Michael D'Arcy (Fine Gael)

As things stand it is not possible for current arrangements to deal with eurozone debtors Spain and Italy, but they can deal with Greece. The combination of both Spain and Italy would come to more than €2.2 trillion in public debt. That is almost twice as high as the proposed €1.25 trillion European Financial Stability Facility, EFSF, vehicle. That latter amount would have only enough fire-power to keep buying Spanish and Italian government debt for approximately two years, assuming €10 billion per week at a purchase rate. This would not be able to cover the full insurance of the bonds and also assumes that no other country would require help.

Given these constraints, it is clear that the only credible lender of last resort is the ECB. That is where we must get to, at some stage. Every other fiscal zone in the world that has its central bank as the lender of last resort, as such, is enabled to print money. The main method of doing this is quantitative easing so that a central bank can buy the country's own bonds. The initial thought of providing 20% to 30% first-clause insurance is completely nonsensical because an investor buying government bonds would naturally expect to get much more back from a eurozone sovereign investment that simply 20% to 30% on the euro. When a sovereign state defaults its recovery value is based upon whatever IMF-sponsored bail-out restructuring can be arranged. I cannot see how it is possible to suggest 20% to 30% insurance could be supplied during bailout recovery if this is being supplied by the same institutions to which we are looking for that bailout.

In the end we saw the ECB stepping up its buying programme to more than €10 billion last week yet the Italian five and ten year bond yields are on a one-way ticket to 7%. The general belief in the market is that the EFSF will simply not have enough fire power to stem the flow. The only way a concerted market short can be tackled is to ensure that those trying to force down the market have no idea of the size of the pool of money against which they are playing. By setting an upper limit on the EFSF the bears know what they are fighting. Were the ECB to have a mandate to print money and buy it would require much less money to turn the market around simply because the bears would be the ones with the constraints on their limits of capacity, rather than the ECB. One cannot beat an unlimited capacity so why try? The problem is Germany and its completely irrational fear of inflation. When we get beyond that we will be all right.

Ireland is not Greece but we must make some comparisons. Greek default equals Greek-style austerity. We have not gone anywhere near that. The last round of austerity in that country required a 15% further reduction in public sector salaries, a €5 billion increase in income taxes, a €5 billion decrease in social welfare payments, 2,000 schools being closed and 30,000 public sector employees going on short-time work before being let go in 18 months. We are nowhere near that sort of position.

I mention some other points. If a nation is impoverished from outside that nation will rise up. The Greeks are being impoverished by the extent of the austerity imposed on its citizens. We seem to have forgotten that it is not so long since some of the 17 countries in the eurozone had military dictators - Spain, in the early 1970s, Greece in the mid-1970s. If we push a nation hard enough - I am not concerned about the people who merely riot, the thugs - and if its middle class is impoverished it will rise up and there will be a revolt. That can happen. We have been looking down our noses at some of the slaughter going on in sub-Saharan Africa but in the last century Europe slaughtered its citizens more than did any other continent.

Are we to continue going down this route because we want to hold true to a principle argued 15 years ago, prior to the establishment of the ECB between the Germans and the French? On that occasion the Germans won and made the ECB entirely independent of political control. At some stage the nations of the Continent must step up to the plate and put in place the structures required to force the ECB to print money. It must happen. Barry Eichengreen, the US scholar, has a view that on every occasion that European ministers or leaders meet they kick the can down the road and make a bad scenario worse. That seems to be where we are getting to but eventually we must bringing this situation to a conclusion and it will be by means of the ECB printing money and putting more money into circulation.