Brian Hayes (Dublin South West, Fine Gael)

This has been a useful debate and I thank colleagues for their interesting observations on this legislation. Tomorrow we can get into the detail of the Bill on Committee and Report Stages.

Ireland is a small country and our ability to get out of this difficulty depends in the Government's view, and I suspect in the view of the great majority of the Houses, on negotiating our way out and using the opportunity we have to resolve the problems we face. We are not going to do this by taking some dramatic unilateral position. That is the view of most moderate people in the country.

We face a very challenging situation. I agree with the comments about the appalling financial crisis we face. It is the view of the Government that a broader, pan-European solution to this problem is required. The Taoiseach, the Minister for Finance, the Tánaiste and others are on record as looking at what would be required for a banking union. Any cold, calm assessment of a banking union would give three answers. It inevitably requires a degree of supervision across the entire banking system within the eurozone at a much heightened level of integration than has been the case up to now. That is inevitable. There would have to be some form of deposit scheme as a bedrock for the banking system. It would also require a form of bank recapitalisation by European authorities where banks get into difficulties.

I want to be clear about this Bill in case there is any confusion. The ESM as currently constituted does not provide for that banking resolution. It does not provide for funds in the ESM to be directly used for recapitalisation purposes. If, in the future, it was chosen to be the vehicle for such bank recapitalisation, it would require a change to the treaty and at the very least a change to primary legislation in these Houses. People who talk about this being a vehicle for bank recapitalisation must understand the facts. It is currently not that vehicle, despite the growing body of opinion across the eurozone that to break the link between bank debt and sovereign debt, a fund authorised by the European authorities to fund bank recapitalisation is needed that is then not placed on the sovereign. That is the fundamental problem we have been foisted with and that resolves itself in other countries, Spain being the latest. Even though it has used a new vehicle to fund recapitalisation, the debt still lies with the Spanish sovereign. Until there is a change in policy, and not just in Germany but in Finland, Austria and the Netherlands, that will remain the case. We might want that to occur, as articulated consistently by the Government. In the most recent conference call of eurozone Ministers, the Minister for Finance, Deputy Michael Noonan, made this patently clear. If there is a change in that policy, we will be seeking a change in terms and conditions also. However, our wanting it to happen and it actually happening are two separate things. We need to be honest in this debate about where we stand.

We are moving towards much closer integration, particularly in the area of banking. The current policy has not worked. Let me consider the view expressed, referred to by some Senators, of the €170 billion write-down for Greece. I was at the eurozone meeting representing the Government on the night the second Greek bailout was agreed. Senator Jimmy Harte was absolutely right that there was public and private sector involvement and an agreed debt write-down of €170 billion. One must ask, however, whether this has actually worked. One could argue it worked for two months until the problem in Spain re-emerged. I ask whether the arrangement has worked because there is a default position among commentators that if there is to be a radical write-down of debt, it will allow us to recalibrate economies, increase demand and get people back to work. That is a presumption people make at their peril because there is no evidence that such a radical course of action across the eurozone - one could argue that there was a Lehman Brothers mark 2 in Greece – would actually solve the problem we face. Those who speak with certainty about what is required also need to understand the depth of the crisis. It is not just an economic crisis but also a political crisis. I say this in all honesty to those who recognise it as such.

The great problem we faced in the course of the past 12 months was that of the gigantic game of catch-up. Last July we took very clear positions. Then people in Europe went off on their holidays to the Mediterranean and came back in August and September only to wake up to the next phase of the crisis. We said we would put together a firewall. That is what we are now discussing. It is what we said we needed last October-----