Dan Boyle (Green Party)

On the Order of Business this morning I agreed with those Senators who had spoken about trust and the growth of uncertainty. My comments were taken in a way I did not directly mean. The public perception of there being a lack of trust and certainty is fuelled by many factors, including international reports since the weekend. The ongoing and preliminary contacts between this country, the European Commission and the European Central Bank were developed during the Minister for Finance's discussions at the ECOFIN meeting today and yesterday's meeting of eurozone Ministers. They will be developed further when representatives of the European Commission, the European Central Bank and the International Monetary Fund visit Ireland tomorrow. There continues to be uncertainty about the nature of the problems we are experiencing as a country and the remedies available to us to deal with them. The essence of the proposals made on foot of the ongoing investigations will be the extent of the assistance we can receive from our EU partners.

ECOFIN Ministers have concluded their meeting. Commissioner Rehn who visited Ireland last week has indicated at a press conference following the meeting that Ireland is receiving ongoing and positive support in dealing with its difficulties. He has said the only mechanisms available in that context - the stability mechanism and the stability fund - must be applied directly to countries. The essence of our problem is the debts accumulated following the collapse of the banking sector, but it does not appear that it will be possible for these mechanisms to apply directly to the banks themselves. That is the nature of the problem the experts from the three organisations will face when they are in Ireland in the next few days. The ultimate difficulty to be overcome by the Government in making a decision on this matter is that certain responsibilities and conditions are associated with the use of the stability mechanism or the stability fund. These responsibilities and conditions could make the Government's business very difficult, a concern I have expressed in the House. I know everyone in the political system will examine this carefully in the next few days.

Some of the misreporting and over-reporting has been so ignorant of our current economic position that it has made a direct correlation between the bank guarantee and the bank debts we have acquired. Professor Honohan's report which was compiled on behalf of the Oireachtas suggested the decision to introduce the bank guarantee, in its widest application, was an error that resulted from a fear that the country's banking system would collapse the following day. The debts of the banks were not incurred by the existence of the guarantee. However, the scale of banking debt is greater than initially envisaged. As I said on the Order of Business this morning, I do not believe any policy option such as a narrower guarantee would have resulted in the elimination of the problem. It has been constantly argued in this House that we could have reneged on senior and subordinated bonds. We would only have reduced the scale of the banking debt. Existing bank guarantees were in place. The problem was related to the deposit accounts of the banks concerned and the bondholders were no more than a subsidiary aspect. If we had chosen a different policy option in the last two years, we would not have avoided the acquisition of billions of euro in debt as a result of the collapse of the banking sector.

Questions can be asked about how matters were allowed to develop to reach that stage. I agree that the actions of those who made reckless decisions should be seen as economic treason. The existence of the guarantee is not the problem. The reconstitution of the guarantee - it was initially extended for a period of two months and with this motion it will be extended by a further six months - shows that it is no more than an instrument to try to deal with the ongoing problem. It has to be emphasised that we have the agreement and co-operation of our partners in the European Commission and the European Central Bank for the use of this mechanism. I also stress that in terms of the banking crisis we face, the two largest banks - outside the problems created by Anglo Irish Bank and, to a lesser extent, by the Irish Nationwide Building Society - were subjected to very rigorous stress testing by the European Central Bank. The nature of discussions which have been going on in Europe since last Friday and which continued over the past two days should be balanced by a recognition that Government policy has sought to protect and ensure the Irish banks surviving this difficulty are stronger in the future and are the banks which have been stress tested by Europe and have passed those tests. Six financial institutions did not pass the test, including one bank in Germany and five credit institutions in Spain.

Despite all our problems, the remaining Irish banks passed those criteria. In the discussions and in the investigations by the experts coming here tomorrow and who will make their recommendations over the next few days, that point must be stressed. We can even go further and say that the stress tests undertaken by the Central Bank of Ireland were even more rigorous than the tests put in place by the European Central Bank in regard to European banking in general. That is why we find ourselves in this situation.

There were constant political complaints about the existence of NAMA and the role it was playing in perhaps artificially protecting the banks. If NAMA has done one thing, it has exposed the real extent of losses within the banks.

The other reality which we must face is past regulation. We developed a banking sector which had too many banks and was overcapitalised in that it had twice the capital assets of what this country had in GDP which made it impossible to control. Ireland is not Iceland where the ratio was ten times the country's GDP.

It is difficult to isolate our banking difficulties because of the amount of the debt and the potential debt is so staggering. We still have a properly functioning economy which has the ability to get us out of this situation. We still have a debt to GDP ratio which is less than it was in the 1980s when we had to face a similar set of circumstances. We have been through worse and we managed to get out of it. How can we do so again in the least possible time and with the least possible pain? We need to divorce the banking situation from the difficulties we are having with our public expenditure and our budgetary situation. We must put to bed the idea that if we have to make use of the facility - there will be considerable political difficulties in that - somehow we will be able to avoid the other adjustments we need to make as a country. Even if we get assistance from the EU and the European Central Bank for our banking crisis, we still have to reduce our deficit by €15 billion in four years. We still must reduce our deficit by €6 billion in the first year. The effect of decisions made and measures taken will supersede changes in the political system.

At a time when we are under considerable pressure from the organisations with which we are involved and given the perception internationally of how we are being treated, in particular by the markets, there is a need for greater cohesion in terms of our politics, although we have had some. In these critical weeks ahead, we need not so much to don the green jersey, because that is an overworn analogy, but we must think of future generations. The decisions we make and the actions we take now will have an impact on the type of society, economy and country we develop from here. There are many positive aspects on which we can build but they will be lessened if we talk ourselves down further, if we impair our image further in terms of the international community and if we lose the belief we once had in regard to our ability to get ourselves out of these situations. Things are serious and have the potential to become more serious but we also have the potential to recuse them within the time period concerned. We must eliminate that lack of trust and growth of uncertainty in our communities and present to the wider world a more brash, confident and more knowing Ireland in terms of what we are and what we can achieve.

The irony is that over recent weeks, the situation has developed into one where it is less about our political situation, the composition of the Government, the political parties involved in that and even less about our interest as a country. As a result of a combination of circumstances, Ireland has been identified by international markets as a weak link in a chain in terms of the credibility and cohesion of the euro currency. We have a number of options. We should remain a member of the euro currency because thus far in this crisis, it has been of assistance to us. We could argue that it might have been a contributory factor in bringing us to where we are but I believe the euro currency is the best way forward. It must not be done by the larger economies and the governments responsible for those economies making decisions at their behest and making reactive decisions for countries and economies like ours. The success of the euro currency depends on its strength in countries like Ireland. I hope the visit of the experts from the three organisations tomorrow will be the start of a process where we not only recover as an economy but Europe as a wider entity understands the importance of the euro and how it needs to be protected.