Derek McDowell (Labour)

That is the point I made earlier. What he does is determined by political considerations, not what he claims to believe economically. There is a serious difference of view between us on the issue. It is reflected in how we approached the last few days in Brussels. What happened this week was the inevitable outworking of a pact that is fundamentally flawed. I agreed with the President of the European Commission, Mr. Prodi, when he called the pact stupid and said that the defects in it have been clear for a long time. I also agree with the Dutch Minister for Finance who said the pact is effectively dead. It is a pity it has come to this, although it was inevitable, but the pact will have to be revisited in circumstances that are less than ideal. The opportunity existed for some years to revisit it and to put in place a genuine Stability and Growth Pact that would respect both sides of the equation because they do not pull in the same direction all the time. If that had been in place several years ago, we would not be where we are now – faced with the grubby deal that emerged in Brussels this week.

I heard some of Senator Ross's German bashing but no one can argue that the Germans should not be spending money. Their economy is stagnant and for the German Government to cut back further would undoubtedly result in a tailspin that would bring the German economy into serious recession within a short time.

I agree with Senator Minihan that we must take account of two factors. We must take account of the debt to GDP ratio and the level of unemployment in particular countries and the point in the economic cycle each country is at. The first is easy because it can be defined in simple terms, those who have a low debt to GDP ratio should be allowed to borrow for structural purposes and those that do not should do so with great caution or not at all. Italy still has an enormous debt to GDP ratio and is not in the same position as Ireland.

The second consideration is more complex. It is difficult to say that if Germany is in danger of recession, it should be allowed to spend more money. The only way to achieve this is to introduce a measure of discretion into the pact – the current reality – although the rules are supposedly rigid, and take into account the point in the economic cycle countries are at. When we are dealing with countries as powerful as Germany and France, that becomes inevitable.

I do not believe for one minute that the Cork School of Music has been held up because of the European Stability and Growth Pact.