Jim Walsh (Fianna Fail)

This debate is taking place in the face of great financial turbulence. I was going to say it was unprecedented but if one goes back to the 1929 Wall Street crash and the subsequent years, I am sure there is a precedent there. The real challenge is to ensure we do not end up in the situation in which they ended up.

This time the problems in America are mirrored across the world, including in Europe, because of the globalised economy. It raises serious questions for regulatory authorities and for central banks across the globe. There were so many innovative but, none the less, artificial financial products on the market and the concept of some of those products was mind-boggling. It is easy to say that with the benefit of hindsight but one would have expected the expertise within central banks and regulatory authorities at least to have anticipated some of the difficulties now being encountered. Having said that, it is a question for another day because the issue, as I see it, is about containment and the restoration of the banking sector.

In that regard, I pay tribute to the Minister for Finance on the initiatives taken. They are courageous and are not without creating certain exposure and risk but they are essential. The Minister was right to follow the lead of Britain and the United States in respect of banning hedge funds and short selling because that was bringing pressure on an already strained marketplace. Guaranteeing deposits was an essential measure and the manner and speed with which he did so was good.

I heard the Opposition spokesman on finance speak today and it is good there was liaison between the Opposition and the Government, a point to which I will return. In a time of serious challenge to the State, it is very important that politicians can show some unity of purpose, which is being done.

There are a number of broad issues, including the banking and construction sectors. The construction sector is in the middle of this problem internationally. The too easy availability of credit and low interest rates over a long period perhaps over-primed the construction sector and caused exposure in that area. There is a need for people to be able to access property. Historically, this country has had a high rate of home ownership of which we can be justifiably proud. It compares favourably with that in the rest of the world. With falling prices, we should try to marry the need for property with the over-supply of it because for as long as over-supply remains, it will be a serious drag not only on the construction industry but on the economy generally. Economists have said — I am sure they are correct — that in doing that, we must ensure we do not artificially buttress property prices because that would only prolong the time before we return to growth.

Another area at which we must look is public expenditure, which there is no avoiding. We have seen significant growth in public expenditure in the past decade. I have worked most of my life in the private sector. At a time of plenty, the ship tends not to be trimmed as tightly as it might otherwise be and, no doubt, areas of fat build up within the system. This happens in the private sector as well and is not unique to the public sector. In the private sector, however, competition ultimately tends to ensure that if this is not trimmed and reined in, business will be lost. This triggers attention to it.

There are also areas of waste and wasteful and unnecessary expenditure. We are in a position now where we are forced to look at reducing current public expenditure by 10% to 20%. This cannot be achieved painlessly. It will be difficult to achieve this, but we will not have the receipts in the short term and may not have them in the medium term. In this regard, I welcome the serious attention this area is getting from the Cabinet, Departments and our Civil Service. In the past our Civil Service structure was very good at meeting the challenges and laying the foundations for the success we enjoyed over the past decade or more.

I see this as a defining moment for our economic well-being and a defining moment for politicians, which brings me back to a point I made earlier about unity of purpose. Being a small island, we have a very open economy and are very exposed. We must send an important signal, therefore, that there is unity of purpose among the political establishment. I do not wish to make undue comment on the other House, but l heard much negative criticism of the debate there last week due to the lack of quality debate and the partisanship shown. This contrasts with the approach taken on the issue by the Opposition spokesman last night and today. It behoves the Government and all parties to knuckle down and face the issue. They must realise they face a challenge that is more serious than their well-being as parties and work together. The people will detect whether they work together in unity and succeed. People are concerned about their economic future, jobs and everything else and the last thing they want to see is partisan politics being played out. What happened in Congress last night was an example of what should not happen.

We need close liaison, on a formal basis, between the central banks of the EU member states and the European Central Bank. The challenges we face require a cohesive approach that will signal to the market and speculators that a serious and determined approach is being taken to ensure we weather this crisis in a way that will lay the platform for future growth in each member state.

The situation also poses a challenge in respect of the social partners. They need to realise that unemployment will, inevitably, increase. The question is to what extent and how this will affect union members. It is important therefore that the social partnership structure shows some flexibility as the situation changes month by month or week by week. There should be some disposition among both the private and public sector to extending the pay pause should the need arise in the national interest. If everyone keeps their eye on the ball, we will come through this situation and look back on it in a few years as a time of great difficulty but a time when we got back to some of the more important fundamentals of the economic life of the State and a time when we put the country on a better footing for the next one or two decades.