Sean Barrett (Independent) | Oireachtas source

I move amendment No. 1:

In page 6, between lines 22 and 23, to insert the following:"5. Where the burdens of bank recovery and resolution impose excessive burdens on a member state of the eurozone an agreed re-introduction of a national currency and a flexible exchange rate regime shall be a permitted alternative to the bank recovery and resolution measures of Part 2 of this Act.".

As always, I welcome the Minister of State at the Department of Finance, Deputy Simon Harris, to the House. He informed us on Second Stage that "this Bill is very much of a technical nature and is designed primarily to address certain national and international obligations arising from a number of issues associated with the EU financial services legislative and transposition agenda". The purpose of the amendment is to address this issue. It provides that where a bank recovery and resolution imposes excessive burdens on a member state of the eurozone, an agreed reintroduction of a national currency and a flexible exchange rate regime should be permitted as alternatives to the bank recovery and resolution measures set out in Part 2.

The austerity agenda, as it is known, the bank collapses and rescues and the major burden that every Member of the Oireachtas has borne and substantially dealt with over the past four years could all have been alleviated if a measure such as that proposed in the amendment had been available. I am seeking to have included in the Official Report of a Parliament of a member state of the eurozone confirmation that an alternative exists by providing that countries must not stick rigidly to a fixed exchange rate and make those on the receiving end miserable forever. I specifically have in mind Greece, its fixed exchange rate vis-à-visGermany and all the trouble and turmoil Greek people have endured. If Greece had a separate exchange rate - the Minister for Finance referred to this on one occasion when he used the example of feta cheese - it could have varied the exchange rate to increase the number of German holidaymakers and exports of goods.

It is a design fault of the euro that it does not provide an exit mechanism and instead provides for a lobster pot means of making economic policy. It is very easy to join the euro but impossible to leave it. It the case of some eurozone member states, for example, Italy, Portugal and Greece, it would be easier to reintroduce a devalued national currency than to have the relentless imposition of austerity that has been associated with rigidly maintaining a fixed exchange rate, regardless of the underlying economic conditions. Greece and most other countries are not Germany and the single currency is not essential to the operation of the European Union. Countries outside the euro include Denmark, Sweden and large member states such as the United Kingdom and Poland.

The exchange rate benefits of the euro may have been exaggerated. What we lost on joining the single currency was the ability to use the exchange rate and interest rates as instruments of economic policy. Colm McCarthy described it, in his inimitable way, when he compared the exchange rate to the canary in the coalmine and stated that the EU shot the canary, meaning we did not have danger signals emerging from the types of policies that were pursued. The excess flow of capital in massive quantities and the tsunami of capital from German and French banks into Irish banks were promptly used to undermine the economy. The major inflow of bank funding was the start of the property bubble and we have all been required to participate in the rescue of the banks.

Irish banking dates back to 1783 and Grattan's Parliament. Since then, there have been approximately 20 massive shocks to the system, none of which bankrupted the Bank of Ireland. They included the Famine, revolutions and two world recessions. The bank was bankrupted, however, by the decision to join the euro in 2008. We were warned against joining the single currency by people such as Milton Friedman who noted that without an exit mechanism, we had locked ourselves in and thrown away the key.

As the Minister of State indicated on Second Stage, the Bill involves an element of retrofitting. Last November, a bank resolution mechanism finally came into operation for a currency that had been in place for the best part of 20 years. There is a respectable economic view that much of this would not be necessary if we had not been so rigid about the fixed exchange rate. Keynes described Churchill's decision to restore the gold standard in the United Kingdom as crucifying an economy on a cross of gold. There are also design faults in the euro currency. In addition to the loss of the interest rate and exchange rates, one also has weak bank regulation, which was only remedied last November, and the absence of an exit mechanism.

While it may be most unwelcome to Mr. Trichet, Mr. Draghi and others, there are still parliamentarians in the member states who think for themselves and propose alternative policies. It seems particularly strange that they will hang themselves on the absence of an exit mechanism, even where the policy of fixed exchange rates between the Deutschmark and all the other countries does not work. Some of this arrogance spilled over in the statement to the Minister for Finance that if bondholders were burned, a bomb would go off in Dublin. We need to address the problem of countries being stuck at the wrong exchange rate.

The purpose of the amendment is to place on the agenda the message that in at least one member state parliament, there are people who do not see the euro as the be-all and end-all of economic policy. There are alternatives to the regime of austerity. We threw away some without properly considering them, while others caught us unawares. The tsunami effect of the massive flow of capital into the Irish banking system imposed costs on the economy which it had never borne in the 217 years between 1783 and 2000. When we had policy discretion we used it wisely.

The purpose of the amendment is not to annoy the Minister or undermine his work.I want to get across that when we go to Brussels and Frankfurt there must be a discussion of equals about whether fixed or flexible exchange rates are correct and whether the one-size-fits-all policy, which is part of the Franco-German alliance, applies to peripheral countries, rather than what has been done heretofore, which is blaming people in peripheral countries for being lazy or incompetent and refusing to talk to them in a parliamentary context and being pretty patronising to them in the European Parliament. A very rigid alternative has been chosen. Many economists would have chosen something different, and I have tabled the amendment to show that in the world of learning which is the subject of economics, it did not have to be this way. It was chosen and we were locked in, but it did not have to be as immutable as it has been made. We should have discussions every time a policy comes from Brussels or Frankfurt, because it is not inevitably and inextricably the correct one. We must use our own thinking caps in the interests of this country.