Martin Mansergh (Tipperary South, Fianna Fail)

I found it a stimulating debate with many different angles. Inevitably with the financial crisis coming on top of the economic difficulties, many of the contributions dealt with the financial events and decisions of the past 24 hours. While I do not wish to pre-empt in any detail later discussion on that topic, I will say a few words none the less. The action taken by the Government earlier today to guarantee the retail, wholesale, dated-term debt, secured borrowings and interbank deposits of the six domestic credit institutions followed the advice of the Central Bank and the Financial Regulator. In taking this action the Government is acting first and foremost in the interest of the taxpayer and the small saver and depositor to support the stability of the financial sector, which is essential for the stability of the economy.

I agree with Senator Buttimer and many others who made the point that there have been many very worried people, not just in the past 24 hours but also in recent weeks. In many respects we are in uncharted territory. The action needed to be taken now because global problems over how credit institutions are funded have led to a lack of liquidity across the global financial environment, which has meant that Irish institutions have had difficulty raising the funds they need to lend to customers. In a normal environment when borrowings on the wholesale money markets where banks lend to each other fall due for repayment, they would either be continued or new loans taken to replace them. However, with the credit crunch new funds are no longer available.

The Government's decision to give a €400 billion guarantee to six of the main banking institutions would allow the banks to go to the international markets now and raise funds. It is not the intention that the taxpayer would be liable for any shortfall in the future. Money has not been handed over to the banks and as the Taoiseach said earlier in the Dáil, the facility will come at a price for the financial institutions and a fee reflecting commercial reality will need to be paid by any of them that seek to make use of the guarantee. This relates to the liability side of the institutions' balance sheets.

Senator Fitzgerald raised the situation of Ulster Bank and one or two other related institutions. That is a question I will deal with. On the previous announcement of the €100,000 guarantee on deposits authorised by the Financial Regulator, this applied to foreign-owned banks with branches in Ireland, including Ulster Bank, First Active, and IIB. The broader guarantee does not apply to those banks because they are all supported by large overseas parent banks.

I wish to deal with one or two points raised in the debate. I appreciate the distinction Senator O'Toole made between the market and the free market. He was right to draw attention to the importance of the clearance the Minister received from Brussels to exceed the 3% borrowing limit in the current circumstances because obviously that would have put impossible constrictions on it.

I also liked Senator Boyle's phrase about an unhealthy belief in bubble economics. It is funny in some ways as this has been going on from time to time back to at least 300 years. Humanity seems to have difficulty in learning and, unfortunately, these things repeat themselves too frequently.

Last Wednesday, the Financial Times published a survey which showed that the eurozone as a whole is in recession. The point being made is that Ireland is the first country to announce it.