Seán Barrett (Dún Laoghaire, Ceann Comhairle)
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There will be an hour and a quarter of debate, an hour of which will be taken up by the main spokespersons.

Enda Kenny (Mayo, Fine Gael)
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Our relations with our European partners and our standing in Europe are of vital importance to our national recovery. This Government will work in a co-ordinated and concerted way to see that they are improved. We also need to improve the standing of the European Union at home. In particular, the Government wants to see a step change in how European business is conducted in the Oireachtas. In our programme for Government we have set out a number of important initiatives in that regard.

As the elected representatives of the people, the Oireachtas must engage seriously with the passage of EU legislation if that law is to have the legitimacy it deserves in the eyes of our people. It must also play an enhanced role in holding the Government to account for the positions it takes and the decisions it makes at EU level. I have, therefore, committed myself to providing briefings prior to attending regular meetings of the European Council, and I am pleased to do so now.

As the House will be aware, the European Council is due to meet on Thursday and Friday of this week and I will represent the Government at those meetings. As the House will also be aware, I attended meetings of both the European Council and of the heads of state or government of the euro area in Brussels on 11 March. As these were important meetings for Ireland and for Europe, and as they laid much of the groundwork for what lies ahead, I thought it might be helpful to say a little about what happened then before looking forward to the Council meeting at the end of the week.

The meeting of the European Council on 11 March was an extraordinary one, convened to discuss developments in Libya and the southern Mediterranean region and to set the political direction and priorities for future EU policy and action. We saluted the courage of the people of the region and called for accelerated political and economic reform. In particular, we welcomed developments in Tunisia, including the announcement that elections will take place on 24 July, and we expressed our support for the democratic transition in Egypt. At the time of the meeting, the position in Libya was already a cause of grave concern. In calling for the immediate departure of Colonel Gaddafi, the European Council expressed strong solidarity with the people of Libya, condemned their violent repression and called on all parties to allow access for humanitarian assistance. Matters have clearly moved on considerably in the period since 11 March and the matter will arise for discussion again when the European Council meets this week, a point to which I shall return later in my statement.

Discussions among member states within the euro area normally take place at the level of Finance Ministers. Meetings at Head of State or government level are rare and in the past have been convened only when the most serious issues are in play. The meeting on 11 March was, therefore, a relatively unusual occurrence. As this was my first meeting as Taoiseach with my euro area colleagues, I took the opportunity to let them know that this Government is committed to a fresh approach to our relations with the EU and we want Ireland to be a respected and influential member of the European family. I told them of the strength of our mandate, briefed them on the severe economic challenges Ireland faces and the pain that this had meant for the Irish people. I reiterated our commitment to achieving a 3% deficit rate by the end of 2015, in keeping with the EU and IMF programme, and I stressed the importance of getting Ireland back on to a sustainable track. I emphasised the necessity of a lower interest rate in this regard.

I also briefed the meeting on the position in our banks, noting the stress tests currently under way, and I said that we should have firm figures by the end of the month. The meeting was an important stepping stone towards the meeting of the European Council that will take place later this week, where it is hoped to adopt a comprehensive package of measures to address the economic challenges facing Europe. It endorsed what has been termed a "pact for the euro", aimed at fostering competitiveness and employment, and at contributing to the sustainability of public finances and to restoring financial stability. This will now be presented to the European Council at this week's meeting.

Progress being made by Ireland and Greece in implementing their respective EU and IMF programmes was welcomed. Greece undertook to complete a €50 billion programme of privatisation speedily and to introduce a strict and stable fiscal framework. For our part, Ireland reiterated our intention to introduce a fiscal framework, with the strongest possible legal basis, and to stick to fiscal targets.

The meeting also invited Ministers for Finance to complete work on the European Stability Mechanism, ESM, and European Financial Stability Facility, EFSF, in time for the European Council this week. It was agreed that the ESM should have an overall effective lending rate of €500 billion and that, until the entry into force of the ESM, the agreed lending capacity of €440 billion will be made fully effective.

It was also agreed that, to maximise the cost efficiency of the support offered under the ESM and EFSF, they may also intervene in primary debt markets in the context of a programme with strict conditionality. Importantly from Ireland's perspective, it was agreed in principle that the pricing of the EFSF should be lowered to better take into account the debt sustainability of recipient countries. Greece, which does not receive its loans from the EFSF, received a 1% reduction in the interest rate it pays for European Union moneys. It also had the maturity for all loans it receives increased to 7.5 years.

As the House will be aware, in what were at times difficult exchanges it was not possible to find an agreed basis on which to secure a reduction for Ireland. As has been widely reported, some partners were seeking a commitment from Ireland in the area of corporation tax which I was not prepared to enter into or cede. Discussions are ongoing and I will continue to press Ireland's case. I am convinced that with goodwill on all sides it will be possible to find an agreed basis on which to move forward. I do not, however, wish to enter into the detail of ongoing negotiations, as I am sure the House will understand and appreciate.

The meeting of the European Council this week will be an important one for the European Union. As the House will be aware, for some time the EU has been working hard to respond to the economic crisis it has faced. Some have criticised it for adopting a piecemeal approach. Therefore, when we meet later this week the European Council will adopt a wide range of measures - a full and comprehensive package designed to lay the ground for sustainable and job creating growth. As part of this effort, the European Council is expected to endorse the first set of priorities for fiscal consolidation and structural reform under the new European semester. These were identified by the Council on the basis of the Commission's annual growth survey.

Priority is to be given to restoring sound budgets, reducing unemployment through labour market reforms and making new efforts to front-load growth patterns. Member states will be expected to translate these priorities into concrete measures as part of their stability or convergence programmes and national reform programmes which are to be submitted next month. In Ireland's case an extensive range of such measures is already committed to in our EU-IMF programme.

Actions at EU level also have a role to play in restoring growth and job creation. In particular, the Single Market, if operating well, offers great potential. I hope reforms under the Single Market Act, which the Commission intends to publish shortly, will make a real contribution. Now that the "pact for the euro" has been endorsed by those member states whose currency is the euro, it will be

submitted to the European Council, at which other non-euro area member states may indicate a wish to participate. If it is to have impact, the pact must translate into concrete actions. Participating member states will, therefore, be expected to move rapidly to identify steps which they can commit themselves to achieving within the next 12 months.

The European Council is also expected to welcome progress on the package of six legislative measures - to ensure fiscal discipline and to avoid macroeconomic imbalances - which is currently being progressed within the legislative process. The package includes the reform of the Stability and Growth Pact to enhance surveillance of fiscal policies and apply enforcement measures earlier and more consistently. It is intended that work on these measures will be completed by June of this year.

I expect the European Council will also take note of the importance of the banking stress tests being carried out by the European Banking Authority and other relevant authorities. This is a separate exercise from the testing of Irish banks currently under way. The results of the European exercise are not expected to be known until the early summer. However, it is intended that member states will have prepared strategies for the restructuring of vulnerable institutions and provision of government support in case of need before the results are published.

As Deputies will be aware, the results of the stress tests on Irish banks are due at the end of this month. Once they are available, the Government will elaborate a comprehensive response, including in consultation with the European Union.

The European Council is also expected to adopt the final wording for a change to the Treaty on the Functioning of the European Union to provide a foundation in law for the new European Stability Mechanism. The change was proposed by the European Council in December and has been progressed under the simplified treaty revision procedure. Once adopted, it will be for all member states to ratify the change in keeping with their respective constitutional requirements. The draft wording was examined by the previous Government and Attorney General and the view was taken that it did not have implications for our Constitution, Bunreacht na hÉireann, and, therefore, a referendum was not required to enable Ireland to ratify. We will examine the final wording carefully before deciding the best and most appropriate way to proceed.

The European Council will also take stock of international developments, particularly the unfolding situation in Libya. While European Union member states are contributing in different ways to resolving the crisis, we are determined to act collectively and resolutely. The people of Libya deserve an agreed and a democratic future. The regime of Colonel Gadaffi, which has a long and vicious record of violence against those who oppose it, has neither the agreement nor democratic endorsement of the Libyan people. Colonel Gadaffi should order an immediate and genuine cessation of his military offensive. It is now clear that he and his family should surrender power and allow the Libyan people to peacefully determine their own shared future.

I expect the European Council will work to increase the pressure on and international isolation of the Gadaffi regime by adopting further EU sanctions against Libya in implementation of UN Security Council Resolution 1973. I also expect a thorough discussion of the wider region and to hear from High Representative Ashton on her ongoing high level contacts with the countries of the region, including Egypt and Tunisia. High Representative Ashton also gave a detailed briefing to the meeting of eurozone leaders in Brussels.

The situation in Japan following the earthquake and devastating tsunami on 11 March will also arise. The focus of deliberations will be on the European Union's emergency and humanitarian response to date and the provision of additional assistance, if requested; the ongoing nuclear situation and the lessons Europe can draw from events in Japan; and the need to closely monitor the economic and financial consequences for the world economy.

At the meeting of the General Affairs Council on Monday, Ministers received an update on the EU response to the humanitarian emergency from EU Commissioner Georgieva. Ireland has provided €1 million in emergency funding for the Red Cross relief operation in Japan and made available blankets, mattresses and water tanks from our stockpiles of these items. This morning I signed a book of condolences at the Japanese Embassy and had a discussion with the Japanese ambassador who expressed strong appreciation of the contribution made by Irish people to the distress of people in Japan. The ambassador and I also discussed the ongoing difficulties with nuclear reactors. It is difficult to comprehend the scale of the tragedy unfolding in Japan. The ambassador pointed out that the recent tsunami was the equivalent of a three storey wave coming ashore over 500 miles of coastline. The emergency services in Japan have responded in the best way possible.

The issues before the European Council this week are important ones. Clearly, Ireland will support measures that can contribute to a restoration of confidence in the markets, foster economic growth and job creation and help Europe move beyond the economic crisis. While I will continue my efforts to secure a better deal for Ireland, including in regard to the interest rates attaching to our loans and in respect of the situation in our banks, I cannot yet say how much progress will be made this week as the final figures from the banking stress tests are not yet available. I assure the House that I will continue to fight on behalf of the Irish people and to do everything in my power to protect and defend our country's interests. I know I will have the support of the House in doing so.

Micheál Martin (Cork South Central, Fianna Fail)
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During the past decade the formal meetings of Heads of State and Government at the European Council have involved significantly less substantive negotiations. The formal agenda has become more focused on simply putting through matters decided in preparatory meetings, with the final communiqué issued frequently almost exactly as drafted before Council met. There have been times when the difference between the media hype outside the Council and what goes on inside has bordered on the ridiculous.

This week's meeting looks like it will be significantly different. Substantive issues remain to be decided and the outcome will give a major signal as to the future direction of the Union. The outcome of the Council is important for Ireland but it is not about Ireland. Fundamentally, this meeting is about whether the spirit of solidarity remains at the heart of Union and whether the Union is capable of responding in a comprehensive and credible way to what has been rightly described as the first crisis of globalisation.

This Council represents the culmination of three years of ongoing discussions about the role and responsibility of the Union in tackling the economic crisis which continues to impact on large parts of the Union. Even the most euro-positive person must accept that the Union's response has been at best halting and faltering. The crisis has been unique and so there has been no easy blueprint to follow. All too frequently there has been a sense that the driving agenda has been not to find solutions to the problems of today but rather to try to push forward long-standing national policies.

At this week's Council there will be a clear choice before member states. They can recognise the collective benefit which comes from giving sustainable support to countries experiencing difficulties or they can fail to act and thereby risk the sustainability of the euro and a rising tide of euroscepticism in many countries, which would be destructive of the foundation of public support vital for the Union. The stakes are as high as they have been at a Council meeting for many years. Given this and the work done in recent months, I believe there can and will be a good outcome to the meeting.

One of the most dishonest parts of the debate as it has evolved is the idea that the problems facing Europe today are as a result of the wild periphery being allowed to act without the adult supervision of others. Under this view the problems are uniquely contained within the policies of the member countries and would have been avoided if the views of the centre had been listened to. Unfortunately, this is a superficial stereotype deployed in the pursuit of narrow electoral and broad political advantage. It is an argument which at its core is a cop-out, removing the necessity to look at many parts of the crisis as it has evolved, in particular here, in Portugal and Spain. It is also what creates the idea that countries seeking assistance need to pay a price for the assistance.

The European Commission and the Council took a clear view of the Irish economy in the years before the crisis and published regular commentaries and recommendations. In 2006, the Commission stated, and the Council agreed, that Ireland's "budgetary position is sound and the budgetary strategy provides a good example of fiscal policies in compliance with the Stability and Growth Pact". In 2007, the Commission stated, and the Council again agreed, that not only were things okay here but we provided a "good example of fiscal policies conducted in compliance with the pact".

Equally, as written in recent weeks by former Taoiseach, John Bruton, it is not credible to look at what happened and to miss the failures of European Central Bank, ECB, regulation. The rights of oversight and ability to act were in place and to write them out of the story avoids asking uncomfortable questions of the ECB and risks the possibility that these serious failings will remain unrecognised and unchallenged.

Every country has legitimate domestic concerns which must be understood in the context of the debate on the financial stability facility. Where the danger lies is in inflaming these concerns with damaging rhetoric about teaching lessons to other countries. This sets up the false opposites of the national interest versus the collective interest, something which only ever undermines the capacity for collective action.

As the House knows, the terms under which Ireland agreed a support programme under the European Financial Stability Facility were set out for all countries in a series of meetings in the early and middle parts of last year. They were not subject to negotiation because no negotiation was or is possible for an individual country. I know that there are those who would like to present it as a new phenomenon but from a point soon after the support programme was agreed, Ireland has been seeking to have the EFSF's conditions changed. It has been argued to our colleagues in the Union that the interest rate is simply too high and undermines the ability of the programme to achieve its core objective of helping our economy to recover. At the start of the process quite a few countries did not accept that the terms of the facility should be changed. As the discussions progressed, this changed to the point whereby a few weeks before the general election all countries signalled that they accept that this is not about whether the facility's terms should be changed but rather how they should be changed. This was a welcome development.

The recent eurozone summit had never been intended as the place to reach the final deal and the offer of a rate cut in return for abandoning our corporation tax policies was in no way a serious attempt to reach an agreement. The countries involved in this attempt to force the issue had repeatedly and strongly been turned down by the previous Irish Government and foolishly hoped that they could push something through.

The argument which the Taoiseach had with President Sarkozy was an exact rerun of an argument which former Taoiseach and Deputy Brian Cowen had with him earlier this year. Ireland's Government has changed but its negotiating position has not for the simple reason that it cannot. A deal on the support programme is worthless if to win it we would have to undermine a major proportion of economic activity in the country. We will have more time to debate corporation tax later when the Dáil will have the opportunity to give a strong endorsement to current policy.

I believe there will be a deal on Friday and that it will restructure the facility and reduce the interest rates to be charged to Ireland and anyone who subsequently accesses the facility. This is the clear implication of the statements of other countries in recent months. It will happen because it is in everyone's interests for it to happen. Ireland can be quite clear at the Council in saying that it has fulfilled its responsibilities. The scale and pace of fiscal retrenchment is unquestioned. In return for support and in light of our common interests with other eurozone countries, Ireland has accepted very significant constraints on its policy options in relation to the financial system. We have not acted unilaterally. So when we hear the statement that in return for a deal, Ireland must give up something, the answer has to be that we are giving up many things already. Instead of obsessing about non-relevant issues, what others should now face up to is whether they really want not just Ireland, but Portugal and Spain to be restored within a secure euro. Attempts to exploit the current situation to push other points are both cynical and damaging. It is a classic case of marginal issues being mishandled so that they become more important than they are, with domestic opinion being inflamed to no possible positive end.

Chancellor Merkel is a person of considerable abilities and undoubted commitment to the founding ideals of the Union. The nature of the German system means that she and her party face an almost continuous round of important elections and as we saw here last month, she pays close attention to elections. However, that particular electoral photo-opportunity does not appear to have had any particular impact on her views. What has been missing from Germany and France in recent times has been the type of instinctive understanding of the need for a balance between centre and periphery which was a hallmark of their past leaders. Those who constructed the engine of integration and progress from the mid-1980s onwards would not have become almost fixated on the policies of a small nation when the future of monetary union is at stake.

What should happen at the Council meeting, and I believe will happen, is that there will be a balanced agreement. The facility will be made more flexible and less onerous, benefitting Ireland and, just as important, ensuring it is of more credible assistance to Portugal and Spain should it be required.

It is reasonable that there be a specific response to the failures of fiscal policy here and elsewhere in the eurozone. The agreement of new fiscal rules to be introduced on a national level would not only be acceptable but would be welcome. A fiscal responsibility law which would give a stronger basis to the planning, agreement and oversight of fiscal policy is one part of it. There are also measures to which we could reasonably commit about limiting the scope for agreeing spending outside of the Estimates or a so-called pay-go system which requires the matching of costs and income for new initiatives. There will be no one-size-fits-all approach available because of the different constitutional systems operating in member states. However, Ireland can offer a detailed and credible plan which addresses the demand that fiscal policy should be more sustainable.

It may be tempting for the new Government to focus only on our domestic issues at the Council meeting. To do so would be a mistake. Ireland's international position and influence is real and significant and was hard won. Despite our current and temporary problems, we have a wider responsibility as a positive and progressive modern nation in the wider world.

In this context, specifically with regard to the situation in Libya, the Council should express its strong support for the principles of democracy and human rights to be respected. The recent action in support of the democratic aspirations of the Libyan people is welcome and, it is hoped, not too late. The early support for the no-fly zone strategy which has come from the Arab League is surprising but encouraging. Ireland should show these countries that when they take a principled stand, they can rely on the support of small but principled countries throughout the world.

I note with some disappointment that our new Tánaiste and Minister for Foreign Affairs has been quite slow to take a strong stand in support of the action to halt this violence against the Libyan people. As a nation, we know only too well the effects of Colonel Gadaffi's willingness to use arms and explosives on innocent civilians. Why has the Minister, Deputy Gilmore, not taken the opportunity to express strongly Ireland's solidarity with the innocent civilians of Libya and support for the action to halt this slaughter? Now is the time to re-examine the issue of Gadaffi's role in the conflict in the North of Ireland and to establish once and for all the extent to which this man and his regime contributed to the suffering experienced by so many in these islands over the decades of conflict which we suffered. Now is the time examine what intelligence material from the various security agencies can be published. Now may also be time for the wider provisional movement to look to their own records and, in the spirit of the Eames Bradley process and following on from the work done in helping to find the bodies of the disappeared, assist in establishing the extent to which Gadaffi and Libya contributed weaponry, finance and other assistance.

This weekend's referendum in Egypt showed that the Arab world's largest country is moving forward and there are equally hopeful signs in Tunisia. There is a need for the largest club of democracies in the world, the European Union, to be active and generous in supporting democracy, human rights and development in these countries.

People throughout Europe who believe in the ideals of the Union are looking to member states to agree credible and generous measures at this European Council meeting to help to get Europe and the euro through this crisis. These include measures which help individual countries to recover, protect the common currency and reinforce the vision of a Europe of shared interests.

The price of failure is also significant. It would mark an encouragement of euroscepticism and promote the idea that narrowly defined national interests should prevail. At the same time it would suggest to peripheral countries that the views of the strong centre must prevail. Now, more than ever, the European ideal can offer the best hope for our country and the people of Europe as a whole. However, Europe must actively choose this path. Its leaders must remember the principles upon which the Union was founded and they must take this opportunity to remind the people of Europe why they supported the Union in the past and why it deserves the continued support of citizens.

The outlines of a deal have been clear for months. There has been significant movement in the right direction from almost all countries. It is vital, therefore, the new Government holds the line that was established by the last Government, does not allow any fudge on any element of our corporation tax policy and ensures the principles upon which the European Union was established and upon which the country's support for Europe is based are protected and maintained.

Pádraig Mac Lochlainn (Donegal North East, Sinn Fein)
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I wish to share the final five minutes of my time with Deputy McDonald. Looking forward to this week's European Union summit, we hear the word "co-operation" bandied about. Co-operation is defined by the Oxford English Dictionary as the action or process of working together to the same end. To intimidate means to frighten or overawe, especially to make another do what one wants. There is a world of difference between co-operation and intimidation. One outcome of the meeting of European leaders last week was that Greece secured a lower interest rate on its borrowings. What was the cost? It had to agree to sell €50 billion of state assets. When the Greek economy is gutted completely, when all vehicles of growth have been auctioned off, when there is no mechanism to begin paying back these extortionate loans, what will a difference of 100 basis points amount to?

When Ireland went cap in hand to get a reduction, we were told "No". Angela Merkel said that it was simply fair to say they could only give a commitment when they got something in return. However, Germany and France continue to get something every time we put another €1 billion of taxpayers' money into our banks in order that German and French banks do not take a hit. They get something with each budget when billions of euro is taken out of ordinary people's pockets in order that the Government can adhere to the strict terms and conditions imposed by the EU. They get something each time the prospect of burden sharing is taken off the table.

At this week's meeting, the pact for the euro will be converted into a binding agreement for euro area countries, representing a deep European penetration into national political and policy freedoms without any genuine democratic mandate. The effective lending capacity of the European rescue funds will be bumped up to meet the original goal of €500 billion through higher guarantees and injections of capital, although the precise mix and timing have yet to be spelt out. It will concentrate on actions where competence lies with the member states, constraining somewhat their autonomy to set policy by way of an annual system of setting common targets and national commitments, reporting and evaluation by the Commission and Council. It stipulates that all eurozone countries should put into law a pledge to get a grip on public debt. There are no provisions for compulsion or sanctions on member states. The reliance is on peer pressure. Only those seeking the support of the European Financial Stability Facility, EFSF, and European Stability Mechanism, ESM, will be forced to make policy changes. How can this be co-operation? An IMF-type institution will be established for Europe, the lending of which will be senior to that of private sector bondholders and which will be able to impose restructuring agreements and haircuts. As with all mention of burden sharing in Europe, however, this will only take place after 2013. Is the pact aimed at the right problems? No. How can it be when the German Chancellor is facing into an electoral challenge this week?

One cause of market turmoil is fear of contagion because of the fragility of Europe's banks. However, any sensible debate about restructuring debt in the near term has been completely blocked although, confusingly, Germany insists that bondholders must bear more of the burden in future. The European Commission and French and German Governments' hard-line position on private debt restructuring in the future, whether in the form of haircuts for bondholders or debt-for-bank-equity swaps, merely rubs salt into the wounds of the people.

The Government must inform the people of the measures it intends to pledge to implement this week under the pact for the next year. It must outline the concrete commitments to be achieved in the next 12 months in the name of the people. What is it bringing to the table this week? The people also deserve to know when the timetable for the gradual paying in of capital to the new fund will be established. How much capital must the people put into this fund in order that we may get it out at a later date as a loan at some extortionate interest rate? These are the small details of this pact which escape public attention. We will be paying into a fund that we will most likely access at a later date at a high rate of interest. It is like a burglar robbing one's home and then charging one to take away the loot.

One of the most pressing issues in this pact relates to the European Stability Mechanism whereby any decision to provide assistance will be taken by unanimity on the basis of a debt sustainability analysis of the member state concerned conducted by the Commission and the IMF in liaison with the European Central Bank. Where was this debt sustainability analysis before Ireland drew down the crippling EU IMF loan? Will there be such an analysis? These are the questions our Government must ask and these are the things for which this Government must fight.

The dogs on the street know that the current debt burden is unsustainable. The world and its mother knows that there is no way the people will be able to support bondholders of German and French banks indefinitely while dealing with packages of income cuts, public service decimation and taxes on everything bar the wealth of the State.

During the election the Taoiseach stated there would be burden sharing. He said that no longer would the people carry the debts of private banks on their backs. He said Irish sovereign default was becoming closer to reality because of the strangulation of private debt. Sinn Féin has always said as much. Ours was the only party which rejected the bailout on that basis. Ours was the only party that did not suggest renegotiating the interest rate when in reality the whole deal was rotten. Ours was the only party which held that the people could not afford the terms and conditions of the bailout. Unfortunately, we were right. Unemployment is at a record high of 14.7%. An increasing number of people are making the decision on whether they can afford to feed their families or pay their mortgage. Some 1,000 people are emigrating every week.

The choice is clear. Will the Taoiseach stand up for Ireland and challenge head on the blatant injustice of the EU-IMF package or will he repeat the disastrous policies of the last Government, which amounted to a betrayal of the Irish people? For all our sakes, I hope he makes the right decision.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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There was a time when the term "eurosclerosis" was in vogue, but it seems to have gone out of fashion recently. The pace with which European institutions have responded to the crisis, not just in this State, but across the Union, has been sclerotic. Having been slow to react, the nature of the reaction is not only questionable, but destructive.

I will focus most of my remarks on the pact for the euro that will be presented at the Council meeting. The objectives set out for the pact are to foster competitiveness and employment, to contribute further to the sustainability of public finances and to reinforce financial stability. The great difficulty with the pact is that it runs headlong into its own contradictions. To achieve any of its objectives, we need investment for faster growth, an equal path towards effective competitive rebalancing, urgent measures to get countries in deficit out of the straitjackets in which they find themselves and measures to clean up the banks. As it stands, the pact is a million miles away from any such plan. It fails to set out any kind of roadmap to achieve its stated goals.

Concurrent with the pact, the European Central Bank, ECB, has stepped forward to announce it will raise interest rates. This runs precisely counter to each of the pact's stated aims. Fiscal consolidation will be made more difficult because of higher interest rates and slower nominal GDP growth. The appreciation of the euro will harm external competitiveness. The impact on deficit countries will be more severe than it will be on countries in surplus, such as Germany, thereby worsening the current imbalance. Growth and employment will be lower than would otherwise be the case.

This is no great surprise, given the fundamental flaw at the heart of the EU's austerity strategy. The more countries reduce wages, the greater their inherited debt loads become. As debt burdens become heavier, public spending must be cut further and taxes increased to service governments' debts and the debts of their wards, such as the banks. In turn, this creates a need for additional internal devaluations, further heightening the debt burden and so on. It will be a vicious spiral downwards into economic depression.

The two main policy planks of the pact for the euro, namely, rapid and permanent fiscal consolidation and further wage cuts, can only lead us to conclude that it is not so much a pact for the euro as it is a pact for austerity. This does not bode well for the future of the European economy. The proposed pact aims to enshrine the austerity remedies supposedly prescribed by the financial markets. While fiscal discipline and fiscal balance are positive and desirable in the medium and long term, it is an offence against democracy to elevate them to pre-eminent points of principle. With worry I heard the Taoiseach assert he would give the principle the strongest legal underpinning. Did he mean a constitutional underpinning? Perhaps he will clarify.

Enda Kenny (Mayo, Fine Gael)
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Is the Deputy referring to the debt break? Which issue is she discussing?

Mary Lou McDonald (Dublin Central, Sinn Fein)
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Fiscal discipline. The Taoiseach stated-----

Enda Kenny (Mayo, Fine Gael)
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I was discussing a legislative base, not a constitutional one.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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That was not clear. The Taoiseach referred to the strongest legal underpinning, so I wanted to clarify.

Enda Kenny (Mayo, Fine Gael)
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No. Legislative.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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None the less, even to elevate the principle in that way is incredibly dangerous. If one elevates fiscal discipline and fiscal shrinkage to a point of principle, it will have immediate impacts in terms of public service provision. While there must be balance and discipline, a keen eye must also be kept on the provision of public services and citizens' quality of life. The difficulty with pursuing a legal underpinning of this kind, something that is much beloved of German and other EU administrations, is that it relegates public service, service quality and the well-being of citizens to a clear second position.

Enda Kenny (Mayo, Fine Gael)
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Its purpose is to prevent reckless spending.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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No one in this House - actually, I am not so sure about that - commends reckless spending.

Eamon Gilmore (Dún Laoghaire, Labour)
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Got it in one.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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There is a way to deal with this issue in a manner that does not cut the legs out from under services that are already struggling, yet still understand that the citizen and citizens' welfare, not economic dogma, have primary position in the State. May I finish my speech?

Enda Kenny (Mayo, Fine Gael)
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And by preventing reckless spending, one protects the citizen as the primary concern.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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Certainly, but the Taoiseach must prove there is a case for the kind of legal underpinning he suggested for so-called fiscal discipline.

Olivia Mitchell (Dublin South, Fine Gael)
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The Deputy has two minutes remaining.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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I hope I will get them.

Pádraig Mac Lochlainn (Donegal North East, Sinn Fein)
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The Acting Chairman should give the Deputy an extra minute to make up for the interruptions.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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For citizens, terms such as "fiscal discipline" often translate into real life as cutbacks, hardship and, as my colleague Deputy Mac Lochlainn stated, struggling to meet basic household bills.

The proposed strategy poses a further dilemma at EU level. How can the reputation of a financial area be made more solid by rewarding bank failure and not bank success? How can we trust the EU to police national budgets and to ensure economic growth and recovery while it is bailing out European banks at the expense of the welfare of European citizens for generations to come? How is it that the European Commission's deliberations on, for example, burden sharing are an exercise in futuring? Why has it adopted this "not yet" policy? Not only will the policy not work, it could bring about an economic apocalypse in so-called peripheral countries like Greece and Ireland. How can the term "economic governance reform" be used at European level to sugar coat a vicious agenda of shrinking the public sector, slashing the welfare state and protecting bondholders? I will conclude, so I ask the Acting Chairman to indulge me.

Olivia Mitchell (Dublin South, Fine Gael)
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The Deputy's time has expired.

Mary Lou McDonald (Dublin Central, Sinn Fein)
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There is a danger that European policymakers will believe their own propaganda, namely, that the pact constitutes a resolution of the euro area crisis. It is nothing of the sort. If anything, it will exacerbate matters. In fact, Merkel and Sarkozy may fan the flames of the euro crisis. For our purposes, the greater danger is that the Government and the Taoiseach will buy into the propaganda to the detriment of our State and citizens.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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May I share time with Deputy Daly? I believe that is all.

Olivia Mitchell (Dublin South, Fine Gael)
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It will be eight and seven minutes.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We initially believed there would be more of us, so it might not take that long.

Olivia Mitchell (Dublin South, Fine Gael)
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That is fine.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The central issue I wish to address is the IMF-EU deal, but the Libyan crisis was also discussed at the summit. I would like to follow up my question to the Tánaiste and Minister for Foreign Affairs during Question Time earlier about the Libyan bombings. We should be screaming from the rooftops about the inconsistencies and double standards that are being applied because we have been told the action taking place in Libya is designed to prevent violent attacks by the Gadaffi regime against Libyan civilians. Preventing such attacks is an entirely laudable ambition and supporting the movement for democracy within Libya, which is seeking to overthrow the Gadaffi regime and establish a democracy, is also entirely laudable. I hope Members are genuine and serious in making statements on this but one has to seriously question the bona fides of the US, France, Britain and other major powers, given they made enormous sums arming Gadaffi in recent years and providing him with the weapons he is now using against his own people.

The Minster might say that is history but this cynical policy of double standards in supporting brutal regimes continues in the form of turning a blind eye to what the rulers of Bahrain, Saudi Arabia, the United Arab Emirates are doing to their people who, like the people of Libya, are campaigning on the streets for democracy and an end to dictatorships. No one is screaming from the rooftops about this inconsistency. The only way to explain this inconsistency is that the intervention of the US and the major European powers has nothing whatsoever to do with supporting the movement for democracy in Libya and elsewhere in the Middle East and has everything to do with using any means to secure control over oil supplies in the region. If that means backing dictatorships that are crushing democratic movements, they will do so. We in Ireland have a special responsibility to raise our voices about this.

I refer to the IMF-EU deal. Much play has been made of the attempt to renegotiate the deal, which everyone accepts is unsustainable in the context of the interest repayments on the huge loans the State must take to bail out the banks. This amounts to shifting around the deckchairs on the Titanic. Even if the Government manages to secure a 1% reduction in the interest rate on the repayments, that would barely address the unsustainability of this deal. Approximately €100 billion will be borrowed but national revenue is €30 billion and economic growth is zero. Even on the best projections, economic growth will not exceed 2% annually over the next few years and no credible projection would suggest it would exceed that. One could credibly argue that as the Government takes money out of the economy through austerity cuts, the economy will continue to contract and it is obvious we are digging a hole for ourselves. While the EU and the IMF are extorting us with interest rates on these loans, we are digging a worse hole for ourselves and it is unsustainable.

What I find particularly galling about this is it represents a serious U-turn by the Minister and by Fine Gael in the context of what they said during the election campaign. According to the Minister, it would be "Labour's way or Frankfurt's way" but that tough talk has been dropped. Fine Gael was more specific when it launched its banking policy document in February. According to The Wall Street Journal, the Minister for Finance, Deputy Noonan said: "The next government would be forced to "unilaterally" restructure the debt of Irish banks if agreement cannot be reached with Europe on senior bond holders sharing the cost of recapitalising the country's insolvent banks." He went to say, "It is neither morally right nor economically sustainable for taxpayers to be asked to beggar themselves to make massive profits for speculators".

Fine Gael said senior unguaranteed bondholders should be unilaterally burned. The Central Bank of Ireland stated in recent days senior unguaranteed, unsecured bonds amounted to €16 billion. Why is the Government not unilaterally restructuring that debt and saying it will not pay? Fine Gael and the Labour Party are reneging on their policies and they are begging the Union to lower the interest rate on the loans by 1%, which will make no difference to the unsustainability of this deal. That is a massive U-turn. Should the Government parties not match their pre-election rhetoric by seriously standing up to Europe and saying they will not pay the gambling debts of private institutions because they will sink this economy and are unjust, and private financial institutions, the ECB and the EU have to take responsibility for their culpability in causing this crisis by promoting the policies that led to the reckless speculation in the banking and property sectors? To do anything less would betray the aspirations of those who voted for the Government parties in the election.

Clare Daly (Dublin North, Socialist Party)
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It is important the Taoiseach is cognisant of and serious about these issues before he attends the European Council. He said he would not go into too much detail, which is unfortunate, given this is a feature of the Government's approach to many issues. Time is running out, however, and there is an expectation among the population that he will return from the meeting with more than the lofty aspirations that are being repeated in various documents. There has been much discussion about sustainable growth, comprehensive packages and so on, but the reality on the ground is different for people. There is no indication of jobs growth and a turnaround in unemployment.

I agree with the Taoiseach that the people of Libya deserve an agreed democratic future but so do the people of Yemen, Bahrain, Palestine and so on. I hope he will highlight to our European counterparts the selective way in which they approach dictators. It is total hypocrisy for them to implement a no-fly zone in Libya only to stand idly by 12 hours later while the army of an ally, Yemen, shoots dead 39 protesters. I hope the Taoiseach brings to the attention of the Council that this action is not being taken to support the revolutionary or democratic movement in Libya but, instead, to take advantage of the situation and to exploit the opportunity to replace the current regime with a more compliant one.

The most serious issue facing the people and the Government is the EU-IMF deal. The people want to know what is going on. Multiple trips have been made to Brussels and it is clear the Government parties fought the election by creating the illusion that there would be a simple, easy renegotiation of the deal which would yield an alteration that would result in a lifting of the crushing burden on the shoulders of ordinary people as a result of the disastrous policies of the previous Government. It is clear now that what we are getting instead is some soft talk about a reduction, primarily in interest rates, which will not wash. The points have been made by my colleague in that regard. A price is being put even on that paltry reduction. It is not a renegotiation. We are being told that if we give up this, we will get that back. It is that type of horse trading, with very few benefits attached.

Where is the burden sharing? Where are the hair cuts and where is the hit being made? People would tremble if they read the Taoiseach's speech in which he lauds the situation that Ireland and Greece are making good progress. That good progress for Greece is a €50 billion rapid privatisation programme being foisted on that economy and the deflationary impact and the job losses that will cause will be devastating for Greece. Is that what the Irish Government expects us to emulate? It is saying we will adhere to the terms of the 3% deficit by the end of 2015. How will it do that? That is what people want to know. It is no longer good enough to say we are where we are or we are where Fianna Fáil and the Green Party put us. We know all that. We now want to know what is being done about it. The question is whether there is a benchmark below which this Government is not prepared to go because we have a European Union acting, in reality, as an agent for the financial markets. Let us be clear about that. They seem to be intervening to shore up the interests of German and French banks who recklessly speculated on our property economy. They were private loans for speculative gain and private profit. How much is the Minister expecting those people to pay for their role in this crisis? What appears to be happening, and we will know soon enough, is that he expects people who are being crushed with the universal social charge, those taking a hit in social welfare and ordinary householders paying excruciating mortgages to continue on in that manner.

What the Government must be clear on going into the negotiations is that an adherence to the policies it has hinted at in the Taoiseach's opening address will not satisfy the concerns of the people who voted for the Government. Many people will be considering what has happened in recent weeks and they will say there is no indication that there is any departure from the policies the previous Government implemented. I remind the Minister of the recent electoral hiding that Government received. While people may be prepared to give this Government a little space to manoeuvre and do the negotiating, they bought the Government's line in good faith and they expect it to come back with something concrete and much more than has been outlined in the documents we have seen so far.

Kieran O'Donnell (Limerick City, Fine Gael)
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I am delighted to make a contribution to this debate and in the short time available to me I want to make a number of important points. I wish the Taoiseach, Deputy Enda Kenny, well in the negotiations over the comings days but I want to deal with the issue of corporation tax. Europe should be aware that the low corporation tax has been a cornerstone of our economic platform since the 1950s across a range of areas. We had a 10% manufacturing rate. We now have a low rate of corporation tax. Furthermore, our corporation tax is twice as important to us as the tax is to Germany. Our tax as a percentage of gross domestic product is 2.9%, which is twice Germany's rate of 1.1% and ahead of France whose rate is 2.8%. That is an indication of the importance of our low rate of corporation tax in terms of generating tax in the Irish economy. We have a large number of multinational companies in Ireland. I am a Deputy for Limerick city which has a huge multinational base. Many of those companies would not have come to Europe if Ireland did not have a 12.5% rate of corporation tax. That is something that is overlooked. A rising tide should lift all boats.

We are a small, open economy. That is often overlooked. We are a vital partner in terms of Europe. One of the cornerstones of our small, open economy is our low corporation tax rate. Figures do not lie. The fact our corporation tax in percentage terms equates to 2.9% of our GDP - it is 1.1% in Germany - shows the benefit of the tax in terms of bringing industry and jobs to Ireland. We have a lower corporation tax rate than France. Our European partners must be aware that the low corporation tax has been a driver in terms of our small, open economy. We have a large number of multinationals coming here and we cannot ignore that.

I want to make two other points in the time available. In the overall context of the negotiations, Europe must see that in terms of the 5.8% interest rate and the fact that we are being charged a 3% margin over and above the cost of money to the fund itself, that rate is not sustainable. Europe is aware of that. I expect there will be a lowering of the rate but it must be to a rate that is sustainable.

In terms of the European Central Bank, our Minister for Finance has already had discussions with Jean-Claude Trichet on giving the banks a proper period of time to re-establish independent funding as distinct from ECB funding of €150 billion. We do not want a situation where the banks are involved in a fire sale of assets effectively to reduce their deposit to loan ratios.

When the bank guarantee scheme was introduced in September 2008, the then Minister for Finance, Deputy Brian Lenihan, stated it was to ensure credit would flow from the banks to the small and medium-sized business sector. That has not happened. I am aware from my previous role as an accountant in practice and the number of people who come to see us in our constituency offices that people cannot get credit from the banks. The banks are now actively looking to reduce their loan portfolio and I believe they are making decisions that may not make commercial sense both from the point of view of the bank and the economy in terms of keeping people in jobs and in business.

The stress testing being carried out on the Irish banks will be completed by the end of March. That must feed into the discussions with Europe. Europe is carrying out its own stress testing which it is expected will not be concluded until the summer. That, too, must feed into the discussions.

We have reached the point where our European partners must realise that countries are different. As a small, open economy over successive decades, a low rate of corporation tax has been to our benefit. That is measured in the tax take and the number of jobs across a range of sectors, especially in the multinational sector. If a company is paying 40% corporation tax, it means the company must give 40 cent from every euro of profit to the Exchequer. If that were reduced to 12.5%, the company could put the difference back into keeping people in jobs. What we must consider is a sustainable basis.

I wish the Taoiseach, Deputy Kenny, well in the negotiations. I have no doubt they will be successful, but they will be difficult. Europe must be aware that what is good for Ireland is also good for Europe.

Eamon Gilmore (Dún Laoghaire, Labour)
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I thank the Members who contributed to the debate, in the course of which there were many references, understandably, to the debates that took place during the general election campaign. Leaving aside the partisan comments we all tend to make about general elections and their outcomes, the overwhelming message from the general election was people's desire that the new Government would get to grips with the unprecedented economic difficulty the country is facing and address the issues of economic recovery, getting people back to work, getting growth into the economy and confidence back into the domestic economy, and restoring the country's reputation.

There is a great understanding among the people that this is a process that will take some time. I doubt that anybody in this country expects the Taoiseach to arrive back from the European Council meeting at the weekend with a neatly packaged solution to our economic and financial difficulties. We must therefore see the Council meeting as part of a process which the Government is undertaking and through which we are determined to restore this country's fortunes and get us back on our feet. In that context, there is a responsibility on everybody to be supportive of that effort. I do not mean it should be uncritical support, but support in the sense that we must be confident about this country's future. We should not be talking ourselves further into a depression or decline. Second, where Members of the House or individual political parties have suggestions about how we can best do that and constructive ideas about how we can move things forward, the Government is open to addressing them.

Apart from the economic issue, the Council meeting will address a range of issues which have been referred to by a number of Deputies. Preparation for this week's European Council was taken forward in a number of productive meetings held yesterday in Brussels. The Council of Ministers dealing with energy met and considered the situation in light of recent developments in Japan and north Africa. The Minister for Communications, Energy and Natural Resources, Deputy Rabbitte, represented Ireland. With regard to energy markets and supply, the conclusion was that members have so far been able to cope with the consequences for the oil and gas markets but that these needed to be kept under close watch, including as regards price developments.

Where nuclear safety is concerned, it was agreed the priority is to ensure the highest standards are in force. Improving safety is a continuing process. The Council welcomed voluntary steps taken by national authorities and industry operators regarding the review of safety of nuclear facilities. There was a shared willingness to launch a process for defining a comprehensive risk and safety assessment of nuclear plants in Europe, the so-called stress tests.

A meeting of Finance Ministers was also held yesterday with regard to the European Stability Mechanism, ESM. The Minister for Finance, Deputy Noonan, attended that meeting. The main task of relevance to the European Council was to finalise the key structural features of the ESM, following the euro group Heads of State and Government meeting on 11 March. This was successfully achieved and the details are set out in an 11 page term sheet which I understand is now publicly available.

The Foreign Affairs Council, attended by the Minister of State, Deputy Creighton, met yesterday morning and over lunch and devoted a considerable amount of time and deliberation to the situation in Libya. Ministers agreed Council conclusions which clearly condemn the continued violence and ongoing violations of human rights by the Libyan regime against its people. Ireland strongly supports these conclusions which also express satisfaction at the adoption of UN Security Council Resolution 1973 and make clear that the EU will support actions provided for by that resolution which are necessary to protect civilians and civilian populated areas under threat of attack. The Council also adopted further sanctions against the Libyan leadership. A further round of EU sanctions is expected to be agreed by the European Council later this week.

Ahead of the European Council discussion on the southern neighbourhood, the Foreign Affairs Council also discussed the situation in the broader region, particularly the EU's support for transitions in Tunisia and Egypt, as well as the situations in Bahrain and Yemen. The Council agreed conclusions on Bahrain and Yemen which Ireland fully supports. On Bahrain, the Council deplored the recent loss of life and the escalation of violence and called for the immediate commencement of dialogue on reform, without preconditions. The need for the Bahraini Government and security forces to respect and protect basic human rights was also emphasised.

With regard to Yemen, the Council strongly condemned the use of force against protestors which resulted in at least 39 deaths last Friday. The Council also made clear that the EU will review its policies towards Yemen should the safety of demonstrators not be ensured. The Council urged all sides to engage in constructive and comprehensive dialogue without delay with a view to achieving an orderly political transition in Yemen.

As is usual and in line with the treaty provisions, the General Affairs Councilmet yesterday to prepare the meeting of the European Council on Thursday and Friday. This was a good meeting which worked through the draft conclusions of the European Council and brought together the diverse elements which figure on its agenda: the situation in Libya and the wider southern neighbourhood; the situation in Japan; and the comprehensive package of measures to respond to the economic crisis and preserve financial stability.

There are some grounds for satisfaction in seeing the components of this comprehensive package now come together, and in a relatively short timescale. The stepping-up of economic co-ordination at EU level through the European Semester has now been launched. The pact for the euro, agreed by Heads of Government on 11 March, is now in effect and is open for other member states to join. At the General Affairs Council, Denmark was clear in stating it would be participating, and a number of other non-euro member states are actively considering such a step.

The strengthening of the Stability and Growth Pact through legislation is advancing and the Council's so-called general approach now opens the way for negotiations with the European Parliament. The banking sector stress tests throughout Europe are under way, and the European Council will underline the importance of the peer review process. The final element of this package will be the adoption by the European Council of the decision which will amend the Treaty on the Functioning of the European Union, TFEU, with regard to the setting up of the ESM.

In the Council discussions yesterday the draft conclusions of the European Council on this range of matters were generally well received. Suggestions for amendment and improvement in a number of respects were put forward, including by Ireland regarding the attraction of capital to finance growth, and these will be considered by President Van Rompuy and his team before the next draft is presented to the Heads of State and Government.

As regards the southern Mediterranean region, since the Foreign Affairs Council had already had an in-depth discussion on current events, the General Affairs Council focused on how the EU can assist those countries, such as Egypt and Tunisia, which are now on the path to democratic transition. The Council and the Commission are considering a number of medium and long-term measures. These will form part of a new partnership between the EU and our southern neighbours which we hope will be founded on deeper economic integration, broader market access and political co-operation. However, there are also some actions we can take now, such as increasing lending from the European Investment Bank. These will be further considered by the European Council.

While there was little discussion at yesterday's General Affairs Council on issues related to the ESM and the EFSF, given that Finance Ministers were meeting in parallel, we welcome the acknowledgement in the pact for the euro of the importance of debt sustainability of recipient countries. In Ireland's case, bringing about the pricing reduction in the EFSF envisaged in the 11 March conclusions is a matter being addressed in ongoing contacts. We will work constructively to reach an outcome that is acceptable to all concerned.

The stage is set for a productive meeting of the European Council, marking the culmination of an intensive process of preparation of an integrated package of economic and financial measures, as well as providing for a distinctive European Union input to the preoccupying situations in both Japan and Libya.