John Gerard Hanafin (Fianna Fail)

The current bond market crisis has passed and we were caught in that storm. There is no doubt that the EU was anxious that we would take the package because it was anxious about the stability of the EU and the eurozone. It is good to note that this morning the Irish bond prices have decreased significantly in line with Portugal and Spain, as the ECB is now buying bonds and giving stability to the market. However, there are other reasons for the market having stabilised. We have strong growth rates in China, as shown in the figures that came through yesterday. The world economy appears to be picking up. The stock markets were up significantly yesterday, with the New York Stock Exchange up 2.25%, one of the largest increases in recent times. Commodity prices are significantly up. Commodity prices rise in anticipation of demand. On the New York index crude oil prices were $86 a barrel and Brent oil prices were $88 a barrel, which are an indication that there will be significant demand. The OECD predicts there will be a 4.5% growth in the world economy. It is my opinion that the crisis has passed and that we will now see some stability and growth. I am conscious there is growth in the Irish economy this year and there will be even more growth next year. As we all know, ours is a very globalised economy and we will take a more significant share of and benefit disproportionately from the 4.5% growth in the world economy.

Regarding the question mark over EU bonds, we needed stability and we got it at a good rate. The reality is that there was not a suite of rates under the counter and all one had to do to get a cheaper rate was ask for it in the correct manner and be a member of the right political party. The price is fixed and it is nonsense to suggest that Greece got a better deal because the money it received is over a three-years and the price for seven years is the rate we will pay. It does not vary according to the way one puts the question. The price is fixed. Any other suggestion is nonsense and a misrepresentation.

The fact the NTMA money was used was inevitable. I know the Opposition is annoyed about that because it had plans for the NTMA money and it certainly was not to put it into the public service pensions fund. The reality is that once we had money available to us, there was no way the people who were lending us money and the bondholders would not say we would use our own funding. However, as I suggested, I believe we have come through the worst of this. We should see a good trajectory now and a good way forward for the euro and for the Irish economy. It does not help when suggestions are made by the leading Opposition financial commentators, the leading socialist commentators in the country, that the country is banjaxed. That is not appropriate language and it is incorrect. Things are looking up significantly.

However, questions arise such as where we have come from and how we got to a state where Irish bonds were charged at 8% and 9% and we were going to have to pay significantly more, and we would have got through it. We paid 10% in the 1980s. Our debt to GDP ratio in the 1980s was 126%, we had 20% inflation, 20% unemployment and interest rates were 16%, 17% and up to 20% for businesses. Therefore, we have got through worse. We are part of the eurozone and it has different expectations and a much higher standard, and we are fortunate to be part of that. There are people who have vested interests and would like to see the euro area broken up. Being part of the euro will be of benefit right down the line. As I mentioned previously in the House, Pat Cox said that Europe is something of the light and the euro is something of that. We should support it, as we are doing. We have done our bit. As the markets change, we will benefit.

The reality is that two years ago we came through something very significant. When people say we should default on our debt, do they have any concept of the implications and repercussions of defaulting? There is almost the suggestion that it could be done quietly and that nobody would notice, that it would just happen and that it would be accepted. Argentina did that 30 years ago and it still cannot go into the world market to borrow money. In the case of the Russian bond market, Russia still gets money but it gets it at home. Anybody who defaults pays a big price. We could not have an EU member state and a eurozone country defaulting.

Art has often mimicked what happens in reality. Some of the expressions of Michael Douglas in the film "Wall Street" caught the public imagination, such as "greed is good." It caught people's imagination because we knew there was greed on Wall Street and we eventually saw the repercussions for the Michael Douglas character in that he went to jail. That seemed to be correct. We have seen extraordinary greed in the banking sector in this country and in other countries.

"Wall Street" showed exactly what would happen if one started to default on bonds. Eli Wallach, who starred in the Godfather films and in many spaghetti westerns, played one of the heads on Wall Street. The gentleman who played Ben Bernanke asked this group of businessmen, who all represented the senior houses on Wall Street, what he should do. They suggested that they would need to pump $700 billion into the economy. In fact, that is what happened in reality and we were very fortunate that Ben Bernanke's doctorate was on the Great Depression. When Lehman Brothers went belly up, there would have been very serious repercussions if many of the houses had not got funding straight away. We are talking about Bear Stearns, Goldman Sachs, Mellon's and the other major houses.

In the film, having been asked his opinion - this accurately describes what happens when a bank defaults on its debt - the character played by Eli Wallach said it was 1929 all over again but that it was worse because it would be faster, money markets would dry up, ATMs would stop spitting out bills, federal deposit insurance would collapse, banks would close, mobs would panic and that it would be the end of the world. We saved ourselves from that.

We saved ourselves from banks collapsing. It was very unfortunate that the banks in this country got into such difficulty. We had our own bubble. We all talked about soft landings, that since this was such a great exporting nation, we would be able to manage, that there would be 100,000 people unemployed but that would not matter too much because many of the eastern Europeans working here would probably go back to their own countries where they would get work, that we could start to refloat the Irish economy with capital projects such as new terminals, ports and railways and that people would hardly notice.

Unfortunately for us, there was a double whammy. Products, called sub-prime loans, were being sold on world markets and they almost destroyed the world economy. There was a major collapse and fall in confidence in that banks would not lend to each other. Week after week we found out how bad the situation was in Ireland. We were told the Government misrepresented the situation to the people. The Government asked the banks what was happening. It was given and took advice and relayed it to the Oireachtas. That advice was wrong on many occasions. The EU was also caught out. Does anybody remember the recent stress tests done on the Irish banks? They were all found to be fine but they were not.

It is a bit much that we still see the same practices today. Bonuses are being paid by banks which is unsustainable and incorrect. There is no positive news or justifiable reason for those bonuses to be paid. Having raised it on the Order of Business along with others, the Government and the Oireachtas should see if they can do anything about those bonuses which are unjustifiable in the current climate given that billions of euro have gone into the banks, although necessarily so.

I have outlined clearly what happens when a bank does not pay its bondholders and defaults. The reality is that banks close their doors, ATMs stop spitting out bills, insurance collapses and people panic. That has all been averted. We are on a strong growth trajectory now. There are positive signs and we will reach our targets. The four year plan will work and even by 2014, our debt to GDP ratio will still only be 100% of GDP which many European countries had at the start of the crisis.

Let us make no mistake about it, the bond markets picked on Irish bonds. Some specifically target the euro; there is a group which wants to destroy the euro. There was short selling of Greek debt. The Chicago Mercantile Exchange had a $15 billion fund to short sell Greek bonds. Now it only sells bonds to insurance companies and banks. It was going to target Portugal, Spain, Italy and Belgium. Iceland and Greece have already fallen.

We got the money from the IMF at a good rate. It was not a variable or notional rate or one we could choose. It is the IMF rate; it does not have a suite of rates under the counter. We had to use National Pensions Reserve Fund money and we were lucky it was there. We were also lucky we had a very low debt to GDP ratio when we started because at the end of all of this in 2014, when our debt to GDP is at 100%, it will still be below that of many countries which, even before the crisis started in Europe, had a debt to GDP ratio which was higher than that. Our budget deficit will also be below 3%. It is only now that we are beginning to see a turn in the world market and we will benefit disproportionately.