Paddy Burke (Fine Gael)
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I welcome the Minister of State, Deputy Mansergh.

Martin Mansergh (Tipperary South, Fianna Fail)
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For the information of the House, copies of my speech will be ready in about ten minutes, before I have finished speaking.

I can think of few more topical and important subjects to be discussing today on the economic front. Following the meeting of the European Council on 11 February, the heads of state and government issued a statement supporting and defending the integrity and cohesion of the euro area against a background of the recent global economic and financial crisis. In the context of difficulties related to the budgetary and economic position of Greece, they stated that euro-area member states will take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area as a whole. This statement sent an important signal to the public and to the markets.

There has been considerable concern and extensive media comment regarding the position of Greece and possible spillover effects across the euro and EU areas. Last week's European Council made clear its full support for the efforts of the Greek Government and its commitment to do whatever is necessary, including adopting additional measures to those already announced, to ensure the ambitious targets set out in the Greek stability programme for 2010 and the following years are met. The Council called on the Greek Government to implement all these measures in a rigorous and determined manner to reduce effectively the budgetary deficit by 4% of GDP in 2010. The statement also acknowledged that the Greek Government has not requested any financial support.

The position taken on Greece implicitly reminds all concerned that the Stability and Growth Pact, and adherence to its rules, continues to provide an essential framework for sound budgetary policies, and that there has to be a continued firm commitment to the pact in these difficult times.

At their meeting last evening, the eurogroup — the economic and finance ministers of the euro area — expressed confidence in the plans of the Greek authorities. They agreed that Commission would report further next month on the implementation of budgetary measures by Greece and that additional measures would be taken, if considered necessary, to secure the budgetary targets for 2010.

Earlier today, the Ecofin Council adopted a comprehensive and ambitious package of recommendations to Greece, covering fiscal and structural policies, based on proposals from the European Commission and following discussion with all member states. These recommendations require that the Greek authorities take steps to reduce the deficit on the public finances below 3% of GDP by 2012, in line with their obligations under the Stability and Growth Pact. They are also invited to implement specific economic reforms considered consistent with the smooth functioning of the euro area.

As envisaged by the European Council, the EU Commission will closely monitor implementation of the recommendations in liaison with the ECB, and will propose necessary additional measures, drawing on the expertise of the IMF. A first assessment will be done in March.

With regard to Ireland's response to the Greek situation, we welcome the efforts of the Greek Government to tackle the substantial economic and fiscal challenges which the country faces. These measures are key to addressing the fiscal and competitiveness challenges of the Greek economy. We also welcome recently announced measures which clearly show the determination of the Greek Government to consolidate the public finances and restore competitiveness. There is an urgent need for these measures to be implemented in order to regain the confidence of financial markets.

We are very supportive of the Greek Government in its plans to deal with a difficult economic and fiscal situation. This is primarily in the interest of Greek citizens, but also in the common interest of all euro area countries and the entire EU. We are confident that the necessary measures will be implemented speedily and efficiently, and that the Greek authorities will succeed in overcoming the fiscal and macro-economic challenges they face. We also note the important contribution of the Stability and Growth Pact in the context of the fiscal consolidation which is under way in Greece.

It is important to highlight the commitment of the EU to deal with the crisis, which began in 2008. From the outset of the global economic and financial crisis, the EU has taken decisive and concerted action to mitigate its impact and to position the European economy for future recovery. Last week's statement from the European Council should be seen in this context.

In December 2008, the European Council announced a major European economic recovery programme. This has involved concerted action of the order of 5% of GDP in 2009 and 2010, in support of the European economy through a range of fiscal stimulus measures and economic supports, as well as measures to support restoration of the normal functioning of the financial sector and a resumption of a flow of credit to the real economy.

The European economic recovery programme also took account of the position of member states, such as Ireland, where the overall priority is to restore stability to the public finances, while also taking action to support international competitiveness and to position the economy for future growth.

Measures taken by member states under the programme are designed to be timely, temporary and targeted in their impacts. Some member states are out of recession and starting to recover, while others have been more severely hit by the global downturn and financial turmoil, and their economies will take longer to recover. As the latest EUROSTAT figures show, recovery remains fragile, with GDP growth of only 0.1% in the EU-27 in the final quarter of 2009, and some continued stimulus will be required until it becomes self-sustaining. The average EU budget deficit will be approximately 7.5% of gross domestic product in 2010, taking account of stimulus measures, rising social protection expenditure and depleted revenues. Accelerated spending through the EU budget of €6.25 billion has seen earlier implementation of certain Structural Fund programmes. Member states' short-term labour market measures have provided a measure of protection to jobs, but unemployment in the EU is lagging developments in the real economy and will exceed 10% by the end of 2010. Public indebtedness due to rising deficits and interest payments is now a key policy challenge.

There is a general consensus within the EU and in the G20 that fiscal consolidation will need to be combined with progress on structural reforms to support medium to long-term growth and jobs. In other words, in future there will be a more integrated approach as far as possible. The recent international financial crisis is a stark reminder of just how interconnected global economies have become and of the need for the Union to act decisively if it is to avoid the risk of slipping behind globally.

As well as restoring sound public finances, it will be equally important to promote investment in new sources of growth and social cohesion. In most member states, economic and structural reforms will be essential to offset the detrimental impact of the crisis on potential output. The EU has been developing a strategy to do this.

One of the topics discussed at last week's European Council and which has received relatively little attention was the planned successor to the Lisbon strategy for growth and jobs. Europe 2020, as this new strategy is currently called, aims to provide the means by which sustainable growth and jobs can be generated in the EU. It will do this by providing a reform agenda and the framework to ensure it is pursued at EU, eurozone, member state and, where appropriate, regional levels.

The Lisbon strategy for growth and jobs, which has been in place since 2000, is due to expire this year. It encouraged member states to engage in a programme of wide-ranging structural reforms to enhance the growth potential of the EU economy. Before the global economic and financial crisis, the strategy had helped create more than 18 million jobs within the EU. The post-crisis challenges now facing the EU, including long-term issues such as ageing populations and climate change, require an acceleration of reforms to increase sustainable economic growth and generate employment. This requires a new strategy for long-term structural reforms across the EU. Ireland has been a strong supporter of the Lisbon Agenda and is committed to ensuring its successor, the Europe 2020 strategy, due to be formally endorsed by the European Council later this year, will provide a new and positive departure towards ensuring sustainable growth and jobs in the EU.

As the time approaches for the withdrawal of short-term support measures implemented under the European economic recovery plan, the new EU 2020 strategy will play a vital role in facilitating the implementation of structural reforms across the EU, which will help achieve sustainable economic and employment growth over the long term. In essence, EU 2020 represents the exit strategy from the current short-term fiscal stimulus measures across the EU which, obviously, are not sustainable in the long term.

The challenges of increased unemployment, increased budget deficits and low potential growth highlighted by the recent crisis emphasise the need to retain the focus on sustainable growth and employment. It is expected that the new strategy will be pursued through a better functioning Internal Market, more efficient and inclusive labour markets and increased openness with regard to external trade. Finally, EU 2020 will also play an important role in the consolidation of public finances through the stimulation of employment and growth.

The current difficulties of Greece and the associated movements in the international financial markets underline the importance of continuing to take firm and decisive action to restore stability to Ireland's public finances. This in turn will help return the economy to a sustainable growth path. The actions taken by the Government to date, as well as the plan we have set out to restore sustainability to the public finances by reducing the general Government balance to below minus 3% of GDP by 2014, have been well received internationally. For example, the chief economist of the ECB, Jürgen Stark, commented recently that Ireland has won back the trust of the markets.

The 2010 budget was the latest in a series of measures, beginning in mid-2008, designed to restore order to the public finances. The budget re-emphasised the Government's commitment in this regard. Difficult and painful measures were necessary in the 2010 budget. An expenditure adjustment of €4 billion was delivered. As a result of these decisive actions, it is forecast that the deficit will be stabilised in 2010. The Exchequer returns for the end of January 2010 were broadly in line with expectations. The budget also provided for considerable capital investment with €6.4 billion, or 5% of gross national product, provided in 2010 and €5.5 billion each year for the years 2011 to 2016. In addition, tender prices for many new projects have also fallen back significantly, thus enabling us to get better value for money. In 2010, our investment projects will focus on labour-intensive areas such as schools building and maintenance, energy efficiency measures and investment in our tourism infrastructure.

While Ireland's debt level will rise over the coming years, it was relatively low to begin with. General Government debt was estimated at approximately 64.5% of GDP at the end of 2009, below the eurozone average of 78% of GDP. However, when account is taken of the Exchequer cash balances and the assets of the National Pensions Reserve Fund, it is estimated that the net debt ratio stood at approximately 38% of GDP at the end of 2009. In 2010, the National Treasury Management Agency, NTMA, plans to raise €20 billion and already it has raised approximately one-third of this total funding requirement for the year.

Over the past 18 months we have made and implemented difficult decisions. We know that challenges and difficult choices still remain but the Government is determined to continue to take the necessary steps in this regard. This in turn will help return the economy to a sustainable growth path. Alongside fiscal consolidation, the Government is pursuing measures to restore stability to the banking system and reform our regulatory and supervisory structures in line with best EU and international practice. The transfer of assets to NAMA will commence in the coming weeks with the process continuing over the course of the year.

Turning to the outlook for the economy, while the Government is not complacent about the numerous challenges that still confront us and the expectation is that economic activity will contract again this year, there are indications that the economy is stabilising and there are emerging signs that we may be close to the bottom of the current downturn. There is growing consensus among observers that positive economic growth will now return during the second half of this year, although we will have to wait until next year before we experience growth on a full-year basis, as the international recovery gains momentum, competitiveness improves and the domestic economy recovers.

Looking at our economy from a medium to longer-term perspective, our future pattern of growth will, by necessity, be based on a more sustainable export-led growth model. This will require a continued focus on improving our competitiveness and continued reductions in our cost base. Price levels and wages are adjusting to the new circumstances, thereby improving Ireland's competitiveness. Our economy is proving yet again to be flexible and resilient with evidence that the necessary adjustment is under way. Once the necessary adjustments are made, the medium-term outlook is favourable.

The performance of individual member states in sustaining their international competitiveness and dealing with economic imbalances, current account deficits in particular, is increasingly seen as critical to the cohesiveness of the eurozone. This is an important issue and one that is receiving considerable attention within the EU. Eurozone member states are facing important challenges arising from the economic, budgetary and financial implications of the crisis. They are taking steps, however, as we are, to prepare for a return to sustainable growth.

Having considered a detailed report from the European Commission, Ministers are considering appropriate horizontal policy guidelines for the eurozone. It is likely that analysis of this nature will increasingly inform the EU monitoring of macroeconomic performance. The discussions in this area have focused on the need for countries with large current account deficits to reduce them, while it was also accepted that countries such as Germany and the Netherlands, which have run large surpluses from strong export performance, would be urged to stimulate domestic demand.

Ireland is recognised as having taken necessary action to reduce costs, especially public sector wage costs, and regain competitiveness. It is vital we continue with this process. The budget included a number of targeted measures to support economic recovery and employment in 2010. I note a reported warning yesterday from a trade union leader of Armageddon if the Government does not reverse the pay cuts. I am reminded of the old saying, "beware of what you wish for", as I can think of few quicker ways of bringing forward an outcome which could engulf us all, including the public service unions, than the Government agreeing to such a demand. Our external deficit is also improving. The current account of the balance of payments is expected to move into surplus this year as the economy is rebalancing.

In line with other member states, we note and welcome the recent important statement from the European Council emphasising the cohesion and integrity of the eurozone and that, in the context of current difficulties in relation to Greece, determined and co-ordinated action, if needed, will be taken to safeguard financial stability in the euro area as a whole. I understand that at meetings yesterday and today of the finance ministers of the euro area and the EU 27, respectively, the Greek authorities have reiterated their commitment to take all necessary measures to address their budgetary and economic situation. We welcome this and remain confident the Greek authorities will proceed to implement the relevant measures in a speedy and efficient manner.

It is widely recognised the Irish Government has taken difficult but necessary budgetary action to restore stability to the public finances, with €4 billion in cuts this year equivalent to 2.5% of GDP, following cumulative cuts of 5% of GDP in 2009. Recent developments vindicate the action taken by the Government and underline the importance, in all of our interests, of continuing to implement the budgetary consolidation which the Government has set out. We have begun to make progress in improving competitiveness, with necessary price and wage adjustments under way, and in resolving problems in the banking system. We are making headway in addressing all of these challenges and we are confident that with further efforts we can continue to do so.

We remain, however, in very difficult times and it is essential we maintain our resolve to prepare the economy and public finances for future sustainable growth and jobs, and that we are seen to be doing this. As anyone who has been following the financial press will know, this issue has raised many debates about the governance by the EU and the eurozone and of the financial markets. It is important to exercise restraint in commenting on the affairs of partner countries so as to create the maximum space for appropriate action.

Liam Twomey (Fine Gael)
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I welcome the Minister of State to the House and thank him for his speech. Unfortunately, we have not really tackled where we are in all of this. One of the important points in the Minister of State's speech is the following: "The performance of individual member states in sustaining their international competitiveness and dealing with economic imbalances, current account deficits in particular, is increasingly seen as critical to the cohesiveness of the eurozone." Politicians, Ministers and officials can dress up their utterances in such a way as to believe they do not matter. However, the cruellest way to learn a lesson about the money markets is when someone such as George Soros decides to make his move and starts short-selling one's reputation, whether it is Government bonds, the country as a whole or the euro. There is a sense in which the money markets identify Greece as being a wounded animal and are going after it. We are not speaking in real terms about the potential crisis Greece represents if it does not get its act together.

Greece is probably the worst example, but these problems exist in other European countries as well. Spain has a major problem with its deficit, for instance. It is 15 times the size of Ireland and 7.5 times the size of Greece, so if the Spanish economy goes wrong, we will be dealing with a major crisis within the eurozone. I do not know whether the euro is capable of sustaining crisis in the long-term. We should be explaining ourselves clearly and not trying to dress up this problem or lessening the impact of what is happening. This is a very serious crisis. Perhaps the Minister of State, when he is responding, might tell the House whether the European Community is capable of handling a crisis that is growing larger by the day. Has the eurozone the resources because, apart from Germany and Holland, most European countries will not be able to handle a major crisis. There is a really major problem here.

Ireland's problems are somewhat similar to Greece's. I am glad the Minister of State says the measures being taken by the Government are in line with what was expected in the budget. I would like to know, however, whether we are really dealing with out deficit and the problems that have been highlighted ad nauseam in recent months. We are taking €4 billion in spending cuts out of some parts of the economy, but we are witnessing massive increased spending in others because of the numbers of people who have lost their jobs and the resulting increased social welfare costs. We must take into account, perhaps, that by the end of the year we may not see an overall improvement. There is a need to explain this to the public so that people are ready for the next round of cuts that may come.

The Minister of State referred to the public service unions talking about bringing crisis to the economy. I do not believe there is too much will among public sector workers to bring such a crisis to the level that some union leaders believe it can be brought. Media commentary on Greece would suggest that all civil and public service workers are on strike and throwing stones at the police, day in, day out. They are not, and this is being exaggerated by the media. Civil and public service workers in Greece are seriously concerned about the state of the economy and are aware that this whole thing could go pear-shaped for them. The majority of them have no intention of bringing this crisis to a point where they will receive IOUs rather than euro in their paycheques at the end of each month. It needs to be highlighted more that within Greece there is an understanding of what is going on. There is probably a fear, too, as there is within Government in Ireland, that a real crisis might be generated if matters are taken too far. However, people need to be told just how serious the Greek problem is.

The Government is downplaying economic issues in Ireland by saying that our public debt is very low. I notice that all through the Minister of State's speech he has made reference to GDP, not GNP. GDP includes the profits multinationals make in this country and which are removed from Ireland straight away. GNP is significantly lower, equivalent to the actual level of economic activity remaining in the country every year. If the national debt is compared with our GNP figures, we are running into serious problems. The Minister was ratcheting up €20 billion worth of extra national debt every year. There is nothing to show from the figures projected in recent budgets that it will be less than €20 billion over the next couple of years. Ireland could easily see itself in five years' time €100 billion more in debt, equivalent to nearly 60% to 70% of GNP. That is too much and justifies serious and frank discussions with the people because our austerity measures could count for nothing if the eurozone runs into liquidity problems, especially where Spain or Portugal are concerned. In the event, this could really test the resolve of the European Union to work its way through this crisis.

Another major concern is public opinion within Germany and Holland. These countries are not keen to bail out what they consider to be rogue states that have been delinquent financially over a number of years. They are starting to come to terms with the massive sums of money to which the Minister of State has referred to stabilise the economies of countries such as Greece, Spain, Portugal and Ireland. I am not sure they will come to our rescue if this problem becomes a full-blown crisis. We need to have a proper debate with the people on how potentially large this crisis could be.

I have seen comments to the effect that Ireland might even go into trade surplus. The reason we might, in the event, is because our imports have dropped dramatically over the past 18 to 24 months. Our exports have not improved dramatically. The reason there might be a potential balance of trade surplus is that imports have dropped so sharply and consumer spending is dropping. Therefore there is considerable shrinkage within the economy that must be taken into account. We must be far more open in what we say in our debates on this issue because our economy is in difficulty. I do not wish to use the term "in crisis" because that is unfair, but we should not be seen to act as if we were whistling past the graveyard in respect of the concerns that exist in our economy. There is a need for us to tighten up the public finances to a greater extent. There is a need also for an increase in taxation, which most people are against because they believe it would increase the rate of shrinkage of our economy, but there is also a belief in the need to restore competitiveness.

From this point of view, there is a need to examine what is taking place in the public sector. The Minister of State should go back into negotiations with the public sector workers because there is a go slow planned unless the Government does something. That would decrease the efficiency and productivity of the public sector which will reflect on our economy in the longer term. There is a need to hold such debates with the public sector unions and to make the point that they are only damaging their own case in future by insisting on the work to rule under way at the moment. It will damage the economy significantly and will only serve to force the Minister of State to make more dramatic cuts next year. There is a need for the Minister of State to get back into negotiations with public sector unions in order that this country does not end up in the same position in which Greece finds itself at present.

In reality, there is not much more we can say about it. This is an evolving issue and we will see what will happen in the coming months. I become greatly concerned when I see hedge funds beginning to short sell on the financial markets in the way they appear to be in respect of Greece. Obviously, they believe they can smell a kill and that they can make it happen, regardless of what the European Union says. They may well know the eurozone group does not have the resources to take them on or to bail out Greece in the long term. They may also be more aware of an impending crisis for Spain, Portugal and, to some degree, Ireland because there is a sizeable correction under way in our economy. I have no doubt the same correction will come in the Spanish and Portuguese economies and, therefore, hedge funds may well believe that even if they bring this one to a head, they may simply be lining up the other countries to do the same thing there. The European Union must take that on board in the way it deals with this crisis because we have no wish to return to the days of long ago during which governments had to deflate their currencies and economies when they came under sustained attack from such short selling by hedge funds. I trust the Minister of State will provide more detail on these matters in his reply.

Marc MacSharry (Fianna Fail)
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I join others in welcoming the Minister of State to the House. I am pleased to have some brief moments to make some points on the proposed emergency funding for Greece. As Senator Alex White remarked today, given our economic crisis it would appear to be a most unusual topic of debate. However, I disagree with Senator White that he would prefer to be discussing Ireland. The ramifications of what happens in Greece are very significant for Ireland. The crisis in Greece poses the most significant challenge yet to the single currency and the goal of economic unity across the Continent. To use one of the banking terms of the past, it is too big to fail in the context of our currency. Greece owes the world €300 billion and if it were to default, there would be very significant implications for many of the major banks in the world which are on the hook for much of the money. A default would reverberate throughout the globe in a major way and it would have a great impact on us. The UK owns one fifth of Greek bonds and there is no question that if Greece does not manage to deal with its issues in the same way and manner with which we have set about dealing with ours, then the future is bleak indeed. However, we have no reason to believe that under the guidance of the EU, such a process will not begin this week following the ECOFIN meeting of recent days.

We have heard many comments in the media regarding Greece's public finances, including that there is a dire financial crisis, that it was dishonest in how it managed its finances, that it will be very difficult to avoid a tragedy and that it was mess of its own making. A general election in 2009 introduced a new government which came to power only to find its predecessors had effectively lied about the real state of the country's finances. The country had gone on a spending spree. It hosted the Olympic Games very proudly in 2004. In a bid to win power and votes, political parties filled the public sector and this eventually led to debt of some €300 billion. There is a 12.7% budget deficit, more than four times the EU limit. Greece must sell €53 billion of its debt this year to avoid the intervention of Europe and it must reduce the deficit by 4% of GDP in line with EU rules. The relative cost of insuring debt against its borrowings is €33.50 per €1,000, more than double our cost which is less than €15 per €1,000.

As the Minister of State, Deputy Mansergh, has outlined, last night eurozone finance ministers imposed a 28-day deadline on Greece, during which the country must demonstrate its austerity measures aimed at cutting its vast deficit from 12.7% to 8.7% of economic output this year in respect of yield of returns. The finance ministers and ECB president, Jean Claude Trichet, stated it would be unwise for them to discuss publicly any measures the EU may employ if Greece were to fail to meet its four-week deadline. There is no question the Irish must be supportive of Greece and of all measures to bring the situation into line. While one cannot speculate on the future of Greece's economy, we must reflect on the impact it may have on us. The uncertainty surrounding the financial health of Greece is a reminder of just how fragile economic recovery may be. However, we can take comfort in the positive international reaction we have received in respect of our budgets and the steps we have taken on our path to recovery. The Minister of State, Deputy Mansergh, has outlined these and it is imperative that Greece begins a process that is at least akin to ours.

Simply put, had we not made the cuts in December's budget and taken other measures dating back to 2008, eurozone finance ministers would probably be in Ireland now, a prospect for which no one would wish. Last week an EU commentator, David Marshall, remarked that the Irish had taken a lot of pain and he was supportive of what we have done. He suggested we got our retaliation in early, recognised things were going very badly, took a lot of pain and cut wages, which is exactly what Greece must do now. He further suggested we should not relax because we have only started this process but that previous decades have shown that Ireland can knuckle down. This is what we have shown in recent months under the stewardship of the Taoiseach, Deputy Cowen, and the Minister for Fiance, Deputy Brian Lenihan, in particular. Many commentators have noted that while difficulties remain in Ireland, the worst of its woes are probably behind it, and this is attributable to the political will that is lacking in several of its neighbours. This was a view from the Wall Street Journal in December 2009. Several other international commentators acknowledge that Ireland is taking the appropriate steps.

I wish to make several points in respect of the single currency. Obviously, ECOFIN will determine whatever measures should be taken and Greece must bring its public finances into order. It was encouraging to note that, according to an opinion poll, some 70% of the Greek public was aware that public sector wages should be reduced and that the country must cut its tape to measure. Notwithstanding the protests on the streets that we have seen in the international media in recent weeks, I believe it has the public will to make progress and it is to be hoped its Government will do the same.

I hold concerns about some issues to which Senator Norris referred on the Order of Business in respect of Goldman Sachs and the need for some level of international regulation in lending to countries and in international banking. There is an incentive for major banks such as J.P. Morgan and Goldman Sachs to spot the difficulties nations are having and design derivatives for them to window-dress their actual financial circumstances to mislead others. This has undermined the strength of the euro in recent days and certainly undermines the European Union. There were suggestions Italy had engaged in this practice. From 2001 Greece forward sold its future lottery receipts and airport landing fees, which is a disgrace. It was also wrong. It was on foot of doing so that Greece joined the single currency.

Derivatives can be very useful instruments but they become bad if they are used as window-dressing, as they have been in this instance. I am encouraged that the Greek Government, having been approached by Goldman Sachs before Christmas, declined to enter into such agreements. However, it points to the fact that if we are to avoid a recurrence of the catastrophe in financial markets in recent years and the economic downturn that has affected so many countries, we have a responsibility to sign up to a set of basic regulations, otherwise we will be one step away from the next crisis. As with the world of crime, the world of banking always has the potential to design derivatives to hide the next financial disaster. That is what we have seen in Greece. I would like to believe the developed nations of the world will sign up to a set of regulatory reforms to govern lending to governments. However, I have not seen much evidence of this to date, be it under the auspices of the World Bank, the IMF, the United Nations or another organisation. The Financial Times stated in recent days that if a government wanted to cheat, it could. We must try to prevent this to the maximum extent.

As we overcome the crises in Greece and perhaps other countries, we must be cognisant of the future management of the eurozone. As I said a number of times in the House, Ireland was very lucky to be in the eurozone in that it saved us to a great extent, but there was a flaw in the sense that we were experiencing growth of 8% and 9% year on year with money available at a rate of 2%. That fed the frenzy in Ireland somewhat. It is a weakness within the system that although Ireland constitutes only 1% of the eurozone economy, interest rates will not be affected if inflation is featuring throughout the eurozone but not here. As we begin to see the eurozone economies recover in the next year or so, interest rates will begin to rise. However, at that time our employment levels will not have had time to recover to the same extent. These are flaws that need to be contemplated by ECOFIN and the ECB because while there were and are many benefits to our being involved in the euro, which I certainly desire, there are also weaknesses. I am not putting forward solutions, as better minds than mine can come up with a better way to proceed.

Feargal Quinn (Independent)
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I wish to share my time with Senator Norris.

Pat Moylan (Fianna Fail)
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Is that agreed? Agreed.

Feargal Quinn (Independent)
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I first visited Greece in May 1967. Before doing so, I went to collect my drachmas in the bank in Dublin and the staff asked me whether I was still going. In the week I arrived in Greece there was a coup d'état. The tanks were in the streets and the colonels took over. It was a dramatic time in history and there were very few tourists in the country. My tour was one of the first since the coup d'état. I know Greece comparatively well and this example reminds me that Greece is being targeted. The euro zone is comparatively strong but it is only as strong as its weakest link. It is as if Greece is being targeted. It may be deserved because it may well be correct that the Greeks have not behaved themselves and misled us a little, or a lot, with regard to the figures they produced, even those pertaining to their entry into the eurozone. Therefore, it is understandable Greece is not trusted.

The proposed emergency funding for Greece is extremely serious for the eurozone. Many forget or do not realise this fact. The Greeks cannot continue to produce estimates that suggest a deficit amount for 2009 of more than 12% of GDP, while the level of public debt is above 120% of GDP. Many even believe this is the most serious test of the eurozone since its foundation.

It is very stark. What is surprising is that there is so much indifference to helping the Greeks. A poll in the German newspaper Bild am Sonntag showed that 53% of Germans had said the European Union should, if necessary, expel Greece from the euro zone. The Lower House of the Dutch Parliament has just passed a motion, backed by all parties, prohibiting the use of Dutch taxpayers' money to bail out Greece, either through bilateral aid or EU funds. The Bundestag in Germany has drafted an opinion deeming aid to Greece illegal. The Bundestag indicates that state bodies may not purchase the debt of another state, in whatever guise it is presented. One can only imagine the trouble Ireland would be in if it were in Greece's position and had to face such negativity and the prospect of seeking out such help.

One of the main problems is that Greece is struggling to convince the market, especially investors, that it is tackling its debt crisis. The European Union has also played a part in this, as it has failed so far to outline the concrete steps Greece must take to remedy its finances. I understand today that EU leaders will now wait until March to see whether Greece can implement some measures to reduce its debt. Greece is procrastinating and putting off measures to stabilise its economy. The Greek Finance Minister announced just yesterday that his Government would not be adding new measures to the public sector cuts and higher fuel taxes unveiled last week. In addition, the Greeks are reluctant to reconsider their generous pensions system, despite the degree of relief it could bring to them. It concerns me that there is no clear and unambiguous message issued jointly by both the European Union and Greece. They seem to be pulling in different directions and this lack of co-operation is harming Greece and the eurozone.

I agree with Brendan Keenan who wrote last week, "The crisis in Greece seems to show that reducing the budget deficit — however illogical and harmful in a shrinking economy — is the only option in these unprecedented times". Ireland has managed to escape being the first to be targeted but maintaining this position will not be easy. We have taken correct steps in recent times to help us in this regard.

With all this talk of Greece, it is easy to forget some of the other problems in Europe. Harvard University economist and former IMF chief economist Kenneth Rogoff has warned Germany could face similar problems to Greece. I had not heard this before. He said:

Germany's public finances are not on a sustainable path . . . There will come a time when Germany will have its own Greece problem . . . It won't be as bad as in Greece, but it will be painful.

Latvia has been largely ignored, although it is an important example of what could go wrong. It is easy to be downbeat about our economic circumstances but let us be thankful that we are the controller of our own destiny. The largest economy in the European Union, Germany, could face a massive problem with regard to its finances, while Latvia is on course to losses greater than those accrued during the Great Depression in the United States. Thank goodness, we are now back in the game. I hope everybody in the country can be convinced of the benefits of the tough steps we have had to take. This is comparatively easy when we consider what has happened to Greece. It must be possible to convince everybody in the country that we must tighten our belts and take some tough decisions. It will not be easy, but we must try to come together and make those decision to our current advantage so we can succeed in that.

Last Saturday the OECD pointed out that our labour cost rose at a faster rate in the third quarter of 2009. That is a reminder of the dangers facing us. No matter what we do with the economy, we must ensure in the long term that we become as competitive as we were in the past. On that basis, I urge the Minister of State not only to convince our citizens of the steps we must take but to convince them that in the long term we must be more competitive if we are to succeed.

David Norris (Independent)
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I thank my colleague, Deputy Quinn, for sharing time. It is not very edifying for us in Ireland to be included in the acronym PIIGS, but that seems to be what has happened and I am not sure it is entirely our own fault. If one looks at the situation, tax evasion is endemic throughout the Hellenic world. I have a house in Cyprus where the same situation obtains as in Greece. It is a national pastime to evade taxes. The entire establishment collaborates, in particular, in land conveyancing, etc. There is a systematic, deliberate and knowing fraud on the government. People do not want to pay tax. We know that. That is the first part of it.

The initial figures given by the Greeks when they entered the eurozone are now quite suspect. However, to my mind the most significant aspect — Senator MacSharry is quite right, I did raise this on the Order of Business — was the quite deliberate and malignant intervention of Goldman Sachs. It astonishes me that the big people get away with it. Implicit in all of this is a lack of morality. I have constantly railed against Standard& Poors, and Fitch, which were also involved in these toxic bundles and derivatives, but it should be placed on the record of this House to the dishonour of Goldman Sachs that it specifically perfected instruments calculated to deceive and to assist the Greek Government in postponing the evil day, in pushing forward all its debt and also to deliberately deceive their colleagues in Europe. That is a disgrace. It may not be illegal, but it is certainly wrong and it should be made illegal. Next we will have these hedge-fund managers and financial gurus also betting against the Greek economy and perhaps trying to bring down the euro. That certainly worries me.

The Minister of State, Deputy Mansergh, stated in his speech that the eurogroup expressed confidence in the plans of the Greek authorities. Almost simultaneously, however, they were stating it is not enough and they need more. The measures adopted by Greece so far are twice as severe within a shorter timescale than what we have adopted here, and we are expecting them to be added to.

It is worrying to hear Senator Quinn state there are moves through different European parliaments to embargo a loan on Greece because the knock-on effect should Greece collapse completely — bankruptcy has been mentioned — would be serious.

In all the documentation issued there is a bureaucratic soft-tone diplomatic language. However, when one comes to the account of EUROSTAT, and its view of the Greek statistics, it speaks of significant uncertainties over the figures. EUROSTAT states that there is a recent report on exceptional and unprecedented failures in the reporting of budgetary data by Greece, severe irregularities and political interference with statistics and forecasts.

If Greece has lied, if Greece has landed in this, how many other countries have done the same? We were not prepared for this. Are any methods of investigation of certification being now considered that will prevent this happening in future?

I ask the Minister of State when he will be in a position to respond to what I said about Goldman Sachs. I will not be present when he replies but I will read the Official Report with great interest. Something needs to be done to address these people and their malign influence on the economy.

Dan Boyle (Green Party)
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I must admit to being somewhat surprised to hear Members of the House speak of the relevance of today's statements. It is quite obvious that the situation in Greece is serious and has important consequences for our economy, as a fellow member of the euro currency. We need to be aware of events and how they might affect us. It would be a tragedy if, having made a series of difficult decisions which have proven unpopular but which are the right and necessary decisions towards correcting our economy in the short term, we were to fall victim of a failure of take similar political charge in another EU member state.

We must remember that at one stage, before we started getting a handle on our own economic difficulties, on the international bond market we were the euro currency country that was at the bottom of the league in terms of the cost of borrowing money, behind Greece itself. At that stage, the Greek Government made a fairly adamant statement that it would not implement the type of measures necessary to correct its own crisis. That has led to an air of uncertainty that has seen a fall in the value of the euro and placed a threat on the currency itself.

I am confident the currency can and will survive these particular threats, but they do have economic consequences, particularly for this country because the fall in the value of the euro will mean an increase in the cost of the money we have borrowed. It shows a lack of understanding of how international geo-economics affect this country for any Member of this House to state the situation in Greece is not important, is not relevant and does not impact on our economic situation. That is why it is important that the measures taken, and collectively agreed by the eurozone members, the European Union and the Greek Government, are seen to be appropriate.

Senator Norris spoke of the scale of measures that have been promised by the Greek Government, and they have already been taken. One must take into account that Greece is structured differently as an economy to Ireland. There was a political jibe once spoken about our own economy, that Ireland was the most socialised country outside of Albania. While that might have been true then in terms of the scale of our public sector, there is still a particular imbalance as regards the cost of our public services. However, in Greece the balance is even more in favour of public expenditure and that needs to be examined in a real sense at a time of economic crisis.

There has been a reluctance on the part of the Greek Government to face up to these realities. Greece, like our country, has an agricultural base and benefits from funds such as the common agricultural fund, although its farmers benefit, not in terms of beef, other animals, dairy, crops and plants, but instead through the subsidisation of tobacco products. That is another argument, but it is a situation where, in terms of European Union membership, and particularly membership of the eurozone, the Greek Government needs to be reminded of its responsibilities.

It is especially unfortunate that we find ourselves in this area of uncertainty because of the failure to take appropriate action. We cannot take any particular pleasure from it because Ireland, while having put a degree of distance between itself and a grouping of other countries that includes Greece, Spain, Portugal and Italy, is by no means out of the woods. We require further additional action on the same course that we have taken to date. We need to do it into the medium term. We need to be consistent about the type of policies we are applying.

If all of that is undermined by the failure within the eurozone and other member states by Greece, then as a country we have a right to ask questions. Diplomatic niceties would mean that we might couch those reservations in terms of how diplomats and officials from each member government address this issue. We have a duty of care to the economy and citizens to ensure the hard decisions we have made will have the maximum beneficial effect and cannot be undermined by the lack of such political approaches in other member states. My hope is that there is a growing reality in Greece that there are proper support measures from the eurozone members and that this is a crisis that can be overcome. However, I note the contributions of other Members regarding the serious flaws exposed in terms of allowing member states to become members of the eurozone when they were not ready, the falsification of statistics and the use of international financial organisations to play loose and fast in meeting these statistics.

With regard to the position of Ireland and Greece, it must be borne in mind that Greece has a level of national debt which we last dealt with in the 1980s. Even after dealing with our own situation, including whatever measures we take to rescue our financial services, we will only be at a level of debt equal to the EU average. The scale of what must be done in Greece is important. As a fellow eurozone and EU member, Ireland has a collective responsibility to ensure it is addressed properly. However, I like to think we can do it as much by example as anything else, that we are not undermined in what we are doing and that in assisting the eurozone to achieve the necessary stability it does not undermine our economic recovery.

Paschal Donohoe (Fine Gael)
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I thank the Minister of State for attending this debate. I agree with the point made by Senator Boyle. This appears to be a situation of huge gravity and it is important that this debate take place. We should examine what is taking place in the Greek economy and the implications overall for the eurozone.

The nub of the issue is that governments bailed out the banks. One can quibble with the language but governments played a huge role in supporting and stabilising the cost of bank failure. As a result, they have incurred or are incurring debt on their balance sheets owing to dealing with a recession that was induced by the failure of the banks. The question now is: who will bail out the governments? We are seeing a movement of risk and uncertainty of debt from the balance sheets of banks to the balance sheets of elected governments.

Consider the level of debt with which the various European economies are dealing. I looked at some of the statistics when preparing for this debate. The Greek level of national debt stands at nearly eight times its gross domestic product. The level of debt in the eurozone is five times its gross domestic product; the US debt is more than five times its gross domestic product. The levels of debt are getting larger and the markets are looking to the governments to ascertain whether they have confidence that they will be able to sell that debt over time and, second, reduce the level of debt which they are asking the markets to finance.

Some of my colleagues in the House have mentioned the role and responsibility of Greece in this situation. That is a vital point, but there are broader questions to be asked regarding the composition and future of European monetary union. These are very grave questions, to which we must provide answers. Economic and Monetary Union, EMU, has two pillars which I can discern. The first is the credibility and strength of the euro. The second which is required to make the euro work is that the fiscal performance of the governments that form the eurozone must be healthy.

Overall, the health of the European economy is dependent on how national governments perform. It is apparent that we have monetary union, but we obviously do not have political union. Different governments can choose different routes in terms of how they wish to manage their taxation, spending and so forth. However, they are making these decisions within the environment of a single currency and single exchange rate. That tension was shielded or managed by the fact that for most of its history the eurozone enjoyed and caused in many cases unprecedented levels of economic growth. However, now that those levels of economic growth are receding, that tension is becoming increasingly apparent. Huge questions have been asked about the stability of monetary union, but this is the first example of these questions being put to governments.

I am a supporter and firm advocate of the need for a single currency and Economic and Monetary Union. My point is that huge questions about how that actually operates did not have to be answered previously because the European economy was doing so well. The German, French and other economies were leading the way and doing the heavy lifting for other economies that did not need to confront major questions regarding their fiscal stability. Three crucial questions must be answered. I do not have the answers and I should not have because they are so big. First, if any government or group of governments plays a role in providing a bailout for the Greek economy, to what degree will that undermine the long-term stability of monetary union and the euro, as opposed to helping it? The issue of moral hazard which we have discussed repeatedly with regard to banks arises with regard to a country.

Second, in an era of normal economic growth or recession, how can we maintain monetary union with the current levels of political integration? The declaration that emerged from the G20 summit spoke about the need for increased peer pressure to be applied to various countries to review the performance of their economies. However, it appears we will have to deal with a bigger question in this regard. If a national government decides to take steps that could potentially undermine the health of monetary union and the broader European economy, will we continue to give it the latitude to do so? That is a huge question which must be teased out. In effect, we could reach a point where the actions of another government will, as Senator Boyle said, drive up the interest rates we are paying on our debt. Let us say a plan is developed for Greece. Does that mean we must have a plan for every other economy that could face this problem? As we help one economy after another, who will pay for this?

These are the three big questions that must be answered. I will conclude with two brief points relating to what I think might form the components of the answers. The first is that Ireland's plans must be credible and supported by everybody. The Opposition has a role to play in that regard. Second, economies that have the ability to drive their domestic demand such as Germany should be acting to do so. If these economies can reflate, it will allow the export performances of other countries to pick up. That is desperately needed, if for nothing else than to help the balance sheets of the countries we are discussing.

Larry Butler (Fianna Fail)
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I agree with much of what Senator Donohoe said. If we start bailing out one country, we will find ourselves bailing out more. Greece has not faced up to its responsibilities and commitments within the European Union, which is a serious problem. When a country joins the European Union it must consider what its budget deficit will be, how it will manage it and so forth. I do not believe the Greek Government has done enough. It did not take responsibility for its budgets and now we see the consequences of that, namely, the European Union has said it cannot allow any country in the European Union to fail, including Greece which is one of the first countries to get into trouble.

We found ourselves in trouble two years ago. I did not see anybody jumping up and down to save this economy or propose how we would rescue the banks. We were criticised by the European Union and Britain when we developed what were extremely good proposals to rescue the banks and the manner in which we tackled our budgetary situation over three budgets. Some €8 billion in spending reductions was achieved over three budgets, which is what I call taking responsibility for running a country. I do not believe this happened in Greece.

Europe needs to examine the economic plan it has in place when there is a downturn, which plan is lacking in the single currency community. There was no plan in place to deal with a downturn in any country. Strong countries such as Germany, France and Britain felt the pinch during the downturn. A recovery is coming in Europe. This issue puts us in real danger. We have taken extremely strong measures. If other countries in the European Union do not live up to their responsibilities, we have a major problem. It will not be just Ireland, Britain or any other country.

The IMF will be merciless if it decides to come in, and the Greeks will be told 4% is no longer enough and cuts of 28% to 30% are required. We faced such a possibility two years ago. In the future, European countries will have to structure a new policy to ensure there is stability and increased monitoring of countries which are running into trouble. Before they are in trouble, there should be a yardstick to indicate there is a serious problem which the country concerned has to correct, and it would be better to do it immediately than in two years' time. This seems to be the problem in terms of how the Greek Government runs its country. I do not want to be critical of anyone. We have all had our own problems. In this country we have had major problems in the banking and building sectors as well as a downturn in the world economy. They have created major difficulties for us.

In terms of our situation regarding the banks, it is time we put in place a plan for our banking system if the banks have not yet done so. We nationalised Anglo Irish Bank. I have seen indications that it will be able to produce a plan soon. This should be aimed at lending to small and medium-sized businesses and export businesses. It is an opportunity. We own the bank and it is time we produced the goods. We have owned it for a year and a half. I ask the Minister of State to examine the matter. It is vital.

I do not subscribe to the view that we must make credit available across the whole banking system because the problem was that the banks lent too much and for bad business reasons. We are now suffering the consequences and have had to bail them out. We should ensure it never happens again. If we learn anything, we should ensure that banks do not lend too much again and, instead, lend money correctly, that is, to businesses and people who can pay them back.

The question that arises concerns what policies will be put in place regarding Greece, Portugal, Spain and Ireland to ensure there is support. If that is the policy, let us have it and see how it will work. If we are in the business of bailing out different countries, it will not work and will reduce the strength of the currency. An exporting company would be delighted to see the euro weaker than the dollar and various other currencies.

Joe O'Toole (Independent)
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I welcome the Minister of State to the House and listened closely to his comments at the beginning of the debate. It is an important debate and I disagree with people who asked me why we would discuss the Greek situation. There is every reason why we should discuss it, one of which has been raised by my colleague, Senator Norris. This is an issue we have to get stuck into.

In effect, what Goldman Sachs has done is worse than the instruments which were created by it and others for the sub-prime business three or four years ago. It is worse than that. In effect, it collaborated with the Greek Government to hide the mounting debts of the Greek economy. It did that, not last year or the year before, but for the past ten years to obscure from the European Union the correct interpretation of its national accounts. This has continued in recent months. I was appalled to learn that in recent months Goldman Sachs again created an instrument to give it billions in what was, in effect, a loan disguised as a currency trade. It was like giving somebody who cannot pay off his or her mortgage a second mortgage under the counter to pay off his or her credit cards and, as a consequence, being left with three large debts rather than two.

I raise this matter because there is a major issue in terms of international regulation. I must declare an interest — I am a board member of the Irish Auditing and Accounting Supervisory Authority and I have a keen interest in global accounting and auditing standards. I am not suggesting the Minister of State has an answer to the question I wish to ask. Charlie McCreevy hammered the table in Ireland and in Washington two years ago and insisted that international accounting standards be similar across the globe. The Securities and Exchange Commission in the United States of America, which is attached to the Stock Exchange, has a certain set of standards, the main part of which comprises the Sarbanes-Oxley Act which was introduced after the Enron disaster. It thinks it is great. It is a joy to be the one to get around it. It is a classic example of trying to have a rule for everything. I guarantee there is no rule which states one should not disguise a loan as a currency trade. That is the problem with rules-based auditing to which many Members on the Government side referred during the banking crisis, including those who did not know what they were talking about. They should all remember this as a classic example of a bank which operated under the strictest regime of rules but got around the intentions of the legislation. That is why rules-based principles will never do the business. In Britain, Ireland and most of Europe, accountancy is principles-based. In other words, one has to be honest and if one is not honest, one has to explain the reason. This is not about trying to have a rule to cover every instance because that simply does not happen. I learned that when I was 14 years of age in Dingle and saw double and treble sets of books in small businesses. This practice has been going on that long; it has gone on forever. If anybody believes there can be a rule to sort that out, it will not work.

How would this practice work? The simple way to deal with it is that auditing standards provided to Europe, whether they come from Greece or Ireland, should provide the same information. In other words, if a person owes, that is a debt, no matter how it arose or what the approach to it may be. Europe must decide on this course. In this country we have been slow to impose European directives, including the one introduced by Commissioner McCreevy, a very important piece of legislation concerning auditing and related transparency. Ireland is the second-last country in Europe to enact this, if my memory is correct. However, I do not want to go into that matter now.

We must insist on proper accounting standards, working with the Securities and Exchange Commission in the United States. The US must be called to book in this regard. It is the worst country in the world regarding co-operation on global issues. It is impossible to deal with. It is the author of its own misfortune in this situation. The bank in question should be brought to book for what it has done. It effectively collaborated in bringing an economy to its knees, not to mention the domino effect this might have all over Europe although I do not believe such an outcome will happen now. What the bank did, however, was inexcusable. I ask the Minister of State to bring to the European Union our demand that accounting standards be interpreted in a similar or complementary way to those of the United States, or else that standards as practised can be easily understood so that we can have the same information as it is required.

I wish to touch on some other issues regarding our economy. As the Minister of State will recall, I supported the NAMA legislation all the way through this House. There was one issue with which I disagreed and I raised it time and again, namely, credit flow. I asked repeatedly that the Minister for Finance make it absolutely clear that even though NAMA might do what it set out to do it would not create credit. I said this time and again and explained my reason, namely, that the total amount we were to put into the banks would only be enough to bring them to the tier 1, loan-to-asset requirements of the Basel principles. It was never going to do more than that. People were misled, although not by the Minister. I listened to him very closely and although he did not say that NAMA would release credit, neither did he make it clear that this was not the intention of the Bill. The only time he was forced into saying this was when Fine Gael tabled an amendment demanding that what the Minister was issuing as credit guidelines should be credit requirements.

I pointed out at the time, as a number of people have pointed out since, that there is no way the Government can force the banks to act against the best interests of their shareholders. It cannot force the banks to act in the public good. They are bound by company law and would break the law of the land if they were to listen to the Government rather than do the best for their shareholders. That was the reason to which I referred.

One has to look to the future. Previous speakers pointed out the importance of having a third banking force. Senator Butler touched on this and it has been done before. I advise the Minister of State to look at the origins of Rabobank which came about through a conglomeration of co-operatives, or small credit unions. There is a way in which credit unions might be developed into banks. In New Zealand, for example, there is the Kiwibank, a post bank which has developed enormously in the past five years. We have a post bank in this country and we should look to that as well as at other options now being considered that would put two institutions together.

I apologise for going over my time. I welcome the Minister of State to the House and I hope he will bring some of the issues raised back to his Department.

Paschal Mooney (Fianna Fail)
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I welcome my former colleague in this House, Deputy Mansergh, in his capacity as Minister of State. It is my first opportunity to sit across from him rather than beside him. I welcome his statement clarifying the position of Ireland. I concur with all the comments made so far in speakers' contributions on this debate. I cannot for the life of me understand how any Member of this House or any person outside could feel that the economic situation in Greece, that country's indebtedness and the manner in which it affects the eurozone and the European Union should not be debated as being of important national interest. Those people can answer for themselves.

Much of what was said in the Chamber raises fundamental questions about the stability of the eurozone if not of the wider European Union. Questions were thrown up that have been lying dormant since the debate on the eurozone and the subsequent implementation of the euro in the early years of this decade. They now come crashing around us because of Greek indebtedness. Seen from a general perspective, there is the question of the lack of an integrated formula that would allow the eurozone work more effectively or, as in the current situation, where there is a group of sovereign states. Therein lies a very real problem. Traditionally, and in the current situation, Germany is not in favour of any kind of bailout. It is also tied by the constitutional court which ruled last June that the EU remains an association of sovereign states. That is exactly what it is.

I am grateful to Tony Barber, the bureau chief in Brussels for the Financial Times for a quote which puts in context what the eurozone members are struggling with at present. On 14 January 2010 he stated:"In the context of the eurozone this implies that everything will depend on a superhuman effort from Greece to slash its budget deficit, improve tax collection, purge the public sector of corruption, raise business competitiveness, take the axe to the pensions system and start publishing accurate financial statistics for the first time since independence in 1832." Mr. Barber goes on to say that is a nice thought.

Therein lies the problem. I do not believe the eurozone will bail out Greece. It is evident from the debates and discussions of the past week that what is being attempted is more of the oversight about which Senator O'Toole spoke. Not only is Greece going to lose some of its national fiscal sovereignty in this context, it will also be put under the microscope more than was ever the case before. Already, the Prime Minister, Mr. Papandreou, resents what he sees as external interference. However, the reality not only for Greece but for countries like Ireland — especially countries like Ireland — is that Greece must get its act together. I do not believe a bailout will help. It is obvious from everything we heard earlier that many parliaments in Europe, in particular the German Parliament, are totally opposed to a bailout but, if such were to occur, it would have very serious implications for the remainder of the eurozone.

I turn briefly to the wider context of what is happening in Greece, what the eurozone ministers are attempting to do and what Ireland is doing. I am pleased to note the Minister for Finance, Deputy Lenihan, who was in Brussels in recent days, said that Ireland is now at a different stage to Greece and other weak eurozone members thanks to the stringent austerity measures he took. He said that Ireland is not among the countries now attracting the most adverse comment and this is reflected in the Irish spreads which have remained relatively steady during the recent crisis. This reflects that we are already some way down the path of addressing the three main challenges facing us: continuing to take firm and decisive action to improve competitiveness, restoring stability in public finances and addressing problems in the banking system.

The Greek Government faces very serious difficulties in raising capital from international markets and it is for that reason it has turned to its eurozone partners for guarantees and offers of a bailout. I am pleased also to see that the European Union is holding steady on this. Mr. Hank Paulson, the US equivalent of the Minister for Finance, made a comment when he addressed a Senate banking committee in July 2008. This was in the context of the view being expressed that the eurozone may let Greece default, but it will not allow that happen. He made what I think is an apt comment that if a person has a bazooka in his pocket and people know that, the person with the bazooka will probably not have to use it. It is that sort of encouragement the eurozone members are giving now, based on what they have already proposed, namely, that the IMF and the European Commission be involved in the proposals being put forward to Greece which should get us out of the situation. However, it is a very big ask for Greece.

One aspect of the temperament of the Prime Minister, Mr. Papandreou, about which I read some days ago may be relevant. He belongs to a long-standing political dynasty and both his father and grandfather were former Prime Ministers. When the attack on Greek democracy took place with the introduction of the colonels and the takeover by the military junta in 1967, a group of elite soldiers arrived at the house of the current Prime Minister's father, who was a leading political figure at the time. The current Prime Minister was 13 years of age at that time. One of the soldiers put a gun to his head and said he would shoot him if he did not tell him where his father was. He coolly replied that he did not know where he was. If he had such a spine of steel in that situation, I have every confidence his Greek Government will find its way out of the current situation. If it does not, not only will international investors move in to pick off Greece, they will then start looking around for similar countries.

To reiterate what the Minister for Finance, Deputy Brian Lenihan, said, I think we are in a much better place. Over the weekend, somebody said the acronym in use in recent months, PIIGS, which refers to the economies of Portugal, Italy, Ireland, Greece and Spain, has now dropped one of its "I"s. In all of the international comment over recent weeks, Ireland is not included. On 28 January, Tony Barber, in his column in the Financial Times, suggested that how Greece could dig itself out of the crisis was to study what the Irish Government was doing. He said the Irish banking sector fell into such distress as a result of the global financial crisis that the Government took action. In his opinion, if it had not been for the unorthodox support measure provided by NAMA, it was likely the Irish financial sector would have gone into meltdown. That is praise indeed in the current crisis from a respected international commentator with an internationally respected newspaper. I have every confidence, based on what the Minister of State has brought to the House today and on what the Minister for Finance has been doing in Europe over recent days, that Ireland will not be damaged by what is happening.

The Greek issue must be resolved, but the answer lies with the Greek Government. If there is a combined effort on the part of the European Commission and the IMF and if Greece addresses the structural problems in its economy, we can work our way through the situation. Otherwise, this economy could suffer and none of us wants to see that.

Mary White (Fianna Fail)
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I welcome the Minister of State to the House and thank him for his excellent speech. Much attention has been paid to the economic crisis in Greece. This is understandable, for Greece has broken important promises and, apparently, committed fraud towards other eurozone members. The exact extent of fraud committed by Greece to appear euro-ready is still uncertain as new details are still emerging, the latest detail being complicity by the controversial US investment bank Goldman Sachs. The EUobserver reported:

Investment firms, including Goldman Sachs, arranged currency swaps for Greece over the last decade that allowed Athens to raise funds to reduce its budget deficit while pushing payments well into the future. Those transactions were not classified as loans, reports The New York Times, and not made known to Brussels officials.

Greece is fighting a battle to restore its international credibility as well as its economy. Arriving in Brussels yesterday, the Greek Minister for Finance admitted his country is in a terrible mess.

However, the narrow focus on Greece clouds what really matters. This is no mere Greek crisis. It is a crisis for the euro. In his speech, the Minister of State said the EU summit last week agreed to bail out Greece, if needed, but demanded tougher government reforms in Athens to restore economic stability and calm world markets anticipating a single currency collapse. At their meeting yesterday, the ECOFIN ministers expressed confidence in the plans of the Greek authorities. Today, they adopted a comprehensive and ambitious package of recommendations for Greece, covering fiscal and structural policies, based on proposals from the European Commission and following discussion with all member states. These recommendations require that the Greek authorities take steps to reduce the deficit on the public finances below 3% of GDP by 2012, in line with their obligations under the Stability and Growth Pact. The authorities are also requested to implement specific economic reforms considered consistent with the smooth functioning of the euro area. The Minister of State also said that, as envisaged by the European Council, the European Commission will closely monitor implementation of the recommendation, in liaison with the ECB, and would propose necessary additional measures, drawing on the expertise of the IMF, and that a first assessment would be done in March.

Many international analysts remain sceptical as to whether Greece's current plans will go far enough, especially since figures released last week show the economy contracted by 2% in 2009 as against a projected contraction of 1.2%. In yesterday's Financial Times, a senior Athens banker is reported as saying it was difficult to see how Greece could avoid a further tightening of fiscal policy. French and German officials have said they are willing to wait until March for further assessment. The ECB is anxious to safeguard the eurozone's "no bailout" clause, but last week Mr. Trichet backed a eurozone leaders' pledge to take determined and co-ordinated action if needed to safeguard financial stability in the euro area.

When wrapping up his speech, the Minister of State said it was widely recognised the Government had taken difficult but necessary budgetary action to restore stability to the public finances. There is no doubt the Minister for Finance has restored credibility to the Irish financial situation through his international meetings and as a result of his grasping the crisis from the beginning. We are also making progress in the area of competitiveness, with necessary price and wage adjustments under way and as a result of the resolution of problems in the banking system. However, the Government has not spelled out sufficiently what it intends to do to create employment. People say governments do not create employment, but they do. The actions they take help create jobs. What is our Government's strategic plan for jobs? We now have 12.7% unemployment. I believe unemployment is a scourge.

As I mentioned last week, Dr. Craig Barrett has said there are many inherent inadequacies in our competitiveness, but the Minister of State has said we are making improvements and wages have reduced. Dr. Barrett, previous chairman of Intel, has spelled out the many areas where we are not competitive. The blueprint we developed for bringing in foreign direct investment, which brought in Hewlett Packard, Microsoft and Intel, is no longer our exclusive blueprint. It has been copied worldwide. Today we have competitors in China, Russia, India, Brazil, etc. Our biggest competitor at this time is Israel. Dr. Barrett spelled out the fact that we are only average in the world at mathematics and science. He says the new technologies of the 21st century will be nano-based, but we are not in the business. Those other countries are competing for international mobile investment, but we no longer have the highly educated workforce we had 20 years ago when Intel came here. We have competition from China, India, Israel and the Middle East. Dr. Barrett said that if we want to come first, we have to compete. We are not even in the race at this time. We have become complacent. We thought we were great, we believed our own story and we let the ball drop.

There is a crisis in employment in this country. The Government talks about a smart economy while forgetting that India, China and Israel are all in the smart economy but their educational standards are much higher than ours, including their level of mathematics and science education. I am despondent at present about this crisis. For me, it is all about jobs. Having started a business in the middle of the 1980s during the last world recession, I saw the psychological effect of unemployment. I also saw, when people got a job, how they began to stand up straight and how their self-confidence grew. Work is not just about the money; it is about meeting and talking to people, and being involved rather than stuck at home, depressed.

I cannot think of anything worse than a person losing their job. Many people are worried at present that they will lose their jobs. Every second day, we are hearing about this or that company going out of business. I am sorry to be pessimistic but that is how I feel, and I always say it as it is. We have our heads in the sand. We have forgotten we are competing with Israel, India and China. Every year, China must create 23 million new jobs for its people. The Government and the people of China are hungry for jobs. We did not have that competition 20 years ago, when we were the only ones with a serious blueprint. Senator MacSharry referred to the IDA being a model but that blueprint is no longer workable to deliver the jobs we need.

Martin Mansergh (Tipperary South, Fianna Fail)
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I thank the Senators of all parties and the Independent Senators who contributed to the debate, which has been a very good, interesting and high level. Some very big and important questions have been raised, and many of the speakers correctly said they do not expect me to answer those questions as the events and decisions of the months ahead will in many instances provide the answers.

Greece is the cradle of democracy and of European civilisation, and is integral to the European Union. We have a huge interest in this country, as indeed do people in other member states, in the Greeks successfully overcoming their problems. Nothing would be more foolish than to think we could take some satisfaction or escape the consequences of them falling down in what faces them. The issue is the appropriate and intelligent form of solidarity in the circumstances that helps the Greek Government take the appropriate decisions while also protecting the long-term viability and credibility of the euro, in which we in this country have an enormous interest.

In response to Senator Quinn's comments, it is worth noting that the ECOFIN Council is issuing detailed recommendations and requirements to Greece today involving an unprecedented level of detail as to what is required in regard to public finances, debt levels, economic and structural reforms and wage and cost developments. Greece is being asked to show or explain progress on budgetary targets by 16 March and to submit quarterly reports thereafter. It is also being asked to take additional budgetary measures if the targets are at risk.

I compliment Senator Twomey on a very good speech. None of us can understate the seriousness of the situation, which affects not just Greece but the entire eurozone, including Ireland. The Government is confident that it will be resolved by the Greek Government with the support of all the heads of state and government in the EU.

We had an example in another sphere when we stumbled, if one likes, or when a negative decision was taken with regard to the Lisbon referendum. We had the solidarity and cohesion of other member states and help in terms of addressing the problems so we were able to overcome that and ratify the Lisbon treaty. It is a good example of how EU solidarity has worked in the recent past, and the same sort of approach is being applied in the case of Greece.

Senator Twomey is correct in his comments on the demonstrations in Greece, namely, that they have been exaggerated. In a sense, the opinion polls showing 70% support for the Prime Minister countervails the image of mass protests on the streets.

I also agree with what Senator Twomey said, by extension, about the situation here. Remarks are made, of which I quoted one by a trade union leader. However, those leaders, or certainly the vast majority of them, have a better understanding of the situation than their rhetoric sometimes suggests. I believe they are conscious of the fact their members do not wish to be engaged in actions that will seriously and detrimentally affect their own jobs and incomes. For example, it is very easy for trade union leaders to say overtime will not be done but the union members will tell them that if they do not do overtime, their incomes will be reduced. I make the point to underline that I agree with Senator Twomey's analysis of the situation.

I also agree that much more needs to be done to improve our own public finances, and we have set out commitments in this regard up to the end of 2014. As the natural term of the Government terminates in mid-2012, this will also have to be pursued by its successor, be it the current Government or an alternative formation. We have taken the first important steps and the rewards will begin to be gained through resumed growth before the end of the year.

It is worth pointing out that Greece's problems predate the current economic and financial crisis. It has had for many years excessive deficits in its public finances, large current account deficits and high levels of public debt. Its recent difficulties do not arise primarily from the recession. Unlike here, there were substantial expenditure overruns in 2009 and large revenue shortfall problems owing to poor collection.

A question arises in respect of the relationship between monetary and political union. Obviously, we have a political union of a sort in that the European Union is a political union but it is not a tight political union of the type once envisaged. A Senator quoted a ruling last year by the German federal constitutional court. Broadly, governments remain fiscally sovereign. The European Union is probably the first of its kind in history to be a monetary union but not involving close fiscal union and political union at the same time. In the circumstances, the issue is what is the appropriate degree of co-ordination. The European Council statement underlines the need to keep to the rules of the Stability and Growth Pact. Also, the European Union is looking closely at the important issues of competitiveness and economic imbalances so as to avoid Greek-type problems in the future.

The Independent Senators referred to another set of issues, including financial markets betting against default on Greece's debt. I read with some sympathy last week an editorial in Le Monde which referred to the assistance and support governments, in particular western governments, had given the banks all over Europe and America during the past couple of years and now some of the same people so assisted and supported are in front of their screens trying, if they can, to bring down not just one country but also attack the euro, to which it seems there still remains a certain level of ideological opposition, especially in what the French would call the Anglo-Saxon world. Last week the French Finance Minister, Ms Christine Lagarde, pictured with the Minister for Finance, Deputy Brian Lenihan, in one of this morning's newspapers, spoke about the need to look deeply at the use of sovereign country credit default swaps in terms of the need for changes. She also said: "We are closing ranks: whether we are big member states or small member states, we are all in this together and are not going to let any of us down." To be fair, that is exactly the same attitude she took following the first Lisbon treaty referendum here. I met her at one or two European or IMF meetings.

A large number of issues were touched on in the debate. It is one of the most lively discussions taking place in the financial press, from which several Senators quoted. I was familiar with most of the articles quoted by Senator Mooney, whom I welcome back to the House. I am very pleased to see him here. He added much to the House before and I know he will do so again in the future.

Senator Mary White spoke about China and presented in a pessimistic way its need to fill 23 million jobs per annum. If one turns the bottle upside down and believes the bottle is half full rather than half empty, in comparison with big countries such as China, we need to fill relatively few jobs to put us on the pig's back. I would not necessarily be depressed in that regard.

Allegations have been made; whether they have been proved beyond doubt I am not sure but they certainly merit closer examination: that a finance house contributed to distorting a country's finances in such a way that is not transparent. We all know through the European statistics office that there are accounting procedures that are legitimate and that certain items are allowed off balance sheet. Provided they are transparent to the markets and can be taken into account by them, no problem arises. All member states make use of the degree of flexibility allowed in this regard. If this flexibility is used, without others being aware of it, to brush problems under the carpet, obviously that is a very serious matter, against which we will have to be well guarded in the future.

Terry Leyden (Fianna Fail)
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When is it proposed to sit again?

Marc MacSharry (Fianna Fail)
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At 10.30 a.m. tomorrow.