Seanad debates

Friday, 28 January 2011

Finance Bill 2011: Second Stage

 

1:00 pm

Photo of Shane RossShane Ross (Independent)

We might swap titles. The Minister of State, Deputy Mansergh, has upbraided me in this House before for referring to this matter. However, the fundamental question is whether this is a disastrous deal that could have been avoided. Are the terms of this deal acceptable or affordable? Will we be able to pay back the money we have promised or accepted in desperation? Why were the bondholders not burnt? Why was the default option not given serious consideration? It happened in Iceland which is on the road to economic recovery while our credit rating still goes down. The question of default is the taboo, the unmentionable in the bailout document.

It has been well flagged in the reliable media that what happened on the default issue was equally shameful and ignominious. When the issue of burning the bondholders was put on the table on the Saturday night of the negotiations, the guys from Europe demanded it be taken off. What did the Irish negotiators and the Government do? They took it off. It was surrender and diktat from day one.

What is more shameful is that the International Monetary Fund, IMF, was prepared to discuss this particular option but the European Central Bank, ECB, representatives apparently had a fit and said there would be no negotiations and no money if there was even a mention of the possibility of default. What sort of negotiations were these when one's biggest card was taken off the table from the very start? After that, it was all downhill. It was surrender and retreat for every remaining hour of the negotiations resulting in this bailout document dictated by Europe and accepted by the Government.

Why did we not stand up to Mr. Trichet's boys and say default is on the table? Perhaps we have adopted such a craven attitude to our international masters that we can no longer challenge them when needs be. We had a card to play and they were scared stiff we would burn the bondholders resulting in contagion and their banks getting burned too.

The morality of all of this, one must remember, is very serious. Who lent to Anglo Irish Bank, AIB and Bank of Ireland? How could they borrow vast sums from the international money markets which they then lent on with equal recklessness to the developers and to those unfortunate people now in negative equity? They got this money from the very banks the European Central Bank protected during these negotiations.

Those very banks should pay a price at least equal to that being paid by the Irish people. While I do not agree very much with Joe Higgins, MEP, he is right that the Irish people and taxpayers are paying for the recklessness of European banks. They were the banks that provided the money that ended up in the hands of the developers in Ireland. They were the banks which gave vast sums of money to Anglo Irish Bank, AIB and Bank of Ireland without a care because they claimed that was how the markets operate and, anyway, it was all guaranteed.

Why should these banks not take some of the pain? Why should Ireland claim it can afford to pay this? If it were a sin, as it is, for the bankers here to have lent so recklessly, it was equally irresponsible of those European banks which lent to our banks so recklessly from the start. On that dreadful St. Patrick's Day in 2008 when Irish bank share prices fell by 25%, the markets signalled through selling and short selling that they knew the Irish banks were rogue banks. They had read the balance sheets and knew our banks were going to go bust. At the same time, their brother banks, knowing full well of this development, were still lending to Anglo Irish Bank, AIB and Bank of Ireland in the money markets. They relied on our mug Government to pay them off for their reckless lending. The result is this bailout deal which is a crucifixion of the lower paid, the middle classes and those on social welfare.

It is a shame. Despite what everyone says, it is very doubtful we can actually repay this debt. The money is coming now with its short-term benefits but it is doubtful it can be repaid. One can see already that the European conscience is working in the reports that some European Union member states do not want Ireland to pay such a high interest rate. Europe has realised this deal may land Ireland in a situation where it cannot make the repayments and will have to default anyway. This means we signed a deal that was so humiliating that we cannot even deliver on it.

It would be a good idea if the Government promised, in principle, not to allow its debt rise above a certain level if the interest rate on the bailout loans were lowered. It has never been properly explained to me why the IMF and EU interest rates are different except that we were so desperate we agreed to the European one. The bailout was an ignominious deal.

The Finance Bill, which is meant to represent the options taken by the Government, the Minister for Finance and his Department within the limits of the deal, contains all the wrong choices. What happened to the Croke Park agreement? It remains untouched, a political sacred cow. It should at least have been addressed. The issue of the power of the social partners who feathered their nests at the taxpayers' expense should also have been addressed. We should have said we will no longer be dictated to by outside forces. For a long time we tolerated diktats from our internal social partners on our budgets which has caused problems further down the line. One was the benchmarking deal, dictated by the public service unions and which we were are paying back now. They can no longer dictate anything anymore because we have not got the money to bribe them to give us industrial peace or to capitulate to them for political advantage and votes. They have been replaced by the IMF and Europe, more outside forces.

All Governments, including those of Fine Gael and Labour, allowed the social partners and trade unions to usurp their power and that of the Oireachtas. This was one of the fundamental problems of the country's budgetary process.

Europe is now doing it instead and there is a form of puppet Government ruling over us. We will have another such Government if those who come to power after the general election do not have the courage to challenge the fundamental reasoning behind the Finance Bill.

Where are the fundamental changes that are required at this time and the cuts to the budgets of the semi-State bodies located in the Bill? Why did the Government not reduce the budgets of FÁS from €1 billion to €500 million a year and that of CIE from €300 million to €150 million? Why are we subsidising these semi-State agencies and bodies and not reforming them?

Comments

No comments

Log in or join to post a public comment.