Michael D'Arcy (Fine Gael)

It is no pleasure to discuss this Bill, but we are doing so because of the position in which we find ourselves. Much of that position is self-inflicted. Senator Byrne was part of the infliction when his party was in government. He voted for his Government's appalling decisions.

We must consider some of the facts that are relevant to the context of our being here today. The euro has been a relative success in a number of areas but this is forgotten in respect of inflation and the interest rates that have obtained since its introduction. Over that past ten years, inflation has averaged less than 2%. That would have been very good for so many in this country and the eurozone as a whole had insane funds not been made available by banks, including from one bank to another. These funds were unchecked owing to the lack of regulation. We debated this last week. We learned the insurance bill could cost the State another €1 billion because of the lack of regulation.

The lack of regulation in this jurisdiction will cost the State approximately €50 billion because the banks did whatever they wanted and the actions of former Financial Regulator, Mr. Neary, went unchecked. I feel some sympathy for him because when he was Regulator the then Taoiseach, Mr. Bertie Ahern, was saying everything was grand and that we should keep spending. We cannot forget that. In addition, inflation was low. It should have led to an extremely strong economy, which we do not have today.

In addition to touching on low inflation, we must touch upon low interest rates. Owing partly to the consternation in the European markets during the summer months, we have benefited. This is because the ECB signalled six or seven months ago that there were to be four quarterly increases to the interest rate amounting to 1%. That 1% would have cost all the lending institutions, not just the banks underwritten by the State, €4.5 billion in extra payments, thereby affecting people with loans. The loan book is worth €440 billion and 1% amounts to a little under €4.5 billion in extra interest. To put that into context, it is the equivalent of the spending reductions and tax increases that will occur in the budget. It would have been the equivalent of two budgets in one year if the four quarterly increases were made. I am thankful they are not being made. I anticipate from the noises coming from the ECB that there could be a move towards decreasing the interest rates in line with the USA, which is holding its rates firm.

We must consider our current position. It is a little ironic that Mr. Geithner came over from the Unites States to push Europe in a particular direction through getting hold of the finances. The reality is that eurozone debts are between 50% and 60% of those of the United States. The United States owes just less than €15 trillion dollars, of which €10.5 trillion is publicly owned. The remainder is intergovernmental debt. I could not find the figures on the moneys owed in the eurozone but it appears they amount to approximately €6.5 trillion. Since the figures were broken down per state, I was not able to discern how much was publicly owned and how much was intergovernmental, be it owned by Governments or central banks.

We are not in as bad a position as many are saying. The problem is there is no political leadership. The primary political leadership should be coming from Germany and France, as was the case under former leaders such as Helmut Kohl and François Mitterrand. Unfortunately, Chancellor Merkel and President Sarkozy are putting their own political advancement over what should be done for Europe. I will not pretend it will be easy for them. The library research digest shows Germany is putting up almost €120 billion. That is a lot of money and will come from the German taxpayer.

We have not stabilised the debt structure. The European Union, as an entity, is less borrowed than the United States and many other economies. The truth is that some countries will have to pay more to assist those in difficulty. We know countries such as Ireland, Greece and Portugal are in difficulty but there are others that are close to the brink. If countries such as Spain and Italy go over and find themselves in a position like ours, the markets will be satisfied the ESM is not big enough to deal with what is to come down the tracks.

The International Bank of Settlements showed that the French and German banks are exposed to the tune of €475 billion in respect of Italian debt and another €175 billion in respect of Spanish debt. The existing funds will not be large enough if any of the larger economies find themselves in the Irish position. This was very close to being the case. The Italians were very much on the brink in that its debts were at a level that warranted a bailout in Ireland. Italy has reversed this but it is not far from a bailout.

I have some questions I would like clarified. With regard to secondary markets, we were told there could not be a default. Effectively the Greeks defaulted through an agreed default. We have been told consistently by the ECB that there can be no purchasing in the secondary markets of debt trading at a significant write-down.

The Minister of State referred to the purchase of bonds in secondary bond markets on the basis of the ECB analysis, recognising the existence of exceptional financial circumstances and the risks to financial stability. I can understand the latter but I would like some clarity on what constitutes exceptional financial circumstances. If the Minister of State does not have the answer, he may send it to me in writing.

On the ESM, I welcome very much the possibility of private sector involvement in debt restructuring. Where there is recklessness on the part of financial institutions, as there clearly was, be it in regard to lending to a country or a lending institution while understanding the risks being taken, and they find themselves in a position such as ours, they should lose some of their own funds.

Following the discussion between President Sarkozy and Chancellor Merkel, reference was made to the placing in constitutional law of an upper limit for a country in terms of borrowing. That would be helpful as it would prevent a country from going down the route of buying election results. I refer to electioneering throughout the political process. There is no better example than sports capital funding. Fianna Fáil Members were able to ask for and receive what they wanted.