Wednesday, 17 November 2010
Credit Institutions (Eligible Liabilities Guarantee) (Amendment) (No. 2) Scheme 2010: Motion
That Seanad Éireann approves the terms of the draft scheme entitled Credit Institutions (Eligible Liabilities Guarantee) (Amendment) (No. 2) Scheme 2010 a copy of which draft scheme was laid before Seanad Éireann on 16th November, 2010.
Dara Calleary (Minister of State with special responsibility for Public Service Transformation and Labour Affairs, Department of Enterprise, Trade and Employment; Minister of State, Department of An Taoiseach; Minister of State, Department of Finance; Mayo, Fianna Fail)
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I wish to be associated with all the tributes to the late Senator Kieran Phelan and I compliment the House on the manner of the tributes.
The position of the Irish banking sector remains challenged at a time of significant continued financial market dislocation. Market conditions have not normalised and funding pressures remain necessitating the further extension of the bank guarantee scheme. Yesterday's euro group statement on Ireland welcomed the measures taken to date by Ireland to deal with issues in its banking sector. The euro group endorses the measures taken by Government, including bank guarantees, as well as recapitalisation and the asset segregation achieved through NAMA to support the banking sector.
Market sentiment towards Ireland has become very negative, particularly since the end of October, reflecting intense speculation in the bond market regarding possible debt restructuring in the design of a permanent crisis resolution mechanism in the eurozone. While these concerns were addressed by the joint statement by the Finance Ministers of France, Germany, Italy, Spain and the UK on 12 November last, market sentiment towards Ireland and the eurozone remains negative. The State guarantee for bank liabilities provided under the ELG scheme, which the Government has put forward for approval by the Oireachtas today, continues to provide very significant support for the funding of the banking system. This draft statutory instrument amends the bank guarantee scheme known as the eligible liabilities guarantee scheme or ELG scheme which was introduced in December 2009. Senators will recall that a similar statutory instrument was before this House in September to extend the ELG scheme from 29 September to 31 December 2010.
Funding conditions have not normalised for credit institutions in Ireland and the requirement for the guarantee remains. On the advice of the Governor of the Central Bank, the Government is proposing to extend the issuance period under the scheme beyond the current end date of 31 December 2010 and on financial stability grounds the statutory instrument before the House will enable the issuance period to run to 31 December 2011. As the House may be aware, the European Commission has already announced the approval of the scheme for six months, the maximum approval period allowed under the Commission's state aid rules.
I will now set out the details of the draft statutory instrument before the House. The instrument proposes to amend the credit institutions (eligible liabilities guarantee) scheme 2009. Under section 6 of the Credit Institutions (Financial Support) Act 2008, the approval of both Houses is required for such an amendment. The 2009 scheme allows participating credit institutions to accept all deposits and issue short and long-term debt on a guaranteed or unguaranteed basis. Eligible liabilities under the scheme comprise deposits, senior unsecured certificates of deposits, senior unsecured commercial paper, other senior unsecured bonds and notes or other forms of senior unsecured debt specified by the Minister for Finance and approved by the European Commission. The participating institutions under the scheme are the AIB, Anglo Irish Bank, Bank of Ireland, EBS, Irish Life & Permanent and Irish Nationwide Building Society. Their relevant subsidiaries also joined and are listed fully on the website of the Department of Finance.
Institutions are able to issue debt and take deposits guaranteed under the scheme with a maturity of up to five years. According to the latest data available to my Department, bank liabilities covered under the scheme stood at €147 billion in aggregate at the end of September. Liabilities must be incurred within a limited issuance period that currently ends on 31 December. The main amendment made by the statutory instrument before the House proposes to extend the scheme such that it will now end on 31 December 2011, subject to continuing state aid approval from the European Commission. This is similar to the mechanism used in the original scheme when it was introduced in December 2009. Other consequential changes are made to the scheme by the statutory instrument.
EU state aid approval was granted on 10 November for the extension of the issuance period to 30 June 2011 for all debt and deposits and short and long-term liabilities under the scheme. European Commission approval follows closely from the recent legal opinion of the European Central Bank dated 2 November which endorsed the extension in national law to 31 December 2011 on financial stability grounds. This extension is subject to continuing Commission approval beyond the current date of 30 June 2011, the maximum period allowed at one time under EU state aid rules. Further state aid approval will be required to extend the issuance period end date for another six months from 30 June to 31 December 2011. The draft scheme before the House would facilitate that further extension.
The participating institution must pay a significant fee to the Exchequer for the benefit of the guarantee. The fee is in line with or, in certain circumstances for shorter term bank liabilities, exceeds the fees applicable generally for guarantee schemes approved by the European Commission. The precise pricing arrangements for the guarantee are set out in the rules to the scheme at Annex 7.By the end of October, a total of €1.3 billion, divided into €760 million in respect of the covered institutions credit institutions financial support scheme and €573 million in respect of the eligible liabilities guarantee scheme, was collected from the institutions. The fees collected surpassed the original minimum target of €1 billion for guarantee fees when the covered institutions credit institutions financial support scheme was introduced in September 2008. The draft statutory instrument gives legal effect to this time extension.
The eligible liabilities guarantee scheme covers specific issuances of debt or deposits of up to five years in duration incurred during the period set out in the scheme. Item 1 inserts a definition of "financial support period order", an order made under section 6(3) of the Credit Institutions (Financial Support) Act 2008. This order which the Minister for Finance will make in conjunction with the scheme sets out the issuance period, that is, the period within which guaranteed liabilities can be incurred and guaranteed under the scheme. As European Commission approval was granted for the period 1 January to 30 June 2011, this will be the issuance period for the next phase of the scheme.
Item 2 amends paragraph 3.1 of the schedule to the scheme which sets out the period within which institutions may join. This amendment seeks to update the application period by substituting 31 December 2011 for 31 December 2010 to reflect the time extension to the scheme.
Items 3 and 4 amend paragraph 5 of the schedule to the scheme. Paragraph 5 provides that the Minister shall review the scheme and its rules at six monthly intervals. This amendment proposes that the Minister may review the scheme at shorter intervals than six months if so required by the European Commission in accordance with state aid policies. This would allow for a future exit strategy on a gradual basis for certain liabilities in line with prevailing market conditions and based on the advice of the Governor of the Central Bank.
Item 5 proposes to substitute a new paragraph 11.1(c) to the schedule to the scheme. The new paragraph replaces the current scheme end date of 31 December 2010 with an extended end date in national law of up to 31 December 2011, subject to continuing EU state aid approval. Such approval was obtained on 10 November for the continuation of the issuance period up to 30 June 2011. Any future extensions of the issuance period beyond 30 June 2011 will require further state aid approval.
Item 6 amends paragraph 18 of the schedule to the scheme which sets out the maximum period the Minister will stand as guarantor of liabilities. This amendment proposes to substitute a period of five years after the end of the period specified in the most recent financial support period order as the end date of the scheme instead of the current date of 31 December 2015.
The extension of the scheme to 31 December 2011, subject to EU state aid approval, will continue to facilitate funding access in the short and longer terms for participating institutions and provide security for depositors. The scheme, as extended, complements the broad Government strategy to restore fully the banking system and maximise its contribution to overall economic recovery. I commend the scheme to the House.
I am surprised the Minister of State did not refer to the events unfolding in the European Union which will have a great impact on how we access funding in the future. Ministers were describing these events as fiction over the weekend but now that they are rapidly becoming facts no one in Government circles appears willing to discuss them. The Minister of State should have alluded to what was happening in the European Union.
Dara Calleary (Minister of State with special responsibility for Public Service Transformation and Labour Affairs, Department of Enterprise, Trade and Employment; Minister of State, Department of An Taoiseach; Minister of State, Department of Finance; Mayo, Fianna Fail)
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I refer the Senator to the first five paragraphs of my contribution.
The Minister of State should tell us what is going on. The Government has become unstable and lost the confidence of the people. International investors have abandoned Ireland and there is a crisis of confidence in the European Union regarding the Government's ability to fulfil its mandate. In the same way that lions circle a wounded beast, speculators are circling Ireland's economy and the eurozone. This is coupled with the market's irrational sentiments in times of crisis when the most outrageous rumours run wild across the world. The oscillation of Irish bonds in the past seven months is one reason Ministers need to provide as much information as possible to the people, as well as international bondholders. An Internet search for the phrase "Irish bond traders" will retrieve headlines from news outlets across the world, but the Government was denying anything was afoot as recently as 24 hours ago. That does not instil confidence in the markets. As I may be misinterpreting these events, perhaps the Minister of State might clarify matters.
It seems Mr. Trichet of the European Central Bank and his EU colleagues, including Commissioner Almunia who is responsible for banking and Commissioner Rehn who is responsible for monetary affairs, are trying to restructure Ireland's debts. It seems they want to move some of the billions of euro the European Central Bank has loaned us to the stabilisation fund and thereby take responsibility for some of this money. I do not know whether the relevant figure is €40 billion, €50 billion or €60 billion. Perhaps, to reduce the cost of borrowings by international investors, it will be possible to create an overdraft for the State using the stabilisation fund. If we had such an overdraft facility fixed at a specific rate - perhaps 4%, 4.5% or 5% - we might have an opportunity to tell the international bond markets to stuff it when they try to play games with the economy and the eurozone as a whole.
The Government needs to engage in a discussion on the purpose of what we are doing here and the role we hope to fulfil. There is no point in the Minister bluffing by saying we have enough money until next year. The reality is that in the next three years we will need to gain at least €40 billion for the public finances. I am not sure exactly how much money will be needed to complete the bailout of the banks. Where will the Government find that money? There is no point in it telling us it has enough money until next June. We need to know from where it will get money in June 2013, not June 2011. The Government is brushing over this issue as if it was not relevant. When one considers the amount of money we have borrowed, it is massively relevant.
We are trying to play home politics with the economy. The reality is that this is a much bigger issue than politics at home. It is a question of what the European Union will do for Ireland as one of its partners, how we will work with it, how we will calm international investors and how we will actively deal with those who are speculating on what will happen to the economy and the euro. Greater clarity is needed. We do not need the Minister to treat us like children. He seems to believe he knows best on what is going on. This problem has been brewing for a while. When the Governor of the Central Bank, Professor Patrick Honohan, went to Hong Kong on 16 August, he got a fright when he found out how Ireland was perceived among international bondholders. Very little has been done to alleviate the fears and concerns of international investors or improve their perception of what is happening in Ireland.
We face many problems as we decide what the extent of the bailout should be and on what should happen here. There is no point in denying serious discussions are taking place about how we can restructure our debt. Many of these problems were obvious in the last couple of months, but the Government, to its eternal shame, refused to accept this or move quickly enough to deal with them. I do not think there is anything wrong with the economy. The fundamentals are very sound. We are making painful adjustments to our lifestyles and quality of life and will make tougher adjustments in the next couple of years.
There is a need for the Government to engage with the European Union and tell citizens exactly what is going on. There is huge fear because of the lack of information. The counter-productive statements made by Ministers in recent days have added to the confusion of the public and have done nothing to help us get out of the crisis. There is a need for somebody to spell out what is being considered. Perhaps the Minister of State believes he is not in a position to do so. We need some indication of what the European Union is looking for. We have to restore the confidence of the people that the Government is doing the right thing in their interests. It will take a little longer, however, to restore the confidence of international investors. If we work with our EU partners now in a constructive and positive way, it will help us in the next couple of years.
On the Order of Business this morning I agreed with those Senators who had spoken about trust and the growth of uncertainty. My comments were taken in a way I did not directly mean. The public perception of there being a lack of trust and certainty is fuelled by many factors, including international reports since the weekend. The ongoing and preliminary contacts between this country, the European Commission and the European Central Bank were developed during the Minister for Finance's discussions at the ECOFIN meeting today and yesterday's meeting of eurozone Ministers. They will be developed further when representatives of the European Commission, the European Central Bank and the International Monetary Fund visit Ireland tomorrow. There continues to be uncertainty about the nature of the problems we are experiencing as a country and the remedies available to us to deal with them. The essence of the proposals made on foot of the ongoing investigations will be the extent of the assistance we can receive from our EU partners.
ECOFIN Ministers have concluded their meeting. Commissioner Rehn who visited Ireland last week has indicated at a press conference following the meeting that Ireland is receiving ongoing and positive support in dealing with its difficulties. He has said the only mechanisms available in that context - the stability mechanism and the stability fund - must be applied directly to countries. The essence of our problem is the debts accumulated following the collapse of the banking sector, but it does not appear that it will be possible for these mechanisms to apply directly to the banks themselves. That is the nature of the problem the experts from the three organisations will face when they are in Ireland in the next few days. The ultimate difficulty to be overcome by the Government in making a decision on this matter is that certain responsibilities and conditions are associated with the use of the stability mechanism or the stability fund. These responsibilities and conditions could make the Government's business very difficult, a concern I have expressed in the House. I know everyone in the political system will examine this carefully in the next few days.
Some of the misreporting and over-reporting has been so ignorant of our current economic position that it has made a direct correlation between the bank guarantee and the bank debts we have acquired. Professor Honohan's report which was compiled on behalf of the Oireachtas suggested the decision to introduce the bank guarantee, in its widest application, was an error that resulted from a fear that the country's banking system would collapse the following day. The debts of the banks were not incurred by the existence of the guarantee. However, the scale of banking debt is greater than initially envisaged. As I said on the Order of Business this morning, I do not believe any policy option such as a narrower guarantee would have resulted in the elimination of the problem. It has been constantly argued in this House that we could have reneged on senior and subordinated bonds. We would only have reduced the scale of the banking debt. Existing bank guarantees were in place. The problem was related to the deposit accounts of the banks concerned and the bondholders were no more than a subsidiary aspect. If we had chosen a different policy option in the last two years, we would not have avoided the acquisition of billions of euro in debt as a result of the collapse of the banking sector.
Questions can be asked about how matters were allowed to develop to reach that stage. I agree that the actions of those who made reckless decisions should be seen as economic treason. The existence of the guarantee is not the problem. The reconstitution of the guarantee - it was initially extended for a period of two months and with this motion it will be extended by a further six months - shows that it is no more than an instrument to try to deal with the ongoing problem. It has to be emphasised that we have the agreement and co-operation of our partners in the European Commission and the European Central Bank for the use of this mechanism. I also stress that in terms of the banking crisis we face, the two largest banks - outside the problems created by Anglo Irish Bank and, to a lesser extent, by the Irish Nationwide Building Society - were subjected to very rigorous stress testing by the European Central Bank. The nature of discussions which have been going on in Europe since last Friday and which continued over the past two days should be balanced by a recognition that Government policy has sought to protect and ensure the Irish banks surviving this difficulty are stronger in the future and are the banks which have been stress tested by Europe and have passed those tests. Six financial institutions did not pass the test, including one bank in Germany and five credit institutions in Spain.
Despite all our problems, the remaining Irish banks passed those criteria. In the discussions and in the investigations by the experts coming here tomorrow and who will make their recommendations over the next few days, that point must be stressed. We can even go further and say that the stress tests undertaken by the Central Bank of Ireland were even more rigorous than the tests put in place by the European Central Bank in regard to European banking in general. That is why we find ourselves in this situation.
There were constant political complaints about the existence of NAMA and the role it was playing in perhaps artificially protecting the banks. If NAMA has done one thing, it has exposed the real extent of losses within the banks.
The other reality which we must face is past regulation. We developed a banking sector which had too many banks and was overcapitalised in that it had twice the capital assets of what this country had in GDP which made it impossible to control. Ireland is not Iceland where the ratio was ten times the country's GDP.
It is difficult to isolate our banking difficulties because of the amount of the debt and the potential debt is so staggering. We still have a properly functioning economy which has the ability to get us out of this situation. We still have a debt to GDP ratio which is less than it was in the 1980s when we had to face a similar set of circumstances. We have been through worse and we managed to get out of it. How can we do so again in the least possible time and with the least possible pain? We need to divorce the banking situation from the difficulties we are having with our public expenditure and our budgetary situation. We must put to bed the idea that if we have to make use of the facility - there will be considerable political difficulties in that - somehow we will be able to avoid the other adjustments we need to make as a country. Even if we get assistance from the EU and the European Central Bank for our banking crisis, we still have to reduce our deficit by €15 billion in four years. We still must reduce our deficit by €6 billion in the first year. The effect of decisions made and measures taken will supersede changes in the political system.
At a time when we are under considerable pressure from the organisations with which we are involved and given the perception internationally of how we are being treated, in particular by the markets, there is a need for greater cohesion in terms of our politics, although we have had some. In these critical weeks ahead, we need not so much to don the green jersey, because that is an overworn analogy, but we must think of future generations. The decisions we make and the actions we take now will have an impact on the type of society, economy and country we develop from here. There are many positive aspects on which we can build but they will be lessened if we talk ourselves down further, if we impair our image further in terms of the international community and if we lose the belief we once had in regard to our ability to get ourselves out of these situations. Things are serious and have the potential to become more serious but we also have the potential to recuse them within the time period concerned. We must eliminate that lack of trust and growth of uncertainty in our communities and present to the wider world a more brash, confident and more knowing Ireland in terms of what we are and what we can achieve.
The irony is that over recent weeks, the situation has developed into one where it is less about our political situation, the composition of the Government, the political parties involved in that and even less about our interest as a country. As a result of a combination of circumstances, Ireland has been identified by international markets as a weak link in a chain in terms of the credibility and cohesion of the euro currency. We have a number of options. We should remain a member of the euro currency because thus far in this crisis, it has been of assistance to us. We could argue that it might have been a contributory factor in bringing us to where we are but I believe the euro currency is the best way forward. It must not be done by the larger economies and the governments responsible for those economies making decisions at their behest and making reactive decisions for countries and economies like ours. The success of the euro currency depends on its strength in countries like Ireland. I hope the visit of the experts from the three organisations tomorrow will be the start of a process where we not only recover as an economy but Europe as a wider entity understands the importance of the euro and how it needs to be protected.
I welcome the Minister of State. This is a threatening and traumatic time for Ireland and we must be very careful about what we say because words can be taken out of context. The Minister was quite right when he said market sentiment has become very negative since October. Whether we should have anticipated a long time ago that this would happen is looking to the past. There will be times in the future when we will look back and ask what we did wrong.
I understand the problem of the support we are getting now and of the EU rules which state that it can support governments but not banks. We want to use the money to support the banks but the various EU bodies state that it should be for the country and not for the banks.
Senator Boyle reminded us that we have been here before. Our situation was bad in the 1980s but we got out of it. We may have big problems now and we are a weak link in a chain and we must ensure we find a solution.
I understand the Minister for Finance's argument that we need the ELG scheme to continue in place as one of the measures to support our banking system. I hope it will contribute to the banking stability about which we are speaking. However, this comes with a caveat. The current state of our debt means that the extension of the bank guarantee scheme may not be enough to stop corporate deposits moving out of Irish institutions. As any business person knows, a guarantee is only as strong as the guarantor. The extension is part of the wider aim to bring more stability to the market and combined with the budget and the four-year plan, we are sending a very strong message to the international community that we can look after our own financial affairs. The obvious question is that if it is not having the intended benefits of providing stability, should we continue with the guarantee? Our interest rate is now 8% which is similar to the interest rate in countries like Pakistan, Argentina and Greece. Indeed, our borrowing costs surpassed 9% in the past week which is approximately three times what Germany pays.
I hope the guarantee will play a part in restoring consumer confidence here in order that businesses can grow and invest for the future. It also interesting to note that the State has earned more than €1 billion by charging the banks for providing the guarantee. Where did that money go? What happened to it? I presume it went straight into funding the banks. We charge the banks for it, think it is great we have got €1 billion - in fact, I believe it was €1.3 billion - and then put it back into the banks. It is difficult to know whether we are charging them.
I would like some indication from the Minister of State on when it is forecast that the guarantee scheme may be lifted. I came across a table by the International Monetary Fund, IMF, which showed that even in Sweden, which is often held up as a model for the way it coped with the Nordic banking crisis in the early 1990s, it took four years for the guarantee to be lifted. The question also remains as to what the full cost of this will be. Is the figure of €300 million for the whole guarantee realistic?
I want to ask a question about the Bank of Ireland disengagement from the guarantee scheme. It was interesting to hear the Bank of Ireland chief executive, Richie Boucher, say in August that the bank was actively planning to "disengage from the guarantee in a prudent fashion". Those were the words he used. Mr. Boucher hinted that Bank of Ireland, which raised €2.9 billion from investors earlier in the year, would test the market for so-called unguaranteed investment before the support expires. He said that Bank of Ireland "will be looking at a range of programmes, guaranteed issuances, covered bonds, secured and unsecured bonds across a range of geographies". Given these indications by Bank of Ireland, can individual institutions be forced to disengage from the scheme if they are deemed to be financially capable of doing so in the near future? That is a question I would like answered because I am not sure of the position on that. We are looking to the future, to this particular scheme and to the eligible liabilities guarantee, ELG, scheme. This is the right way to go. We do not have a choice about it but there are some questions about it and those are the ones I would like to have answered.
I am glad to have this opportunity to speak on the debate on this scheme. I share the concern of everyone else that we are at a difficult time in our evolution as a country. It is frightening in a sense where we find ourselves.
I have great sympathy for the Government, especially the Taoiseach and the Minister for Finance because they are dealing with a situation that is changing all the time. While I accept that politics will always be politics, there is a time when we have to put that aside and consider the welfare of the country. Time and again the Taoiseach, when questioned in the Dáil by the Leader of the Opposition, has been asked to hold a general election. I often wish the Leader of the Opposition would suspend that questioning for just for one week until we deal with the issues before us. One of the reasons the Leader of the Opposition gives the Taoiseach for seeking a general election is that he had promised us this would all be over now and that this was to be cheapest bailout, as the Leader of the Opposition continues to call it, and none of this appears to be true. I am sure Deputy Kenny, in moments of quiet reflection, when he thinks about how he would behave, conduct himself or lead a Government were he faced with the same challenges facing the Government, would realise that it is difficult to have absolutes at a time such as this.
The criticism that is always made of the Government is that it has not been able to provide certainty to the market. This is the reality and the difficulty. What we need to appreciate a little better in this country is that we are not alone in the difficulties we face. While we might look back at the period since the economic collapse and question whether we maximised the opportunities or gave the right answers, no one can be sure of that yet. We also need to appreciate that we are now looking back at that time with the benefit of 20:20 vision and that adds a different complexion to dealing with the scenario. Ordinary politics does not have any relevance in dealing with a situation like this. I heard the leader of the Labour Party criticise the Taoiseach on his conduct. Given the difficulties we face, the Taoiseach constantly faces such criticism week after week rather than being able to rely on the support of his parliamentary colleagues when he is trying to do the best for his country.
The independent report conducted by the Governor of the Central Bank indicated that the course of action taken by the Government in offering the guarantee was the least worst option as such. That needs to be recognised. While the leader of the Labour Party believes his party was right that the guarantee should not have been given, he fails to recognise what would have happened had the guarantee not been offered. We would have been faced with an immediate collapse of the Irish economy. That seems to have been lost on him and he is not an unintelligent man. I do not know why he continues to persist with this notion.
I am sure the Government was somewhat cautious, which is probably the best word to describe it, in offering this guarantee. We have discovered that the whole truth was not given by the banks on that fateful night when an immediate decision was required. That is why I will always have sympathy for the Taoiseach, the Minister for Finance and members of the Government who, with the best advice available, had to take a decision. Take it they did and in doing so they averted a catastrophe. The way the market has played on since and what we are required to do to keep our economy floating is unfortunate. That we find ourselves here again today approving this scheme is not where we would like to be.
Having regard to what we have learned from the process since September 2008, I would say that we were not tough enough on the banks. I was pleased to learn from briefing notes that the position of the Minister for Finance is that we are to have a good examination of the structural problems within the banking sector. That is critical. We must do that at this point. We failed to take the opportunity to do it before. This is a moment when we need the solidarity of everyone in the country working together. As we deal with the difficulties we face over the next few weeks, we need to remember that thinking about each other and that sense of community which has delivered great success in our country and is part of the proud tradition of our heritage and our inherent decency of one to the other.
My final point is on how the banks have conducted themselves. The people of this country have taken on the burden of the banks and the way the banks have shown gratitude for that is to continue to operate as if none of this has happened. Bonus after bonus is being offered, given and collected by staff and that is not acceptable. Bonuses are meant to be given for outstanding performance. How can anyone who has been working in the banking sector during the past five years consider himself or herself worthy of a bonus? People need to ensure that does not happen. We would have expected that there would have been a complete change in attitude when the people came in to help the banks but, unfortunately, there was not. I hope in this instance we take the opportunity to demand change and that the banks, in particular, will not even contemplate offering a bonus to anyone because certainly no one has earned it at this point.
I listened to the debate with some interest. Some of the points made were not without significance, especially one or two points made by Senator Boyle to which I will return. I was most struck by what Senator Quinn said. I understood him to say, essentially, that this debate, unfortunately, can be reduced to the proposition - these are not his words, I am paraphrasing what he said - that the Seanad has no choice but to support the motion. I will not support it because there is a choice. This harks back to what happened in September 2008. On the question as to whether there was no choice on the fateful night in question, the Governor of the Central Bank, Professor Honohan, has never stated the Government was faced with only one option or that it could have taken only one course of action, namely, that of providing a blanket guarantee. Neither the Honohan report nor any of the other reports bears out the proposition that only one course of action was available. The central consequence of what took place on the night in question and subsequently when the Houses endorsed the Government's approach was that options were closed off. The introduction to the heart of the Government's banking policy of a guarantee of the nature and extent of the bank guarantee closed off all other options.
There has been much debate about burning bondholders and so forth. The Fine Gael Party took the perfectly legitimate view that the bondholders should have been required to share some of the pain. It was not possible, however, to achieve this outcome once the guarantee was in place. A number of the policies advocated, including the Labour Party policy of taking the banks into public ownership for a period and the policy of sharing the pain, as it were, the position taken by the Fine Gael Party, were recognised by Professor Honohan and others as legitimate options. However, it was not possible to achieve any of them once the guarantee was introduced.
Senators have argued that it is time to forget the banking crisis because it is not connected to the deficit of €19 billion and instead look to the future by focusing the debate on how we deal with the deficit. It is absurd to suggest the legacy of the banking crisis can somehow be divorced from what we need to do to address the budget deficit. The budgetary and banking crises may be different issues, but they are intimately bound up with one another.
Last night's television and radio coverage featured a great deal of commentary. Stephanie Flanders of the BBC nailed the issue very well when she noted that bondholders who had looked at the Irish deficit of €19 billion and were advised that the Government planned to introduce a budget and four-year plan to slash the deficit only had to look a little deeper to see that the legacy of the banking crisis lay right beside the deficit problem that needed to be addressed. They do not only see that the current deficit must be reduced to below 10% next year, by a further margin in the subsequent year and to 3% by 2014, the reason being they do not see the issue in the mechanical way Senator Boyle would like them to see it. While the Senator may want the House to debate the deficit and forget about the banks, the legacy of the banking crisis spooks the whole crisis, both in its economic and budgetary aspects. It forms part of the crisis and cannot be divorced from it. If anything, the events of recent days and the insistence by eurozone and ECOFIN Ministers that there cannot be a direct feed of aid to the banks, as Senator Boyle described it, indicate that the Government is on the line. The Irish sovereign has been infected by the banking crisis. The position of the sovereign and the financial position of the Government, as perceived internationally, are undershot by our banking problems. There is no point in wishing these problems away because they are at the heart of the crisis.
Senator Boyle made an interesting and welcome remark on two occasions today. I concur with him that any solution adopted in September 2008 would have led to problems, in other words, none of the available options, including those advocated by the Labour Party and Fine Gael and that advocated and ultimately settled upon by the Government, would have settled the matter on the night in question. It was clear that the issue would not go away simply because the Government had made a decision in an overnight session in the Oireachtas because legacy issues would have remained, regardless of what was done. Senator Boyle makes a fair point, therefore, when he argues that the problem would not have been buried on the night in question.
Senator Boyle's central point, with which I agree, concerned his acknowledgement that if other options - sensible ones - had been taken, they might have reduced the scale of the problems we face. I believe these were the words he used. He is in the position of being able to state that if we had taken a different policy option on that occasion, things would not be as bad as they are now. Let us not pass over that statement because it is no small thing to say things would not be as bad as they are now. That is a fair comment which I enthusiastically and harshly endorse. However, it draws one inevitably into the debate on the extent of the guarantee and its targets in terms of its scope. It is clear the guarantee drew us into a vortex from which we could not emerge. That is the position in which we find ourselves and the reason the Government is seeking to further extend the guarantee. Let us not pretend we can divorce the banking crisis from the budgetary crisis.
Another issue that is knocked about in the House ad nauseam is what the Opposition should do and the need for everyone to pull together. As public representatives, Members on this side are as worried about what is happening as our colleagues on the other side. However, one cannot command trust or seek to involve the Opposition simply on the basis that the Government will propose something and the Opposition will dutifully agree with it. How many times must we say such an approach will not work or achieve the cohesion Senators Boyle, O'Malley and others seek? There is a lack of trust, not only on the part of Opposition Members but also among members of the public who have lost trust. As I noted on the Order of Business, how does one expect ordinary people to react when Ministers flatly deny that anything is going on by way of negotiations in the European Union, state that it is a fiction to suggest such negotiations are taking place and shake their heads on camera saying they do not know anything about what is being suggested and then, within 48 hours, it transpires that negotiations have been taking place?
To secure legitimacy, a Government must be elected and a Taoiseach appointed with the support of the Dáil. One of the central features of the legitimacy of any Government is credibility, in other words, a Government needs to be believed. For the purposes of the point I propose to make, I will allow for the cynical view that I would never agree with the Government because I am a member of the Opposition. What members of the public and I expect is not to be able to agree with the Government but to be able to believe the words that come out of its members' mouths. Once trust ceases, one can almost see and hear what follows as legitimacy flows out of the Government. At this very tense time, the last thing we need is a situation where people do not even believe the basics from the Government.
The credibility of the Taoiseach and the Minister for Finance is on the line. Regardless of what they say, people raise question marks. We can make jokes about turning corners or, as was stated in September, closing the final chapter on the banking crisis. We were also told repeatedly that we had reached the point at which there would be a new beginning.
However, one can only get away with doing that so often. One can only get away so often with telling people something that is shown to be wrong two weeks later.
I will conclude by appealing to the Government that if it does nothing else in the coming days and weeks, it should level with people. People can take it as they already face dreadful situations in respect of their own lives, families and workplaces and many have lost their jobs. They can take hard, tough news at this stage and consequently, the Government should stop the spinning and the nonsense about turning corners, that everything is fine, that a chapter is being closed and that everything will be okay. Everything will not be okay but will be extremely difficult. However, the Government should level with people and be honest with them.
I welcome the Minister of State, Deputy Áine Brady, on what is a difficult day for Ireland. Although the position is extremely difficult, I believe the Minister for Finance, Deputy Brian Lenihan, the Taoiseach and the Government are the right people at the right time to deal with this issue. It is an international, national and European problem and Ireland is in a very difficult position. I raised the issue of the guarantee in the House last week and made the point that it must be made crystal clear to people that their deposits are absolutely 100% safe. I made this point last week, this information has been published and the Minister has again made it quite clear. I reiterate, to provide further reassurance, that all deposits up to €100,000 in all Irish banks are absolutely guaranteed by Government guarantee. Moreover, all deposits greater than that amount are guaranteed under the eligible liabilities guarantee scheme. It is important to make this point clearly.
The four-year plan under discussion at present should be brought forward as quickly as possible, perhaps next week, to indicate to our European partners Ireland's future budgetary position. The budget will be introduced on 7 December, as the Minister has made clear that it is not possible to bring it forward because November is an important month with regard to taxation and he must have all the facts available to him before he can make final decisions in respect of budget 2011, in which savings of €6 billion must be made.
I refer to chapter 1 of the report by Professor Patrick Honohan, Governor of the Central Bank, in which he states:
It is hard to argue with the view that an extensive guarantee needed to be put in place, since all participants (rightly) felt that they faced the likely collapse of the Irish banking system within days in the absence of decisive immediate action. Given the hysterical state of global financial markets in those weeks, failure to avoid this outcome would have resulted in immediate and lasting damage to the economy and society. There would have been additional lost income and employment surely amounting, if it could be quantified, to tens of billions of euros.
This was the reason the bank guarantees were put in place at that time. Without such guarantees, the ATM machines literally would have been empty on the following day. It is important to look back to ascertain what happened in September 2008 and Professor Honohan, who an is independent observer, made that point. This quote from his report aptly and succinctly describes the reason the Government introduced a bank guarantee scheme in the autumn of 2008. It was clear to everyone that we faced a very difficult period in respect of our banking system. Funding for the banking system had all but dried up and the banks were facing closure within a matter of days.
Decisions of this nature are never easy to make but must be taken in times of crisis. Thankfully, we have a Taoiseach and Minister for Finance who have the capacity to make tough decisions and to stick by them. I also include the Green Party, its leader and members in government in this regard. In particular, I commend the Green Party because it had only been in government since 2007 and, unlike Fianna Fáil, had no previous experience of this particular situation. Fianna Fáil had been in office during a similar period during the 1980s when Charles J. Haughey was Taoiseach and when we took very hard and tough decisions that brought this country from near-collapse to a period of tremendous development. I wonder, in absolute fear, what would have happened had the Labour Party been in power in the autumn of 2008 and had failed to introduce a bank guarantee scheme.
The motion under discussion is an extension of the eligible liabilities guarantee scheme from November 2009. This is different from the original bank guarantee scheme of 2008. The scheme before Members is a more focused and targeted scheme than the original guarantee scheme and is in line with the European model of bank guarantees that was developed in its wake. No longer does the scheme cover subordinated debt, and rightly so. Moreover, to reflect the problems that participating financial institutions have inflicted on Irish society, significantly higher fees are being charged for the benefit of a State guarantee of their liabilities. Since the introduction of the original bank guarantee scheme of 2008 and its extension last year, the Government has attempted to phase out gradually the extent to which guarantee arrangements are available. The establishment of the National Asset Management Agency and the various bank recapitalisation schemes have been part of this process. One must be extremely careful about how these supports are phased out and such moves must be measured, incremental and responsible. New issues arise almost on a daily basis and these must be reflected in how we implement the eligible liabilities guarantee scheme. In fact, more than €1 billion has been collected in fees from institutions covered by this guarantee and fees will rise following the extension of the scheme.
This scheme is still of great importance to the Irish banking system. It provides certainty to people who have money on deposit with institutions covered by the scheme. These people usually are run-of-the-mill individuals who have put aside some money for a rainy day and who are anxious to be reassured that they are protected. One must always be aware of the power of confidence in the Irish economy. If people do not consider themselves to be protected, they will not go out and spend and this is a key point at this stage. I support the continuing bank guarantee scheme under the new criteria outlined by the Minister. I believe it was necessary in 2008 and still is necessary in 2010. A functioning banking system is essential to our recovery. A banking system that is responsive to the needs of its customers is also necessary and I urge all banks to start lending again to the many viable businesses and companies that are struggling with credit issues.
The Government will issue its four-year plan next week and I understand that is the envisaged timescale. Ireland is being visited by experts tomorrow from the European Union, the European Central Bank and the International Monetary Fund, who will give advice on the banking situation. They will enter consultations with senior Government institutions such as the Central Bank and all institutions of the State will study the situation. As the Minister of State is aware, we are not in this alone but are together with the eurozone. While Ireland is a small country, it is a participant in one of the strongest currencies in the world. Consequently, in such situations one must stand shoulder to shoulder together. This morning, in a detailed and comprehensive radio interview on "Morning Ireland" with Áine Lawlor, the Minister for Finance, Deputy Brian Lenihan, outlined the position exactly. I commend him on his clarity of thought, his views and his strength of character, as well as for the respect shown to him and to Ireland within the European Union. The Minister of State will be aware from her experience of travelling in a ministerial capacity to Europe, as I am from my experience as Minister of State with responsibility for trade and marketing with the former Minister, Des O'Malley, that while we fought our case at the Council of Ministers, we were always treated on a completely equal basis. This is a fact. We must have confidence in the future and must work together and we can overcome the present challenges. I commend the Opposition parties that have agreed on the four-year plan and the 3% target by the end of that period. This is highly positive and I hope we can work together for the future.
I have no intention of taking up the eight minutes allotted to me, as I will be brief. Anyone who has spoken to people on the streets in recent days will have noted that they are afraid. They are concerned about their bank deposits, mortgages and social welfare payments. There is a general fear in the body public. It is important that people be aware that their deposits up to €100,000 are safe and I support this measure. However, when considering the eligible liabilities guarantee scheme, I note it also encompasses senior unsecured certificates of deposit, senior unsecured commercial paper and other senior unsecured bonds, notes and other forms of senior unsecured debt specified by the Minister and approved by the European Commission. We should never have taken responsibility for Anglo Irish Bank. It was one monumental mistake not to allow it to fold on day one and allow the unsecured bondholders to take a hit. They should have taken a hit. What we heard at the time about how it would reflect badly on the country if bondholders took a hit was a load of waffle and rubbish, as we now know. The bondholders were gamblers who had gambled on the markets. We were prepared to bail them out and let the people - taxpayers - pay for the mistakes of bankers. That is what has happened. Let there be no mistake about it. It is no wonder people are angry in the streets.
The record of the Government on banking is, at best, incompetent and, at worst, deceptive. The Government is still in denial. Even in the past week Ministers have been trying to deceive ordinary decent taxpayers. Some of them said no negotiations were taking place, while others said they had started. They do not seem to know where they are going with finance and banking policy. The people are aware that every target the Government has put in front of them and the Houses of the Oireachtas has been missed by miles.
I listened with interest to Senator Boyle on the Order of Business this morning and during this debate. Irrespective of what Senator Leyden stated, I predict that the Green Party will soon run from the sinking ship. If Senator Boyle's utterances reflect current Green Party policy, I have no doubt it will run from the sinking ship in a very short time.
In the last couple of days in this House I have heard Members talking about going back to the old Sinn Féin adages of "We Ourselves" and "Ourselves Alone". What a load of rubbish. Are the same Members talking about going back to using the British pound? Where would we be without the help of our European partners? That question should be asked. We would not be in a nice place.
Fine Gael will support the guarantee of deposits of €100,000 and less, but we have grave reservations about guaranteeing unsecured paper. This is a matter of grave concern to my party and the Labour Party and everyone else. People are fed up with the notion that they must pay for the mistakes of others, whether the Government or the bankers.
I agree with Senator Cummins's comment that we are lucky to be in the eurozone. That goes without saying. Ireland has been a good member since we joined. We have benefited hugely from being a member of the European Community, to which we have contributed. Now it will stand behind us when we are in need. We must take responsibility for what is happening in the bond market because it affects our European partners. While we do not need to borrow at present, other countries are borrowing and the price of bonds has gone up substantially. It is incumbent on us, as a member of the European Community, to take seriously the offer being made to us. This offer will get to the heart of the banking system which is not working, although we have poured billions of euro into it. The experts coming here will ensure it will be fit for purpose by the time they leave. It will be important to use the funding made available to meet our demands in that regard.
This is a great country. When we joined the European Community in the 1970s, it was a very poor country. However, we have made leaps and bounds since we joined and it is now offering us a hand-out as an equal member. We would do the same for any of our fellow Community members. We did so for the Greeks. When we made a contribution, people asked if we could afford it. Of course, we could, just as they can afford to support us now.
The European Financial Stability Fund is very important and we can look forward to borrowing from it at more favourable rates than from the bond market. It will also underpin our four-year plan. We know exactly where we are going in terms of costs and funding in the next four years. It is incumbent on Members of the Oireachtas, of all parties, to ensure the budget and the four-year plan are supported. If we have an election early next year, whichever parties form the new Government will need that plan and budget. Therefore, it is vitally important that both are supported and that we achieve a budget deficit figure of 3% of GDP by 2013.
The scheme has been outlined in detail by the Minister of State, Deputy Calleary, and the views of many colleagues have been heard. I agree with the continuation of the eligible liabilities guarantee scheme which covers Irish retail, corporate and interbank deposits. The scheme has been in existence for almost one year and replaced the bank guarantee of September 2008. We have earned money from providing such guarantees and will probably earn in the region of €800 million next year for extending them.
The print media, the airwaves and all aspects of communications have been consumed in recent weeks and days by the potential of Ireland not to meet its commitments and nervousness about what will happen in the entire eurozone. I will make a few quick points. First, our cash position remains positive. It is a fact that the country is fully funded to the middle of next year. Greece was not funded. That is why it had to seek a bailout.
Ireland is not in that position.
People's deposits are 100% secure. The Irish sovereign is well funded into the middle of next year. There are problems with the structures of the banking system. Circumstances have evolved over the past year such that the vulnerability of the Irish banks has increased to a very nervy and volatile level, to the extent that funding is difficult to secure. The international interpretation of the stability of the euro must be considered if economies such as Ireland, Spain, Portugal and others are having difficulties. It is interesting to note that all our European counterparts have praised the Government for the actions it has taken.
As factual information was made available to the relevant authorities in this State, appropriate actions were taken.
With the benefit of hindsight, many experts emerge with views on why certain events occur and why certain economists predicted correctly and why others did not. It is agreed unanimously, and confirmed in the ECOFIN statement of last night, that Ireland should be praised for its determination in dealing with the issues as they arose and taking the appropriate action based on the facts at the time in question. Some of those facts were in fluid circumstances and have changed, but when circumstances change it is appropriate for people to change their minds.
As talks continue over the coming days, with the benefit of the expertise of individuals from the IMF, the European Central Bank, the Irish Regulator, the authorities in the Irish Central Bank and officials in the Department of Finance, it will be important to take whatever steps are necessary to shore up our banks to ensure we play our part in a shared sovereign position in terms of the single currency. We must ensure we focus on continuing to implement the budgetary plan for the next four years, which will be announced next week, and taking difficult decisions.
I said yesterday in the House that we have been consumed by our reaction to the media's reaction to what is an irrational international perception of the Irish position. Instead, we should be focusing on where the cuts should be made and on the question of whether public sector pay should be cut and whether the Croke Park agreement should be revisited. This is how our time would be best spent.
With regard to Ireland's potential to seek funding to assist with bank restructuring, it is appropriate to embrace, without any shame, any support offered. In a shared sovereign currency position in the eurozone, that is what is appropriate.
I have consistently stated in the House – senior party colleagues and Ministers may not agree with me - that if there is a flaw in the many positive aspects of being in the eurozone and Single Market, it is that when assessing interest rates, the European Central Bank focuses exclusively on inflation rather than economic issues. Ireland's economy constitutes less than 1% of the overall EU economy. Whatever inflation occurs here will not have any major effect on the economies of mainland Europe and the rest of the eurozone. When we needed to be cooling our economy some years ago on foot of over indulgence in the property market and elsewhere, we were borrowing at a rate of 2%, with a consequent growth rate of 8%. In the context of structural reforms and other reforms that must take place to ensure that Europe, not least Ireland, never faces these difficulties again, we must have clear guidelines on the maintenance of the 3% deficit as outlined in last week's report by the Joint Committee on Finance and the Public Service, and also clear guidance for countries with serious surpluses – Ireland was in this position - to ensure the punch-bowl is taken out of the room at the appropriate time.
There are many lessons to be learned. The message needs to be sent out loud and clear that Ireland has taken many of the necessary steps. It is a resilient nation and is not reactionary or over emotional. Irrespective of whether public service pay cuts or other cuts need to be made, this nation will take the necessary steps and adjust. It will react in whatever way it sees fit in a general election whenever it occurs - so be it - but in the meantime people are entitled to know that the Houses of the Oireachtas are confident in their ability to take the appropriate decisions and, without shame, happily welcome our EU partners and sovereign partners in the eurozone.
I heard a very grand contributor from The Observer stating on the lunchtime news that his country will probably have to bail out Ireland, on foot of which it will have to see about Ireland's corporation tax. In 1975, when Mr. Harold Wilson sought £2.3 billion from the International Monetary Fund, Ireland sought no such preconditions. We currently do not need help but, if we did, a message should be sent out that the position on corporation tax in Ireland is enshrined in EU treaties. This will remain the case and corporation tax will not be visited as part of any package of measures to assist this country.
I am very grateful to Senator MacSharry and defer to his expertise. His thoughtful contribution reflects the widespread views of Members, certainly those within Government parties, on how the Government is handling this matter. The Senator is absolutely correct to debunk the canard that our corporation tax rate will somehow be threatened. I am glad he has nailed this. To state the contrary represents total irresponsibility on the part of commentators. In fairness to many Irish media commentators, they have made the point I am making. Perhaps they have not done so as strongly as we would like them to do but they have stated our control of corporation tax will not be relinquished. This matter has nothing to do with the current crisis because protection in respect of our corporation tax rate is enshrined in the treaties.
We are part of the eurozone. It ill behoves those who are talking about a loss of sovereignty to be trying again to scare the living daylights out of people. We are already sharing sovereignty and have been doing so since 1 January 1973. We are part of the eurozone and do not have our own currency. We are quite legitimately involved in discussions on how the eurozone and the euro itself, as a leading world currency, can be protected, bearing in mind the demands of creditors.
I have listened to distinguished economic commentators over recent months who somehow do not seem to get onto the airwaves. The celebrity economists do because it is all about soundbite politics and nothing to do with the reality on the ground. Time and again, economists have made the point that the eurozone is under threat and that once Ireland is disposed of by the creditors, who have no sentiment other than that which relates to the dollar, they will then go after Portugal, Spain, Italy and Greece. What is occurring in Brussels at present and what will occur tomorrow on foot of the visit from various members of the aforesaid institutions, constitute part of the fight back.
What the Government is doing is strongly supported, certainly within my party. It is important that, in this debate, we send out the message that there is confidence in what the Taoiseach is doing. As he said in the Dáil today, there is total confidence in the ability of the Minister for Finance, Deputy Brian Lenihan, to fight Ireland's case. It is ultimately a question of reckless banking and criminality in the banking sector. What we are attempting to do is ensure that the banking sector issue is separated from the sovereign debt issue. Ultimately, the solutions currently being talked about in Brussels will not be realised overnight or in the next few days but certainly over the coming weeks. What is being decided in Brussels will have the overall support of the Irish people because we will protect vital national interests, as various Governments have done over decades.
Martin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
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I thank the Senators for their contributions on this important motion. I have been briefed on some of the points raised. I begin by making one or two general observations.
To remove the bank guarantee at this point would be folly. I am not sure any party in the House wants to do so. It is all too clear that this State and the eurozone as a whole are experiencing extreme financial turbulence. The Governor of the Central Bank has recommended to the Minister for Finance that the credit institutions (eligible liabilities guarantee) scheme continues next year. There is broad European consensus on the case for Ireland's banking guarantee, as set out explicitly in the euro group statement last night, which included a welcome for the measures taken to date by Ireland to deal with issues in its banking sector by guarantees, recapitalisation and asset segregation.
As stated by the Taoiseach today, the necessity for the bank guarantee arrangements was and is compelling. As the Minister for Finance stated when the scheme was originally extended, had the guarantee not been introduced we would scarcely have an economy not to mention a banking system. Funding for our banking system had all but dried up, which meant that there was a liquidity problem in the short term - other problems subsequently came to light - and the banks faced closure within days. Prolongation of the ELG scheme is a key element of the Government's response to the broader systemic challenges the banking system continues to face. As Senators will have been informed, the statutory instrument covers a period of one year. As 30 June next approaches, however, EU approval will have to be obtained in respect of the second half of the year because, in legal terms, the Union is only in a position to approve six-month extensions. EU state aid approval has been granted for the extension of the scheme to 30 June 2011. This follows on from the recent legal opinion from the European Central Bank, dated 2 November 2010, which endorsed the extension in national law to 31 December 2011 on financial stability grounds.
Heightened volatility in international bond markets will eventually abate. When this happens, it will be essential that the guarantee should remain in place for a period in order that the banks would be in a position to raise funding in the markets. The guarantee provides important protection for the savings of ordinary depositors. The guarantee of bank liabilities was an established part of the international toolkit for responding to systemic banking crises internationally. In the 1990s, Sweden provided a blanket guarantee in respect of bank liabilities. Other countries also introduced broad guarantees.
Recent figures indicate that since the onset of the crisis in 2008, the European Commission, under state aid rules, authorised some €3.6 trillion in guarantees. Some 12 guarantee schemes remain in force and it is expected that most of these will be extended into next year. The most recent figures indicate that some €147 billion of liabilities are covered under the ELG scheme. This equates to 4% of the amount authorised by the Commission. The figures to which I refer relate to the position up to the end of September. I was asked in the Lower House about developments since then. The figures for October will not be finalised until the end of this month. That is because a period of 20 working days from the end of the relevant month is required to finalise the figures. All the indications are that the liabilities have not risen above €147 billion and that the actual figure may be somewhat lower than this. Member states currently implementing guarantee schemes include Austria, Germany, the Netherlands, Portugal and Ireland.
The only substantive change being made relates to the extension, subject to Commission approval, of the scheme to 31 December 2011. Other consequential changes relate to drafting. I remind Senators and members of the public that retail deposits up to €100,000 are permanently guaranteed under the deposit guarantee scheme, DGS, which has no expiry date. Amounts in excess of this are guaranteed under the ELG scheme.
Several Senators referred to the involvement of outside parties. The Government has expressed its determination to work with its EU colleagues - particularly the ECB and the European Commission - and the IMF to address the issue of market turbulence and to identify where the risks for Ireland in the markets lie and evaluate how these can be dealt with. As a number of Senators outlined, there is a far broader picture relating to the eurozone of which cognisance must be taken. The latter has been the case since earlier in the year when problems affecting Greece were placed in sharp focus. As the Taoiseach indicated earlier today, talks will begin at official level in Dublin this week - with a delegation from the IMF, the European Commission and the European Central Bank - on the possible use of EU and IMF funding to deal with the banking crisis.
Many of those present in the Chamber, including myself, remember the 1970s and 1980s, when the IMF had a reputation for being draconian, especially in respect of the economies of South American countries. I had the privilege to attend the IMF's annual meetings in 2008 and 2009. It has been intimated that the director general of that organisation, Mr. Dominique Strauss-Kahn, could quite possibly be the Socialist Party's candidate in the next French presidential election. In that context, I wish to point out that much more attention is now paid to the social dimensions and effects of financial stringency than was, perhaps, the case 20 or 30 years ago.
The Seanad Divided:
For the motion: 26 (Dan Boyle, Martin Brady, Larry Butler, James Carroll, John Carty, Donie Cassidy, Maria Corrigan, Mark Daly, Mark Dearey, John Ellis, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Lisa McDonald, Paschal Mooney, Francis O'Brien, Denis O'Donovan, Fiona O'Malley, Ned O'Sullivan, Niall Ó Brolcháin, Ann Ormonde, Jim Walsh, Diarmuid Wilson)
Against the motion: 19 (Paul Bradford, Paddy Burke, Jerry Buttimer, Ciarán Cannon, Paudie Coffey, Paul Coghlan, Maurice Cummins, Paschal Donohoe, Frances Fitzgerald, Dominic Hannigan, Fidelma Healy Eames, Michael McCarthy, Nicky McFadden, Rónán Mullen, David Norris, Joe O'Reilly, Brendan Ryan, Liam Twomey, Alex White)
Tellers: Tá, Senators Niall Ó Brolcháin and Diarmuid Wilson; Níl, Senators Maurice Cummins and Alex White.
Question declared carried