Dáil debates

Wednesday, 13 April 2011

12:00 pm

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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The meeting of the European Council on 24 and 25 March was a full and productive one. It took important decisions on economic matters and addressed two important international concerns, events in Libya and Japan. The atmosphere was good and positive and I engaged individually with all of my colleagues in the room.

The Tánaiste and Minister for Foreign Affairs spoke at the weekend about the need for a strong diplomatic campaign to rebuild Ireland's international reputation. That is an important element of Government policy in providing a clear understanding of how serious is our intent to deal with the country's problems. Nobody in this House can doubt the damage that Ireland's good name and standing have suffered in recent times, especially within the European Union. That did not happen overnight and it will not be put right overnight. However, together with my colleagues in the Government, I am determined to do what is necessary to return Ireland to what it once was - a constructive and well regarded member state of the Union, with good relations with partners, large and small; a member state that saw its citizens climb to the highest levels within EU institutions, that held its head high and that made its mark. We live in difficult times, but Irish people have a right to be proud of their country and proud of the leaders who represent them on the world stage. I will do my utmost to ensure they are.

For some time the European Union has been seeking to respond effectively to the economic crisis that has engulfed it in recent times. Many criticised it for taking a piecemeal approach. That was never a fair or accurate picture; a great deal of work was and is under way. What was missing, in some respects, was a framework in which to draw it all together. The meeting of the European Council on 24 and 25 March provided the framework. It took decisions in six main areas that, taken together, represent a broad response to the economic challenges Europe continues to face.

Building on the annual growth survey published by the European Commission in January, we advanced the process of implementing the European semester, a new cycle of economic policy co-ordination. "European semester" is one of those phrases that has entered into European jargon very quickly, without, I suspect, many people appreciating what exactly is involved. It is straightforward. From now on, at its regular meeting in March, the European Council will identify the main economic challenges facing the European Union, giving strategic advice on the measures needed to address them. Taking this guidance into account, each April the member states will present their medium-term budgetary strategies in their stability and convergence programmes, together with their national reform programmes, which will set out measures to strengthen their national economic positions.

Following assessment of the programmes, the European Commission will make proposals to the European Council, on the basis of which the Council will adopt country specific opinions and policy recommendations. Each member state is expected to turn the recommendations into concrete measures in adopting their national budgets for the following year. The Council has now endorsed this year's priorities for fiscal consolidation and structural reform. These include restoring sound budgets and fiscal sustainability, and reducing unemployment through labour market reforms and growth enhancing measures. Member states will factor in these reforms when preparing their national programmes. In particular, they will present a multi-annual consolidation plan, including specific deficit, revenue and expenditure targets. They will set out the strategy through which they envisage reaching the targets and a timeline for its implementation. Consolidation is to be front-loaded in those member states facing large structural deficits or high or rapidly increasing levels of public debt.

Like others, Ireland is in the process of preparing its national submission. Our situation, however, is quite different from that of most others in that we are already engaged in an EU-IMF programme in which we are committed to a demanding and extensive consolidation effort. Naturally, that will be reflected in this country's submission.

Of course, not everything can or should be done at national level. There is also a European dimension. The Single Market, in particular, is key to the European Union's future growth and competitiveness. The European Council, therefore, welcomed the European Commission's intention to present the Single Market Act and invited the Parliament and the Council to adopt by the end of 2012 a first set of priority measures to bring new impetus to the Single Market. I was particularly pleased that agreement was reached, with our full support, that the overall regulatory burden for small and medium enterprises, SMEs, should be a particular focus. We need to enable them to make their full contribution to growth and recovery.

The European Council also assessed progress on the six legislative proposals aimed at improving economic governance in the European Union. Once adopted, they will lead to a stronger Stability and Growth Pact; improved budgetary surveillance, including macroeconomic imbalances; and stronger and more automatic sanctions for those member states which do not play by the rules. We welcome the general approach reached by the Council on these six measures, opening the way for negotiations with the European Parliament. We would like to see this work advance rapidly so as to allow for the final adoption of the measures in June.

As I previously told the House, the meeting of the Heads of State or Government of the euro area adopted a Pact for the Euro at its meeting on 11 March aimed at improving economic policy co-ordination. At the meeting of the European Council six non-euro member states - Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania - announced their intention to join what is now known as the Euro Plus Pact, not a name I personally would have chosen, as I do not believe it is very meaningful to the public. The member states which have signed up to the pact are expected to announce a set of concrete actions to be achieved in the next 12 months. Some member states, including France and Spain, have already done so. Most are expected to identify their proposed actions as they complete their national reform programmes.

The European Council also addressed the strength of the European banking system. The European Banking Authority is carrying out stress tests on a wide range of European banks, representing 65% of EU banking system assets and not less than 50% of the national banking system in each member state. That is a completely separate exercise to that carried out on the Irish banks, the results of which were recently announced. The purpose of the tests is to assess the resilience of the banking system across the European Union and individual institutions to hypothetical external shocks. They are intended to help to identify vulnerabilities and, where relevant, remedial actions, including strengthening capital levels, where required. They are designed to be more robust than the tests carried out last year which were not sufficiently convincing to the markets. A high level of disclosure by banks, including on their holdings of sovereign debt, is being required. Results are expected to be known in June. The Council has agreed that, ahead of publication of the results, member states will have prepared specific and ambitious strategies for the restructuring of vulnerable institutions, including the provision of government support, where needed. The stress tests will provide an important analysis of the strengths and vulnerabilities in the European banking system.

The European Council also adopted the wording of the proposed amendment to the European treaties to ensure the new European Stabilisation Mechanism, ESM, will be put on a sound legal footing. The wording has not changed since it was adopted as a draft last December. It is a simple and straightforward text which it is proposed to insert in Article 136 in the section on "provisions specific to Member States whose currency is the euro".

As I informed the House, the previous Attorney General advised that the proposed amendment did not have consequences for the Constitution - Bunreacht na hÉireann. There is, therefore, no need to amend it by way of referendum. I expect this position to be confirmed now that the final text is available and the Attorney General will advise on the most appropriate means of ratification. Member states are expected to move forward with this process so as to allow the amendment to enter into force on 1 January 2013.

The European Council endorsed the features of the new European Stability Mechanism as agreed by the Heads of State or Government of the euro area when they met on 11 March. It was confirmed that the new mechanism which will come into being in July 2013 would have €500 billion available to lend. To achieve this and maintain a AAA rating, it will need an overall capital level of €700 billion. Of this, €80 billion will be paid-in capital, to be provided pro rata by the eurozone member states in five equal annual instalments. The remainder will be callable contributions. We also agreed that the current European Financial Stability Facility, EFSF, under which Ireland is drawing down funds, should have a full effective lending capacity of €440 billion. While it is funded to this extent notionally, its effective lending capacity to date has been considerably lower.

As I have informed the House, the question of Ireland's programme, including the interest applying to our loans under the EFSF, did not arise. Ahead of the summit, I had suggested to President Van Rompuy that it was better to await the outcome of the banking stress tests before coming back to the matter. In the event, European partners agreed this made sense, and that once the full picture was clear, Finance Ministers should take the work forward.

As the House will be aware, the Minister for Finance met his colleagues at the informal ECOFIN meeting in Hungary last week. The principle of applying a lower rate to the EFSF was agreed by euro area Heads on 11 March, and Greece, which borrows outside the facility, has seen its interest rate reduced by 1%. I remain confident that it will be possible to find an agreed way forward for Ireland and I will keep the House informed as matters advance.

The Council also heard briefly from the Prime Minister of Portugal, whose Government had fallen the day before we met. As the House is aware, in light of Portugal's seriously deteriorating economic circumstances, it has since made a formal application for financial assistance and is now engaged in negotiations towards that end.

The European Council also discussed two major international matters, the consequences of the earthquake in Japan and the ongoing events in Libya. The situation has developed further in the period since the meeting, and the Tánaiste will brief the House at the end of this debate. In summary, on Libya the European Council endorsed UN Security Council Resolution 1973, which authorises actions to protect civilians, and we reiterated our call on Colonel Gadaffi to stand down immediately. The Council stated its readiness to adopt further sanctions to ensure that the Gadaffi regime does not benefit from oil and gas revenues. It noted with concern the humanitarian situation, both within Libya and on its borders. There was particular emphasis on the protection of civilian life in the area around Benghazi.

On Japan, on which there was a detailed discussion, the European Council again offered the Union's support as the country faces enormous challenges in the wake of the earthquake and tsunami. We stand ready to provide further assistance at Japan's request. There are, of course, lessons to be learned from what has happened, not least in the area of nuclear safety. I called on the Japanese ambassador and signed the book of condolences in respect of those Japanese people who lost their lives.

I particularly welcome the agreement reached at our meeting that all nuclear plants within the Union, including the reprocessing plant at Sellafield, will now be subjected to comprehensive and transparent risk assessment. The assessments are to be carried out by independent national authorities and through peer review, and the outcome, together with any necessary measures to be taken, will be made public.

The European Commission will be centrally involved in the testing process and the European Council will assess initial findings by the end of the year. This was the third meeting of the European Council in just seven weeks. The Council is not now expected to meet again before June. That is welcomed by most. While it is good and appropriate that we meet whenever the need arises, there is also a place for calm and considered reflection.

In the meantime, the Government will continue to press forward with its efforts towards consolidation and recovery in the economy, and with its plans for extensive engagement with other member states and the European institutions.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Three weeks ago, Deputies contributed to statements about the then upcoming meeting of the European Council. A common theme from all parts of the House was that this would be an extremely significant meeting at which the Heads of State and Government would reach decisions that would have far-reaching effects for Ireland and Europe as a whole. It was to be the Council at which a clear and unequivocal message would be sent out that the leaders of Europe shared an absolute determination to overcome the economic difficulties facing member states and the common currency. Few summits have convened with higher expectations and, unfortunately, few summits did as much to fail to meet expectations.

Through my entire adult life, I have been a confirmed believer in the European cause, in the idea that the European Union provides the essential means to overcome problems and achieve progress both within nation states and throughout Europe as a whole. I still believe this, but equally I share a growing concern that the spirit which built the Union and made it the most successful multinational institution in world history is becoming less of a driving force.

The problems before leaders at this summit could not have been more important, but there appears to have been a lack of a genuinely communautaire spirit. Certainly, this appears in the comments which emerged from the summit about national concerns.

The reformed financial support mechanisms are to be welcomed. They probably are sufficient to persuade the bond markets that Europe has the financial firepower and intention to assist at least one large economy should the situation require it. This is exactly as required. What has not been done, however, is the presentation of a more comprehensive and conclusive series of measures to both support countries in need and show how states will ensure economic policies will be more sustainable in future.

Those who built the engine of integration understood that one cannot reduce every decision to a zero-sum game. The sovereignty that small states, in particular, agree to share in the Union, together with the adopting of everything that is involved with the Single Market, is enormously significant. The support programmes that were put in place saw the funding of cohesion not as a handout but as an essential part of recognising the sacrifices countries were making and the economic benefits being derived by the strongest countries. Most notably, former Chancellor Kohl understood instinctively that the cohesion funding Germany supported was of enormous economic advantage to Germany. Equally, he never demanded that recipient countries abandon key national policies in order to receive support, and he always treated other member states with respect. He did not do election photo opportunities with other leaders, preferring to show his support in more important ways.

What I find genuinely surprising from the summit is how little has progressed in recent months. There is little in the final communiqué that is significantly different from what existed in draft form in January; there is certainly no substantive difference between the measures agreed to and those agreed in principle months ago. However, what is noteworthy is that many areas that seemed likely to be advanced to a final conclusion at this summit, or at the very least to be close to agreement, were kicked down the road. The decisiveness and comprehensiveness which comprised a core part of the strategy for this Council got lost in the final weeks. I will return to the issue of Ireland's support programme.

In regard to the wider issues, we should have had greater clarity and a more substantive framework of action. What people were looking for was a demonstration of both understanding and will on behalf of the leaders. Part of that is the enlarged and more flexible financial support package, and this is to be welcomed. Part of it should also have been more detail on exactly what States are proposing in terms of fiscal rules and long-term confidence building. Instead of it being a demonstration of mutual interest and collective will, the summit was allowed to become a place where fine words about grand bargains were undermined by the reality of divisive comments.

The decision to hold off on the matter of revising the terms of Ireland's financial support was inevitable given the importance of the bank stress tests and the need for the Government parties to take a few more weeks before formally abandoning their election comments about bondholders, Frankfurt and red cent. What was not inevitable and what is of great concern was the continuation of the deeply damaging idea that a price must be paid for revised terms for Ireland.

Last week, the Minister for Finance, Deputy Noonan, went to Budapest telling the Irish media that corporation tax was not up for discussion and appears to have talked about little else. In his bilateral discussion with Ms Christine Lagarde on the shuttle bus to dinner, he received, if the comments of French officials are to be believed, little comprehension and less movement in regard to Ireland's position.

The ever-unhelpful anonymous briefings from the European Commission have joined those of certain countries in claiming that Ireland's position is untenable and that we must give something up to receive better terms. Specifically, they continue to insist that we must increase our corporation tax rate. This demand is economically illiterate, deeply cynical and an obstacle to changes which are essential not only for us but for the whole of Europe.

It is economically illiterate because its implementation would destroy any chance of achieving the core objectives of the support programmes, which are the restoration of national economies and the protection of the common currency. An increase in our corporation tax rate would immediately damage our economy and destroy our reputation as a country with a reliable, long-term corporation structure which can attract and retain globally mobile investment. There is no possible economic upside and there are many direct and rapid down-sides. It is not a zero sum game. Our economy would quickly reach a situation where we would no longer be able to maintain a policy on debts which is key to maintaining international confidence in the euro. To seek to damage an economy in the name of supporting the same economy is absurd and representative of a continuing failure to think through the implications of policy demands.

These demands are deeply cynical because they represent the exploitation of a crisis to progress purely national or institutional concerns. One major point about our corporation tax rate which has been missed by those who complain about it is that every relevant authority which has looked at it has confirmed that it does not represent a distortion of the Single Market. It fully adheres to our legal commitments to the European Union. It is because of this that the attacks are purely political. What is amazing about this is that not one piece of evidence has been produced to show that our corporation tax is anything other than a minuscule part of broader European economic performance. Our economy is 1% the size of the European economy. Our policies have an impact on the larger economies which is so close to zero it is almost immeasurable.

As the Taoiseach found out recently, there is a great tendency among some to see the refusal of Ireland simply to roll over on this point as being arrogant. This is how they described, and continue to describe, the previous Government's refusal to concede the point, and it is how they described the new Government's attitude at the Taoiseach's first Council meeting.

What is most damaging about this obsession with our corporation tax is that it is preventing Europe from showing the clarity and determination that is essential for confidence in national economies and the eurozone as a whole. Investors see the failure to agree a sustainable rate with Ireland because two leaders want Ireland to commit economic suicide with a corporation tax increase and wonder whether there really is a determination to do what it takes to protect the euro.

In response to the demand that Ireland put something on the table there should be no doubt in anyone's mind about exactly how much we have put on the table. We have accepted enormous debt obligations in the interests of protecting the common currency. We have adopted a deep and profound fiscal retrenchment. We have put politics to one side in order to do what is right rather than what is expedient. We are absorbing interest rates which are being set in light of the conditions in other countries. We have fully adhered to all of our commitments, and we are offering to adopt strong fiscal rules as a guarantor of future action.

We have put more than enough on the table. We accepted the only terms possible last year and have negotiated in good faith. The question for the other leaders now is whether they actually want the recovery for Ireland and Europe which they claim. If so, then there will be a deal in the next few weeks. If not, then the uncertainty will continue, the damage will escalate and the outcome will be negative for everyone.

We have discussed already this week the issue of bilaterals and negotiations, but I would like to stress one point to the Taoiseach. Both he and the Minister, Deputy Noonan, have signalled a significant change in at least the tone of their policy on a consolidated corporate tax base, CCTB. They have gone from absolutely ruling it out to promoting what they term "constructive engagement".

The motivation behind the push for a consolidated corporate tax base has only ever been to raise the level of corporation tax paid by companies based here and in other low-rate countries. From its very inception, CCTB has been a solution in search of a credible problem to address. At the start, the explicit justification behind CCTB was harmonisation. Growing resistance from many countries forced this to be changed to supposedly "reducing the costs of compliance". The fact is that this benefit would be at best marginal and is itself an item very low on the agenda of European industry. CCTB is a priority only for governments which want to increase revenue. Nobody who actually runs competitive and job-creating enterprises is demanding this.

The only independent study of the likely impact of the Commission's latest CCTB proposal is deeply worrying. It has many parts, but the report, published late last month, states clearly that the proposal, if implemented in full, would be likely to be of no net benefit to the European economy as a whole. It would also be of negligible, if any, benefit to France and Germany. There would, however, be a direct and potentially devastating impact on Ireland's economy. It would reduce our national income by more than 3%; that is a quick and permanent reduction in GNP by more than 3%. How can this be something that should form part of a deal supposedly to restore our economy?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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We do not agree with it either.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Your language on it has changed.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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We have a duty to discuss it.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Yesterday, the Taoiseach mentioned that he spoke with President Trichet at the summit.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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It is a paper produced by the Commission.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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The mandate of the ECB should be reviewed urgently. The bank has shown that the sole role of low inflation as a policy target is increasingly unsuitable in terms of the economic needs of Europe. Targeting inflation is important, but when this leads to an overly-aggressive stance it is highly damaging. The ECB's rate increase in mid-2008 after the recession had already begun was an historic misreading of the available information. Unfortunately, the same mistake may be being made at the moment, with short-term commodity price rises driving rate increases which are not justified by the fundamentals.

The President of the ECB, Mr. Trichet, and his predecessor were rightly eager to establish the bank's independence of political interference, particularly from heavy-handed attacks from French presidents over a number of years. However, this does not mean that the ECB should never be challenged. In this case, the potential impact of further rises could undermine fragile recoveries throughout Europe.

This summit will not be looked back on as a moment when the leaders of Europe showed a shared determination and clarity of vision. It will be seen as a deeply unsatisfactory continuation of a mixture of indecision and rising short-termism. The pact for Europe remains incomplete. There will be progress in the coming weeks. Ireland will get a more sustainable rate for financial support and there will be agreement on fiscal rules for the future. What is as yet uncertain is whether it will take another crisis before this happens.

Photo of Pádraig Mac LochlainnPádraig Mac Lochlainn (Donegal North East, Sinn Fein)
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I wish to share time with Deputy Pearse Doherty.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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Is that agreed? Agreed.

Photo of Pádraig Mac LochlainnPádraig Mac Lochlainn (Donegal North East, Sinn Fein)
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Following the EU Council's summit meeting last week, the European Commission Secretary General, Catherine Day, called the Irish bailout "tough but sustainable". For the Irish taxpayer and Ireland's future generations, there is nothing sustainable about the figures announced on Monday by the IMF, which included a predicted drop in growth rate from 0.9% to 0.5%, among the lowest of any country in the developed world, and further increases in unemployment.

What is clear, though, from these new figures and from the results of the recent stress tests, is that Ireland will never be able to sustain the EU-IMF loan. As the Nobel Prize-winning economist, Joseph Stiglitz, pointed out in The Irish Times this week:

Even in more optimistic scenarios, Ireland's debt to GDP ratio is expected to soar to 125 per cent in 2013, up from 25% in 2007. Low growth could make things worse, as stagnant GDP offsets the reduction in Ireland's debt. If Europe continues to falter - 2011 growth is projected to be lower even than last year - this will make recovery all the more difficult.

He went on to point out that the question of which policies are right is being distorted by an effort to save the banks and in the article also stated:

Even the EU is now anticipating that projections made just a short while ago were too rosy. But the EU recipe for recovery is more of the same: to meet the deficit reduction targets, more austerity – which in turn means still lower growth and still higher unemployment.

It does not take an economic genius to figure out where all this will inevitably lead. It creates a perverse cycle where austerity kills growth and that in turn causes revenue to fall. The fall in revenue then adds to the deficits and creates a demand for even more funding and more austerity. It is a perfect example of the self-fulfilling prophecy.

The words of Stiglitz will come as no surprise to Irish taxpayers who have had to witness billions upon billions of their money being pumped into a bottomless black hole. The EU, the IMF, and our Government all call this a "bailout". But the truth is that the only people being bailed out are the protected bondholders. This sentiment is being echoed by prominent European and international organisations, such as the European Trade Union Institute, ETUI, the European Trade Union Confederation, ETUC and the International Labour Organisation, ILO, which have also stated that a prolonged process of austerity in the absence of a co-ordinated public investment plan from Europe can only depress the Irish economy further. This downward spiral will only be halted by a redirection of priorities, away from the saving of banks and toward the creation of jobs and economic growth.

Sinn Féin has consistently called for the investment of the resources in the National Pensions Reserve Fund into a concentrated programme for job creation. The previous Fianna Fáil and Green Party Government decided to pump those assets into the failing banks, and the current Government is now following suit. Sinn Féin believes we must exploit our resources for the national good, for our economy, our industry and our people. In stark contrast, both the current Government and its immediate predecessors have chosen to sell them off. Where is the vision? Where is the hope for future generations when our Tánaiste signs his consent to the Corrib pipeline because he believes it meets all the preconditions, yet his party criticised the former Minister, former Deputy Pat Carey, for issuing the consent on the day of the election?

Instead of protecting our resources and challenging their being auctioned off, which we are witnessing, the Minister for Communications, Energy and Natural Resources, Deputy Pat Rabbitte, has limply regurgitated the same briefings from the Department that were issued by previous Ministers. Rather than do what is right by the people, this Fine Gael and Labour Party Government prefers to follow a road map that will secure the assets not of this country or its people but of European banks and their bondholders. Rather than opening up their minds to consider real alternatives that have been put forward not just by our party but also by Independent Deputies, national and international economists, Nobel Prize winners and international and European labour organisations, this Government prefers to commit the Irish people to following a flawed plan forced on them by the EU and IMF.

What is that plan? It amounts to nothing more than inflicting massive pain and suffering on ordinary people in order to pay off monstrous debts incurred by reckless banks at extortionate rates from our European partners and the IMF. How can a country with a population of 4.4 million, and a working population of less than half that number, cope with a debt that is escalating by the billions at what appears to be a weekly rate? It is lunacy.

The ETUC has already sent clear warning signals to European institutions about its concern for the way the EU and the IMF are tackling the Irish, Greek and Portuguese crises. It stated that some measures in the recent economic governance package touch upon industrial relations and taxation. It is clear that the real aim of including these measures in the package is to reduce the wages and living standards of ordinary people across Europe, rather than to strengthen the regulation of European banks and financial markets. Reckless lending and reckless gambling by these speculators is what fuelled the financial crisis across Europe. Ireland is not alone. Unfortunately, many more of our European partners will soon be sharing our misery.

The EU is leading this Fine Gael and Labour Party Government by the nose into an exploding economic depression. The policies it is following amount to little more than further deregulation of labour markets, wage cuts, tax increases and reductions in Government spending. Elite policy makers across the EU are responsible for the eurozone debt crisis and it is time we confronted them and told them so. The IMF and ECB are demanding that Irish citizens bear the burden of the mistakes made by international financial wizards. We are being told that we must socialise the losses, while the gains can continue to be privatised.

Again, Ireland is not alone in this mess. We have plenty of company now. Ireland's problem is a European problem and it reflects a stark structural imbalance between the core and the periphery. The countries on the periphery of Europe - Ireland, Greece, Portugal and perhaps more to follow - are caught up in a European financial storm. Where is the solidarity from our large core European partners such as Germany and France? They have placed a savage and unbearable burden on our people - a burden that should have been shared because the responsibility for the crisis lies with Europe as much as Ireland. They have kicked us while we are down and they have torn the stated objectives of the European project into tatters.

International opinion is clear. Respected observers are looking in amazement at how we have been abandoned and punished. The European Council meeting is the core policy making centre of Europe; above all the institutions, it is where the strategic direction is decided. We have an unprecedented economic crisis and it was not even raised, according to what the Taoiseach said. It was not even on the agenda for that core summit Council meeting. That is wrong. We must change tack. I appeal to the Government to stand up against this injustice, to invoke the spirit of those honourable men and women who sacrificed so much so we would have the honour of serving in this House, to immediately engage in a robust diplomatic initiative against this patent injustice and to seek realistic and genuinely sustainable terms for our people. We are not alone. It is not too late.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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The Minister for Finance recently said of the European Stability Mechanism:

It has the organic potential to put in place a great many tools or policy measures to protect the eurozone post-2013. This is one of the most significant developments that has taken place. If we had our crisis in 2015 or 2016, much of the architecture of the euro land would be in place. The crisis hit and when the architecture was tested it was insufficient and the policy instruments were not in place.

Our problem is that the crisis did not hit between 2013 and 2016, but now. Burden sharing with private creditors is needed now, as is investment, not austerity.

The pact for the euro is essentially an IMF for the eurozone. It will lend money to countries in need and can also buy their bonds directly. Provision of support will be conditional and agreed by all other member states. We must remember that what happens in practice will depend not least on the political balance of power at the time help is requested. We can see that when we consider Ireland's current situation. We are bowing to the whim of two strong core countries that are on the cusp of national elections. I am sure we are all glad that the leading Government party is part of the European People's Party, EPP. Imagine the situation if we did not have friends such as Angela Merkel and Nickolas Sarkozy. What mess would we be in then?

The perverse measures imposed on Greece and Ireland are not encouraging precedents. The price of the loans – the surcharge on the interest rates that the ESM pays on its borrowing – has already been set at two percentage points for short-term loans and three percentage points for loans above three years. That is too high. If we are really a partner among equals, why further punish a country that is committing to an agreed and painful consolidation package and make the consolidation that much more difficult? There was no modesty from the European Council when it stated its conclusions about economic policy by proclaiming:

The European Council today adopted a comprehensive package of measures to respond to the crisis, preserve financial stability and lay the ground for smart, sustainable, socially inclusive and job-creating growth. This will strengthen the economic governance and competitiveness of the euro area and of the European Union.

The euro pact plus builds on the eurozone's old macroeconomic code of conduct, the Stability and Growth Pact. It extends the original pact's rules into new areas, such as wage negotiation procedures, and gives the European Union a stronger legal framework to increase compliance. Essentially, it puts pay, pensions and social benefits at the centre of how to run the euro in the future. As currencies cannot be devalued, the pressure will be on pay, pensions and other social investments to be devalued instead. It is vital to recognise that the euro pact plus does not chart a path out of the crisis. In particular, there is no strategy for achieving faster growth through higher public and private investment. On the contrary, the combination of fiscal austerity and supply side reforms will delay the pick-up of growth and keep unemployment unacceptably high for the foreseeable future. We can see that in the figures being released each week in this country.

The pact also does not hold out the promise of near-term resolution of the ongoing banking crisis, an essential precondition for recovery. We are looking to 2013 for burden sharing when countries such as Ireland need it now. To that extent the pact is a missed opportunity. The trouble with the European approach to the problem is that it is the wrong way around. When a business becomes insolvent, one does not generally lend it more money. Rather, one seeks to restructure the debts so that the business stands a fighting chance of becoming a going concern once more. Banks exposed to the write-offs are then recapitalised after private creditors take a hit. One recapitalises to fund the banks' workings, not to pay off private speculated debt, but that is not what is happening here. Instead, in effect, the core is lending the periphery even more money in the hope that by so doing it will protect the core's banking systems from further damage.

After the agreement by the Taoiseach to this euro-pact plus on behalf of the Irish people, there are questions that need to be answered. One of them is: what are the concrete commitments to be achieved in the next 12 months in the name of the Irish people as a result of this pact and what concrete commitments are included in the national reform and stability programmes to be submitted later this month as a result of this pact?

Several weeks ago, I learned, through questions, from the Minister for Finance, Deputy Noonan, that we must put €1.7 billion over four years into the European stability mechanism starting in 2013. Some €1.7 billion of our money will go into this new fund that the Government signed off on. This means that Irish people must contribute to this fund so that at a later date we may tap into or get a loan from this fund and be charged an extortionate interest rate on the money that we gave it in the first instance. It is akin to a burglar robbing your home and charging you to take away the loot.

I asked specifically earlier today for a debate on what happens after 2012 because I and many others are unconvinced. My colleague, Deputy MacLochlainn spoke of Nobel prize winners and others who are unconvinced by the Government's strategy. The European Commission is telling us clearly that this bailout will not last us the four-year term. The European Commission states that we must tap into the bond markets by the end of 2012 at the latest.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I ask the Deputy to conclude.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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How are we to achieve that, given that interest rates, nearly six months on from the start of the negotiations of the bailout, are even higher than then?

I wish the Taoiseach well and I hope he does well because it is not a party-political matter. The country needs him to do well and sort this problem out. The flaw in his approach is in the first two pages of his statement and I can summarise it in his words. The Taoiseach stated, "I am determined to do what is necessary to return Ireland to what it once was - a constructive and well-regarded member state of the Union, with good relations with partners, large and small." That should not be his ambition when he goes out to these European Council meetings. It is not to appease the French or the Germans so that they see us as good neighbours-----

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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Deputy Doherty, please.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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It is to stand up for Irish people. That is what is not happening.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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Deputy Doherty has other colleagues. I understand Deputy Boyd Barrett is sharing time.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I am sharing my time with Deputies Mattie McGrath, Healy and Ross.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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There are three and three-quarter minutes.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Many of the arguments about the debate that happened at the European Council have been gone through and I have a short time to make my points. As Deputy Doherty stated, no doubt all of us want to sort out the mess we are in, but what seems to me extraordinary is that there is no willingness on the part of the Government to recognise that the path we are being asked to go down by the IMF and the EU is a path that makes matters worse, not better. It is essentially the path that led us to this crisis in the first place. I do not understand why the Government does not acknowledge that.

In simple terms, this crisis happened because banks in Europe - French, German, British banks - lent money to Irish banks to speculate on the property bubble and they were happy with the unregulated financial and banking sector. The philosophy was "no regulation" or "light regulation", let the market rip and remove anything that gets in the way of making profits. We know where that got us.

The bankers here, in blind competition with one another to get a piece of the action, cheered on by the Fianna Fáil Government, stoked up a property bubble and the bankers in Europe knew what it was all about - if they did not, they were grossly incompetent. They knew, but they were happy to stoke up that sort of bubble and to make profits in the sort of unregulated Celtic tiger environment which they might not even have got away with in their own countries, and the inevitable crash came. Europe, having been very significantly responsible for it, then told the State that it must unload the cost of this mess on to the backs of working people in the form of cutbacks and austerity, that the State must bail out the Irish banks because if it does not, the Irish banks will bring Europe's banks down and it might affect the euro, and that Europe is not having that.

The immorality and injustice of that is obvious to all. Given this crisis, which did not happen under the Taoiseach's watch but under the watch of the previous Government, Europe is now telling us that we must continue along the same road. It is a joke to talk about a bailout because they are burying this economy and society to protect the bankers who bankrolled this property bubble in the first place. In so far as they will bail us out and in so far as they are saying that they will give us money to pay off the bankers - to pay them back, essentially - they, the European banks demand more deregulation, more austerity and more cutbacks that are contracting the economy as well as causing massive injustice, hardship and suffering for ordinary people. The effects are clear. Growth in the economy is contracting continuously.

The more the Government imposes austerity, the more the economy contracts. The IMF revised downward growth forecasts prove that. When will the Government state that this is not working? When will the Government stand up and state that it is not fair and it is not working, and insist that we go down another path and stand up to them? In doing that, we will be siding with other people in Iceland who have rejected similar policies.

Photo of Shane RossShane Ross (Dublin South, Independent)
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Hear, hear.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We will be siding with people in Portugal who are standing up to it, and people on the streets in Greece and Spain who are saying that neither do they want to pay for the crimes of politicians, bankers and the corporate elite. Should we not stand up with those people and stop the insanity?

1:00 pm

Photo of Mattie McGrathMattie McGrath (Tipperary South, Independent)
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All my adult life I have been a keen supporter of the EEC, now the EU, and the various different treaties. We have had strong, good leaders in Europe over the years who seemed interested in fair play for all member states even though the number of member states at such times might have been fewer. There were some good deals out there - under CAP, the European Cohesion Fund, and so on. That was all fair and good.

We voted for different treaties and included in those treaties are strict regulations regarding financial and banking behaviour. Obviously, there was no regulation in Ireland. We had a regulator who earned a considerable salary who did not do his job and who should not have got his bonus because he broke his contract. As far as I am concerned, it is as simple as that.

European countries had more strict regulations and that is why they lent the money so recklessly in Ireland, which fuelled the property bubble to an enormous degree. I stated consistently, and I believe it to be a fair assessment, that the couple of European countries that lent that money so recklessly here were 50% responsible for what happened in the banking crisis.

What happens when we get into trouble is that we go to our partners. Among those same partners, a common belief in recent years of which we have heard so much was that Ireland was punching above its weight, suggesting that we had some additional influence in decision and policy-making processes in the EU. However, we now know the real position. That was never the case but it was what we were led to believe. It was what we were led to believe when we were asked and being encouraged to support the second Lisbon treaty.

Given that the guidelines set out under that treaty and the Maastricht treaty were not adhered to, why has this Government and its predecessor accepted a diktat from Europe that ordinary people must bail out those who got us into this mess? At least half of the cost should be imposed on the European banks which lent so recklessly. I cannot understand why they are getting away it. They will continue with this behaviour as long as they are allowed to do so. We must stand up to them because the interest rate the EU is forcing on us is exorbitant in comparison to that charged on the funding by the IMF. We have to say "stop".

The public is confused and disappointed by the actions of the new Government, which promised that it would not spend another cent on the bailout. I recognise it has to tidy up what happened but we would all be fully behind it if it stood up to these people because they are being unfair. It is also unfair to attack our corporation tax rate. Our EU neighbours should analyse their own rates of tax in terms of their attractiveness to foreign direct investment. What is happening is not fair and it is time we stood up and rejected it.

Photo of Séamus HealySéamus Healy (Tipperary South, Workers and Unemployed Action Group)
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We need to recognise that, in this instance at least, the EU is not a good Samaritan coming to the help of a neighbour in trouble. German, French and British banks gambled recklessly and lost but they are now demanding an each way bet. They want the Irish taxpayer to pay for the losses they incurred. That has been the policy of the previous Government and, sadly, it is now being pursued by Fine Gael and the Labour Party. European banks bear a lot of responsibility for what has happened to the Irish economy.

We are now faced with a genuine national economic and social emergency accompanied by an unprecedented assault on the living standards of Irish people and low and middle income earning families in particular. Meanwhile, billions of euro are being taken from working people and given to bankers, developers, international speculators and finance houses. This Government and its predecessor are trying to solve the economic crisis by slashing public expenditure and cutting welfare payments and the pay and pensions of workers. There can be no just or sustainable solution on this basis. I favour democratic and public control of our own resources so that social need is prioritised over profit.

It was established yesterday that we are in even worse trouble than we previously believed. Growth rate projections have been halved to 0.5% and we appear to be €1.3 billion worse off today than we were yesterday morning. Is it not time to default? This situation is unsustainable. We face payments of €4.9 billion this year, rising to €9 billion or more in 2014. That burden will crush Irish families and devastate the economy. One way or another, there will be a default. We need to negotiate a structured default because if we default unilaterally, the resulting situation will be absolutely dire. It is unsustainable to force Irish taxpayers to pay for banks which gambled recklessly and lost. We will see a continued onslaught on ordinary Irish people in coming budgets and people on low incomes or social welfare payments of €188 per week will be forced to live on even less. It is time to default and the Government should stand up to the EU to stop the pressure on Irish taxpayers to pay huge sums of money to foreign banks.

Photo of Shane RossShane Ross (Dublin South, Independent)
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I welcome the tone of the contribution from my colleague, Deputy Healy. He unapologetically introduced the word "default" into the debate. It is time this option was put centre stage in Europe as well as this Chamber. Ministers are fond of claiming, correctly, that our standing in Europe has never been lower. Their political intent is to blame the previous Government. They are also right about that because that Government reduced us from Celtic tiger heroes to the bottom of the European pile. The problem with our low standing is that little notice is taken of what we do. Our EU colleagues are not particularly impressed by our stand on various issues and they are able to kick us around and bully us. Apparently that has been happening at European Council meetings, the evidence for which is our inability achieve a reduction on our interest rate.

I welcome the decision by the Minister for Foreign Affairs to embark on a diplomatic initiative to get the message across to our European partners about our intent and the state we are in but that is not enough. If we are being bullied, we have to fight back. It is clear from the various European meetings that we have accepted lying down the diktats from German and France, which think they can push us around. As the U-turn on burning the bondholders made clear, we lack an alternative to the strategy pursued by the previous Government.

I would welcome a reasonable debate on this issue rather than an emotional or political one. Why did we not embark on the different programme championed from these benches in what I hope was a non-political way? The first step would have been a referendum. I would like the Minister to reply to my question because I raise a serious point. It is fair to accuse our proposal to hold a referendum as populist, although there is nothing wrong with being populist. However, while the referendum in Iceland is not a direct parallel, once the people in that country rejected the terms of their debt settlement by a majority of 93% their Government renegotiated much better terms with the British and Dutch Governments. These terms were once again rejected last Saturday by a much narrower margin but the nation was strengthened by its vote. If we told Europe our people will not stomach the deal without getting something in return, our hand will be strengthened. If any subsequent settlement involved a structured default, they might consider it.

We have other cards to play but we are not playing them. What in the name of God is wrong with announcing we will move our corporate tax rate in the opposite direction to that demanded in Europe? It might drive other governments barmy but we are not in the business of keeping these people happy. We could declare that we intend reducing it to 9.9% rather than raising it. That might have the effect of waking them up to the fact that we are still in charge of our tax affairs and they could do absolutely nothing about it. We have to go on a counter offensive and develop an alternative strategy to going to European Council meetings and doing what we are told by our larger neighbours.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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We will now take questions to the Tánaiste and Minister for Foreign Affairs.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Does the Tánaiste regret the comment he made during the general election campaign - this is in the context of the summit and the resolution of the Irish debt problem - that it was Frankfurt's way or the Labour Party's way? We now know that the bondholders have not been burned. There has been no unilateral action in regard to them. If anything, it seems the notion that Ireland must give something before it receives something in return is gaining momentum. As I said, that is a fundamentally flawed perspective on the part of our European colleagues. There was a deeply cynical approach to all of these issues in the year or two years before the general election campaign, during which people were led to believe there could be a unilateral burning of bondholders and that it was our way rather than anybody else's.

There should be a restructuring and it should be done at European level. My criticism of the summit is very much that there was a clear failure in terms of finding a solution. There are fundamental difficulties across Europe in terms of the electoral position in Finland, Germany and France, the fundamental driver of the behaviour of the French President and the German Chancellor, as well as the other countries which are reluctant to look at the big picture in resolving the issues facing the European Union. All of the problems are interdependent; they are not just Irish problems. There is a fundamental lack of leadership at European level which is undermining the European vision and the Union itself.

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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I do not regret anything I said during the general election campaign. If there is cause for regret, or expressions of regret, it is probably for Deputy Martin, his party and the other side of the House. The approach always recommended and advocated by the Labour Party was not a unilateral but a negotiated one, as outlined on several occasions.

We could go on forever talking about how we got into this mess - I am happy to have that discussion and give my thoughts on it - but we must concentrate on the process of recovery because that is what the people who sent us here want us to engage in. Much of the discussion we have had for the past hour or so is a recipe for depression. We need to talk about how we can get the country to recover.

Stress tests have highlighted the extent of the problem in the banking system. They were very robust and we will see in the course of time how robust they were when we receive the results of stress testing in the wider European banking system. We know the extent of that problem. What we have not had up to now is a clear statement on the future of Irish banking. That is a firm decision the Government has made and issues regarding burden sharing, bondholders and so on must be seen in the context of the Government's intention that the pillar banks should be enabled to raise private capital. That is part of the strategy we are pursuing.

The second issue that arises is that of the terms on which finance is being provided for this country. It is being provided on two levels - there is the liquidity going into the banking system and the finance available to the State to enable it to pay its bills. The Government has been absolutely clear that it wants to negotiate a reduction in the interest rate charged on the money coming into the State, something which is being progressed by the Minister for Finance at ECOFIN.

The third dimension is the European one. As a number of speakers said, this is not just an Irish problem. There is also a European dimension and that is the framework which has been put together and is reflected in the conclusions reached at the European Council meeting. This is a process; it is not something in respect of which there is an absolute conclusion at the end of any one European Council meeting. It is a process which will continue for some time. For Ireland to maximise its influence in the matters which directly affect us as a country and to influence the framework and decisions being taken at European level, it is important that our position as a country is enhanced within the overall European framework. That is why are pursuing the diplomatic approach which will over a period set out what the Government is doing, what it intends to do and make it absolutely clear that what this is about is a process of recovery to ensure the economy recovers, people will be back at work, business will be successful and that we will get out of the economic mess we inherited.

Photo of Pádraig Mac LochlainnPádraig Mac Lochlainn (Donegal North East, Sinn Fein)
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We have been told that what is required to bring forward the European Stability Mechanism is an amendment to the treaty. According to the Taoiseach, he has been advised by the Attorney General that it does not require a constitutional referendum. Will the Tánaiste give a commitment to publish the legal advice received from the Attorney General in order that we can analyse it? Has the wording of an amendment to the treaty been designed to avoid the need for a constitutional referendum? Does the Tánaiste believe the matters which have led to this amendment to the treaty do not have a serious enough impact on the people to necessitate a constitutional referendum in order to give them a chance to have their say on the matter?

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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Following consultations with the European Parliament, the European Commission and the European Central Bank, the spring European Council formally adopted the decision amending the treaty in order to allow member states of the euro area to establish a permanent mechanism to be known as the European Stability Mechanism to safeguard the financial stability of the euro area as a whole. This will be done using the simplified revision procedure provided for in Article 48.6 of the Treaty on European Union. The Office of the Attorney General advises that the European Council decision does not require an amendment of the Constitution. As no amendment of the Constitution arises, holding a referendum will not be a requirement in order to allow Ireland to approve the decision on the amendment. The precise manner in which Irish approval of the proposed treaty change will be given effect is being considered. It is expected that the necessary measures will be taken by all member states to allow the European Stability Mechanism to enter into force on 1 January 2013.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Independent)
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It appears the European Council meeting was very reactive to the situation in Portugal. It appears also that a large country must be affected before one looks at the vision for the European Union. From where will leadership be given? It appears member states are taking a unilateral approach to crises as they emerge. Did the Tánaiste receive any indication on from where the leadership would be given to address this issue in looking at the big picture? If we are to get out of this problem, the European Union, although part of it, will have to be part of the solution. We must see where that vision will take us. I see only a very reactive approach being taken in moving from one crisis to another. Could we provide some leadership in the matter?

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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The European Union is attempting to avoid a reactive situation. It is true that the EU found itself in a position where it had to react to the nature of the crisis in Greece, the difficulty in Ireland and more recently in Portugal. The idea of establishing a European stability mechanism for the eurozone is so that there will be, post-2013, a permanent mechanism to deal with circumstances where countries find themselves in difficulty. The measures and the issues discussed and considered at the European Council meeting are intended to provide a framework to address economic crises as they emerge and to ensure we work to avoid them happening in the future.

Regarding the issue of leadership, it is important that we consider ourselves part of that leadership. The EU is intended to operate on the basis of solidarity and co-operation between member states. Instead of looking to leadership from individual member states, we must examine the way in which the 27 member states acting as a whole provide leadership collectively. It is valuable to have a framework in place to enable crises to be addressed in a manner not entirely reactive and to have a framework about moving the European economy out of the economic difficulties at present.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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I do not want to labour the point but much of what has been said about the policy situation is incorrect. I refer to the spin that robust tests were initiated by the current Government and that these are new. These were initiated long before the current Government came into office. We all know about the pillar banks and we all knew about the rationalisation of banks. That was clearly going to happen once the robust tests had taken place.

Why has the Government's position changed on the harmonisation of the common consolidated tax base? It has changed to one of constructive and active engagement. The impact of the common consolidated tax base in Ireland would be devastating. It would be worse than simply increasing the corporate tax rate, which I do not agree with, having been a former Minister with responsibility for employment. Is this because the Tánaiste is teeing up the prospect of having to put something on the table to get an interest rate reduction? I thought my speech was constructive and it should not have been depressing. Irish people have put a great deal on the table. We accepted enormous debt obligations in the interest of protecting the common currency. It is in the interest of protecting the common currency, and not of Ireland, that we have done this. We adopted a deep and profound fiscal retrenchment. We put politics to one side to do what is right and not what is expedient. When we were doing what was right for the past two years, we were pilloried left, right and centre by the parties of the current Government and others. This applied to what we did about banks, deficit reductions, budgets and measures that were described as savage. Within a couple of weeks, people were able to say that they accepted all of this and adopted it as policy. I do not mind that, other than the fact that it is deeply cynical and hypocritical and has created problems in terms of doing what needs to be done to ensure economic recovery. We have put a great deal on the table and the notion that the German finance minister and others have intimated that we must put more on the table to get a rational position of a reduction in the interest rate, is unacceptable. The IMF said yesterday that there was an urgent need for a reduction in interest rates across all the mechanisms to support Greece, Ireland and Portugal.

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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I acknowledge that Deputy Martin's speech was constructive, as were the contributions of all Members.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Is that another U-turn?

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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I was expressing some temptation to depression at the tone in some of the contributions, that we will all be ruined before the night is out. I make it clear to Deputy Martin that the Government's position in respect of the common consolidated tax base has not changed. We are opposed to it. We do not favour it. There is a proposal from the European Commission that puts the issue on the table. That must be discussed but in the discussion of the proposal the Government's position is very clear. I agree with Deputy Martin that Ireland has put a great deal on the table. The Government position on the proposal has not changed and we have been clear about the rate of corporation tax. This is a different dimension of the same point and Deputy Martin validly made the connection between the two. We have made it clear that we will not agree to a reduction in the rate of corporation tax. I appreciate the support from the House on the matter. Our position on the common consolidated tax base has not changed even though it is up for discussion. We are opposed to the common consolidated tax base.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Tánaiste is correct to ask for constructive questions and contributions to this debate. Perhaps the Tánaiste agrees that it is very difficult to take seriously the castigation and criticism by Fianna Fáil when it has not got down on bended knee and asked for forgiveness from the people of this country for what it has done to them. I refer to Fianna Fáil's major culpability in dragging this country to the edge of the abyss. Members and the rest of the country can start to take them seriously when they admit to their crimes. We will pass on from political point scoring but it makes me retch to hear them criticise anyone, given what they have done.

In an effort to be constructive, it is not doom and gloom to question the continuing policy of bailing out the banks. It is continuing to bail out the banks and asking ordinary people to pay for this in the form of cutbacks and austerity that is closing off the road to economic recovery. Is that not obviously a fact? Austerity started with the last Government and was imposed for two years but it did not work. When Deputy Gilmore was in opposition, he made that point. These measures contracted the economy, as the latest IMF figures confirm. At the weekend, Dr. Joseph Stiglitz confirmed that the more we go down this road, the more the economy contracts and reduces the possibility of future economic growth, which is the only thing that can get us out of this mess.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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Can Deputy Boyd Barrett ask a question please?

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Is it not the case that the prescriptions of the EU and the IMF, irrespective of how we got here, are moving us in the opposite direction to that which allows for job growth and economic growth? The EU and IMF require austerity, which is sucking money out of the economy. For Greece to get a miserable 1% reduction on its interest rate, it had to agree to €50 billion worth of privatisation. Is that the road we go down as the growth forecasts go down, as the EU and the IMF come back and say we will not be able to pay it back on this basis and that they want more?

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I call on the Tánaiste to reply.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Are we to accept that? We are moving in the opposite direction, instead of stimulating the economy.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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Many other Members also want to contribute.

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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I thank Deputy Boyd Barrett for being constructive. The route we must travel is about the process of recovery. Growing the economy is central to that. That is why the Government is putting the emphasis on jobs and why proposals in regard to what we want to do to get people back to work and to increase the number of people in employment will be brought before the House next month.

The decisions made by Government in regard to the banking issue are aimed at recovery. They are aimed at having a strategy to allow the two pillar banks to recover and raise private capital thereby reducing their dependence on the State and or public finances and, more critically, allowing them to lend to business so that business in turn will be able generate employment, thus getting people back to work.

We must see this as a process. No single part of this series of decisions made over time by Government can be singled out and identified as being right or wrong. As such, the decisions in regard to the banks in terms of restructuring them and getting them to lend again and the decisions in regard to what we are attempting to do in terms of reducing the interest rate, what we do in terms of jobs and the wider European economy must be seen as part of the overall recovery effort which is aimed at getting people back to work. What matters ultimately is how all of this impacts on the lives of the people we represent. We must ensure we have a strong, robust economy, people at work, people returning to work and businesses getting back on their feet while minimising the impact of what has to be done on the taxpayer and the public finances. All of this must be done as part of the recovery process.

While we will differ from time to time on some of the detailed individual components of that recovery process, it is important that the message communicated is confident and optimistic. Part of our recovery process is to re-instil and re-ignite confidence in our economy. The Government has its views on how this should be done. We are taking decisions and moving forward. Individual decisions will be debated. We need to get into the thinking space that we are going to work our way out of this problem and bring about recovery.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I ask for Members' co-operation in agreeing to taking all of the remaining questions together, following which the Minister will reply to them. Is that agreed? Agreed.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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The Minister stated that we need to send out a confident message. In regard to his statement that other contributions are a recipe for depression, I am sure he is aware of a former Taoiseach who also dismissed with the same type of words claims by others that the economic policies that the then Government were pursuing were not the right ones and would lead us into depression. The Minister should be careful when others point up the pitfalls in Government strategy.

The pact for the euro deals with a debt sustainability model. Anyone who taps into the ESM post-2013 will be subject to debt sustainability analysis by the EU-IMF. If a state is deemed insolvent debt restructuring must follow. The European Commission has carried out a debt sustainability analysis for this country. However, its data was off the mark. Three issues arise. Has this come up at the European Council meeting? Are we asking for a new debt sustainability based on the fact that our GDP growth rate has been slashed to almost one-quarter of what the Government projected or half of that predicted by the EU-IMF? Our unemployment average for this year is estimated to be 405,000. It is currently running at approximately 441,000 people. We have committed to putting €24 billion into the four guaranteed institutions. However, the stress tests on Irish Nationwide Building Society and Anglo Irish Bank show that the Government may need to inject further billions into the banks. The big issues are debt sustainability and how we can afford this debt.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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Will the Minister confirm, given the European stabilisation mechanism has been put on a sound legal footing, that the Irish contribution to that will be €11 billion and that we are legally obliged to do this? If that is the case, will that money be loaned to us by the ECB at an interest rate of 5.8%?

Photo of Mattie McGrathMattie McGrath (Tipperary South, Independent)
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I compliment the Minister on launching his diplomatic initiative. Perhaps if he is at liberty to do so, he will outline initial reactions to it.

Photo of Mick WallaceMick Wallace (Wexford, Independent)
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I could not agree more with the Minister that co-operation between all members of the EU will be vital. Will he agree that of late the decisions being made are more in the interests of Germany than of the periphery countries? For example, the recent increase in interest rates suits Germany and not the periphery countries like Ireland. It will be difficult for periphery countries to recover if Chancellor Merkel is to be a better German than she is a European. The Germans are controlling everything. Chancellor Merkel knows that it will be good business in the long term for Germany to look after the periphery countries because Germany has done well out of the European Union and the euro. However, if Chancellor Merkel is now, because of fear of the German electorate, to make decisions that are more insular and Germany orientated, the periphery countries will suffer.

Photo of Pádraig Mac LochlainnPádraig Mac Lochlainn (Donegal North East, Sinn Fein)
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Will the Government publish the Attorney General's advice in regard to the referendum? Ireland is committed to contributing to a range of funds in the European Union. This commitment was achieved by way of agreement in a referendum, which means the people at least had a say in that regard. Will the Government publish the Attorney General's legal advice on the reason we cannot have a referendum?

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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I call on the Minister to reply and ask him also to be brief as we are over time.

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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I will try to comply with the Leas-Cheann Comhairle's request.

On Deputy Doherty's point, the European Stability Mechanism is intended to provide the framework which will apply post-2013. Our approach to that is on the basis of debt sustainability. The Government's objective is to work our way out of the difficulties we are in. We are confident this can be done.

Deputy Pringle asked about the amount that we are to contribute to the ESM. Only €80 billion of the €700 billion capacity of the mechanism is paid in capital. This will be made available by participating member states in five equal annual instalments from 2013 according to an established key. Ireland will contribute 1.592% of the €80 billion or approximately €255 million in each of the five years. The total will be €1.27 billion. The manner in which the ESM is structured means that each country's contribution will not impact on its general government deficit. The remaining €620 billion of the subscribed capital will be made available by way of calling capital and guarantees. Ireland's share of the €620 billion will be approximately €9.87 billion. The amount put up by Ireland will be approximately €255 million in each of the five years. We have to bear in mind that it is a fund and mechanism which we want to have available to us.

I will return to Deputy McGrath because I missed the point he made.

The arrangement brings us back to Deputy Wallace's point, with which I agree. I do not think any member state, whether this country or Germany, can play the game for country advantage. There is interdependence within the European union. If large countries like Germany or any other member state insist on decisions being taken which are in its national interest alone, it will ultimately come back and bite the member state concerned. Therefore, it is necessary that decisions are taken in the interest of the wider European Union.

The decisions taken at the last European Council meeting reflect that, because as the Deputy will know, in the months leading into it there was concern in some member states about the extent of the contribution taxpayers and individual member states were being required to make, as they saw it, to come to the aid of countries on the periphery. That is a short-sighted way of looking at the problem. As Deputy Martin said, countries like Ireland have put a great deal on the table and that needs to be factored into the equation.

I missed the point made by Deputy McGrath.

Photo of Mattie McGrathMattie McGrath (Tipperary South, Independent)
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I asked if the Minister had received a response to his diplomatic initiatives.

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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We have. Our embassies have been working on this issue right across the capitals of the European Union and further afield. There is quite a degree of goodwill towards Ireland from Governments, business leaders and potential investors. There has been some very strong, positive feedback from that. The diplomatic initiative is working on a number of levels through embassies, Ministers attending European Council meetings and engaging with others. We have a programme of bilateral discussions which we will have with member states. Early next week I will meet the EU ambassadors who are located here to brief them and update them on the situation.

On a referendum, as Deputy MacLochlainn will be away the advice of the Attorney General is not new. The European treaty provides for a mechanism whereby changes can be made to it. There is a simplified revision procedure which does not expand the competence of the European Union. The establishment of the European stability mechanism is something that applies to the eurozone. The previous Attorney General had advised that a referendum was not required. Now that the text has been finally settled by the European Council, the current Attorney General has been asked to advise the Government on the ratification procedure.

Sitting suspended at 1.45 p.m. and resumed at 2.30 p.m.