyone in this Chamber.
The satellite vans have gone. There are one their way to Portugal and, God knows, perhaps they will be on to Spain after that. What will we do with the euro? How can we survive this crisis? Inevitably, if the euro is to survive it will require some form of federal Europe. That is the only way. We could end up with a two-speed Europe. These are the realities that we must discuss in a very honest way in the coming weeks. Perhaps this is one of the things we would prefer to avoid but it is now unavoidable. If there were such a thing as a federal Europe, what would it lead to? It would lead to harmonised taxes. These are the realities to which everyone here must face up and it is likely Deputy Gilmore will have to face these when he takes on a role in Government.
It has been stated by Deputies on the other side that the Opposition has been placed in a straightjacket. That is an apt analogy in more ways than one. I warn those other parties that they should know when they enter government during this crisis, they will be entering an asylum. They will have to endure the sleepless nights, the no-win situation and the non-stop criticism.
I have no doubt Deputy Gilmore will sit in my place next year, looking up at the Sinn FÃ©in Deputies who will be criticising him non-stop. All Deputy Gilmore will be able to say in reply, just as we have said, is that he has no choice but to act.
There is nothing worse in a democracy when a politician must act in a way because his or her choices are limited. Deputy Gilmore will be faced with that lack of choice which will eat him up inside. I wish him well but there is much awaiting him.
For too long, we have engaged in auction politics and soft choices in this country. Fundamental reforms are required in our taxation and levy system to move it away from the boom-and-bust cycle of the past. Our economy must become more competitive so that we can export goods and services that will bring in the foreign earnings needed to restore the economy.
Fundamental mistakes were made as far back as 1977 when our tax system became skewed and made incomprehensible to many people. Many do not understand why we cannot have real local government, local taxes or water charges. For the first time, these issues will be addressed, which represents some form of progress.
Ireland will recover faster than many people have predicted. Our status as a small open economy means that while we suffer disproportionately on a downturn, we will benefit disproportionately on an upturn when the world and our trading partners enter economic growth. We are already trading in the black with exports exceeding imports. The value of exports by July 2010 had risen 12% since the previous July. New export businesses expanded in each month since September 2009, with overall manufacturing increasing by 5% by the middle of this year. Retail sales increased by 1.3% in August 2010 compared to August 2009. Unemployment rates always lag behind recovery but there is a marked decrease in the live register. September's figures saw a 24,506 overall decrease.
As well as grappling with the problems of the past, we have worked hard to create the economy of the future, one in which our goods will be digitally traded and the energy balance of payments deficit of â¬6 billion â mostly through the import of fossil fuels - will be rectified in our favour. Such an economy will be created by a baseline electricity and broadband infrastructure. They are to the new economy what railroads were to the industrial revolution. The doubling of renewable energy sources on our energy system, the trebling of broadband provision and the â¬8 billion stimulus from the energy semi-State companies over the next four years will create and sustain thousands of jobs, jobs that cannot be outsourced in industries that have a long-term future. Much credit must go to my colleague, the Minister for Communications, Energy and Natural Resources Deputy Ryan, for his work in these areas.
We can see there are grounds for hard fact-based hope, not blind optimism, in this regard. We have the youngest economy in Europe with one in three of our people under the age of 23 years. We have the highest proportion of graduates in the 25-to-34 year age group. Our direct inward investment is five times that of the OECD average.
Jobs in the ICT sector increased by 6% last year to 73,000 according to the national skills strategy. I have seen many of these new jobs in Google, Facebook and eBay. Thousands of Irish software companies sell their innovation to the rest of the world.
The new economy will be more durable than the old because we understand the inherent dangers of short-term thinking. We must get the basics right and learn from the incredible mistakes made over many decades such as the lack of regulation and the skewed tax system. We have much to recommend us as long as we harness our potential to long-term sustainable recovery. None of this will be easy or simple. We must retain our optimism and confidence in ourselves and in our people that we can and will emerge from this to overcome some of the greatest challenges ever to face this State.
Deputy Gilmore suggested the junior partners in the Government do not have the courage to leave it. I have said clearly, we want to stay to put through a budget. It takes courage to stay in to put through the toughest budget this country will ever see. I do not relish it but I will do it because it is the right course of action.
The asylum system is a thing of the past. I presume the asylum of government Deputy Gormley referred to should also be a thing of the past.
The Fianna FÃ¡il-Green Party Government is acting in violation of the Constitution by imposing on the people this disastrous deal with the IMF and EU. The Government, with no mandate or political authority, has signed a deal that amounts to economic treason. It condemns this and future generations of Irish people to economic bondage for many years to come. This has been done not to address the State's deficit problem but to shore up a corrupt banking system and protect international financial gamblers.
Under Article 29.5.2Â° of the Constitution there is an obligation on the Government to place before the DÃ¡il all international agreements. It specifically refers to treaties which involve a charge on the public. If the Fianna FÃ¡il-Green Party Government persists in refusing to put the IMF-EU international loan agreement before the Oireachtas, it will be acting unconstitutionally.
Article 29.5.2Â° clearly states:
The State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by DÃ¡il Ãireann.
The Taoiseach's attempt to refute this argument earlier today carries no credibility. It is an external agreement that involves the use of significant public funds in a long-term commitment that will strap future generations into economic bondage.
Even if the Taoiseach's argument were right, there would still be a compelling moral and democratic obligation on the Government to place such a hugely important measure to a vote of the elected representatives of the people. I urge the Government to reconsider its whole approach to this matter.
It will not be put to a vote because the Taoiseach knows his chances of getting it passed in the DÃ¡il are slimmer than those of passing the budget, even with Deputy Gormley's commitment to vote for it. The budget might just scrape through. I hope it does not. This deal will be too much to swallow even for some of those with lead-lined stomachs on the Government backbenches. Deputies Lowry and Healy-Rae now hold the fate of this Government in their hands. It is time for them to realise that Kerry South and Tipperary North are part of the nation. Acting in the real national interest is also acting in the interests of the people of those constituencies. The tidal wave of damage that will be done to our people across the State if this rotten deal and the forthcoming savage budget are passed, will not somehow miraculously bypass Kerry South and Tipperary North.
We now have an insight into how this rotten deal was done thanks to a disgruntled and embittered Minister for Justice and Law Reform who announced today that he is to abandon the sinking ship of Fianna FÃ¡il. He and others can couch it in any terms they like, but those are the facts. On the national airwaves today, Deputy Dermot Ahern said, "I do believe there was an effort to bounce us into a discussion before the Cabinet had even discussed it". Just a week ago, the outgoing Deputy for Louth told us that the prospect of an IMF intervention was "fiction". In today's radio interview, the Minister said it was the European Central Bank that "bounced the Government into the deal". He added:
Those few days were extremely fraught. Quite clearly, there were people from outside this country who were trying to bounce us as a sovereign State into making an application; throwing in the towel before we had even considered it as a Government. They were leaking in the papers that Sunday. There was quite incredible pressure on this country and, if you notice, they're doing the same with Portugal now.
The Minister also said that there had been no discussion at Cabinet over the IMF's so-called bailout prior to the application. This was not clear before, but the Minister said there was no discussion at Cabinet before the application was made. To what type of collective coalition Government responsibility does that point? What an indictment of how the ECB works in the first instance, and what an indictment of this Cabinet and the Government. In spite of all this, however, the Minister says he is still backing the deal. Incredible is only one word to describe this situation, but there are many others. It is certainly incredible.
Thanks to the European Commission, the European Central Bank, the International Monetary Fund and, above all, a craven Fianna FÃ¡il-Green Government, the people are being sold into economic bondage. We will be burdened with an average interest rate on this loan of at least 5.8% with the Government admitting this can vary according to market conditions. These conditions will almost certainly see this interest rate rise. What are the interest rates for the different elements within the plan? None of that detail has yet been shared with us in this Chamber. We do not know what the real cost of this loan will be because so much information is still being withheld.
The IMF representative has also made clear that funds can be shifted between elements of this deal. In other words, funds supposedly allocated for the public finances can be added to the billions that are to be thrown into the black hole of the banks. Last week, we met with the same IMF figures who appeared on our television screens. I do not know what others have said to them, but we put it to them that they were surely cheer-leaders through all the years of the so-called Celtic tiger. At that time, they encouraged and bualadh-bosed this Government's tax cuts and public spending reductions. They were cheer-leaders in creating the conditions that gave rise to the property madness which burst the bubble and created all that we are having to suffer. Yet they can now stand on the sidelines and present themselves as if they were saviours, here to rescue the situation. They have been complicit in its creation, however, and they should share a significant part of the pain as a consequence. The same applies to the European Central Bank that unleashed billions into Irish banks. Those banks, in turn, let it out free-handedly into the property developers' hands thus feeding into the self same madness that prevailed over many years. They are now ensuring that the only people who will bear the burden of responsibility in having to face up to this and pay for it are those who are absolutely innocent of its creation.
The extension by a year, to 2015, of the time set for the reduction of the deficit vindicates what Sinn FÃ©in said, uniquely among the DÃ¡il's political parties, that the four-year timeframe is totally unrealistic. Yet we were dismissed by the Government and other voices for taking that position. Make no mistake, however, even an extension of 12 months, and pursuing the so-called objective by the method and approach to which this Government is absolutely wedded, will again result in a failure to deliver by that timeframe. The approach is wrong and so is the timeframe. It will not matter what adjustment is made to the timeframe if one does not also adjust one's approach.
This deal protects bondholders while being linked to a four year plan that punishes low to middle-income earners in Ireland and which will devastate public services. It is appalling that this deal is to take money from the National Pensions Reserve Fund to shovel yet more resources into the black hole of the banks.
Sinn FÃ©in's economic recovery plan for 2011, entitled "There is a Better Way", called for the transfer of â¬7 billion from the National Pensions Reserve Fund for a State-wide investment programme. This would be a 3.5 year employment and infrastructural development package to provide stimulus, to protect existing jobs and to create new employment. Instead, however, we have an EU-IMF deal to raid the fund and bail out the banks. In addition, we have a so-called recovery plan for four years with no stimulus for growth and no strategy for job creation.
I note that on today's Order of Business, the Taoiseach again referred to our proposals as "rubbish". He is someone to label another party's views and arguments as rubbish. He is the captain of a ship with that very name on its stern. If this Taoiseach and Government had shown less arrogance and more willingness to listen to alternative viewpoints and proposals, it would not have led the State into the current perilous position in which we find ourselves.
My party has some experience of negotiations, so I can tell the House this. Looking at this rotten deal, I can only conclude that this Government, and those who have represented us, irrespective of what the Minister, Deputy Gormley, had to say, could not negotiate snow off a rope. The consequences of this deal are so huge that I can only compare it to the Act of Union. In that case there was a vote in the Irish Parliament and the British Government had to bribe Members to vote for the union. The difference is that this Government saves itself the need to consider bribing the Members on the Government benches because it is denying everyone a vote. We will not have a say.
The TÃ¡naiste should take the time to read what we have said. It is still possible for us to draw the State back from the brink. All is not over yet. The money must be drawn down before it must be repaid. This Government is on its way out, as Deputy Gormley has acknowledged repeatedly, and has stated there will be a drawdown delay with, for example, Bank of Ireland given until the new year to sell assets and see if it can raise money. Unanimous pressure must be applied on this Government and all Opposition parties, Independent Deputies and Fianna FÃ¡il backbenchers who have expressed no confidence in the Taoiseach. No fewer than five of them did so between Friday and Monday of last week and they need to mould together and vote against the budget on 7 December, thereby ensuring an immediate general election. That is needed.
A new Government should refuse to honour the terms of the loan agreed by a Government that is roundly rejected by the electorate and widely acknowledged to be one of the most inept Administrations in the history of the State. The State still has options. We can burn the bondholders in Anglo Irish Bank. We can offer to buy out bondholders in AIB and Bank of Ireland at hugely discounted rates to go away before we fully nationalise both banks or we can burn those bondholders also. This is a market solution to a market problem. This is bank debt, not Irish Government or sovereign debt. Let us not forget it. The blanket banking guarantee must be immediately abolished and the only guarantee to remain should be that for depositors and deposits up to â¬100,000. This will show international markets that we are serious about protecting our citizens and rebuilding our economy at the earliest opportunity. That is the message the international community and serious players in the bond markets overseas are looking for from Ireland.
The terms of the EU-IMF loan are absolutely ludicrous. The average interest rate on the deal is 5.8%. The Greek deal was at 5.2%. The interest payments alone will cripple our public finances for years, let alone payments on the lump sums if it is drawn down. There is no provision for servicing this debt in the four year plan. All future tax measures and spending cuts will be used to service the debt. They will not reduce the State's structural deficit. International confidence in our economy is not improving. On the contrary, interest rates have shot up again and, as Mr. Paul Krugman pointed out, "investors have noticed that all those austerity measures are depressing the Irish economy - and are fleeing Irish debt because of that economic weakness."
This deal must be rejected and cannot be binding on a future Government. The Fianna FÃ¡il-Green Party Government should immediately resign. This disastrous agreement has profound consequences for Irish society for many years to come. We are calling on Members of this DÃ¡il of all parties and Independent Members to stand up and oppose this deal. The only way we can truly ensure it is confined to the pages of history is to have this Government brought screaming before the electorate and for the electorate to make its judgment.