Tuesday, 5 April 2011
Bank Bailout and EU-IMF Arrangement: Motion
That Dáil Éireann:
recognises that:— the bank bailout and the EU-IMF loan package arrangement imposes a hugely onerous debt burden on Ireland which will have profound consequences on the Irish economy and Irish society for years to come;— there is widespread and justified outrage felt among very wide layers of Irish society that ordinary citizens, and most particularly those on low and middle incomes and the vulnerable in our society, are being forced to pay for the speculation and gambling of bankers, bondholders and developers by way of swingeing cutbacks and austerity;— a wide body of civic, political and expert opinion, both nationally and internationally, believes that the debt burden arising from the bank bailout, the EU-IMF package, and the conditions attached to the package in the memorandum of understanding, are economically unsustainable or potentially will become so, and will damage rather than enhance our country's prospects for future economic growth;— EU treaties signed by this country, with arguably far less grave or immediate effects for our economy and society than the EU-IMF package, have been put to referendum;— faced with a similar crisis to that in this country, the people of Iceland demanded and won the right to a referendum on a proposed IMF loan package;— recent developments in Portugal confirm that the financial and economic crisis now facing Ireland is very much a Europe-wide problem and that wide layers of society in other European countries are questioning the current EU approach to dealing with the banking and financial crisis;— the Pact for the Euro agreed at the recently held EU Council summit and the strengthening of EU powers for monitoring the economic and fiscal policies of member states, particularly those involved in the European Stability Mechanism (ESM) and the proposed European Financial Stability Mechanism (EFSM), have potentially profound effects on the ability of EU member states and their citizens to decide their own economic policies; and— there is an overwhelming democratic case for putting the continued bank bail-out and an agreement with such profound implications for the economic and social future of our country to a referendum of the people; and resolves to call a national referendum providing the Irish people the opportunity to accept or reject the bank bailout and the EU-IMF loan package arrangement.
I appeal to the one member of the Government who has turned up for this debate-----
My apologies, I did not see Deputy Keaveney.
I appeal to the Government to withdraw its amendment to the motion and allow, as the motion calls for, a referendum to be held on the continuing bailout of the banks and the EU-IMF deal. The Government will be aware, as is I am sure everyone in the country, that we are facing the most grave economic crisis in the history of the State. Hundreds of thousands of people have lost their jobs, while tens of thousands have been forced to emigrate. Brutal austerity measures are being imposed on ordinary families, working people and the poor and vulnerable in Irish society whose incomes have been savaged, while services have been cut. Many families are threatened with repossession of their homes. People are not able to pay their bills or make ends meet.
It is important to point out that the people suffering the consequences of this austerity which is being dictated by the IMF are not bankers or speculators but individuals who have worked and reared families and are now trying to enjoy their old age. They did not cause the crisis, yet they are being asked to pay for the criminal greed of bankers and speculators. This is often obscured in technical economic argument. It is often suggested this is a complicated matter, one above the heads of ordinary people. However, it is a simple one. It is about whether ordinary working people, families, communities and the vulnerable in our society, including the young and the old, should pay for the crisis created by the reckless gambling and speculation of bankers and bondholders or whether the bankers and bondholders who caused it should pay for it.
Before entering government, Fine Gael and the Labour Party were unequivocal about on which side of the debate they stood. In February Fine Gael stated it was morally wrong and economically unsustainable to ask the people to beggar themselves to enrich speculators and profiteers. What has changed? With another €24 billion being pumped into the banks, the case for saying we should not beggar ordinary citizens country to enrich bankers and speculators is even greater than it was when Fine Gael made that statement. If it was morally wrong and economically unsustainable to pour €46 billion into the banks, surely it is even more morally wrong and economically unsustainable to put €70 billion into them.
It is a pity the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Eamon Gilmore, is not here. He went further in stating his view of the case when he said for the second time earlier this year that the previous Government was guilty of economic treason for continuing to bail out the banks at a cost to taxpayers. It is worth quoting what he said: "If your Government [talking about the previous Government] knew that Anglo Irish Bank was insolvent and you asked the Irish taxpayers to bail it out and to pay the cost we are now paying for it that was and is economic treason ... I stand over that." If it was economic treason to bail out an insolvent bank at the expense of taxpayers, is it even greater economic treason to bail out all of the banks at greater cost to ordinary taxpayers?
I put to the Government the charge which the Tánaiste, Deputy Eamon Gilmore, put to the previous Government, namely, that it is guilty of economic and political treason for saying one thing before the general election and something quite different afterwards and continuing with the same policies. It is shocking for ordinary people to hear Fine Gael and the Labour Party, given all the rhetoric about change and ohow they would do things differently, sound exactly the same as the previous Government. They are using the same phrases, justifications and arguments for defending a continuation of the failed policy of bailing out the bankers, speculators and bondholders. Whenever these points are put to the Government, it states there is no alternative. We believe there is. If we were to threaten to default, this would put the ball back in the court of the IMF and the European Union, the ones who are trying to dictate to us who should pay for the banking crisis. We must put it up to them that if they wish to save the euro and the banks, they should pay for it and unload the cost of so doing onto the banks, bondholders and speculators guilty of causing the crisis in the first instance. By standing up to them and threatening to default we would at least force the ball back into their court and put it up to them to come with a fair, just and sustainable package to deal with the crisis.
It is important to point out that other countries have defaulted and that the sky has not fallen in on their heads. Iceland defaulted. As a result of campaigning by ordinary people for months, the Icelandic Government was forced to concede default. The Icelandic people, because they were outraged by the thought of this type of package being imposed on them without their having any say, took to the streets, surrounded their Parliament and demanded a referendum on whether to accept a similar package from the IMF. In a referendum they voted by a figure of 93% against a similar deal and the sky did not fall in on their heads. The IMF was forced to consider the outcome of the vote and reduce by a significant amount the interest rate it was charging Iceland. I am not suggesting that is the end of the story for Iceland, but the referendum outcome forced a change and debate. Other countries that defaulted, including Ecuador and Argentina, are still alive and kicking. The sky has not fallen in on their heads. If we leave the European Union to its own devices, as the Government is proposing to do, it will squeeze us. It will use the debt burden it is imposing on us to squeeze more concessions out of us in terms of the agenda it is pursuing. That is clear from what happened in the case of Greece.
The Government states it will negotiate a 1% reduction in the interest rate charged on this unsustainable package. To achieve a 1% reduction in the interest rate applied to its loan, Greece had to agree to a €50 billion programme of privatisation. Will such a programme be the quid pro quo required of the Government in the event that it manages to wangle a tiny concession from the International Monetary Fund and European Union in the forthcoming negotiations? The Government has already been forced to agree to sell State assets worth €2 billion. What will the IMF and EU demand at the next round of meetings if they are not satisfied that Ireland is doing enough or believe it will not be able to repay its loans? What will they seek in return for a small reduction in the interest rate on our loans? How many more privatisations of State assets will they demand? How many more cuts in social welfare and the incomes of ordinary people will they require? Is the Minister aware that at its most recent meeting with the IMF and EU, the Greek Government was told by the IMF-EU representative to start selling beaches and islands. Is this what the Government wants for Ireland?
While some of the Technical Group may differ from me on what are the alternatives, there are other options available. It is unconscionable that the Government refuses to reverse budget cuts which took €6 billion from ordinary people and the vulnerable given that just a few weeks ago we discovered that the 300 richest people in the country are €6.7 billion richer than they were last year. Why will the Government not consider introducing a wealth tax? Why will it not even agree that such a tax would be fair?
While the Government and even some members of the Technical Group will not agree with many of the points I have made, surely they accept that it would be democratic to have a referendum on the bailout. The purpose of our call for a referendum is to enable people to debate the options and allow everyone to set out their stall in order that the country can make a decision on the issue. Does the Government not trust people to consider this matter objectively and make the best decision for the country? This is what democracy and the motion are about. I ask the Government not to move its amendment and instead allow citizens to vote on the bailout package which will determine their social and economic future for many years to come.
If our circumstances were not so serious, I would be tempted to cite the line frequently used in Laurel and Hardy films on this being another fine mess.
The motion before us is about democracy and allowing citizens to decide what they will pay for the foreseeable future. The country faces a massive debt. Notwithstanding the Government's argument that the recent general election was a referendum, the goalposts have been moved because it has made a number of U-turns on the election commitments for which people voted. For this reason, it is vital that a referendum is held on the bailout.
Under Article 27 of the Constitution, taking the referendum route to have legislation overturned is onerous. It is a comment on how we value democracy that the system in place for this option is so complicated, involving as it does a majority of the Seanad and not less than one third of the Dáil petitioning the President if it is considered by them that a Bill contains "a proposal of such national importance that the will of the people thereon ought to be ascertained". The bailout is an issue of extreme national importance. The figures suggested by various economists on the cost of the bailout for each citizen are staggering.
It is difficult to consider this motion separately from the stress tests for banks and bank restructuring plans announced last week. While newspaper headlines tend to be sensational by nature, some of those that I have read contain an element of truth. They include such headlines as "Only a miracle can save the financial system from complete meltdown", "Disastrous world of Irish banking", "Ireland has lost the capacity to borrow", "Frankfurt's way prevails as harsh economic reality confronts Noonan", and "Bondholders escape as €24 billion put into the banks".
I accept that we need money to pay our bills, including salaries, wages and social welfare. However, given the nature of the terms and conditions of the bank bailout and EU-IMF package, the nation must have a say. While every citizen will pay, some will pay more than others. Those who will pay most are the people on lower and middle incomes. The bailout will not make an appreciable, proportionate difference to the wealthy who live abroad for certain times of the year to avoid paying taxes, disposed of shares just in time or transferred property into the names of family members or out of the country. The vulnerable and disabled, on the other hand, will pay heavily.
Senior bankers who held positions of responsibility during the banking bubble and who are now on bank boards remain in situ. The Financial Regulator announced that he intended to conduct a fitness and probity assessment of all members of bank boards but not until the beginning of next year. In the meantime, the bankers in question may decide to resign to avoid undergoing such an assessment and will, without doubt, receive extremely lucrative pensions and severance packages should they do so.
During Leaders' Questions Deputy Ross asked the Taoiseach a significant question, namely, why private debt has become public debt. Why has a protective curtain, almost like an iron curtain, come down around the senior bondholders? The nature of their investment implies risk. When they made profit on their investments were they pouring money into the State or rewarding it in any way? When they lost money did they take the loss? They did not do so because the people of Ireland, who are not being given a say in the matter, did so on their behalf.
I have read the Government amendment and I accept a radical restructuring of the banking system is necessary to ensure they become viable. The IMF-EU bailout is not the way forward, however, as it is too harsh. Ireland will not survive by continuing to take emergency loans from the IMF and EU. In the previous Dáil, I spoke about how IMF actions contributed to the destruction of economies in Africa, Asia and South America. The measures applied included the imposition of strong limits on public expenditure and the pursuit of excessively strict monetary policies.
I welcome the section of the amendment regarding the Government's commitment to protect ordinary depositors. Its final point on a jobs fund to support employment growth and sustainable enterprise appears paradoxical, however, given that it is juxtapositioned with a reference to the EU-IMF programme.
On the most recent capitalisation, I note the statement by the Governor of the Central Bank, Professor Patrick Honohan, that it does not score well on fairness. Fairness would be served if citizens had an opportunity to express a view in a referendum and have their say on whether the EU-IMF agreement will lead the economy on a sustainable path. When a referendum was put to people in Iceland, it resulted in change.
The €70 billion price tag of the current crisis makes it one of the costliest crises in history. Ireland is used to making history for positive reasons, whether through our achievements in sport, the arts or humanitarian work. I support the motion because it proposes to give people a say in their destiny.
The Taoiseach claimed the general election was a referendum on the EU-IMF deal and the four year programme put forward by the Fianna Fáil-Green Party Government. If that is the case, the people have spoken by resoundingly rejecting the deal and the programme of the previous Government. In that case, why is the Government pursuing exactly the same insane policies pursued by the previous Government?
Everyone knows the current policy cannot and will not work. Bailing out the banks to the tune of €105 billion effectively means 400,000 workers will pay taxes for their entire working lives to cover the cost of the bailout. In other words, 20% of the workforce will be enslaved for their entire working lives paying back the debt through their income tax.
The amendment refers to breaking the "massive dependence of the banks on the State" and the separation of "bank risk from that of the Sovereign". This is drivel, as the Government and international money lenders are well aware. Every time the insane step of pouring billions of euro into sovereign banks is repeated, the risk of sovereign default increases. The possibility of such a default raises major issues regarding the banks and markets. First, it will be impossible for the State to exit the EU-IMF deal in 2013 or 2014 and borrow at reasonable rates on conventional money markets. We will be forced into the 2013 EU bailout package which involves debt restructuring. This will expose Irish banks which hold €11 billion in Irish sovereign bonds and €11.5 billion in NAMA bonds.
Second, the banks are reliant on the State guarantee. Can the Central Bank maintain emergency liquidity funding?
Third, major questions arise regarding Ireland's ability to grow out of the current crisis. International patterns indicate that ten years of slow growth is the norm following a banking crisis. The point is proved by the ten years of zombie banking and economic stagnation experienced by Japan following its banking crisis. The only way to break the link between the sovereign and bank debt is by renouncing the private debt of the banks. We should establish a State banking system to take over the assets, boards and workforce, leaving the debts to those who took the risks in their chase for super profits. This Government came to power on a pledge to renegotiate the IMF-EU deal. Even the current Minister for Finance, Deputy Noonan, called it an obscenity. The Government came to power on a pledge to burn the bondholders and have burden-sharing. Now we are told that debate is over, but may I ask what debate occurred? Was it the Taoiseach's chat with Angela Merkel or Nicolas Sarkozy? Or was it the Minister, Deputy Noonan's, chat with Jean-Claude Trichet? Was that the debate? The way to have a debate is to put the matter to the people, which is why I support this motion. Let the people speak.
I congratulate the new Minister of State, Deputy Brian Hayes, on his appointment. I note that there are only three Members on the Government benches: Deputies Brian Hayes, Colm Keaveney and Derek Keating. I welcome their presence in the Chamber but it is a shame nobody else represents Labour or Fine Gael, particularly the so-called new kids on the block.
No Fianna Fáil. Absolutely. Notable by their absence are those who promised change in Irish politics and Dáil reform, so we have a long way to go.
I am grateful to the Acting Chairman for the opportunity to contribute to this important debate on the urgent need for a referendum on the EU-IMF loan package scheme. Before going into the details, I should highlight the amount of stress that some politicians, senior bankers and developers have caused our people. They have tortured our citizens and now we are all suffering the consequences. They have left the poor, the unemployed and others with major economic and social problems, and now we all have to try to clean up the mess. It was a scandal, a shame and a crime against the people for which those responsible should be jailed. There should be no fence-sitting on this issue: those people should be charged, prosecuted and jailed.
Our country is being dictated to and controlled by the European Union and the International Monetary Fund, not in our interests but in the service of global finance houses. Our children and future generations have become virtual indentured labour for as long as it takes to pay off the debts of a speculative clique or golden circle that has controlled our country. They will sell off more and more of our public companies and assets, including our natural resources, in their efforts to pay back money owed to these bankers.
As people will appreciate, the crisis is not about sovereign debt but has resulted from the socialisation of the private debt of financial institutions and developers. That is the truth. Despite it not having been the people's fault, the State - supported by the European Union and the International Monetary Fund - is imposing a continuing transfer of billions of euro in national wealth from the people to domestic and international banks in regressive tax increases, cuts to services, pay cuts, redundancies, an assault on workers' pension entitlements and the National Pension Fund, and through the disposal of national assets. Far from being sovereign debt, this is the illegitimate and odious debt of a handful of private financial institutions and developers and a corrupt political establishment that was taken on by the State against the people's wishes. On this most critical issue, the people have not been consulted, which is why I demand a referendum. Instead, we have suffered a circus of political commentators and so-called experts presented to us by State and private media. We should face up to the fact that there is not an informed debate going on. Look who controls many of our national newspapers.
I commend my colleagues in the technical group for having tabled this motion. The details show that the bank bailout and the EU-IMF loan package arrangements impose an onerous debt burden on Ireland which will have profound consequences on the economy and society for years to come. There is widespread and justified outrage across a wide spectrum of Irish society. There is an overwhelming democratic case for putting the continuing bank bailout and EU-IMF agreement to a referendum, given the profound implications for the economic and social future of our country.
The motion "resolves to call a national referendum providing the Irish people the opportunity to accept or reject the bank bailout and the EU-IMF loan package arrangement". That is what this debate is about. The technical group is putting it up to the Government and to Fianna Fáil on these issues.
We have not yet heard about bank staff, many of whom will probably get the boot from their jobs in the next six months. Low-paid staff in various banks will be affected and there is major concern among them. I fully support the Unite trade union's campaign to defend jobs and services in the banking sector. We must also consider what some bankers have done to small businesses. More than 200,000 jobs in local communities around the State are now being hammered and we may expect 20,000 or 30,000 people to lose their jobs as a result.
Last week, we saw how the Government - shame on the Labour Party - still supports the universal social charge, which is an unjust and regressive tax. It is important to highlight these issues. The Irish people should have the right to decide this issue. I reject those who say that as we have had an election and the current Government has a mandate on this issue. It does not. It got a mandate to do the opposite. It is time for Members of this House to stand up for democracy and for the people, including the unemployed and weaker sections of society. It is not fair that they should have to suffer the consequences.
Thank you, sir, but I will not need six minutes because much of what I had planned to say has already been said. It has also been said by nearly everyone I meet on the street and socially. They all seem to say the same thing. Until one is in Government one also seems to say the same thing - that we cannot afford this bailout. I would not support a referendum on this issue if the Government parties had done what they said they would do. Labour famously said it was either their way or Frankfurt's way, but they did not put up much of a battle there. As far as I can understand it, Fine Gael promised us limited burden sharing. It then copperfastened that by running Mr. Peter Mathews as a candidate, who agrees with nothing it plans as far as I can see.
The long and short of it is that we cannot afford to do what the Government plans. Those who claim that we cannot go down this road are told there is no alternative. There is an alternative, but it will also be difficult. It is similar to discovering that one has cancer, which leaves a person with two horrible choices. The first is to face up to the fact and go under the knife, as well as getting chemotherapy and radiotherapy. One might survive the treatment but there is no guarantee. That is what defaulting would be; there is no guarantee at the end of it but at least one would have some hope. The alternative is to ignore the cancer, saying "It'll be all right. At least you won't have to go to hospital for a year. You might survive for another year after that and at least you wouldn't have to put up with the pain of the knife". The pain of death would be much worse, which is what the Government has opted for. It says it cannot do the right thing because it will be too painful in the short run, but in the long term what the Government plans will cost us much more. It will cost us the ownership of our forests, rural schools and a decent health service. It will cost us so much that it will destroy this country. For that reason I support a referendum on this issue. I understand it would not be simple to hold a referendum; we would have to do a variety of things for that to happen, but where there is a will there is a way.
If the Government had done what it said it would do, I would not support a referendum. We have just had an election and the people had a chance to speak. The problem is that the people spoke on the basis that Labour and Fine Gael would do something different to what they now plan. Because of that, we need a referendum. If it is put before the people - with a choice between supporting the gamblers who took a risk and are now being sorted out by their friends in Europe, or having an extra special needs assistant, or being able to see a urologist for the first time in more than two years - I know what decision they would make. If the Government is that definite it has made the right choice, why not put it to the people to find whether they will support it on this? The Government has not put this to them before. It did not put it to them that it would become the new Fianna Fáil, which is what it has become. The Government should put the following question to the people, namely, do the people accept it is okay for Fianna Fáil and the Labour Party to become Fianna Fáil or do they not?
The motion before the House is that the Irish people should decide whether they are willing to pay back the private losses of wealthy investors and European banks. The motion is not that the Irish people should not pay these losses, it is whether they should be given the choice to pay them. The Government claims the people were given this choice in the recent election. In the Chamber today, the Taoiseach referred to the large Government majority and the mandate this brought with it. In regard to paying back the losses of private investors, this is not true. The people voted for the Government based on what its candidates said during the election, as we heard in the House today.
Fine Gael previously claimed: "The banks aren't getting another cent. Anglo Irish Bank is not getting another cent of our money. Not another cent." As Deputy Luke 'Ming' Flanagan pointed out, the Tánaiste, Deputy Gilmore, said that when it came to the banking debt it would be Labour's way or Frankfurt's way. That is unambiguous language. Had I voted for either Fine Gael or Labour, which of course I did not, I would be pretty sure I was voting for a major push-back on the bondholders. Last week, however, we discovered this was not to be. We discovered that, when it comes to paying unguaranteed senior bondholders, the new Government's policy is to continue Fianna Fáil's policy.
The Government now talks about the Irish people not bearing 100% of the burden - that is the language we hear in this House. Unfortunately, what the Government is not saying is that the Irish people will instead bear the vast majority of this burden, which is clearly contrary to what the people thought they were voting for. This is why we need a referendum. The amounts of money are so big, and the moral argument so abhorrent, that the Irish people have a right to decide. They thought they were voting for this policy but it has vanished.
We learned in December last that the previous Government, whose Members are conspicuous by their absence from the Chamber, had already paid back more than €70 billion to bondholders. We know there is still €35 billion of unguaranteed bonds to be paid, which brings the total to at least €105 billion, or over €80,000 per household. As we are borrowing that money at 6%, this means every household in Ireland is paying €5,000 a year just to service the interest on these debts. For the Irish people to pay back €105 billion of private losses would be the equivalent of the French paying €1.3 trillion or the Germans paying €1.6 trillion. I had a conversation with an MEP during the week who said that if the French people were asked to pay €1.3 trillion of private losses, they would burn down the Champs-Élysées. Yet, the Irish people are being asked to accept this.
I believe the Government would prefer not to pay this money. I believe the Minister, Deputy Varadkar, and the Tánaiste, Deputy Gilmore, meant what they said, namely, that they would prefer not to pay it. Why, therefore, are we doing this? We understand from Professor Honohan that the Europeans have threatened us because he told us this in an interview last Thursday. He confirmed that, should we choose not to pay the investment losses of others, "there will be consequences." He explained that paying the remaining €35 billion was about "expediency and calculation". This is not a marginal policy decision. Paying back the remaining €35 billion amounts to a debt of €27,000 for every household in Ireland. Therefore, what we will be saying to members of the public is that even though they cannot afford petrol for their car, to pay their rent, to service their mortgage or to deal with cuts to disability allowance, we will not help them. However, if they are foreign billionaires who gambled on Irish banks but should not have, not only will we help them, we will cover their entire loss and pay them profit. We will pay not just the total amount of the bond but we will pay the interest earned on that bond. I do not believe that is who we are as a people because it is clearly abhorrent.
To the best of my knowledge, this type of transfer of public money to private losses has never been undertaken anywhere in the world throughout history. I cannot figure out why it is happening here. We know there is no moral argument for this. The only argument is whether we should pay the money and not have the Europeans threaten us or should we not pay the money and accept the consequences of whatever the Europeans have threatened to do. Professor Honohan said we have weighed up those options and believe the consequences of what Europe would do to the Irish people are worse and, therefore, we will pay back on the bonds to foreign investors. I argue, and the reason I support the motion is, that because the money is so big, and the people do not know what these threats are, we have to have an open conversation and decide. The people of Iceland will decide this Saturday and that is what we should do - a referendum would be democracy in action.
The Government's counter-proposal to the motion is astonishing. First, the Government commends itself on its policy, which in regard to the debt is a continuation of Fianna Fáil policy. Then, it "supports all of the actions necessary for the Irish banking sector to become ... better funded and better capitalised". While I do not know who wrote that, I presume "all of the actions necessary" includes the servitude of the Irish people. Let us think about it in this way. To pay back €1.5 billion of private losses would be the equivalent of everyone in Ireland working all day every Monday for the next 20 to 30 years to pay back that money because all tax paid on each Monday would be used to pay that amount.
It does not surprise me there are not many Government Deputies in the Chamber as they would find it difficult to face the people who voted for them on the basis they will come to the House tomorrow to vote for the amendment which states that "all of the actions necessary" will be taken. A vote by Government Deputies on the amendment says the following to the people of Ireland, namely, it is okay for the Irish people to continue to pay the vast unguaranteed losses of private investors, it is okay that the Irish people thought they were voting for something that they were not voting for and it is okay for the Irish people not to have any say in this matter.
For all of these reasons, I call on the Government to hold a referendum. I call on Government Deputies to vote for the motion - in vain, I am sure. I believe a vote for the amendment would constitute a genuine betrayal of the people who voted them in.
I move amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:
"— commends the Government for taking decisions that will lead to a radical restructuring of the domestic banking system, return the banking system to long-term viability and profitability and break the massive dependence of the banks on the State;
— acknowledges that these decisions will result in the banking system becoming the enabler of economic recovery by restoring public and market confidence in its financial health, management competence and ethical integrity;
— supports all of the actions necessary for the Irish banking sector to become smaller, more focused on core operations, better funded and better capitalised;
— supports the Government's objective of strengthening overall fiscal accountability by separating bank risk from that of the sovereign;
— welcomes the Government's restatement of its commitment to protect those whose funds are guaranteed by the Irish State, including depositors and others who continue to support our banks;
— acknowledges the continued high level commitment to the funding of the Irish banking system by the Central Bank and the ECB; and
— welcomes the Government's commitment to bring forward as a matter of priority a jobs fund as part of its strategy to support employment growth and sustainable enterprise while adhering to the aggregate fiscal adjustment targets of the EU-IMF programme."
I wish to share time with Deputies Olivia Mitchell, Colm Keaveney, Robert Dowds and Peter Mathews.
I welcome this first motion from the Technical Group. I wish them many years of Private Members' motions on that side of the House and congratulate them on bringing this motion to our attention.
I agree with the previous speaker that we need an honest discussion on this issue, not a polemic or a sensationalist or charged motion. We need an honest debate about the choices that face this country because they are stark and real. The Deputy is correct in stating it is about weighing up the options and coming to a fair determination as to what is in our collective interest as a people at this time. Pretending to people there is some magic bullet that will resolve this issue is fundamentally dishonest and part of the gombeen politics-----
I am not speaking from a script because I do not believe Ministers should do so on Private Members' business. I am here to listen and I took detailed notes on what Deputies said. I ask for the opportunity to respond in a mature way rather than the type of yaboo, old-fashioned politics this country needs to move away from. I ask colleagues to engage in that spirit. I take this debate seriously and have listened attentively to what Members have said.
We must get back to an honest debate about this issue rather than pretending that a referendum will solve the problem one way or the other. The reality is that it might make the situation infinitely worse. We are in a rolling situation and the Government has had to negotiate in very difficult circumstances. Members are well aware of the enormous legacy we must deal with. We did not take the decision on the bank guarantee in 2008, an open-ended and wrong guarantee which has put this country in a straitjacket. We did not take the decision to put €30 billion of the €46 billion of recapitalisation into the zombie bank that is Anglo Irish Bank. We are left with that legacy from the previous Administration.
It is the clear ambition of the Government to do everything in our power to renegotiate the terms of the EU-IMF deal. Of crucial significance for the Government right now is the necessity to seek a lower rate of interest on the EU portion of the overall package of funding coming into the country over a period of time. That is a live issue. It is an issue we will fight for to ensure we get that reduction in the same way a reduction was secured by Greece. It remains the ambition of the Government to seek a write-down of senior Government debt, but that is not possible at the moment because the majority view is not there within the ECB.
However, a fundamental aspect of the restructuring plan announced by the Minister for Finance, Deputy Noonan, last Thursday was, first and foremost, a very substantial write-down of up to €6 billion on subordinated debt, which will be part of the €24 billion package. In addition, we will demand a sale of the non-core elements of the banking system abroad, which are profitable and successful, at a time when we need that money in this country. We will demand that the banks concentrate on their core work, that is, lending to SMEs and businesses and getting the country running again.
I refute the charge by colleagues opposite that there is no new start from this announcement. This is a radical restructuring of the Irish banking system, with the subordinate debt, with the package of funds - €12 billion on an annualised basis, which will be pumped into the Irish economy - and with the demand that the banking sector shed the non-core international activities in which it became far too involved over a period of time. I refute the notion that there is nothing new in this, that this is not a major and fresh initiative. It is a new start; it is a turning point.
When the previous stress tests were announced the international ratings agencies did not believe a word of the findings. What is significantly different on this occasion is that there is an international perception that we have got to the bottom of this, that this is as bad as it will get. It was significant that on the day following the announcement Standard & Poor's said it accepted the robustness of the stress tests. The whole objective of Government policy is to overcapitalise the banks to such an extent that, first, they can get lending into the real economy and, second, we can get to a sense that this is the end of the end in terms of the big black hole in the banking sector.
We all saw how private, corporate funds have left the system. We will not have a stable banking system until we can attract those funds back. It is interesting that when it comes to retail deposits - ordinary deposits by individuals and businesses - there has not been a dramatic reduction in comparison with the flight of funds on the corporate side. It must be a key objective of Government, in order for the banks to function again and to make a real impact in the economy, that they are overcapitalised. Mr. Arthur Beesley observed last week in The Irish Times that our banks are now better capitalised than many Swiss banks. The task of Government is to overcapitalise the banks to such an extent that they recommence lending. That is how we will rebuild our country. Why does the real economy - the domestic economy - lag so far behind? It is because people are frightened to spend. There is no confidence that the situation they face next week or the following month will not deteriorate, that their partner or spouse will not suffer unemployment. The real task of Government is to use the Irish banking sector as the engine for growth. The only way that can be done is to overcapitalise. The way in which the international markets and the rating agencies have responded to the stress tests is constructive.
Those who argue for a default need to answer a fundamental question - Deputy Boyd Barrett and I had this debate in public last Saturday. If they are suggesting to the Irish taxpayer that there is a better way, will they please show me where we will obtain at 1%, anywhere in the world, the enormous liquidity that is required for our banking system? As I said to Deputy Donnelly, we will have to assess the question of risk. We cannot play with people's lives; we cannot play with the ordinary incomes of people working in this country. Irrespective of the banking crisis, we face a fiscal crisis which is nothing to do with the banking issue. The fiscal crisis arises from the total imbalance between income and expenditure. It is absolutely essential that people are honest in this debate. They must answer the question of where we would obtain the liquidity to keep the banking system going and keep businesses going were the ECB tap to be turned off. That is a fundamental issue in this debate and people must be honest about it. The issue will not simply be wished away by the notion that others will provide the funds.
We should not forget that on the evening when our ratings were reduced because of the enormity of the stress tests, the ECB changed its rules to allow medium-term funding to operate within the Irish banking sector. Without that funding at 1% the banking system would cease to exist. We should never lose focus on this point, that the economy is being held together because of ECB support. That support comes at a price, but the Government view is that we must continue to negotiate and continue to build bridges following the enormous reputational damage done to this country by the previous Administration. We will do that.
I very much welcome the initiative taken by the Tánaiste this week in bringing together our diplomats and all of us involved in public administration, so that we are all singing from the same hymn sheet in terms of trying to build those international bridges. Who knows what the landscape will be in Europe in three months, let alone six months? Who knows what will happen to the Portuguese or the Spanish? We have to box clever. We must use the hand we are given, albeit a very difficult one, in such a way that we get the best results for Ireland. I would not go around quoting the Icelandic example of default. I would not go around talking, as Deputy Boyd Barrett did, about Argentina and Ecuador. This is a developed economy, part of a single currency zone. There are huge risks for the country in talking up the notion of default, huge risks for the people dependent on social welfare and the people in the public sector who are dependent on the Exchequer to pay their wages.
Where default has happened it has led to a collapse, to a 70% reduction in the ordinary wages of teachers, doctors, nurses and public officials. This notion that there is some type of free-range option is a dishonest position. It is not fair, it is not honest. It is fine for the type of polemical, theatrical performance which some people want to continue, but it will not help the honest debate this country needs. Such a debate is needed and in so far-----
Last week's announcement is not in any sense the end to our problems and nor does it pretend to be. It creates a new structure for the banks and hopefully constitutes the last and final figure regarding the recapitalisation of the pillar banks. However, since the announcement much of the debate, including the debate this evening, has pertained to default. I understand how people feel about default. Everything within me rebels against the notion of being obliged to repay money to all the bondholders who lent to us. I undoubtedly share the rage felt by many people about being obliged to pay back money to lenders who were as reckless as our own banks were feckless.
However, were we to opt for a default, we instantly would become international pariahs in the face of the markets. As the previous speaker noted, we already have suffered huge reputational damage and we cannot now or ever in the future allow ourselves to be in a position in which we were the kind of pariahs to whom no one ever would lend money again. We certainly should not do so at present, when Ireland is completely dependent on the willingness of the bailout troika to continue funding next week's salaries and pension and social welfare payments. We should not do so when our banks are dependent for continued funds on the ECB.
Moreover, one should be in no doubt but that this is about funding tomorrow morning, to allow banks to dispense money through the ATMs and to pay people's mortgages, food bills and so on. While it may be that people would continue to lend to us were we to default, I do not believe this to be the case. It certainly would be a high-risk action and no Government is entitled to play such a high-risk game with people's precious savings and futures.
The European Union has said "No" to bank default as far as the pillar banks are concerned and the Government agrees. It must agree because these are the banks the Government is asking it to fund tomorrow, the day after and the day after that. The key point is that at present, we have more to lose by defaulting then we have to gain. This is an equation with which one cannot argue. While everyone wishes it were different, it is not something with which one can argue.
I believe that at some future point, the European Union will agree to some form of debt restructuring. I believe this to be almost inevitable and that in time, the European Union will come to perceive that it is in its interests, as well as in ours. After all, Ireland is joined at the hip with other European Union states in the eurozone and the process of negotiating and renegotiating our financial interactions with them will be an ongoing business. Last week's summit is by no means the end of the story but for the present, we must work the deal.
The deal that was on offer to the previous Government has not changed, although the Government will continue to try to change it. However, for the present it must show determination in its efforts to reduce our primary balance. As the previous speaker stated, I hope the Government can negotiate a reduction in our interest rates because there is no doubt but that if we are ever to achieve the overall deficit target of 3% of GDP, we will be obliged to grow faster than we accumulate debt and at present, it is difficult to envisage how this could happen.
These are the facts of the legacy of the previous Government and they will not change by having a referendum. The result of the bailout and the bankruptcy that led to it is that we do not get to choose these solutions any more. This is the price we all are paying for the last Government's actions. It is fantasy to pretend to the people that were they to have a referendum, they would have different choices. Alternatively, it may constitute a genuine misunderstanding of what is going on but it is not the reality. The only choice left to the people was to choose a new Government to try to get them out of the hole the country is in. This primarily now means stabilising our debt, which in turn depends on interest rates, growth rates, the size of the primary balance and the requirements of the bank losses.
However, we will have no growth without functioning banks and unless there is improved market confidence at home and abroad. The holding of a referendum on how to proceed or on whether to default or otherwise will not bring that day a single moment closer. It will postpone it because it will increase uncertainty, which is the last thing the country can have at present.
I hardly need five minutes to explore the notion of where the referendum would take us in the eyes of the Opposition. The objective outcome is default, despite that language not being used. I have concerns regarding the idea of a referendum that would be akin to holding a referendum in my own house in which I would like to have a vote on whether we should pay back to Ulster Bank the mortgage loan we owe for the next 25 years.
----- default is in the interest of this country. Deputy Boyd Barrett has spoken of those whose fingerprints are on the scene of the crime of this country's economic disaster. As he tucks himself up in bed tonight with a cup of cocoa, I ask him to think carefully about who would benefit from a default, with reference to those who tiptoed out of the market in 2005, 2006 and 2007. In the context of the significant deleveraging that would be forced on Ireland with regard to the assets on the books of the Irish banks, who would bottom-feed on the forced sale of the aforementioned banks' Irish performing assets? It would be those richest 300 people to whom the Deputy referred, who would take advantage of the strategy of default. Such people would return and would bottom-buy assets that would have been forced on to the market as a consequence of the default. One would see a frenzy of bottom-feeding on Irish and international property. If the objective of Deputy Boyd Barrett is to line the pockets of those 300 people whom he regards to be the richest, then the default strategy will benefit them.
The European approach to burden sharing has developed over the past two and a half years. At the outset, subordinate debt was viewed as being an unrealistic target.
It is now considered by the Government to be a legitimate tool to mitigate against the cost of the financial crisis faced by the taxpayer. In this context, the Government estimates that €5 billion can be saved from the €24 billion recapitalisation costs by making subordinate bondholders share in that cost.
Both Government parties have made clear that they favour burden sharing with senior bondholders in banks as long as it is part of a European-wide framework for senior debt. The Government has made clear that burden sharing will not apply to banks that will form part of the two new pillars of Irish banking. This makes complete sense. The Government seeks a systemic banking force in Ireland that will be supported to ensure the domestic economy's ability to get through this dark period. Were burden sharing to be introduced, it would only involve banks that were not part of those new pillars, namely, Anglo Irish Bank and Irish Nationwide.
Ireland is not in a position to act unilaterally with regard to the senior bondholders as this would create serious difficulties for the Irish economy in respect of international confidence. One need only consider last weekend's commentary regarding our international competitors and how they view the Irish situation with regard to confidence within the domestic economy. We must try to position the country to be able to attract outside investors to have confidence in this economy and to have the confidence to take risks by creating jobs here. Some commentators argue that Ireland should engage in some form of high-risk game of brinkmanship on the basis that burden sharing with senior bondholders is in the country's immediate interests. That is a highly risky strategy because it would create serious doubts in the minds of those investors who Ireland so desperately needs, including in my constituency.
I would be grateful were the Minister of State, at some point this evening, to expand on the significance of the restructuring approach that ensures there will be €12 billion per annum in lending made available for each of the next three years. In light of the Central Bank's estimation of a requirement of between €11 billion and €16 billion during that period, how will we ensure these moneys will be circulated into the local and national economies to encourage risk-takers in the SME sector to get involved in job creation and to keep the next generation of young people in this country? Iceland faces a greater crisis in respect of emigration, the delivery of public services and job creation.
Like other Members of Dáil Éireann, I agree with much of the thrust of this Private Members' motion, although I do not see the value of holding a referendum. The general election gave an answer to the previous Government's handling of the nation's economic affairs, be that the failure to engage in the EU-IMF discussion process or the bank bailout. The general election brought out the public's views in this regard.
While canvassing on the doorstep, I made it clear to people that there would be no easy fix for this crisis and that it would take a long time to sort out. This got a positive response. Had I said anything else, I would not have been believed. I am glad I did this and that the new Government has made honesty its modus operandi with the public, as the scale of the challenge is of such monumental proportions. Unquestionably, the essential next step is to persuade our EU partners to lift some of the burden from our shoulders. Most if not all Deputies believe this to be an imperative, but the difference in the ways to go about it is the reason I will not support the motion.
The extent of the task before us is best seen through two examples. First, there is anger among our European partners at the previous Government's attempts to deal with the crisis, in particular the lack of consultation on the bank bailout. Second, Ms Catherine Day, the Irish born head of the civil service element of the European Commission, stated: "The responsibility for the Irish debt crisis rests primarily in Ireland". Her comments show the amount of work we have to do.
My points indicate that we have a considerable amount of footwork to do to rebuild the bridges badly damaged in recent years. Like the Minister of State, I welcome the Tánaiste's diplomatic initiative to explain our case in Europe. This is how we can begin the job of working with as opposed to against our European partners to help solve this crisis. Every Deputy should give his or her full backing to this work.
Undoubtedly, there is a degree of European responsibility for our debt and banking crisis. For example, how many European institutions lent money to Anglo Irish Bank? However, this argument if used on its own will not sway hearts in Europe. As a country, we must persuade our European neighbours that it is in their interests as well as ours that bondholders accept some burden sharing. We may need to soldier on with the current plan, but it will undoubtedly be shown down the road as not working adequately. I hope I am wrong, but the evidence may take the form of rising unemployment or long-term unemployment.
Unfortunately, Ireland will need to wait until Europe sees that we cannot cope with the burden placed upon us. If we cannot pay our way, it is likely that the losses will fall on other national central banks or the European Central Bank, ECB, which is locked into their exposure for the foreseeable future. It is our job to ensure they are made aware of this fact as soon as possible and arrange an arsenal of arguments to put to the ECB and our European partners, namely, that a renegotiation of the deal is in their national interests. We must make this case as soon as possible. The sooner that point is arrived at, the better for Ireland and the whole of the European Union.
Like my colleague, Deputy Keaveney, I would appreciate it if the Minister of State could demonstrate how the money being pumped into the banks will be made available for lending to small to medium-sized businesses.
We all agree that we must pull together in assessing and measuring the situation. Last Thursday, we received a full and honest presentation from the Minister for Finance regarding the report prepared by New York's BlackRock Solutions, suitably adjusted and edited by the Governor of the Central Bank and the Financial Regulator to allow for a presentation on the up-to-date position of the viable banks after restructuring. BlackRock parked to one side two of the moribund banks that are being wound down. Loan losses estimations were made for the banks that would become the two pillars. The amount of loan losses recognised resulted in estimated capitalisation requirements of €24 billion, including €3 billion of contingency funds. This was the starting point of an action plan, added to which was the statement that there would be a review of the overall regulation and operation of the banking sector, including at Department of Finance and other supervisory levels.
Getting across this restructuring plan to all of us in three weeks is commendable. It is the starting point for introducing a closer and more focused examination of the six banks in terms of asset evaluations and estimations, a double checking, as it were. If we do this, it may transpire that we must adjust a little bit more for the further losses that I and some others would suggest are to be found in Anglo Irish Bank and Irish Nationwide. When the full picture becomes clearer, we can present the composition and amount of funding in the six banks, most of which comes from the ECB and our Central Bank.
The losses that have arisen in the banking sector are probably in the order of €90 billion to €95 billion. The foreign institutions that supported the banks that created those loans that resulted in the losses participated in what some journalists have been calling in recent days "Ireland's party". The institutions that invested in our banks' bonds benefited from that party, received interest from the bonds and, apart from subordinated bonds, have seen them redeemed to the extent of €60 billion without any cost. This issue ought to be reviewed and represented to Europe and the ECB. We are all on the same side, namely, the side of the Irish people. The opportunity for us is to present this report card truly, fairly and in a balanced and reasonable way to Europe. It is like when jigsaw pieces are presented so that a viewer can join them and the answer becomes obvious. That is what we should do. The result of the election is tantamount to a referendum, as only 20 seats remain in the hands of the Government parties from the previous Dáil. In itself, that is a startling fact to present to Mr. Trichet, Mr. Rehn and Mr. Chopra. We have had a referendum so we can now arm ourselves with facts, present them coherently and explain the provenance of the unsustainable loan losses that Mr. Noonan very intelligently and diplomatically raised in a shot across the bow when first meeting European officials. That is the challenge for us all so we should rise to it.
Tá áthas orm deis a bheith agam labhairt ar an ceist seo. Reading the motion from the Technical Group, there is much in the first three or four paragraphs with which nobody could find fault. In a just world it is horrendous that people in Europe who speculated with money are having debts paid by taxpayers right across the Continent. Nobody can have an argument with this and I have no brief for bankers, banks or the way they acted over the past ten or 15 years, particularly since the inception of the euro. The question is whether there are easy answers that can wipe away debts without repercussions if the country acts unilaterally and in a fashion that is not co-ordinated. That is where the difficulty lies, as the previous Government found out.
Deputy Mathews has argued that the election was almost a referendum. With a referendum the people normally get a choice and the people's will is implemented. In this case there was a choice but the current Government realised that what was put to the Irish people was not exactly the best choice; I am thankful an about turn was implemented. When one considers coldly the choices, some of the proposals which were so handy and attractive are not so practical when one reads the small print.
As we do not want to repeat the problem we should go back to its beginning. I said this last week and will do so again tonight. When the euro was constructed, there was a major fault line going back to a hang-up which Europe and America has that profit is might and people in private industries, where there is enough competition, will always make profits and good decisions for the people. When the euro was introduced, it came with rules and regulations concerning what governments could do. There was a fixated idea that the private sector could do no wrong and if there was enough competition, all people would get better and cheaper services, although this is not necessarily true. It certainly was not true in this case and what we are discussing are some of the most expensive private services ever provided to people. No rules were laid concerning the international transfer of money and there was no proper European oversight.
Deputy Mathews is correct in that it is absolutely astounding that at a European Central Bank level nobody considered the transfer of funds between the states. The Irish banks made significant mistakes but it is also fair to point out that the non-Irish banks in this market, such as Bank of Scotland, Ulster Bank and so, made the same mistakes and followed the same pattern. Even if the Irish banks had not gone down that road, other banks may have. If we are to ensure this does not happen in future, we must introduce control on private competition and move away from a concept that seems to be one of the basic tenets of the European Union. It may have been founded in food security but now the simplistic notion is that competition solves all problems. That certainly has not been the case with us and ultimately it has been a very expensive choice.
There are other issues, such as banking oversight by the Oireachtas and the Government. There are people who argue that we should not have provided a guarantee, which is a fair point that can be examined. I am willing to consider any point. I have never heard anybody contradict my understanding, which is if there had not been a guarantee, Anglo Irish Bank would have collapsed and may have brought many financial institutions in the State with it. In the event of the bank's default, depositors were at risk. The idea of the guarantee was not to guarantee shares in the bank - they are worthless - but to hold money in the system and reassure depositors that the money was safe.
Over time we reduced the extent of the guarantee but the question arises as to why, in the short term, both bonds and depositors were guaranteed. The answer is simple; if only depositors were guaranteed, all the bondholders would have cashed in as quickly as possible and a difficulty would have ensued. The idea was to create stability and space.
What has happened to the guarantee in time? In practice, the guarantee has been superseded by liquidity provided on a fortnightly basis. In other words, we never paid out directly on the guarantee but paid out on solvency issues in the bank. People have withdrawn money in the past few years so the guarantee has been overtaken by liquidity provided by the European Central Bank. By November last year the relevant figure had risen to €100 billion. Banking issues rather than sovereign problems triggered the EU and IMF deal.
There is a simple equation as I saw it at the time. We had enough money to run the State to June this year because we had pre-funded but a problem would have occurred if the ECB indicated the money it rolled over every fortnight was no longer available or that there was a cap to it. If that had occurred, there was potential for the banking edifice to come down around our ears. That money is at 1% but if the interest is doubled, the cost to the State becomes absolutely enormous as any cost to banks is a cost to the State.
In those circumstances it is being argued that people would vote in a certain way. I would be very happy for a referendum on the issue because the Irish people are pragmatic. They are mad at Fianna Fáil and we got that message. They are mad at bankers, which we also understand. Faced with the equation we saw in November, the Irish people would have made the same choice the previous Government made and which the current Government is making now. To make any other choice and stop that flow of money coming from the ECB which is shoring up banks' liquidity - I understand the figure has gone up considerably since November - would lead to the whole show coming to a shuddering stop.
If the State could not borrow money to run the country and keep the banks open, the cutbacks arising from the EU and IMF deal would have looked very small because the country would have run out of money. Faced with such a dilemma, we took the view that a maintenance of services and our ability to borrow €16 billion for this year and more money for subsequent years was absolutely vital. We saw only one show in town and if we tried to unilaterally renege on bonds, Europe would have not given us a guarantee to keep liquidity in the banks.
The Government got it absolutely right last week with an issue that was of great concern to me last November. There was a tacit understanding that the money would be injected from the ECB. However, I would be much happier if that money was put in on a medium-term basis. I am not comfortable with the idea of tacitly rolling it over every few weeks. It is better than not having it at all but is not a satisfactory situation. What we must do next is ensure stability and the only way to do that is to ensure the money from the ECB and the Central Bank, which latter, in terms of currency, is only a sub-office, is there for the long term. That would create a climate of certainty within the banking sector. In addition to corporate depositors, many ordinary people still move their money out because they are not absolutely sure whether the banks will continue to be funded from the point of view of liquidity.
My understanding of this, in simple terms, was that the ECB would provide the liquidity if we provided the capital. There was to be a total package. As far as I have heard, nobody has put in the totality, an alternative package that would give us the possibility of ensuring that, in the course of the medium term, we can fund the Exchequer services that require to be funded and ensure there is not an implosion of the banking system.
I reiterate I have no love for banks or bankers. What they did was absolutely scandalous and unprecedented. However, ordinary people depend on the financial system. The notion that one hurts nobody but bankers by allowing banks to collapse is naive in the extreme. Therefore, as in a chess game, before making any moves one must work out all the forward steps to ensure one does not create an unforeseen situation that would cause enormous damage to a great number of people.
Another issue which was overlooked when we considered bond markets and financial markets, and so on, is that there is a great mixture present, just as in the case of depositors in the banks. There are those who have big money and big investments but side by side with these are the moneys from the small people which are put into life insurance policies, pension funds, and so on. If one starts to burn people willy nilly there is no way of knowing which person one will burn. Looking at the top end, nobody can know where the trail will lead, whether to a big person or a small person. That is a problem.
I took part in a radio debate recently where a person suggested he would have paid the big depositors who were socially acceptable but not those who were not socially acceptable. I am afraid the law does not provide for that. When one enters this House the price one pays is that although one makes the laws one must live by them no matter how inconvenient it is. One cannot change the law retrospectively. The notion that one can say one does not like such a person and therefore will not pay out but one likes another and will pay is naive in the extreme. It is strange for people who are part of the law-making system to talk in that fashion because the moment we bring into disrepute law-making and abidance with the law by the Government and the Oireachtas we undermine our democratic system and the Constitution. There are calls for a referendum but we must try to solve this problem within the law. If one tried to act outside the law one would be brought quickly to the courts. If we did not stick by the law the courts would bring us to heel very quickly and give an order that we had to comply with the law.
When one sits in the Cabinet room there is a constant constraint. Many solutions are put forward but may not comply with the law. For example, matters may be treated one way in a certain jurisdiction and certain bonds were taken out of this jurisdiction. However, by changing domestic law one does not change the status of those bonds. That matter would not be decided in a court in Ireland in any event.
Very attractive solutions have been put forward that I wish would work. I wish there was a magic bullet because I certainly do not wish to put any burden on the backs of the ordinary people. However, many of the propositions are either not legally possible or would create such great collateral damage that the resulting fallout would be much more severe on the people than the way we have taken to date. The Government which is now facing these constraints----
Will the senior bondholders of Anglo Irish Bank bear their burden?
Regarding the substantive issue, the most recent bailout has put an enormous burden on this State. The reckless bucketing of €24 billion of Irish people's money by this Government into the banking system will bring this State closer to unsustainability. In other words, this has the capacity to break the State. It will deepen austerity measures that are crippling thousands of people, the weakest and the most vulnerable in society. It will also have the effect of deepening the procyclical recession that is currently affecting the State. In the end it may cost every individual worker €13,000.
This bailout is probably the most severe and important policy that has been implemented in this State since Partition. It is of such importance to the people that they should have their say by way of referendum. In the coming days we shall debate some of these issues further and tease out the economic effects and the effects of the actual bailout on the people. However, there is another major inherent cost to the deal, namely, the price of Irish sovereignty. Sovereignty is about having supreme independent authority over the country. In the Republic, this sovereignty lies with the people. In practical terms this means having the right to determine fully the laws that affect the people.
The goal of self-determination has been central to Sinn Féin since 1905 and my party has continued with that goal to the present date, with the aim of ultimately achieving full Irish independence and sovereignty on the island as a whole. Sovereignty is not a woolly or vague aspiration. It is a bread and butter issue, affecting the material wealth of each individual. The referendum is the ultimate tool of sovereignty. In this situation it is the people who have a say over the future of the State.
Over the years, this hard-won sovereignty has been diluted by a number of EU referenda such as that on the Lisbon treaty. The passing of such treaties was surrounded by substantial debate and, in some cases, major controversies. In some cases there were re-runs of referenda. In contrast, in this situation we are on the cusp of a silent revolution, one which sees extensive transfer of macro-economic sovereignty and decision-making to Brussels. The debt mountain created by Fianna Fáil has not only strangled this economy but is leading to a substantial relocation of power from the Irish people to unelected bureaucrats in Europe. It is a debt for sovereignty swap.
Much of the loss of sovereignty has been obscured from the current debate because of the more immediate and pressing issues of the massive debt burden accumulating at present. However, the outworkings of this debt for sovereignty swap will cause major difficulties in the future. In the future, this State will have to go cap in hand to the EU and ask for permission. The EU may or may not allow us permission to pursue certain economic activities. The EU may say, to quote the Minister for Finance, that we can bring in the policy if we introduce a counter-balancing measure. Some people will say it does not matter if we hand over the economy because the EU cannot make as much of a mess of it as Fianna Fáil did. I can see it is hard to imagine anyone making a mess bigger than that made by Fianna Fáil but it is important to understand the dynamics of EU decision making. It makes decisions for the benefit of the greater European economy. Ireland only represents 1% of that economy and does not register regarding decisions that are made. In the past 20 years, Ireland has been on a completely different economic cycle from the core European states. This means monetary policy which would have a beneficial impact on Germany could have a devastating impact on Ireland. In this State, low interest rates were partly responsible for the largest boom and bust cycle the world has ever seen.
Our reticence regarding the ceding of sovereignty to Brussels is not based on an idealistic pipe-dream, it is based on bread and butter side effects that such a sovereignty swap would have. It is worth noting that the so-called reform energy emanating from the EU that is driving this approach on decision-making capacity is not ideologically neutral, much of it comes from deep seated EU federal aspirations.
I appeal to TDs, especially those in Fine Gael and the Labour Party who went from door to door not 40 days ago to convince people the new Government would fairly share the burden of debt with senior bondholders, now they have been elected, to stand up for the people and economic sovereignty and survival of the State.