Feargal Quinn (Independent)

I welcome the Minister of State. This is a threatening and traumatic time for Ireland and we must be very careful about what we say because words can be taken out of context. The Minister was quite right when he said market sentiment has become very negative since October. Whether we should have anticipated a long time ago that this would happen is looking to the past. There will be times in the future when we will look back and ask what we did wrong.

I understand the problem of the support we are getting now and of the EU rules which state that it can support governments but not banks. We want to use the money to support the banks but the various EU bodies state that it should be for the country and not for the banks.

Senator Boyle reminded us that we have been here before. Our situation was bad in the 1980s but we got out of it. We may have big problems now and we are a weak link in a chain and we must ensure we find a solution.

I understand the Minister for Finance's argument that we need the ELG scheme to continue in place as one of the measures to support our banking system. I hope it will contribute to the banking stability about which we are speaking. However, this comes with a caveat. The current state of our debt means that the extension of the bank guarantee scheme may not be enough to stop corporate deposits moving out of Irish institutions. As any business person knows, a guarantee is only as strong as the guarantor. The extension is part of the wider aim to bring more stability to the market and combined with the budget and the four-year plan, we are sending a very strong message to the international community that we can look after our own financial affairs. The obvious question is that if it is not having the intended benefits of providing stability, should we continue with the guarantee? Our interest rate is now 8% which is similar to the interest rate in countries like Pakistan, Argentina and Greece. Indeed, our borrowing costs surpassed 9% in the past week which is approximately three times what Germany pays.

I hope the guarantee will play a part in restoring consumer confidence here in order that businesses can grow and invest for the future. It also interesting to note that the State has earned more than €1 billion by charging the banks for providing the guarantee. Where did that money go? What happened to it? I presume it went straight into funding the banks. We charge the banks for it, think it is great we have got €1 billion - in fact, I believe it was €1.3 billion - and then put it back into the banks. It is difficult to know whether we are charging them.

I would like some indication from the Minister of State on when it is forecast that the guarantee scheme may be lifted. I came across a table by the International Monetary Fund, IMF, which showed that even in Sweden, which is often held up as a model for the way it coped with the Nordic banking crisis in the early 1990s, it took four years for the guarantee to be lifted. The question also remains as to what the full cost of this will be. Is the figure of €300 million for the whole guarantee realistic?

I want to ask a question about the Bank of Ireland disengagement from the guarantee scheme. It was interesting to hear the Bank of Ireland chief executive, Richie Boucher, say in August that the bank was actively planning to "disengage from the guarantee in a prudent fashion". Those were the words he used. Mr. Boucher hinted that Bank of Ireland, which raised €2.9 billion from investors earlier in the year, would test the market for so-called unguaranteed investment before the support expires. He said that Bank of Ireland "will be looking at a range of programmes, guaranteed issuances, covered bonds, secured and unsecured bonds across a range of geographies". Given these indications by Bank of Ireland, can individual institutions be forced to disengage from the scheme if they are deemed to be financially capable of doing so in the near future? That is a question I would like answered because I am not sure of the position on that. We are looking to the future, to this particular scheme and to the eligible liabilities guarantee, ELG, scheme. This is the right way to go. We do not have a choice about it but there are some questions about it and those are the ones I would like to have answered.