Pearse Doherty (Donegal South West, Sinn Fein)
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I move amendment No. 1:

In page 3, between lines 18 and 19, to insert the following:"2. Following the passing of this Act the Minister for Finance shall in 2014 make an application for the direct retroactive recapitalisation of the capital injected by the State in Irish banks as per the Direct Recapitalisation Instrument.".

11 o’clock

My party has a long history of successful negotiation, including in respect of the Good Friday Agreement, the St. Andrews Agreement and so on. I am aware, therefore, that the one thing one must not do during negotiations is show one's hand. One should not do what the Minister has done in the context of his stated objection with regard to applying for retroactive recapitalisation. All of his colleagues on the ESM board are of the view that the Irish Government believes it is going to make an application for retroactive recapitalisation at some point down the track. However, they also heard him inform this Parliament in the past two weeks that the Government is considering selling AIB on the stock market and that it will consider offers for the latter from big European banks if it can attract interest from them. Obviously, that to which I refer limits the potential for a successful application for retroactive recapitalisation to the fullest extent possible. What the Minister has shown is that there are other options available which the Government is willing to consider.

I have already referred to those who would not support an application for retroactive recapitalisation from Ireland. The Irish Government has provided these individuals with additional arguments to strengthen their position. The people in question can easily say to the Minister that the Government is considering selling AIB on the market so why should they - despite the fact that Ireland bailed out its banks and saved other banking institutions across Europe - give us our money back? There is no doubt that Europe would have been in a worse position if we had burned the bondholders. Why would Europe give favourable consideration to an application for retroactive recapitalisation when the Government is actively considering selling shares in AIB?

The other problem the State has, and which I have highlighted on previous occasions, is that with each day that passes, it becomes more difficult to make a request for retroactive recapitalisation. The Government will make great play of the six lines of text it managed to have included in the guidelines. However, it must be remembered that the possibility of retroactive recapitalisation and burning bondholders only came about as a result of Spain's difficulties. When Spain got into serious trouble, Europe listened and decided to act. At the June 2012 summit, EU leaders issued a statement with regard to breaking the link between the debts of bad banks and sovereigns. While it goes a certain distance in the direction Sinn Féin recommended it should go in the context of burning bondholders, the Bill before the House still calls upon the State to inject money into broken banks. It does not, therefore, fulfil the commitment given at the 2012 summit. Of course, it was when Spain was experiencing difficulties in 2012 that European leaders were forced to sit up and take notice. Those difficulties led to the ECB doing what Sinn Féin had been calling for it to do for many years, namely, act as a lender of last resort. It was then, when our deficit and debts were completely out of control and when we were carrying a massive burden, that this country should have struck a blow for the rights of its people and demanded - during that moment of weakness brought about by Spain's problems - further clarity in respect of retroactive recapitalisation. At that point, the Government should have obtained a commitment far stronger than that in which our German leaders stated that Ireland is a wee bit special. The latter just simply does not cut it.

This is not a trivial matter. What we are discussing here is an amount of €64 billion and events which sunk the Irish economy and the impact of which are still causing pain and hardship to families throughout the State. I refer to people who today will be obliged to approach the Society of St. Vincent de Paul in order to obtain money to pay for fuel to heat their homes, people who are queuing for food parcels in our capital city to feed their children and people who are in Dublin Airport saying goodbye to their loved ones and wondering if they will ever return to these shores. That is the legacy of the banking debt which has been placed on our shoulders and of the failure of the Government to strike when the time was right, to obtain a deal for Ireland and to get the maximum possible return in respect of the money that was injected into our broken banks. However, that is past; it is gone and we cannot turn back the clock. The one thing we can do, in the context of the legislation before the House, is oblige the Government to make, at the very least, an application for the retroactive recapitalisation of our banks.

Like every other Member, I do not know how such an application would be viewed. I cannot say that it would be successful. However, the Minister and the Government should start making demands. They should go back to their leaders and state that the Irish Parliament has decided that the European Stability Mechanism (Amendment) Bill 2014 is not good enough. They should state that it has not been changed by the Dáil so there will be no problem for Europe because it can be implemented there. They should further inform those in Europe that this Parliament has placed a burden on this and future Administrations to seek retroactive recapitalisation. The Minister and the Government should make it clear that the six lines which have been included in the guidelines simply do not cut it for the Irish people. They should stress that the people want their money back, that they are not fools, that they know what happened during the relevant period with regard to the flow of credit from European banks into our system, that they are aware that bankers, developers and all the rest were culpable for the economic collapse but that they also know that the European system itself was culpable. It should be made clear that what the people of this country cannot tolerate is the fact that if a bank in Germany, Spain or France goes bust in the future, the ESM will step in at a certain point in order to rescue it. It should also be made clear that they cannot understand why they are being told to suck it up, take it as it is and move on. The Minister and the Government should tell their colleagues in Europe that the people have demanded that they apply for retroactive recapitalisation and that they must understand the mood of the people.

Amendment No. 1 simply asks that the Minister include in the legislation the commitment he has given to this Parliament, to the Select Sub-Committee on Finance and to the Irish people. I see no reason why he would not accept it.

Michael McGrath (Cork South Central, Fianna Fail)
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I wish to speak in support of Deputy Pearse Doherty's amendment. On Committee Stage, we engaged in a lengthy discussion on this issue. Realistically, I am of the view that the prospect of achieving a retroactive deal on bank debt is becoming less and less likely. That is an observation which the Minister may dispute. His position seems to be that he is going to hold in reserve the prospect of seeking such a deal, that he will leave a number of balls hanging in the air, that he will possibly sell a stake in AIB - which sends out a certain signal - and that he may eventually submit an application. The window for making applications opens on 4 November, which is less than three weeks away. Shortly thereafter, the Minister should apply for a deal on bank debt on behalf of the State. Ireland still has a colossal national debt of over €200 billion, a substantial portion of which relates to rescuing the banking system. We ultimately benefited from the latter in terms of avoiding the catastrophic consequences of allowing the banks to fail but it must be noted that Europe also benefited. A number of banks throughout Europe were saved as a result of the action we took. Our position is that the Minister should apply for a deal on bank debt and that the should do so as soon as possible after 4 November. Ultimately, Ireland deserves recognition that it stepped up to the mark, took one for the team and saved not only its own banking system but also that of Europe.

On Committee Stage, I pointed out that the overall funding available from the ESM will be just €60 billion. That amount is to meet new capital shortfalls in banks throughout Europe and also, potentially, to deal with the issue of retroactive recapitalisation. The quantum of money available has led me to conclude that it is becoming increasingly that the Minister will be able to obtain a deal. However, he must at least apply for such a deal and put it up to his European partners to fulfil the commitments made in 2012 and honour the words contained in the relevant agreement with regard to separating banking debt from the sovereign. He must impress upon them the need to deliver on the commitment made in respect of Ireland, which was heralded here, by the Taoiseach, the then Tánaiste and others, as a game-changer and as representing a seismic shift. As I stated a number of weeks ago, the real game-changer arrived approximately one month after the agreement reached at the 2012 summit when Mario Draghi stated that the ECB would do whatever was necessary to save the euro. That is what stabilised the markets and what, ultimately, has been most beneficial to Ireland.

The matter of a deal on bank debt has been left unresolved. The Minister will argue that the issue relating to the former Anglo Irish Bank and the IBRC has been dealt with by means of the deal on the promissory notes. However, an amount of €30 billion remains in play. I refer to the money that was invested in AIB, Bank of Ireland and Permanent TSB. Let us be honest and state that we are not going to get all of this back. The Government has already got money back from the income on guarantee fees and selling some of its stake in Bank of Ireland. Let us obtain the best deal possible. This will not happen if we fail to make an application. The Government must apply on behalf of the Irish State as soon as possible in order that we might have clarity on where we stand in respect of the banking system. I have stated on many occasions that we require a clear strategy on banking. We do not have such a strategy. For example, we do not have a strategy in respect of competition in the banking sector. At present, there is a virtual duopoly in place with AIB and Bank of Ireland and this is not healthy for the economy. This matter must be dealt with and the sooner we obtain finality and clarity in respect of the issue of a deal on bank debt, the better.

The Minister's position is to leave the option of applying open since events in Europe may evolve and we never know what will happen and then we can strike and we might be able to benefit from other events. That is what occurred in respect of the interest rates on the bailout money, for example. However, the issue is more urgent. We need absolute clarity and certainly. My party and those of us on this side of the House advocate an early application for a deal on bank debt.

Paul Murphy (Dublin South West, Socialist Party)
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I support the amendment by Deputy Doherty. The moral case for retroactive recapitalisation is absolutely clear. This is a country with less than 1% of the population of Europe shouldering the burden of 42% of the cost of the total European banking crisis. Despite all the attempts by the Government, echoed by right-wing economists, to suggest that this is a done deal, that it is over and that the banks and the bailout are not a problem for us any more, this remains the central political issue in Ireland today. It is central to the nature of the budget produced the other day. The €64 billion is an important part of our massive national debt. Furthermore, the banking crisis and the policies around the banking crisis are responsible for the explosion of our debt, from a debt to GDP ratio of 25% to over 120% as it currently stands. All this is rooted in the policy of bailing out banks and developers at the expense of working class people. The payments that we make on the national debt are rooted in this decision. Next year, for every €5 collected in tax, €1 will go to pay the bondholders. This is rooted in the decision made in the interests of the European banking system and made at the behest and under the threat, undoubtedly, of the European Central Bank, but it was not made in the interests of working class people here or anywhere else in Europe.

The legal case for an application is absolutely clear. An application can be made to the European Stability Mechanism. The other finance ministers can say "No" or "Yes" but at least we would have clarity. The Minister can and should make an application. The question is why the Minister is less than enthusiastic about making such an application. I believe the answer is simple: it is to avoid political embarrassment with his fellow finance ministers throughout Europe and political embarrassment at home with the exposure of the strategy of being the good pupil of austerity.

The source of that embarrassment stems from June 2012 and the Eurogroup summit and the statements secured at the time: "We affirm that it is imperative to break the vicious circle between banks and sovereigns" and "The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme." We all know how this was translated at home by the Government. It was translated by the Taoiseach and the then Tánaiste into "a game changer" and "a seismic shift" with the assistance of most of the media in the country. The media also assisted this translation into the message which went home for political benefit, which was that Irish working people were going to get our money back in respect of this deal and that was what had been agreed. The reality was at that stage it was not written down and we pointed out as much. I am sure at that stage the Minister got a nod and a wink from Angela Merkel and others to the effect that something would be forthcoming, but it was not written down at the time. It is like what they say about an oral contract: it is worth the paper it is written on. It was oversold at home, it never transpired and it is now perfectly clear from all statements etc. from all the leading figures throughout Europe that the establishment in Europe has no interest in this retroactive recapitalisation taking place.

I believe the Minister, Deputy Noonan, is keen to avoid the embarrassment of going to the other finance ministers and asking whether we could have our money back now because that was what we agreed two years ago. Simply put, that is not the way so-called European solidarity works. European solidarity works in the interests of the banks, with people throughout Europe paying for the banks again and again. Ordinary people do not get any money back from that. It is seen as a little impolite to go and ask for money back for the benefit of ordinary people as opposed to for the banks.

The Minister would like to avoid a definitive "No", although that is most likely the answer he would get. The total fund available for all of Europe for recapitalisation, retroactive or otherwise, is €60 billion. Ireland would have a case for €64 billion. Clearly, the ESM and the ability to recapitalise banks directly are entirely inadequate. Moreover, there is the question of political embarrassment at home. The whole strategy of the Government on this issue, that is, being the good pupil of austerity and getting a slap on the back from the likes of Sarkozy and Merkel, would lie completely in tatters and the idea of an alternative strategy would be given succour.

We should pass this amendment and send the Minister, Deputy Noonan, to ask clearly for direct retroactive recapitalisation and we should get a clear answer. Regardless of the answer and even if the answer was "No", which I believe is the most likely scenario by a long shot, the moral case would remain for this being not our debt and for an alternative strategy to be put in place.

A left government would put in place a debt repudiation strategy for this debt which is simply not our debt. It would impose a moratorium on debt repayments. It would initiate a debt audit commission made up of representatives of ordinary people, progressive left economists and experts from throughout the world. Essentially, we should and still can refuse to pay this debt which is not our debt.

Peter Mathews (Dublin South, Independent)
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The only reason I decided to be a candidate in a general election was to try to bring some of the facts and correct analysis of what had happened in the Irish economy, and, therefore, to the people, onto the discussion floor in the House. This was preferable to what I had seen to that point, that is to say, Irish representatives from the previous Government and from the current Government being pushed around and not understanding what had happened.

The book that Timothy Geithner has published recently, Stress Test, should give the Minister a better understanding of what happens in a financial crisis. The labyrinthine corridors of discussion and politics and so on go out the window and people have to deal with the pragmatics of what is going on. Our country has a GDP of approximately €175 billion - the Minister referred to this recently when he introduced the budget - and a GNP of €140 billion or whatever, but a public debt overhang, regardless of household debt, of well over €200 billion. This type of albatross simply should not be there because a great proportion of it represents losses, not previously-incurred debt for productive purposes. These are losses as a result of the credit Ponzi scheme undertaken by the boards of the banking sector in this country, whether Irish-owned or foreign-owned. They went on a massive spree. These boards used funds and blew up their balance sheets. The value of the domestic banking system increased from a level at three times national income to well over five times national income over seven years. It was crazy stuff.

Seán and Mary and their families have been told that they must bear the cost of the credit that was spent and hosed at the economy. They must pay all of it back although the assets that were bought with that credit have collapsed. The people who provided the funds to the banks were bond subscribers. They sold their bonds into the secondary market and became bondholders. They got paid in full by the European system and the ECB, which had €145 billion in the Irish-owned banks alone in 2008. They all got paid. The inferno of fear that pervaded the financial markets was the reason Ireland had to become the firebreak. The people now carry the scar. In the case of Anglo Irish Bank, the figure was €35 billion approximately and it is now down to €25 billion. It is held by our Central Bank Governor in the form of promissory bonds.

That represents the losses and the escape, unscathed, of people who had bought these bonds in the secondary market, when they knew that many of them were worthless. That is the reason 1.5 million citizens of this country have had their lives ripped apart. A total of 300,000 quality people have emigrated. Households are more than two years in arrears on debt because there has been a pathetic refusal to honourably write down their loans to the correct recoverable amounts in the lifetime of the borrowers. How dare the banks insist on a policy of no write-offs, when they are the ones that created the credit Ponzi pyramid? How dare they create a system that has left 90,000 households which amount to 250,000 to 300,000 people homeless or on waiting lists? That is the reality.

People in America were pragmatic when they recognised that the system had gone out of control. Recall the troubled asset relief programme, TARP, that Hank Poulson, Timothy Geithner and Ben Bernanke put together. They had to write new practical rules for the situation. We should be writing new rules. We should ask Patrick Honohan for the key to his desk and remove the figure of €25 billion. We should explain that they are losses which should never have been imposed on the people. That would not be a deal but the correction of a great wrong. We are fussing about interest rates and so forth when the core is toxic and wrong. It is not right and no amount of shuffling of lever arch files to officials in Frankfurt or Brussels will make a wrong right.

Where are the courage and the leadership? Is the Government squandering the biggest majority in the history of the State? That is the reason the by-elections returned straight talking, true and honest guys who will fight for the people. That is the reason Diarmuid O'Flynn in Ballyhea has secured a turnout every Sunday for the past three years.

Bernard Durkan (Kildare North, Fine Gael)
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The Deputy should speak to the amendment.

Peter Mathews (Dublin South, Independent)
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This is its core.

Bernard Durkan (Kildare North, Fine Gael)
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It may well be, but Ballyhea is not, with no disrespect to it.

Peter Mathews (Dublin South, Independent)
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Do you not like that part of the world?

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It is about bondholders.

Bernard Durkan (Kildare North, Fine Gael)
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Deputy Peter Mathews should continue.

Peter Mathews (Dublin South, Independent)
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He was almost elected on a shoestring budget, despite the hundreds of thousands of euro spent by one of the Government parties for its candidate. I accompanied him, with some other Independent Deputies, to visit the office of the Governor of the Central Bank at the end of July to ask these questions and be allowed to attend the ECB and meet its members in order that we could make the case that the Government had failed to make. Of what is the Government afraid? For God's sake, is it fear itself?

Ashoka Mody, the IMF director in Ireland during the time of the troika, said the austerity regime, as it had been presented to us, was not right and that there should be a debt write-down. Why is that? The debt is the losses. Americans face up to losses. Even in its crisis, America helped Europe, something that is completely missed here. The same thing is beginning to happen again. The Federal Reserve System is in a headlock, beholden to Wall Street again. The markets which are governed by either fear or greed went into a mini tailspin yesterday, with the German DAX down almost 3%, the French CAC 40 down 3%, the FTSE down nearly 3% and the Dow Jones Industrial Average down nearly 3%. This happens when the people who should be leading countries and ministries of finance become involved in chattering rather than getting to grip with the facts.

With regard to moral hazard, Tim Geithner said that when one was in a crisis, one had to forget about all of that and solve the crisis. One must do what is practical and save the system. One must save it correctly, not with sticking plaster but with deep infusions of capital to take losses. This has still not been done in Europe. The Minister will recall that in 2012 the real effects of debt-----

Bernard Durkan (Kildare North, Fine Gael)
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I am sorry, Deputy, but the amendment was tabled by Deputy Pearse Doherty. To be fair to him, he stuck to the amendment. The Deputy is wandering into a historical-----

Peter Mathews (Dublin South, Independent)
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Not at all, I am talking about capital.

Bernard Durkan (Kildare North, Fine Gael)
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The Deputy is not. He is wandering into a different area not covered in the amendment.

Peter Mathews (Dublin South, Independent)
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My last sentence was about capital infusion. The ESM-----

Bernard Durkan (Kildare North, Fine Gael)
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I remind the Deputy that, much as I like him-----

Peter Mathews (Dublin South, Independent)
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It does not matter; you do not have to like me.

Bernard Durkan (Kildare North, Fine Gael)
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-----he cannot wander around the House on the amendment.

Peter Mathews (Dublin South, Independent)
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You do not have to like me; I am making a professional contribution.

Bernard Durkan (Kildare North, Fine Gael)
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I do not have to dislike the Deputy either. Will he, please, stay within the amendment? We do not want a history lesson and this is not a Second Stage debate.

Peter Mathews (Dublin South, Independent)
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The ESM has a provision for €60 billion in capital.

Bernard Durkan (Kildare North, Fine Gael)
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I am sorry, but that is not a matter for debate.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Deputy is talking about the figure of €60 billion.

Peter Mathews (Dublin South, Independent)
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I am dealing withy the core of the matter.

Bernard Durkan (Kildare North, Fine Gael)
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I will manage the debate and call Deputy Richard Boyd Barrett in due course. Will Deputy Peter Mathews, please, refrain from going outside the remit of the amendment?

Peter Mathews (Dublin South, Independent)
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Can I seek clarification from you?

Bernard Durkan (Kildare North, Fine Gael)
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I have just provided clarification; please stay within the amendment.

Peter Mathews (Dublin South, Independent)
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The ESM has a capital provision of €60 billion. That is what I am discussing. It is not enough.

Bernard Durkan (Kildare North, Fine Gael)
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I will read the amendment for the Deputy: "Following the passing of this Act the Minister for Finance shall in 2014 make an application for the direct retroactive recapitalisation of the capital injected by the State in Irish banks as per the Direct Recapitalisation Instrument". Deputy Pearse Doherty who tabled the amendment spoke at length, but he stuck to what was contained in the amendment. It would be unfair to the House and other Members who wish to speak if we were to allow a departure from it. Deputy Peter Mathews should resume and confine the debate to the amendment.

Peter Mathews (Dublin South, Independent)
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We are talking about an application which, of course, should be made. However, it is being made for retrospective capitalisation. These are buzz jargon words that nobody really understands properly. Do you know what retrospective capitalisation means?

Bernard Durkan (Kildare North, Fine Gael)
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I am slow to intervene again, but, please, do not try to explain to me what it means. I know what it means, as the amendment has been moved. The next part is that the Deputy should speak to it. To be fair to other Members of the House who also wish to participate, please stick to the amendment.

Peter Mathews (Dublin South, Independent)
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Recapitalisation is refinancing in the form of capital. The detritus from Anglo Irish Bank is approximately €25 billion in promissory bonds. It is a debt with which the people have been saddled, wrongly so. It is a ball and chain. The other two banks still have liabilities to the euro system in the form of balances due to the ECB and the Central Bank of Ireland. A line should be put through these balances in the form of capitalisation. Why is that? The banks are not doing what they should be doing with the capital they have received, that is, writing down their assets that are uncollectable.

It is simple, but when people use jargon they do not understand everybody becomes confused and their brains become scrambled. People in Ireland are badly served. The liabilities to the euro system should be reduced for the two or three remaining banks and the part of the national debt in the form of promissory bonds that have not yet been sold into the market cancelled. A Government that understood the position of Irish people would adopt that agenda, which should not be the result of wrongdoing by the financial system. If it had courage, guts and leadership, that is what it would do. Not only should the amendment be supported, but we should go further.

Bernard Durkan (Kildare North, Fine Gael)
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I encourage Deputies to confine their remarks to the amendment rather than engage in Second Stage speeches. All Members will have an opportunity to speak a second time and the mover of the amendment will have a right of reply at the conclusion of the discussion. I ask speakers to be fair by ensuring all Deputies have an opportunity to speak.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I congratulate the Acting Chairman on the superb job he is doing in the Chair. It is important to keep Deputies on track.

The issue of whether we should seek retroactive recapitalisation of our banks is related to whether we are prepared to demand that Europe play its part by retrospectively lifting some of the crippling burden of debt that has been imposed on Irish citizens and shouldering it itself. The moral, political and economic case for Europe bearing its share of this intolerable burden is unanswerable. The entire burden of a crisis that Europe played a key part in creating was imposed on Irish citizens. Ordinary working people, the unemployed, school children, the disabled and pensioners took the hit for a crisis which was not of their making but was, to a large extent, engineered in Europe with the active collaboration of the Irish Government. The least we can do, even at this late stage, is to ask that Europe do what it should have done when the crisis broke by taking its share of the burden arising from a crisis it created. However, an examination of the Bill makes clear that there is no chance - none, zero, zilch - of this happening.

I suspect the reason the Government is reticent about making an application for retroactive recapitalisation is that it knows it would have no chance of success, and anything we might get would be derisory compared to the suffering and pain that has been imposed on citizens. We know that is the case because the fund provides only €60 billion for recapitalisation of any kind, not to speak of retroactive recapitalisation, for the whole of Europe. Ireland provided €64 billion to Irish banks, but there is no chance the European authorities will give us the entire €60 billion available for retroactive recapitalisation in the fund.

A reading of the conditions that must be met to access the fund shows that one must jump through so many different hoops that there is virtually no chance of accessing it. The Bill does not spell out in any detail what will be the criteria for accessing the recapitalisation component of the fund, other than that applications will be considered on a case-by-case basis. We must assume, therefore, that the criteria will be the same as those that will apply for general applications for recapitalisation support made by a member state of the European Union going forward. I apologise for using the awful expression "going forward"; it just slipped out.

We welcome one aspect of the so-called waterfall of criteria and conditions, namely, the bail-in that will apply to bondholders. The major problem this creates for Ireland is that the State is the bondholder in our case because we had to bail out the banks. If the first call must be on the bondholders, that call would be made on us to a large extent. As a result, we would be required to show we were willing to be bailed in before we could even apply for funding. The second stage also requires that we would have to be bailed in, as it were, because this stage requires that the State show it has exhausted all of its resources, if one likes, to bail out a bank that has got into financial difficulty before it can apply for access to the funds. As such, the first hurdle requires citizens to pay and the second hurdle also involves citizens paying. Once we have completed the first two hurdles, we must prove that the entire European economy is in danger. As a result, it will be nigh on impossible to access this fund, which has very little money in it in any case. The chances of accessing funds for retroactive recapitalisation are, I suspect, zero to zilch, and if we secure any funding it will be negligible. If that were not the case, a much greater amount would have been allocated for retroactive recapitalisation and much more detail would have been provided on how the retroactive component of the fund will function.

The least the Government can do is apply for retroactive recapitalisation. Let us test the system and find out the response. I do not see any reason for not making an application. Since the so-called statement of two years ago, we have heard that the European Stability Mechanism will be a game changer and so on. I believe the statement was a political sop given to the Government and there was no serious intention to give Ireland what we were seeking. Let us ask for retroactive recapitalisation, and if the European authorities do not give us a reasonable deal and assume some of the burden, let us simply tell them they will not get their debt interest. The Minister has stated many times that we could not possibly take that position because we are borrowing to stand still and our expenditure is greater than our revenue. That excuse no longer holds because we now have a primary surplus and are taking in more revenue than we are spending on public services. The major drain on the economy is the €8 billion per annum we must pay in debt interest.

I hate the idea that a society is run on the basis of balance sheets, because they are always about numbers rather than the people represented by the numbers. Let us recall what is on the other side of the balance sheet, with the €8 billion in interest that we will pay out to these guys next year. Our interest payments on the national debt will be roughly equivalent to the budget for education in 2015. I have just come from a picket in front of Leinster House by construction workers who are building a school on behalf of the State. Having understood they would be paid the legal rates for doing their job, they discovered after five weeks' work that they were being paid €5 per hour and the builder was essentially abusing the system of self-employment.

Bernard Durkan (Kildare North, Fine Gael)
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I apologise for intervening, but I must ask the Deputy to confine his remarks to the context of the amendment. He is beginning to wander outside the gates, so to speak.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I fully agree with the Acting Chairman.

Bernard Durkan (Kildare North, Fine Gael)
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I am glad the Deputy does.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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My point is that the education system and even the workers who build our schools are paying the price for that €8 billion. Why is the State refusing to investigate this scandal? The reason is that because the way the State sees it we have to build schools cheaply and force workers-----

Bernard Durkan (Kildare North, Fine Gael)
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No, Deputy.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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-----to do nothing-----

Bernard Durkan (Kildare North, Fine Gael)
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To be fair-----

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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-----because €8 billion is going out in interest-----

Bernard Durkan (Kildare North, Fine Gael)
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I am sorry, Deputy-----

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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-----which the European Union should be recapitalising.

Bernard Durkan (Kildare North, Fine Gael)
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I ask the Deputy to resume his seat. I fully appreciate his enthusiasm to extemporise on the debate, but that is not permitted. It is not fair to the other Members who have contributed and stayed within the confines of the debate. We cannot allow Second Stage speeches. The Deputy can give us all the examples he likes, provided that they remain within the context of the amendment tabled by Deputy Pearse Doherty. I want to give the Minister the opportunity to reply to the combined wisdom of all those who contributed before we conclude the debate.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Acting Chair is absolutely right.

Bernard Durkan (Kildare North, Fine Gael)
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I know that.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The question before us is whether we should apply for retroactive recapitalisation.

Bernard Durkan (Kildare North, Fine Gael)
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We cannot wander outside of the gates of schools either. This is a debate on a financial resolution to which we have to stick.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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On a point of order-----

Bernard Durkan (Kildare North, Fine Gael)
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There is no point of order. It is as simple as that. I do not wish to intervene. That whistling might be taken in some quarters as a sign of contempt for the House.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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You are not listening.

Bernard Durkan (Kildare North, Fine Gael)
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I am sorry, Deputy. Resume your seat. You will have an opportunity to speak once again.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Hold on. I have not finished.

Bernard Durkan (Kildare North, Fine Gael)
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I am sorry-----

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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A Standing Order allows me to-----

Bernard Durkan (Kildare North, Fine Gael)
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I am sorry Deputy. You will not dictate.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I have not finished.

Bernard Durkan (Kildare North, Fine Gael)
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You indicated contempt for the Chair. I call on the Minister to reply.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I had not finished.

Bernard Durkan (Kildare North, Fine Gael)
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I call on the Minister. The Deputy will have the opportunity to speak again, as will everybody else, with the exception of Deputy Doherty who-----

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Standing Order does not put a time limit on it.

Bernard Durkan (Kildare North, Fine Gael)
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No, you have overstepped your authority.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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No, you have overstepped yours.

Bernard Durkan (Kildare North, Fine Gael)
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Deputy, please do not go that route. I will resolve the matter another way. I will presume you have apologised.

Michael Noonan (Limerick City, Fine Gael)
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I welcome Deputy Paul Murphy to the House. I do not know whether he has contributed already, but I was interested in his remarks this morning. I hope during his time here he will have the job satisfaction necessary for all Deputies to keep up their morale.

I do not propose to accept the amendment tabled by Deputy Doherty. It bears a very strong resemblance to one he tabled on Committee Stage which was not accepted. This amendment seeks to oblige the Minister for Finance to make an application for retroactive recapitalisation in 2014. As the Deputy will be aware, it will not be possible to make an application while the instrument is yet to be put in place. The decision on an application subsequent to that is a matter of timing.

As I indicated on Committee Stage, I do not think that it should be rushed. In that context it would not be appropriate to tie my hands as to timing to any degree, as this amendment seeks to do. Deputy Doherty, in particular, referred to various European personalities who expressed the view that an application would not be successful. Europe, like Ireland, is run by laws not personalities. Many of the personalities who made statements are not longer in offices. Only one of the three finance ministers who signed the Helsinki press release statement to which the Deputy referred during this debate and on Committee Stage is still a finance minister in his jurisdiction. I have been in office for three and a half years and of the 18 euro zone countries only two people have more service than do I. The pace of change in Europe is very rapid, but what is enshrined in law is by what Europe runs and lives. The provision to enable the ESM to recapitalise the banks retroactively is being enshrined in law in this Bill.

Some factual remarks were made both explicitly and implicitly. Deputy Murphy suggested the debt was peaking at 125% of GDP. As I said in my Budget Statement, the debt will peak this year at less than 111% of GDP, a level 14 points adrift of what Deputy Murphy thought it was. While there is interest to be paid on the national debt of something north of €8 billion, only €1 billion of it is attributable to the bailing out of the banks. The other €7 billion of interest is due to the accumulated deficits over the years when the amount collected in taxes did not match the amount being spent. Huge gaps emerged after the collapse in the property market when all the transaction taxes went out of the budgetary calculations. We have been unwinding deficits very slowly since.

In the budget for 2014 the deficit was calculated at around €8 billion, but is coming in at a level significantly below €7 billion. The deficit for the budget introduced this week will be approximately €5 billion but there are still deficits. Every time we run a deficit we add to the quantum of debt and interest rates have to be paid on it. I suggest to the Deputy that the significant issue is whether the debt is sustainable, and I believe our level is entirely sustainable now. The significant statistic is the amount that is paid in interest. Of the €8 billion or so that Irish taxpayers contribute to servicing the debt, €1 billion comes from the banks. The other €7 billion comprises accumulated deficits. That does not reduce the pain, but it corrects the record to show from where the liabilities are coming.

I will not accept the amendment for the reasons I outlined in detail on Committee Stage and which I reaffirmed today. There is also a suggestion that the terms of the treaty on application are totally confused and confusing. Again, for the record on 10 June 2014 the euro area member states reached a preliminary agreement on the operational framework for the ESM's direct recapitalisation instrument, DRI. The draft guidelines on financial assistance for the direct recapitalisation of institutions clearly establishes the scope of eligibility criteria for and operational process of the DRI. Article 14.2 of the guidelines sets out the operational basis for an application with the detailed modalities to be agreed by the ESM's boards of governors on a case-by-case basis. From our point of view, that provides a broad degree of flexibility of interpretation. Demanding more detail would most likely have resulted in a more restrictive retrospective instrument which would not have been in our interests.

The SSM, according to current scheduling, comes into effect on 4 November and the ESM direct recapitalisation instrument is expected to be approved by the ESM governors on 6 November. Those are the deadlines against which we operate for acceptance of this piece of policy. As I said, I do not want my hands to be tied in the negotiations which will take place in the future. I do not want to be tied to a particular timeline. I thank Deputies for their contributions. The asides were even more interesting than the observations on the amendment.

Acting Chairman (Deputy Bernard Durkan):

I thank the Minister. Members are confined to two minutes.

Pearse Doherty (Donegal South West, Sinn Fein)
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I do not think the Minister is genuine about this. We all know a general election is due in March or April 2016 at the latest. It is likely to take place at the end of next year, but that is up to the Government and circumstances between now and then. If an amendment was tabled today to the effect that by the end of 2015 the Minister would have applied for direct recapitalisation would he accept it? I believe he would not because he does not want any legislative burden on the Government to apply in the first place as he has failed to secure any detail on this.

The Minister mentioned that Europe is governed by laws, not by personalities, but there is no law regarding how the retroactive recapitalisation instrument will work. That is the crux of the problem. There are no rules, no law, no ideas and no guidelines on how that element will work. We know how the other elements will work as that is set down in law. This is what the European Stability Mechanism (Amendment) Bill is doing today in regard to how direct recapitalisation for any bust bank will work in the future. However, there is no provision for retroactive recapitalisation - no laws, no rules, no guidelines. The Ministers make it up as they go along. The Minister is correct in saying that he is one of the longest serving of the Finance Ministers at this time, which strengthens my point that retroactive recapitalisation depends on the personalities around the ESM board table, because it is they who decide the laws and rules at the time and who will change the laws and rules for the next group of people.

There is no indication as to what position people will be in down the road, but we know what position they are in here and now. We can have statistics, damn statistics, lies and damn lies. The Minister mentioned debt and was 100% correct in saying that our debt is approximately at 110%, but if he is to be truthful and honest, that debt remains unsustainable. Some €64 billion of that debt was made up of banking debt, but the debt to GDP ratio is reducing. The Minister should be completely factual and tell Parliament that part of the reason for that is because the services of pimps, prostitutes and pedlars of drugs, along with some other funds, came to rescue the GDP figures this year. That is why GDP has increased by €10 billion, along with research and development and that is the cause of the reduction in the debt ratio. The Minister may not be proud of that element of our GDP figures, but it is the reason. Let us not have smoke and mirrors. Our bank debt is €64 billion, almost half of which was injected into the broken banks by the Government and the rest by the previous Fianna Fáil Government. This €64 billion was put into broken banks at a cost of €14,222 per man, woman and child, or €35,000 per household.

This amendment is simple. It asks the Minister for Finance to make an application on behalf of the people. Clearly, we do not trust the Minister to make that application. Therefore, if he is to be believed, let him put it in the legislation. If he is not happy with the end-2014 deadline, let it be end-2015 or April 2016. At least it will indicate the Minister is putting his money where his mouth is and is making the application.

Peter Mathews (Dublin South, Independent)
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In his reply, the Minister focused on the debt, debt sustainability and the interest on debt of €1 billion out of the total of €8 billion in reference to the banks. I remind the Minister that he dismissed as kindergarten economics "The real effects of debt", a paper by Cecchetti, Mohanty and Zampolli, back in September 2011. However, he should have concentrated on that because it discussed what Martin Wolf spoke about in his article in the Financial Timesand The Irish Timeslast week. He said that the bigger countries of the eurozone, where debt is a big proportion of GDP, household debt and non-financial corporate debt have caused a flattening or contraction of the growth of the economies of Europe. If the Minister had listened in 2011, instead of dismissing the paper as kindergarten economics, we might have had a better case back then for getting the write-down of the debt losses of the banking system.

I plead with the Minister to be courageous and brave. He is the one of the longest serving Ministers of the eurozone and I plead with him to use that experience and authority to get the case argued, advocated and across the line for this country. Please do this.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Our deficit is now debt interest because we now have a primary surplus. We have achieved this surplus because of a cruel and unjust six years of austerity. Given this surplus has been achieved through the suffering of the people, we now have an unanswerable moral case to tell the EU it should either give us a good deal and some retrospective justice for what has been done to us, or we will not pay the interest, because it is interest to cover the deficit. It is not interest to cover day to day spending, but interest to cover a deficit made up of debt interest. I believe we should do that, but the Minister has not given any indication he will do it. Therefore, this amendment is justified. It proposes that we demand this.

Think of the worst case scenario. We do not get any recapitalisation, but we end up on the hook when other people's banks go bang. We have a potential liability of €11 billion and that amount can be varied upwards. If there was a serious crash in one of the big or moderate sized economies of Europe we, although beggared by the consequences of the crisis that happened here without any relief from Europe, could end up paying off debt for other people's economic problems. That is not an impossible scenario.

I do not accept that this is just about €1 billion, that just €1 billion of the deficit relates to the bank bailout. Our debt was 25% debt to GDP in 2007 before the crash, approximately €40 billion. Almost overnight, it ballooned to more than 100% debt to GDP and is now up to approximately 200%. This was all the consequence of the banking collapse, but then washed out into the rest of the economy and affected employment and so on. Europe has a responsibility for all of that, not just for the amount that went directly into the banks.

Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputies for their contributions. I remind Deputy Doherty that I acknowledged the statistical correction by the CSO on GDP figures at least twice when I spoke on the budget on Tuesday. I spoke about the contribution that correction made to reducing our debt to GDP ratio. The Deputy is exaggerating when he attributes the correction to criminal activities in the economy. The bulk of the correction is due to including research and development in the figures and taking that back to approximately 1992. The correction was just above €10 billion and over €7.5 billion of that came from research and development. The illegal quantum that was included amounted to approximately €1 billion and did not include fuel smuggling or any of those activities certain people in this jurisdiction would be familiar with.

Bernard Durkan (Kildare North, Fine Gael)
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Deputy Doherty has the right to reply, but as there is insufficient time for him to do so, I ask him to move the adjournment of the debate.