Tuesday, 12 June 2012
This week we had the development with regard to the intervention by the European authorities on the Spanish bank debt and the decision to recapitalise Spanish bank debt by adding €100 million to the sovereign debt of Spain. Does the Taoiseach accept it is a bad deal overall for Spain, Ireland and Europe in the sense that it represents another sticking plaster approach to the resolution of a fundamental crisis for the eurozone? In particular, I refer to the failure to break the link between sovereign debt and bank debt, which the Taoiseach said in the House last week was a desirable objective. In essence, the Spanish deal has reinforced the link between sovereign debt and bank debt and already it is beginning to unravel in the sense that there are significant doubts and uncertainty about the capacity of the Spanish Government to borrow for day-to-day services, given the increasing bond yields after yesterday's rally, which did not last very long. We are witnessing what we witnessed for the past 15 months, a piecemeal, too little too late approach to resolving the crisis in the eurozone.
Last week I asked the Taoiseach about the phone call to Chancellor Merkel. The Taoiseach said he raised the debt issue with her. He did not give us the benefit of her response. We got a partial response on the Spanish bank deal, very clearly not in favour of breaking the link between sovereign debt and bank debt. On the question of the Irish debt issue and the promissory notes, the Irish people would prefer a greater degree of openness and transparency about what the Government is negotiating for and what it is asking on behalf of the Irish people. Will the Taoiseach publish the technical paper and various scenarios on which he and his officials are working since last September? The Taoiseach needs to be more open about that issue and more assertive about the wider eurozone crisis and our position in respect of it.
The Taoiseach seems to be keeping his eyes closed, smiling and waiting for something to land in his lap. This seems to be the general minimalist, passive and acquiescent approach being adopted.
I do not speak for the Spanish Government and neither does Deputy Martin. The Spanish Government made the request for moneys in order to deal with its bank problem. The Spanish Government did not seek moneys for their bank debt problem as well as for the running of the Spanish economy. The request was made and they got the deal and this is the deal they will sign. The sovereign underwrites that loan and it pays the same interest rates as every other country.
It ill behoves Deputy Martin to come into this House and talk about the antics of any other politician when he himself was the Minister for Foreign Affairs in a Government which agreed on a bank guarantee at 4 a.m. in respect of which I, as Taoiseach, am unable to find any file or shred of evidence in the Department of the Taoiseach. Deputy Martin was the Minister for Foreign Affairs-----
-----and this is the legacy which this Government is trying to break. Actually, we are one of the first governments to put forward the proposition that the ESM should be licensed to put money directly into banks. This was indicated by the Minister for Finance, Deputy Noonan, in respect of the Spanish situation, when he participated in the conference held last weekend.
I will make three points to Deputy Martin. First, this country is saddled with the legacy of the greatest economic disaster ever perpetrated on the Irish people and Deputy Martin was the Minister for Foreign Affairs at the time. It ill behoves him now to talk about the negotiations being carried on by other people. Second, last weekend I wrote to every leader of European governments and I set out a view very clearly that this is a European problem which requires a European solution.
I note that Dr. Alan Ahearne, the special adviser to the late Minister for Finance, now realises that the deal was the wrong deal and that the sovereign should have been broken from the banks, which this Government has set out very clearly as being the way to go. I also note that Commissioner Rehn in his comments yesterday said that the Irish negotiations are progressing, that he and the Commission will support this situation being brought to a conclusion and that Ireland deserves support and assistance with the difficulties it inherited from the Deputy's lot on that side of the House. That is what we will continue to do.
There was no bank guarantee in Spain, yet the Spanish citizens and the Spanish Government have to cough up €100 billion on the balance sheet. The Taoiseach has just given the House a non-answer. At the beginning of his reply he said that I have no right to speak on behalf of the Spanish Government. It is not a Spanish problem; it is a European problem.
It is not just an Irish problem; it is a eurozone crisis and that is the point. The Taoiseach contradicted himself by saying he wrote to all the leaders saying it should be a European mechanism and the link should be severed from the national. He cannot have it both ways. It is not just a Spanish problem anymore. That is the issue and it goes to the core. The Taoiseach should not distort what Dr. Alan Ahearne said because he made it very clear that the then Irish Government-----
------sought a European mechanism to deal with the bank debt and the recapitalisation of the banks. He was saying it was a mistake on the part of the European authorities and they still have lessons to learn about the crisis which has escalated over the past 15 months to become a genuine, eurozone-wide crisis. Even the European Commission-----
-----it wants to create mechanisms for the eurozone. The Taoiseach studiously avoided answering my question about the publication of the technical paper. He did not deal with that basic question. Will he publish the technical paper and will he let us know, in an open and clear way, what exactly he is looking for as regards the promissory note issue? There were no European facilities such as the ESM or EFSF at the time of the Irish bank guarantee and the banking system could not have been allowed to collapse, as is happening in Spain, Greece and elsewhere across Europe.
There is a danger that it will spread to every country, one by one, until we really are in the middle of an existential crisis for the euro. There should be less of the PR, less of the spin, less of the smart alec politics from the Taoiseach and let us get down to reality. It is too late to be writing letters - get at it and sort it out. Will he publish the technical paper?
It is either shredded or has been disposed of or dispatched of - in other words, the Government has no evidence of the discussion that took place or of what Deputy Martin said when he was Minister for Foreign Affairs. That bank guarantee led on to the recapitalisation and the subsequent bailout.
That was in respect of its bank debt for €100 billion. The conditions of this assistance remain to be worked out and it is perfectly clear that, contrary to what Deputy Martin said at his press conference, the situation is that Spain must repay those loans at the same interest rate and terms as apply to anyone else and the Spanish sovereign must underwrite the moneys for the Spanish banks. As Deputy Martin will be well aware, the structure of the EFSF and the structure of the ESM - to be introduced in July - in its current position does not allow for direct injection of moneys into banks.
Dr. Ahearne is a respected economist and I am glad to see that on mature recollection and reflection he know says that the deal Deputy Martin's Government did was wrong and that it would have been much better if they had been able to convince the markets to have a split between the sovereign and the banks. I am very glad to see that at least he had the courage to come out and say that the Government which he served loyally and well was wrong in what it did.
The Government is looking for a re-engineering of Ireland's position, with a longer term lower interest rate which would be of great benefit to the country. Therefore, I cannot publish a paper which I have not seen and which is not yet fully completed.
What I said to Chancellor Merkel was that there was a very vigorous engagement in this country regarding the fiscal stability treaty and that the major parties in the Oireachtas supported it as did civic society-----
As the Taoiseach outlined, last Saturday, Spain applied for and was granted what is being referred to as a non-economic bailout - in other words, a bailout - for its toxic banking system for which its citizens will be on the hook. This is all very eerily familiar to us here. It is also now clear that no crumbs from the table will be available for this State. If the Taoiseach's strategy had been to wait and see what the Spanish get, it is clear this strategy failed badly. Last week, he told the House there was a debate in Europe about direct funding of the banking system and he went so far as almost to claim this as his own big idea. However, it has not happened. It is fair to conclude yet again that the Taoiseach failed to stand up for Ireland's interests. Once again, it is Frankfurt's way.
In March, the Taoiseach tried to pull the wool over people's eyes concerning the promissory note but we know that the banking debt remains. The technical paper, which the Taoiseach now incredibly tells us he has not had sight or word of, was due in February. These matters are complex, as the Taoiseach says, but they are also urgent, so where is the technical paper and when will it be published? It is a long time coming.
What is the Taoiseach's overall plan? It is all very well for him to point the finger at Fianna Fáil and say there are no files in his office to inform him on the thinking for past decisions.
The Taoiseach cannot very well do that, however, and then refuse to give the Dáil and the citizens of this State a clear indication of his strategy on the promissory note and the overall banking debt. What is the game plan, or is there one? Perhaps there is none.
The Deputy's party leader is absent, but on one occasion he said I was trying to pull the wool over people's eyes. I reminded him that, down here, we call that the Balaclava effect. Maybe Deputy McDonald was not here that day.
The Government has a strategy which is focused on the re-engineering of our debt position for longer-term, lower interest rates. That has been set out by the Minister for Finance and by every other Minister for quite some time. The first element of the promissory note negotiations that are taking place, as the Deputy is aware, is to move the deadline to 2025. Clearly, I do not claim credit for the discussions that are now taking place in Europe about the ESM, although this Government was one of the first to table that matter, which has now become a central focus of the discussions by many leaders on how to deal with the European response to the European problem. Ireland has a year longer than Spain to reach the 3% target. Spain has its own challenges which were set out by the Prime Minister when he made a connection about the €100 billion loan for the bank position in Spain last weekend.
Ireland's position is to continue to negotiate complex issues with the troika with a view to bringing about a re-engineering of that debt problem, thus easing the position for all our people. The problem was initially caused by the incompetence of a previous government. From that perspective there is a clear strategy, which is to continue to negotiate and reach an agreement to achieve that target of lower interest rates in the longer term.
Deputy McDonald said the strategy was to wait and see but that is far from the case. Ireland has been in a bailout programme for quite some time and we have successfully renegotiated elements of it, with two Ministers engaging with the troika. I would remind the Deputy that the IMF, the head of the European Commission, and Commissioner Rehn have all stated that Ireland will continue to have support in the context of negotiations to reduce our debt problem and bring this to a conclusion. I was happy to note Commissioner Rehn's strong and clear statement yesterday. Deputy McDonald can take it that the Government will follow that through to bring to a conclusion, hopefully successfully, our objective of reducing that debt burden which is currently on the backs of our taxpayers and citizens.
I take no comfort from the Taoiseach's comments. He tells us that decoupling the banking debt from the sovereign is the way to go, to use his term. He has told us repeatedly that he is seeking to re-engineer the promissory note. He also tells us that he is negotiating and making telephone calls, but he has not delivered. The only piece of re-engineering that he has delivered will cost the taxpayer an additional €90 million. If he considers that a success, heaven forbid that we ever witness one of his failures.
I have asked the Taoiseach a direct question in respect of the promissory note. We want to know when the technical paper will be concluded and published. When will this Government move definitively to get a result for this State? There is no strategy. The Taoiseach is waffling and fluffing around, hoping against hope that something will break in Greece or Spain to save his blushes. That will not happen, however. Decisive and assertive action is required but the Taoiseach has proved to be incapable of that.
He should forget about his smart remarks to me across the floor of the House. He should get tell us when the technical paper will be concluded and published. When precisely will the taxpayers and citizens of this State have relief from debts that were never theirs?
It is interesting to note that the Deputy is very clear and decisive. Her comment all through the referendum campaign was that the EU and the IMF should leave this country and take their money with them.
The Deputy asked me when the promissory note would be published, but I cannot answer that because it is not completed. She asked when it would be concluded but I cannot answer that either because the negotiations are still ongoing between the troika, the Minister for Finance, the Minister for Public Expenditure and Reform, and their officials. I hope that is clear. I cannot give the Deputy a date because the negotiations have not concluded.
The strategy is very clear. For the third time, it is to bring about a re-engineering of the debt problem that this country has inherited, so as to have longer-term repayments and lower interest rates, which will be of benefit to our economy and all our citizens. I hope that is clear to the Deputy.
There is a euro Armageddon approaching us of which we are not aware. Every weekend events happen which have the potential to sink the euro. Last weekend, we had the Spanish bailout, while next weekend there will be elections in Greece. Both those events are extraordinarily dangerous not just for the euro but also for this country and the whole of Europe. As Deputy Martin said, the Spanish deal is already unravelling. The theory that one can rescue the Spanish banks with bailout money and somehow the sovereign will then be able to enter the bond markets, has already been exploded. Today, the bond-market rate for Spanish bonds is about 6.7%. Similarly, a dangerous situation is arising in Greece.
In Italy, bond rates went above 6% this morning. Italy is the last domino in this game we are playing in Europe because we cannot afford to bail it out. What will we do if the markets, which have already turned on Italy, require that country to have a bailout? It seems to me that there is a lack of urgency and realisation of the dangerous situation we are now in. The Greek elections this coming weekend have the potential once again to rock the euro. There is no good news in this for Ireland.
I want to ask this question now. The euro is in dire danger. This morning, I heard President Barroso - as I am sure the Taoiseach did - come out with some sort of solution. He said that a year down the road, which he was suggesting as an early date, we will have a banking union. To me, however, that is not enough. It is just a partial solution but it might offer some solace for Ireland in terms of the Anglo Irish Bank promissory notes. Can the Taoiseach tell the House what is the Government's attitude to this proposal for a banking union? Does it offer some hope for Ireland and the Anglo Irish Bank promissory notes?
I believe it would be possible to achieve a banking union more quickly than a fiscal one. I agree with Deputy Ross that these are not easy times for anybody. To echo Deputy McDonald, there is no comfort in what is now unfolding and requires to be dealt with. The Spanish Government made its request for €100 billion of assistance in respect of its banks and will continue to pay over 6% on money to fund its deficit. These are extraordinary times. The second run-off of the French election takes place next week. The Greek elections speak for themselves.
I believe that a banking union could be achieved in a far shorter time than that stated by the President of the Commission. The issues of monetary and fiscal union are much longer term projects. The problem is a banking crisis within the eurozone which requires a European answer. I set out in my letter to all the leaders that these are the issues which should be focused on, considered and decided politically by leaders of the European Union.
I cannot speak for what happens in the elections in Greece. The vast majority of Greek citizens want to remain in the euro. It is not the intention of any country in the European Union or eurozone to have Greece removed from it. That decision will be made by the Greek people when they vote. The French electoral process is continuing. Prime Minister Monti has already signalled his grave anxiety and concern about the scale of the problem in the Italian economy which is of more than €1 trillion and the extent of changes which he has brought about since his appointment as Prime Minister. These are all matters that are the every day focus of European Governments. That connection is being maintained from an Irish point of view also.
Deputy Ross will be well aware that the outcome of the Greek elections will bring about its own conclusion. The scale of what is involved in the Spanish banks will also become apparent when the full analysis is published. All of these matters will require serious and expeditious reflection by European leaders and decisions made at political level to deal with them.
I thank the Taoiseach for his reply. The point I am trying to make is that this time next week we could be facing a catastrophic situation. I often wonder if the sense of urgency has been properly injected into not alone Members of this House but people outside.
I take it from the Taoiseach's reply - perhaps he will confirm this - that he is in favour of a banking union. I believe it is a good idea, one which might be helpful to Ireland, in particular in view of the fact that we will face an extraordinarily urgent recapitalisation of the banks, which has not yet been acknowledged but will happen sooner rather than later. A banking union could help in that project.
Has the Government made preparations - I understand the Taoiseach cannot be specific - for the possibility of a collapse in the euro in the coming weeks? Are we ready for it? Do we have solutions? Are we prepared to consider, as widely reported in the media, the possibility of a two-tier Europe? The Taoiseach will be aware that we will need to be to ready for this when it hits us. It could happen at any time. Events in Europe are happening so fast that it is the Government's duty to prepare for a possible catastrophe coming down the tracks.
I would be supportive in principle of a banking union. As I stated, I believe it is a matter that could be brought to a conclusion successfully and a lot quicker than people might imagine, if the will to do it exists. It is less complex a project than others in terms of people's views of fiscal union.
I do not want to speculate and will not comment on the question in regard to the euro and eurozone. We support the euro and eurozone. Our people gave their view on that in terms of the referendum on the fiscal stability treaty. I am aware of the commentary to which Deputy Ross referred. I would not venture to speculate on it. We must move on in the belief that the political process can deal with the crisis in the eurozone and do so effectively.