Liam Twomey (Fine Gael)

I welcome the Minister of State to the House and thank him for his speech. Unfortunately, we have not really tackled where we are in all of this. One of the important points in the Minister of State's speech is the following: "The performance of individual member states in sustaining their international competitiveness and dealing with economic imbalances, current account deficits in particular, is increasingly seen as critical to the cohesiveness of the eurozone." Politicians, Ministers and officials can dress up their utterances in such a way as to believe they do not matter. However, the cruellest way to learn a lesson about the money markets is when someone such as George Soros decides to make his move and starts short-selling one's reputation, whether it is Government bonds, the country as a whole or the euro. There is a sense in which the money markets identify Greece as being a wounded animal and are going after it. We are not speaking in real terms about the potential crisis Greece represents if it does not get its act together.

Greece is probably the worst example, but these problems exist in other European countries as well. Spain has a major problem with its deficit, for instance. It is 15 times the size of Ireland and 7.5 times the size of Greece, so if the Spanish economy goes wrong, we will be dealing with a major crisis within the eurozone. I do not know whether the euro is capable of sustaining crisis in the long-term. We should be explaining ourselves clearly and not trying to dress up this problem or lessening the impact of what is happening. This is a very serious crisis. Perhaps the Minister of State, when he is responding, might tell the House whether the European Community is capable of handling a crisis that is growing larger by the day. Has the eurozone the resources because, apart from Germany and Holland, most European countries will not be able to handle a major crisis. There is a really major problem here.

Ireland's problems are somewhat similar to Greece's. I am glad the Minister of State says the measures being taken by the Government are in line with what was expected in the budget. I would like to know, however, whether we are really dealing with out deficit and the problems that have been highlighted ad nauseam in recent months. We are taking €4 billion in spending cuts out of some parts of the economy, but we are witnessing massive increased spending in others because of the numbers of people who have lost their jobs and the resulting increased social welfare costs. We must take into account, perhaps, that by the end of the year we may not see an overall improvement. There is a need to explain this to the public so that people are ready for the next round of cuts that may come.

The Minister of State referred to the public service unions talking about bringing crisis to the economy. I do not believe there is too much will among public sector workers to bring such a crisis to the level that some union leaders believe it can be brought. Media commentary on Greece would suggest that all civil and public service workers are on strike and throwing stones at the police, day in, day out. They are not, and this is being exaggerated by the media. Civil and public service workers in Greece are seriously concerned about the state of the economy and are aware that this whole thing could go pear-shaped for them. The majority of them have no intention of bringing this crisis to a point where they will receive IOUs rather than euro in their paycheques at the end of each month. It needs to be highlighted more that within Greece there is an understanding of what is going on. There is probably a fear, too, as there is within Government in Ireland, that a real crisis might be generated if matters are taken too far. However, people need to be told just how serious the Greek problem is.

The Government is downplaying economic issues in Ireland by saying that our public debt is very low. I notice that all through the Minister of State's speech he has made reference to GDP, not GNP. GDP includes the profits multinationals make in this country and which are removed from Ireland straight away. GNP is significantly lower, equivalent to the actual level of economic activity remaining in the country every year. If the national debt is compared with our GNP figures, we are running into serious problems. The Minister was ratcheting up €20 billion worth of extra national debt every year. There is nothing to show from the figures projected in recent budgets that it will be less than €20 billion over the next couple of years. Ireland could easily see itself in five years' time €100 billion more in debt, equivalent to nearly 60% to 70% of GNP. That is too much and justifies serious and frank discussions with the people because our austerity measures could count for nothing if the eurozone runs into liquidity problems, especially where Spain or Portugal are concerned. In the event, this could really test the resolve of the European Union to work its way through this crisis.

Another major concern is public opinion within Germany and Holland. These countries are not keen to bail out what they consider to be rogue states that have been delinquent financially over a number of years. They are starting to come to terms with the massive sums of money to which the Minister of State has referred to stabilise the economies of countries such as Greece, Spain, Portugal and Ireland. I am not sure they will come to our rescue if this problem becomes a full-blown crisis. We need to have a proper debate with the people on how potentially large this crisis could be.

I have seen comments to the effect that Ireland might even go into trade surplus. The reason we might, in the event, is because our imports have dropped dramatically over the past 18 to 24 months. Our exports have not improved dramatically. The reason there might be a potential balance of trade surplus is that imports have dropped so sharply and consumer spending is dropping. Therefore there is considerable shrinkage within the economy that must be taken into account. We must be far more open in what we say in our debates on this issue because our economy is in difficulty. I do not wish to use the term "in crisis" because that is unfair, but we should not be seen to act as if we were whistling past the graveyard in respect of the concerns that exist in our economy. There is a need for us to tighten up the public finances to a greater extent. There is a need also for an increase in taxation, which most people are against because they believe it would increase the rate of shrinkage of our economy, but there is also a belief in the need to restore competitiveness.

From this point of view, there is a need to examine what is taking place in the public sector. The Minister of State should go back into negotiations with the public sector workers because there is a go slow planned unless the Government does something. That would decrease the efficiency and productivity of the public sector which will reflect on our economy in the longer term. There is a need to hold such debates with the public sector unions and to make the point that they are only damaging their own case in future by insisting on the work to rule under way at the moment. It will damage the economy significantly and will only serve to force the Minister of State to make more dramatic cuts next year. There is a need for the Minister of State to get back into negotiations with public sector unions in order that this country does not end up in the same position in which Greece finds itself at present.

In reality, there is not much more we can say about it. This is an evolving issue and we will see what will happen in the coming months. I become greatly concerned when I see hedge funds beginning to short sell on the financial markets in the way they appear to be in respect of Greece. Obviously, they believe they can smell a kill and that they can make it happen, regardless of what the European Union says. They may well know the eurozone group does not have the resources to take them on or to bail out Greece in the long term. They may also be more aware of an impending crisis for Spain, Portugal and, to some degree, Ireland because there is a sizeable correction under way in our economy. I have no doubt the same correction will come in the Spanish and Portuguese economies and, therefore, hedge funds may well believe that even if they bring this one to a head, they may simply be lining up the other countries to do the same thing there. The European Union must take that on board in the way it deals with this crisis because we have no wish to return to the days of long ago during which governments had to deflate their currencies and economies when they came under sustained attack from such short selling by hedge funds. I trust the Minister of State will provide more detail on these matters in his reply.