Seanad debates

Thursday, 2 December 2010

EU-IMF Programme for Ireland: Statements

 

1:00 pm

Photo of Paschal DonohoePaschal Donohoe (Fine Gael)

I wish to understand why the Government believes this cannot be done. I make this point for another reason, as there is much discussion about the intervention the German Chancellor, Angela Merkel, made in the debate. The solution she advocated for 2013 is what we are trying to make happen now. The irony of the crisis we find ourselves in is that the solution proposed by the German Government could work for Ireland now. The time and way in which it was proposed ended up being counter-productive.

The burden-sharing approach of the German Government, which indicates that the German taxpayer does not want to bear the cost of reckless lending in banks in which it does not play a role, is the model many people in Ireland advocate. That intervention came at a time which was not helpful for us. If that solution is right for Europe in 2010, why could it not be a solution for Ireland now?

We may have to grapple with a significant challenge in that if the solution is implemented in 2013 or sooner, the only country in Europe that will be paying debt on senior bank debt would be Ireland. I have made clear my views that default on sovereign debt should not be seriously entertained but clarification of the matter would allow us focus on bank debt, either at senior or subordinated level. Why should we not have a pan-European solution to the issue now? That plan would work for Ireland, Spain, Portugal and many other economies in the same position as us.

There is much evidence to indicate that the IMF wants this plan to work and is very interested in implementing it soon. That organisation has much experience from all over the world where economies must deal with a level of debt generated by a bank or another force, and most of the time such economies find it very difficult to throw off the shackles of the debt. That makes the period of change and adjustment which the economies go through longer than it should be.

It is not realistic for Ireland to follow this course of action unilaterally but it should be a duty of the Government to ask why it cannot be done on a pan-European scale. Many of our neighbours want this to happen. If we find ourselves in a position where we cannot ask for this remedy because it is uncomfortable but find out in two or three years that this is the only country paying off this debt because a solution was put in place for everyone else, how could we explain it to the Irish people? This plan has been signed on behalf of the people so how could we say that after cutting the minimum wage, reducing social benefits and putting universal benefits that so many people depend on under pressure? There is much change but this will be the only country in Europe paying off many billions of euro in banking debt.

I am strongly against even countenancing the possibility of this country considering a default option for our debt. It is not an option because we would pay dearly for it. It is valid to ask why there are not more imaginative solutions in place to handle banking debt. We know the mistakes of the guarantee of September 2008 and it would be reprehensible not to implement those lessons in this agreement which will have such a significant effect on the destiny of this country.

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