Euro Area Loan Facility (Amendment) Bill 2012: Second Stage

Tuesday, 6 March 2012

Dáil Éireann Debate
Vol. 758 No. 1

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Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan  Zoom on Michael Noonan  I move: “That the Bill be now read a Second Time.”

I thank the House for agreeing to discuss the Euro Area Loan Facility (Amendment) Bill 2012. The Bill is needed urgently to allow Ireland to ratify the changes to the Greek loan facility to implement the new programme of assistance for Greece as agreed by the euro group finance Ministers on 20 February 2012. The purpose of this Bill is to facilitate, in the public interest, the financial stability of the European Union and the safeguarding of the financial stability of the euro area as a whole.

As the House is aware, Greece has been beset by serious budgetary and economic problems for some time and is unable to secure international funding at sustainable rates. In order to safeguard the financial stability of the EU and the euro area, it was agreed on foot of an intergovernmental agreement in May 2010 to provide a programme of financial assistance to Greece. This was done by way of a bilateral loan totalling €80 billion to Greece from the euro area member states in conjunction with IMF assistance of €30 billion over a three-year period to mid-2013. Ireland’s participation in the agreement was ratified in the Euro Area Loan Facility Act 2010.

On entering our own programme of assistance in late 2010, Ireland stepped out of the Greek loan facility. However, as an original signatory to the Greek loan facility, Ireland’s consent is required to implement any amendment to the Greek loan facility. The Euro Area Loan Facility Act 2010, as amended, must be further amended before Ireland can confirm acceptance of the second amendment to the Greek loan facility.

In June 2011, finance Ministers agreed with the euro group to revise the Greek loan facility. These revisions provided for the extension of the grace period between drawdown and commencement of repayment from three to four and a half years, the extension of the maturity period for loans from five to ten years and a change in the calculation of the margin relating to loans to Greece to give it a lower interest rate. The Commission signed the loan facility agreement for Greece on behalf of euro area member states on 14 June 2011, pending ratification by the individual euro area member states. Ireland ratified the first amendment through the European Financial Stability and Euro Area Loan Facility (Amendment) Act 2011, and issued formal confirmation of our agreement to the amendment with effect from 23 September 2011.

However, these amendments have proved insufficient and need to be supplemented. On 20 February 2012, euro group finance Ministers approved the new programme of assistance for Greece which includes approval of the second amendment to the Greek loan facility. This amendment includes three elements: a further increase of the grace period, of up to ten years, for paying back the loan principal, a further lengthening of the loan maturity to a minimum of 15 years, and a further reduction in the margin to 150 basis points to apply from the three-month interest period that ended on 15 June 2011.

The Bill provides for the ratification of these amendments to the Greek loan facility agreement. The finalisation of the amendment, by way of signature of the European Commission [64]on behalf of member states and Greece, was not in place until 27 February 2012. The Bill is thus being presented at the earliest possible date following this finalisation.

All signatories to the Greek loan facility agreement have been requested to provide their acceptance to the second amendment to the chairman of the euro working group not later than 13 March 2012. This is to ensure that the next phase of the Greek loan facility can proceed as planned for that date. It has, therefore, been necessary to bring forward the Euro Area Loan Facility (Amendment) Bill 2012 as a matter of urgency to ensure Ireland can confirm acceptance by that date. It is intended to bring forward an earlier signature motion in the Seanad for the President to sign the Bill.

These changes to the Greek loan facility are in conjunction with a number of other changes to the Greek programme, including additional funding of €130 billion and changed private sector involvement, PSI. A common understanding has been reached between the Greek authorities and representatives of the private sector on the general terms of the PSI exchange offer, covering all private sector bondholders. Private sector investors are asked to accept a bond exchange providing for a nominal haircut amounting to 53.5%. The closing date for the PSI exchange offer is 8 March. The additional funding is also provided for interest rate support and banking sector support. Greece and the other euro area member states agree that it is only by fully and strictly implementing the fiscal consolidation and the structural reforms included in their programme that Greece will regain competitiveness and will be able to return to markets.

The Bill provides for amendments to the Euro Area Loan Facility Act 2010, as amended by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. The amendment Bill has four sections with the amendment of March 2012 to the loan facility agreement set out in the Schedule. The first section provides the definitions to the legislation. Section 2 provides for the second amendment of February 2012 to be included in the references to the Euro Area Loan Facility Act 2010, as amended by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011.

Section 3 provides for the second amendment to the loan facility agreement to be inserted as Schedule 3 to European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. Section 4 sets out the Short Title of the Act. Annex 1 contains the form of legal opinion, Annex 2 contains the amended scheduled principal repayments, and Annex 3 contains the list of contacts. The Schedule contains the amendment of February 2012 to the loan facility agreement. The amendment includes the three elements I have already outlined, namely, a longer grace period, a lengthening of the loan maturity, and a further reduction in the margin.

Ireland provided €345.7 million to Greece under the Greek loan facility before entering our EU-IMF programme, when we stepped out of the Greek loan facility. Quarterly interest payments are being made by Greece on this. The reduction in the interest rate chargeable on the loan under the second amendment will reduce the interest we receive each year by €5.2 million, or roughly one third at current rates of interest. We expect that this will be offset by the provision for the distribution of profits from the ECB’s secondary market programme for Greek bonds. A further result of the amendment is that the grace period before Greece begins to repay the principal of this loan will be extended from four and a half years to ten years. The maturity of the loan will be extended from seven and a half years to 15 years.

I look forward to a constructive debate on the Bill. Now is a time for unity among euro area countries to ensure financial stability within the euro area. The purpose of the Bill is to facilitate the stability of the European Union and the safeguarding of the euro area as a whole. Ireland must play its part and stand in solidarity with its fellow euro area member states. It is in the [65]interests of this country and the euro area. Therefore, I urge Deputies to agree to ratify the changes to the Greek loan facility.

I commend this Bill to the House.

Deputy Michael McGrath: Information on Michael McGrath  Zoom on Michael McGrath  I thank the Minister for introducing the Bill. Fianna Fáil will support the legislation, not out of any great sense of conviction that the second Greek bailout deal will necessarily work either for Greece or Europe, but because we do not believe it is for the Irish Parliament to seek to block a deal for Greece which the Greek Parliament has backed and on which the euro group has signed off, especially since Ireland is not a financial contributor to the package involved in this facility.

The fundamental question is whether this particular deal for Greece will work either for Greece, as a member of the eurozone, or the eurozone itself. I am not convinced it will work and only time will tell. I suspect it is only a matter of time before there are further crisis meetings at euro group level to deal with issues concerning the sovereign debt crisis and with Greece. Some critical questions remain as to whether Greece has the capacity to deliver on its obligations under the second Greek bailout, in particular the tax increases, spending cuts, privatisation targets, structural reforms to the economy, public sector redundancies, wage and pension cuts. It must be acknowledged by all that its record to date, to say the least, has not been great. It is hoped Greece will be in a position to deliver on its commitments this time. I suspect it will. We all have a vested interest in the return of stability to the eurozone and in the Greek situation being dealt with in a comprehensive fashion.

The second key issue is whether this bailout, if implemented, will be enough. I wonder if the euro group believes Greece will return to borrowing on the international bond markets at the end of the second bailout. In my view, it will not be in a position to do so. I hope I am wrong. However, only time will tell. The introduction of this legislation in the House this evening comes against the backdrop of pretty grim economic data released by EUROSTAT which demonstrates that in quarter four of 2011 the eurozone economy contracted by 0.3% and Commissioner Rehn’s confirmation today that the eurozone is back in recession.

The proposal before us, which has been signed off on by euro group members and by the Greek Parliament, represents the collective wisdom of those in power in Europe that this deal is sufficient. While it buys time for Greece and the eurozone, I suspect it will be only a matter of time before many of the issues contained in this deal will need to be revisited.

The legislation we are debating today represents the latest instalment in the attempts to stabilise the crisis in Greece, which has been ongoing since 2009, and proposes to give the country breathing space to allow it recover. While Greece, Ireland and Portugal are all in EU-IMF programmes, the origin of the crises in Greece and Ireland are very different. In Ireland, a banking crisis precipitated a crisis in the public finances which was compounded by the collapse in the construction industry whereas in the case of the Greek, public spending was deliberately understated for years. While Ireland stepped out of the original Greek loan facility when it became part of an EU-IMF programme in December 2010, the success of the Greek programme remains of critical importance to Ireland as it is essential to the overall stabilisation of the eurozone. This is especially so given our reliance on an export-led recovery.

By the end of 2009, as a result of a combination of global and domestic factors, namely, the world financial crisis and out of control government spending, the Greek economy faced its most severe crisis since the restoration of democracy in 1974. As a European Union, we need to accept that attempts since then to get ahead of this crisis and put in place a range of measures that would allow Greece to get back on its feet, have been a complete and utter failure. In truth, Greece has often acted in a manner which undermines international confidence in the [66]country and the wider eurozone. In early 2010, it was revealed that successive Greek Governments had been misrepresenting the true state of the economy in order to keep it within EMU guidelines. This allowed Greece to borrow money it simply did not have the capacity to repay.

To avert a default in May 2010, other eurozone countries and the IMF agreed to a €110 billion rescue package, which included €80 billion in loans from euro area member states and €30 billion from the IMF. Ireland participated in this facility. While Greece was required to adopt harsh austerity measures to bring its deficit under control, this has understandably not met with the unquestioning acceptance of the Greek people. Who can blame them? The question that needs to be asked is, was it the austerity package which led ultimately to the need for a second bailout or was it an abject failure of Greece to live up to its obligations under the terms of the agreements that caused whatever investor confidence existed in the country to evaporate completely.

Alongside this additional loan facility there is a write-down of debt by private sector investors. It became increasingly obvious in recent months that this would inevitably have to be done, despite denials by European leaders for many months prior to that. The depth of the crisis into which Greece had plunged meant there was no feasible combination of fiscal measures, namely, tax increases and expenditure cuts, which would have achieved a situation whereby Greece could fully discharge its debts. Even during the best years for the European economy Greece ran deficits. Its crisis is largely a public expenditure one, which has led to an enormous national debt. Incredibly, none of the Greek banks has to date been nationalised. The Irish crisis was largely caused by a property bubble which created massive problems in the banking system and public finances.

The inflexibility of the European Central Bank’s approach to the banking crisis here meant that the burden of rescuing the banking sector fell predominantly on taxpayers in this country, leading to a huge increase in the outstanding Government debt. It should be recognised that our capacity to deal with our difficulties is considerably greater than that of Greece. We remain one of the wealthiest countries in the EU. Our 2011 GDP per capita is forecast to be $39,000 — $3,000 above the eurozone average of $36,000 — while Greece’s is forecast to be $28,000. Of even greater importance is the manner in which our respective economies function. We are a market-orientated economy and we have a generally vibrant traded sector. While the troika has highlighted that areas such as the legal and medical professions undoubtedly need to be opened up, we have a far more dynamic economic base as we continue our process of recovery.

While the banking sector will never be allowed to return to its previous practices and it would not be desirable for the economy to ever again be so dependent on construction, we are not in need of wholesale economic reforms — certainly not of the scale facing Greece. We need to continue to do what we do well, namely, attract foreign direct investment. In terms of assisting indigenous exporters, we need to build on the gains to date and to give them every possible support.

Greece is different in that it has a general government debt level of approximately €350 billion. As a country, it is plagued by a combination of weak exports, poor tax collection and stifling bureaucracy. The study of the Greek debt situation by the European Commission showed that its debt level was set to spiral to 200% of GDP. I understand that the write-down in Greek debt, which accompanies this new loan facility, will bring its debt to GDP down to around 115% before rising again to 120% by 2020. In contrast, without a write-down, Ireland's general government debt will, according to the Government's medium-term fiscal statement, be 106% of GDP at the end of 2011. Under the base case scenario set out in the statement, our debt to GDP will peak at 118% in 2013.

[67]In August 2009, the OECD estimated the size of the Greek black market to be around €65 billion, which is equal to 25% of its GDP. This leaves a huge deficit in Greece’s annual tax revenue. Estimates put this at up to €20 billion per annum. No other European country is facing such a structural deficiency in its ability to levy and collect taxes. By contrast, the Irish Revenue Commissioners estimate that the Irish black economy is approximately 13% of GDP. While this is in itself a cause for deep concern it highlights that the Greek situation has been made considerably worse by its failure to put in place an effective tax collection mechanism. I suggest it would be a worthwhile exercise for the European Commission to engage in a community-wide assessment of how the black economy throughout Europe can be tackled. In an increasingly globalised world, there is an obvious need to maximise the sharing of information and to apply best practice across borders. In addition, reforms of the Greek economy which have long been talked about need to be put in place immediately. While I spoke against the German suggestion that Brussels appoint a proconsul to Athens to run Greece’s affairs as this would be profoundly undemocratic in nature, I believe there is a need for very close monitoring of the implementation of the commitments Greece has given. Clearly, implementation will be fundamental in this case. Greece is set to benefit from a one-off debt reduction, but it will be months or, possibly, years before we will be able to discern its full effects on the Greek economy. While a second bailout and a write-down have become inevitable because of the state to which Greece has fallen, it is not a strategy without considerable risks. It is not one that Ireland should follow; assuming sensible policies are pursued that can stimulate economic growth, Ireland can emerge from the crisis and pay its sovereign debts in full.

It is important to draw a distinction between sovereign debt issued by the Exchequer and bank debt. Ireland should continue to seek to reduce the net cost of its bank recapitalisation. The comments made by the IMF on Friday on the Government’s efforts to renegotiate the promissory note structure with our European partners are highly significant. They offer the Government a clear window of opportunity that must be seized to secure a reduction of the overall burden in recapitalising the banking sector. In the public manner in which it was expressed, this support had not been offered previously, although all Members will have understood the IMF to have been supportive of Ireland, both in respect of burden sharing and the redesign of the promissory note structure. However, unless this opportunity is taken now, particularly given the repayment of €3.1 billion due on 31 March, it may not present itself again. I genuinely wish the Government well in its efforts to negotiate a redesign of the promissory note structure that will deliver a genuine reduction in the bank debt Ireland must pay.

The position within the Greek banks is worth noting. According to its Ministry of Finance this week, bank deposits in Greece have fallen by approximately €70 billion since the start of the crisis in 2009 and this trend is accelerating. Approximately €16 billion of the funds withdrawn were transferred abroad, mostly to the United Kingdom. However, the rest either has been spent or is being hoarded in cash by households preparing for the worst case scenario of a Greek exit from the euro. What is extraordinary at this stage is that no losses have been imposed on the senior bondholders in Greek banks, despite burden sharing of 70% by private sector investors in Greek public debt. This highlights the absurdity of the strategy imposed by the ECB, although this lack of burden sharing may well change, given the write-down of the sovereign bonds held. Three years into the crisis the European Union still does not have a common agreed framework for winding down insolvent banks and avoiding all costs falling on the taxpayer.

In addition to the loan package being put in place under the terms of the euro area loan facility, there is an urgent need for investment in the Greek economy which is underdeveloped in comparison with other European countries. Originally the Greek Government aimed to raise approximately €50 billion by 2020 from privatisations by selling land, utilities, ports, airports [68]and mining rights, but recently this target has been revised downwards substantially because of the worsening economic position. While some of these proceeds inevitably must be used to pay down debt, there is a strong case for allowing Greece to use some of the funds to refocus its economy in a way that ultimately would allow it to grow its way out of its problems.

Apart from tourism, Greece has few sources of foreign earnings. There is a minimal indigenous export sector and it has a poor record in attracting foreign direct investment. This may be a legacy from its relatively recent return to democracy, although in more recent times the reputational damage it has inflicted on itself certainly must have deterred overseas investors who were considering investing in the Greek economy. I suggest the European Investment Bank, EIB, should have a much expanded role to play in this regard. The EIB was established as a policy-driven bank to support the European Union’s priority objectives, especially European integration and the development of economically weak regions. For the fiscal year 2009 it approved approximately €104 billion in various loan products, of which €93.6 billion was within EU and EFTA member states, with the remainder dispersed between so-called “partner countries”. Solidarity between member states is a key founding principle within the European Union. If Greece is serious about meeting its commitments, as I believe it is, as a community we must put our money where our mouth is and not simply lend Greece the money it needs to keep ticking over and pay its remaining debts. We must work to ensure it has a sustainable economic platform on which to build its recovery and the wider eurozone recovery.

Although the European Investment Bank should be at the forefront of bolstering the Greek economy, the European Bank for Reconstruction and Development, EBRD, established during Ireland’s Presidency of the European Union in 1990, also could have a role to play. While its mission was to support the formerly communist countries in the process of establishing their private sectors, the scale of the Greek crisis and the underdeveloped nature of its economy mean that Greece needs all the sources of help it possibly can find. The EBRD has been particularly successful in supporting the building of self-sustaining market economies.

I wish the Government and all of the Minister’s colleagues at Eurogroup and ECOFIN level well as they seek to build an economic recovery across Europe. The statistics released by EUROSTAT today were deeply disappointing and confirm the scale of the challenge that lies ahead both for the European Union and Ireland as a country heavily reliant on its exports. Given the stagnant market into which many Irish exports are being sent, this creates difficulties for Ireland and makes it all the more important to develop new markets in the emerging economies. I note that during the debate on the Finance Bill Members discussed some measures that were designed to stimulate support for the indigenous sector, in particular, as it sought to develop markets in new and emerging economies.

I look forward to the remainder of the debate on the Bill. Fianna Fáil will support it, even though, as I stated, we are not convinced this is a permanent resolution of the issues concerned. However, given that it has been given the support of our European partners and domestic backing by Greek politicians, one must give it a go and hope it will have the desired effect.

Deputy Pearse Doherty: Information on Pearse Doherty  Zoom on Pearse Doherty  Tá an leasú reachtaíochta atá os ár gcomhair anocht faoi éascú dara chlár déine na Gréige, a d’aontaigh Rialtas na Gréige agus an troika an mhí seo a chuaigh thart.

Tá go leor tráchtaireachta aineolach faoi cheist na Gréige sna meáin Éireannacha na laethanta seo, agus tá an cuma air gur maith le daoine an locht a leagan anuas go sonrach ar ghuaillí mhuintir na Gréige iad féin, maidir leis an ngéarchéim.

Ar an drochuair, níl rudaí chomh simplí sin. Ní dabht ar bith ná go gcaithfidh Rialtais na Gréige cuid mhaith den fhreagracht a ghlacadh as an ngéarchéim shoisialta agus eacnamaíochta [69]millteanach atá ag daoine na tíre sin faoi láthair, ach mar an gcéanna le hÉirinn, leis an Phórtaingéil agus leis an Spáinn, is ar na drochbhearta a rinne na Rialtais sna blianta roimh an ngéarchéim in 2008 agus drochpholasaithe airgeadaíochta Bhanc Ceannais na hEorpa, an ECB, is mó atá an locht.

Chuir ballraíocht an euro suimeanna ollmhóra de chreidiúintííseal-riosca saora ar fáil do eacnamaíochtaí laga cosúil leis an Ghréig. Mar gheall ar easpa rialacháin, ag leibheál náisiúnta agus ag leibheál Eorpach, ligeadh do bhancanna san eurozone iasachtaí millteanacha dóchreidte a thabhairt amach. Ar tharraing Rialtais na Gréige iasachtaí agus ar chaith siad i bhfad níos mó ná mar a bhí acu roimh ghéarchéim 2008? Is cinnte go ndearna siad sin. Ar éascaigh cuid de bhancanna na hEorpa, Banc Ceannais na hEorpa san áireamh, agus ar éascaigh an easpa rialacháin airgeadais an cineál mí-iompair gan stuam seo? Is cinnte gur éascaigh.

Cé go bhfuil scála na géarchéime sa Ghréíg difriúil le tíortha eurozone eile atá i bhfiacha ollmhóra, níl na cúiseanna agus an dinimic chomh difriúil sin in Éirinn, sa Phortaingéil nó sa Spáinn, creid é nó ná chreid. I gcás na Gréige agus na Portaingéile, ba é barraíocht iasachtaí Rialtais príomh chúis na géarchéime. In Éirinn agus sa Spáinn, afach, b’iad iasachtaí iomarcacha an éarnáíl phríobhaideach a ba chiontaí.

Ach sna ceithre chás, is é an éascú a rinne na bancanna móra Eorpacha ar iasachtaí ollmhóra gan chéill, agus “codladh ina sheasamh” agus neamhshuim na rialtóirí baince a ba chiontaí, Údarás Baincéireachta Eorpach san áireamh. Tá sé seo chomh soiléir le rud ar bith agus tá a fhios ag gach aon duine é seo ach ní féidir barraíocht iasachtaí neamhréasúnacha a tharraingt — cé acu sin Rialtas nó forbróirí príobhaideacha — mura bhfuil siad sin atáá dtabhairt amach toilteanach iasachtaí iomarcacha a thabhairt amach. Ní féidir le hiasachtaí iomarcacha tarlú ach nuair a theipeann ar na rialtóirí náisiúnta agus Eorpacha a jab a dhéanamh.

The problems in Greece, as well as in Portugal, Ireland and Spain, are not just domestic in origin. They are a consequence of policy failures at domestic and European level. This means that responsibility for the crisis must be borne at domestic and European level. Unfortunately, the approach of the European Union and, in particular, the European Central Bank, ECB, has been to punish the Greek people for failures for which they are partly responsible. Such an approach is not only unfair, it is also destined to fail. For evidence of this failure one need only consider the bailout package agreed between the troika and the Greek Government last month. In 2010, when the eurozone crisis first gripped Greece, that beleaguered country secured emergency funding of €110 billion. In return, it was obliged to increase taxes, cut social spending and dramatically reduce the size of the public sector.

The scale of the austerity foisted on the people of Greece was of a level unimaginable in most other European countries. The figures speak for themselves. By the end of 2011, 21% of Greek people were officially out of work and almost 50% of young people were jobless. The level of homelessness had increased by 25% and poverty by 28%. One in five people living in poverty could only afford meals with meat every second day. The Athens suicide hotline reported that the number of calls it received had doubled to 5,000 in 2011. In conjunction with this human hardship, all the economic indicators were revealing that the austerity programme was not working. Greece remained locked out of the bond markets and its government debt continued to spiral out of control. According to every available social and economic indicator, the first Greek bailout was not working. Did this provoke critical reflection on the part of Greek and European politicians and policy makers? Did anyone in power ask if the reason the first bailout was not working was it was so badly designed? The answer is clearly not. Just as those in power blamed the Greek people for the crisis, they were now blaming them for the failure of the first bailout programme.

[70]Almost two years after the first austerity programme for Greece, we are being asked to approve a second such programme which is based on exactly the same policies which gave rise to the former. The scale of the emergency funding being made available, some €130 billion, is even greater than that for the first programme. The chances of the second programme being successful are even lower than for the first programme. Another 30,000 jobs are to be culled from the public sector in Greece, modest pensions are to be cut by 20%, the minimum wage is to be lowered, taxes on low and middle income earners are to rise dramatically for the second year in a row and state assets to the value of €50 billion are to be sold off. All of these measures will further damage Greece’s economy and its society. They will lead to increases in unemployment and poverty which, in turn, will further depress the economy. This will make a return to economic growth impossible in the medium term.

One of the most obvious aspects of the first bailout programme was the failure to restrain the spiralling level of government debt. Following months of difficult negotiations, private sector lenders, including some European banks, are to write off 53.5% of the money owed to them by the Greek Government. However, the deal on this debt write-down has yet to be concluded and remains fraught with difficulties. Many commentators believe that even if banks fully participate in the write-down, Greece still will not manage to lower its debt to below 120% of GDP. Meanwhile, the Greek Government must bring forward a plan for the recapitalisation of the country’s banks. The cost of this recapitalisation remains unknown. There is little doubt that the Greek people are being punished for the failure of their own politicians and that of political leaders across the European Union.

The deal we are effectively being asked to endorse will mean more hardship for ordinary Greek citizens. It will give rise to further unemployment and poverty and further assaults on the incomes and living standards of those already unable to cope with the cost of the first bailout. We are informed that this is the necessary price which must be paid to fix the broken Greek economy, that it is the harsh medicine required to cure the sick Greek patient. Unfortunately, even a cursory examination of the bailout programme demonstrates that this is not the case.

Let us consider the position on tax reform, for example. While the austerity programmes being heaped on the Greek people dramatically increased tax revenue by €2.32 billion in 2011 and will increase it by a further €3.38 billion in 2012 and 2013, they do nothing to redistribute the tax burden in a fair way. Tax evasion and avoidance will continue among the very wealthy. A recent article in Der Spiegel, the German current affairs magazine, indicated that in Greece “it is mainly a small wealthy class that manages to cheat the authorities out of €40 billion in tax each year”. Nothing in the second bailout programme will address this issue. Rather, the burden of increased taxation will fall on low and middle income earners, pushing them further into poverty, while also further depressing consumer demand and blocking economic recovery.

The conditions attached to the second Greek bailout are a mistake. They are bad for the people of Greece, the Greek economy and the eurozone. While the Bill before the House does not detail these conditions, supporting it means giving our consent to them. As a result of the conditions to which I refer, the loans being provided will not solve the structural problems blocking Greece’s return to economic stability, nor will they assist in bringing stability to the eurozone. Only this morning the Austrian Chancellor, Werner Faymann, said Greece would probably need a third bailout in the coming years. Separately, a leaked troika report which was seen by the German magazine Der Spiegel indicates that Greece may need a further €50 billion in 2015. In itself, this is an admission that the austerity programme we are being asked to endorse is doomed to failure.

[71]Everything I have stated proves the point that Sinn Féin has been right all along in this House since 2008, namely, that the approach taken by the Government and those across Europe is not working. Austerity does not work. One cannot cut and tax one’s way out of a recession, let alone the type of debt crisis with which we are faced. The continued human tragedy and economic catastrophe in Greece are evidence of this.

There is an urgent need for a new approach across the European Union which must be based on investment in growth, real debt write-downs and a real cleansing of the European banking system. Investment in jobs is urgently required in the eurozone, particularly in those countries on its periphery. This can be achieved by combining the resources of member states — in our case this would be the €5.4 billion in the discretionary portfolio of the National Pensions Reserve Fund — with an enlarged investment fund in the European Investment Bank. The existing funds of that bank should be supplemented by a one-off investment on the part of EU member states on a proportional basis. This would be made not as fiscal transfers between states but rather in the form of sound investments that would provide sound returns.

In addition, the matching funding criteria for member states should be amended to a 75:25 ratio, with the European Investment Bank providing the larger portion. With this enlarged fund, the European Investment Bank would work in partnership with those member states experiencing severe recession to roll out major projects in order to generate employment, increase competitiveness and improve the social and economic infrastructure. This would, in turn, lead to both immediate and long-term economic growth. In the first instance, this EU-wide investment programme would aim to kick-start those economies experiencing recession and assist them in reducing their deficits. An enlarged European Investment Bank working with member state governments would not only provide assistance in dealing with the immediate problem of under-investment, it would also help to address the underlying imbalances in the eurozone between those member states with excessive surpluses and those with excessive deficits.

In parallel with this major investment programme, there is a need to reduce the debt burden of certain member states. I refer, in particular, to Greece and Ireland which have unsustainable levels of debt. This can only be achieved by writing down a portion of the debt held by the sovereigns. In Ireland’s case, this could be done by writing down debts that were originally banking debts, while continuing to honour real sovereign debt. In the first instance, this would require lifting the obligation on the State and the taxpayer in respect of the Anglo Irish Bank promissory note. This could be achieved by agreement with the ECB and would reduce our debt to GDP ratio by up to 20%.

  7 o’clock

There is also an urgent need to cleanse the banking system of the as yet undisclosed and unquantified toxic assets on balance sheets. This could only be done by imposing rigorous stress tests, including not only in respect of banks’ loan books but also their exposure to sovereign debt and all special purpose vehicles used for toxic assets such as credit default swaps and collateralised debt obligations. These new stress tests should be followed by a process of writing down portions of the banks’ toxic debts and deleveraging assets in order to refocus the banking system on the needs of the real economy. Only after such a process should the European Central Bank provide any capital required for the recapitalisation of the cleansed banks.

Sinn Féin will not be supporting the Bill. Whereas some will argue that it is a demonstration of solidarity with the people of Greece, the opposite is the case. The emergency funding being provided for Greece comes with conditions attached that are nothing short of an assault on the economic and social well being of the Greek people.

[72]Deputy Clare Daly: Information on Clare Daly  Zoom on Clare Daly  I wish to share time with Deputies Joan Collins, Wallace and Boyd Barrett.

An Ceann Comhairle: Information on Seán Barrett  Zoom on Seán Barrett  Is that agreed? Agreed.

Deputy Clare Daly: Information on Clare Daly  Zoom on Clare Daly  In essence we are talking about a managed default position, where the establishment throughout Europe has understood that what was posed for Greece, given the scale of the debt, amounted to a disorderly default position. It did not want to envisage such a scenario and so the debt was rescheduled in the manner before us today, with a scheme for extending the period for repayments in return for a second bailout. The key point to register is that this was not just granted and is not a benevolent move. What is being demanded in payment for this deal is a package of so-called reforms that are akin to unleashing the fires of hell on the population of Greece.

This scenario has been compared to the position in Latin America in the second half of the 1980s and it is strongly reminiscent in many ways of the Brady plan implemented in that area. We saw how that plan played a significant role both in defending bankers’ interests on the one hand and imposing permanent austerity on the other. The plan for Greece essentially does the same thing by reducing the value of debt stocks, which will be swapped for new bonds, with private banks reducing their exposure to Greece, as they have done previously with Latin America. Gradually but massively, the public creditors, including the likes of our friends in the troika, will take over and exert enormous pressure in order to ensure the new bonds held by the banks are repaid in full with interest on capital.

We should register that every cent of the so-called loans to Greece will be used to repay its debts. Meanwhile, the troika is demanding permanent austerity in the form of social expenditure cuts, massive privatisation, regression in economic and social rights and other actions that we have not seen since the end of the Second World War. As payment for that, we would see a surrender of sovereignty, which is really disgraceful. In Latin America the period was called the long neoliberal night and there is something similar here. We should register that even in Latin America countries never reached a level of indebtedness currently experienced by the eurozone, with a level of 160% of GDP in the case of Greece.

I will spell out what is being demanded of the Greek population and we should look at the shock therapy to which these people are being exposed. The memorandum of impoverishment, as it has been correctly called in my opinion, proposes a number of measures, such as reductions in salaries by 22%, the minimum wage going to €751 per month, the abolition of sectoral bargaining agreements, the freezing of wage bills until 2015, full-time employment being converted to part-time employment based on the decision of employers and a massive decimation of what was already a vulnerable pension position. Pensions will be reduced by €300 million annually, with the new cuts affecting all schemes.

One of the most reprehensible measures is the reduction in employer contributions being imposed, with a 2% reduction in the social contributions of employers through the abolition of contributions for the workers’ housing organisation and other social benefits. These organisations will essentially be forced to close down as a result. There will be a further reduction of 3% in the contributions paid by employers in the private sector in 2013. It is worth noting that these measures were pushed through on a Sunday night on 12 February and the very next day the Greek Government was faced with the European Commissioner responsible for economic affairs stating that it was not enough. He wanted another €325 million in cuts to be introduced within 48 hours, in essence suspending whatever limited democracy already exists.

On top of grinding austerity is the abolition of permanent employment in former state-owned companies, dismissal of 15,000 employees in the public sector this year, cuts of over 150,000 by [73]2015 and a process that will go on and on. There will be cuts of €636 million in salaries for public sector workers, and that is without considering reductions in benefits to families with more than three children, cuts in social benefits, a property tax as part of people’s electricity bill, reduction in the overtime of doctors, and decreases in public investment. This is the massacre being demanded as a result of the deal in front of us today.

What we now have in Europe is the spectacle of an almost open colonial-style agenda being foisted by the stronger European economies, led by German capitalism, and this is effectively egged on and they are being allowed to get away with it by the obedient collaborators in the small, weaker economies like our own. In order to deliver, people have been prepared to throw to the side what would be considered democratic norms, such as the right to elect one’s own government and so on. The only way in which this issue will be addressed ultimately is through ordinary people mobilising and uniting across national boundaries throughout Europe. On the back of the imposed austerity, we have already seen the beginnings of this in a magnificent way with seven general strikes in Greece last year; major movements in Portugal, Italy, Belgium and Spain; the overthrow of the government in Romania and so on.

The task for ordinary people in Europe now is to build a European-wide movement based on an unambiguous rejection of the payment of the national debt to market vultures and institutions like the ECB. The genuine investments of working people, including pension funds, must be protected, but the siphoning of society’s resources for a debt that was not ours in the first place is not the way forward. This money and these resources should be invested in emergency programmes for putting people to work, engendering economic activity and ending austerity. The measures being put forward now offer no solution, which we know, as it has been the show in town. The choice is accepting further attacks on rights and being kicked out of the eurozone or taking more austerity and being kicked out in future; that is not a choice worth making. The way forward is for people across Europe to unite and begin to organise to benchmark living standards against their own governments, which now seem to be more interested in protecting the wealthy rather than their own populations.

Deputy Joan Collins: Information on Joan Collins  Zoom on Joan Collins  The title of the Bill indicates that its purpose is to facilitate, in the public interest, the financial stability of the EU and the safeguarding of financial stability in the euro area as a whole. I note the insertion of the term “public interest” but would it not be more honest to insert the term “in the interests of the European banking system”? What has happened in Greece cannot be described even remotely as being in the public interest. Greece is now in its fifth year of recession and it is estimated that 75% of its decline over the past two years was due to austerity measures. The country has a 25% unemployment rate, with 40% of that made up of young people. There has been a cut in education funding of 25% from a very low spending base of 4% of GDP. Greek society is being forced to jettison the young people who are its future. The NGOs and street clinics for immigrants now service 30% of Greek citizens with food and clothes. These cold statistics cannot give a real picture of what ordinary Greeks suffer. The suicide rates are frightening, with an increase of 40% in the first six months of 2011 following an increase of 25% in 2010. The human cost to the Greek people is staggering and must be taken on board.

The recipe of austerity imposed, including the unprecedented demand for regime change by the troika and Merkozy, has been a disaster for the Greek people and the Greek economy. The people bearing this enormous burden are not responsible for the crisis. Those responsible — the bankers, speculators and market players — have been handed €1 trillion at a 1% interest rate by the ECB under the long-term refinancing operation. This has prompted a market rally and brought down sovereign borrowing rates for Italy and Spain as banks borrow at 1% and lend to these states at 6%, pocketing a 5% profit . The question is how much of this €1 trillion, [74]if any, has filtered down to the real economy. Has a single job been created? How is the €1 trillion to be repaid and by whom? This money is not going into productive investment which would generate economic growth and provide the wherewithal to repay it. It is adding to the debt burden of states which already have unsustainable debt levels with contracting economies in the death grip of austerity.

The only benefit — if it can be called a benefit — is to gloss over the scale of the EU banking crisis. We will now be asked in the upcoming referendum on the fiscal compact to endorse this madness. Irish people must give these issues extremely careful consideration. If the ECB can magic up — that is print —€1 trillion for the banks, why could it not have bailed out Ireland, Portugal and Greece with a 1% interest rate on less than 50% of what was given to the banks and allow them to manage their deficits without the crippling level of austerity demanded by the troika and at the same time have a minimum €500 billion for a programme to create jobs, develop infrastructure and promote growth in the periphery? This would create the possibility of growing out of the crisis.

Deputy Michael McGrath stated Fianna Fáil would support the Bill on the basis that the Greek government and the powers that be have indicated it must be the case. I reject this entirely. A puppet prime minister was put in place by Merkel and Sarkozy. He was parachuted into the Greek Government. Strings are being pulled by international bankers who want their money back. The cost of this is that Greek people must pay enormously, far beyond what they should be paying. The suicide rates indicate the real suffering faced by the Greek people. I cannot support this and I reject the payment of the bailout. Ireland should consider what will happen in the coming months with regard to the fiscal compact treaty because it will batten down austerity in this country and in Europe. The points made by Deputy Clare Daly on European people having more in common with regard to dealing with the needs, economies, lives and jobs of people is key and there should be a Europe-wide campaign.

Deputy Mick Wallace: Information on Mick Wallace  Zoom on Mick Wallace  It was not long ago when Berlin was very eager to be seen as the champion of European unity. I am not convinced history will put that slant on it following this crisis. There is no doubt the attitude towards Greece has changed. I had the impression 18 months ago that under no circumstances would Germany allow Greece to fall away from the eurozone but I am not convinced of this any more. A lack of trust has developed and the German finance Minister, Wolfgang Schåuble, has been fairly open about this. He is eager to be rid of Greece at this stage. Now that a better firewall is in place and there is not much confidence in Athens implementing the reforms the Germans would like it to implement, I would not bet on Greece being part of the eurozone in two or three years time.

The austerity programme on which the Germans insist for all of us is hugely problematic, not for them but for us. The German attitude has the potential to destroy the eurozone. If European monetary policy is run according to German interests, huge structural imbalances will accumulate. The unemployment rate in Germany is very manageable at present as it is less than 7%. Last year its GDP growth was 3%. It suits Germany very well for us to implement austerity but we can all see what austerity is doing here and it is even more draconian in Greece.

The unemployment level in the 17 countries of the eurozone has reached 16.9 million, which is 10.7%, and includes the good countries such as Germany and the Netherlands. Mass unemployment is haunting Europe; it is the biggest problem out there. I do not see how bleeding the patient will be a cure. Unemployment will not be fixed by austerity. The fiscal problems might be fixed but unemployment will not be. It is frightening to see how EU-imposed cuts have left one in five people unemployed in Greece and increased the suicide rate by 40%. This [75]is serious and very frightening. Anyone who argues austerity will spur growth or boost employment is living in cloud cuckoo land.

The philosophy of John Maynard Keynes is out of favour at present. He famously stated if one looks after unemployment, the budget will look after itself, but sadly this is not how Berlin sees it. I would like to argue that Europe’s crisis is not only about economics. Unlike GDP or inflation, unemployment is the major economic indicator which measures real human beings rather than growth or prices. Having a job is not just about earning a living or paying taxes; it is about dignity and self worth. The human and social costs of unemployment are well known and are the same here as in Greece: financial hardship, emotional stress, depression, loss of morale and status, shame, sickness, premature death and hopelessness. These lead to crime, disorder and social unrest. We are sowing the seeds of many problems. Through cuts to education and the lack of employment, austerity is robbing us of the future. It is also robbing us of the present because of the lack of work and the hardship people are going through.

I know it is not easy to run a government. It is not easy to run a business. However, it is not good enough to state we have no money if we are able to find €31 billion for Anglo Irish Bank. A total of 450,000 people are unemployed in Ireland. If it took €30,000 to create a job for each of these people, it would amount to €13 billion, which is less than half the amount being given to Anglo Irish Bank and less than one third of what it will eventually cost us to give it this €31 billion. We are able to find money for some things but not for others and this has to do with our approach. I do not see how what is being done to Greece will help. We are being told the Greek economy will contract by only 4.3% this year, will not contract next year, before achieving a growth rate of 2% in subsequent years. Last year it contracted by 8%. How, in God’s name, will Greece reduce the rate of economic contraction to 0% next year? This objective is not possible against a backdrop of wage, expenditure and pension cuts, collapsing consumer confidence, capital flight and an investment strike. How will Greece turn its economy around under these conditions? I wish the Greeks well, but at some stage Europe will have to reconsider the philosophy of austerity. The medicine will not produce the cure it seeks.

Deputy Kieran O’Donnell: Information on Kieran O'Donnell  Zoom on Kieran O'Donnell  Gabhaim buíochas leis an Aire as an chúpla focal a dúirt sé ar an ábhar tábhachtach sin. Caithfidh mé nóiméad ag caint faoin reifreann atá ag teacht roimh an samhradh. Ba léir dom ag an deireadh seachtaine tar éis caint le daoine i mo dháilcheantar a bhfuil suim acu faoi chúrsaí a bhaineann leis an reifreann gur mhaith leo bheith i lár na hEorpa. Tá sin tábhachtach agus sinn ag caint faoi chúrsaí sa Ghréig. Maidir leis na daoine atá i gcoinne an reifrinn, ba léir freisin go raibh siad ina choinne is cuma cén ábhar ar bhain sé leis. I mo thuairim, agus de réir na pobalbhreithe a bhí sa nuachtán ag an deireadh seachtaine, tá na daoine báúil don Eorap agus tá suim acu Éire a choimeád i lár na hEorpa. I mo dháilcheantar tá a lán daoine atá ag obair sa talmhaíocht agus i ngach contae sa tír tá sé tábhachtach go bhfuil na margaidh oscailte chun a dtáirgí a dhíol. Nuair a labhair mé le muintir Fhine Gael agus daoine eile nach bhfuil ina mball de pháirtí ar bith, tá siad ar aon-intinn go bhfuil sé tábhachtach Éire a choimeád i lár na hEorpa.

This debate provides me with an opportunity to speak not only about Greece, the subject of the legislation, but also the broader context of Ireland’s position. Despite previously bemoaning the fact that Ireland was being discussed in the parliaments of other European Union member states, several speakers in this debate do not appear to have a problem in lecturing the Greek Government on its internal affairs, especially how it deals with budgetary issues. The Greek people have endured a tumultuous period and unfairly become the butt of many jokes. Greece is a sovereign and proud country, to which we can trace back the roots of democracy. It is a relatively new democracy which has experienced turbulent times since the Second World War. Greeks will be annoyed to hear members of another sovereign parliament lecturing them on [76]what they should do with a deal negotiated by their sovereign government with 26 other member states, the European Commission, the European Central Bank and others. They will not be grateful for lectures from Members of the Oireachtas on what they should or should not do or what impact the deal may or may not have on their economy. When Deputies throw around comments about other member states in a European Union of equals, they should remember previous comments they may have made about how Ireland was being perceived in other parliaments.

Some of the Deputies who have spoken have changed their tune in the past 12 months. Having seen the fortunes of their party improving in the opinion polls, they may believe that if they temper their words a little more, their fortunes could improve further. Some of them refused to admit until recently that they had anything to do with the bank guarantee and wondered whether they were present in the Seanad Chamber when a certain vote was called or whether their words about the green jersey and bailout were taken out of context. They have suddenly gone full circle and want to distance themselves from their actions in this Chamber and the other House. People will be able to judge the unfairness of that approach.

We heard comparisons being made between Ireland and Greece. For many months the Minister for Finance has been at pains to point out that one cannot draw comparisons between our two countries which are totally different in respect of economic forecasts, where they are coming from and where they are going. The leadership provided in this country proves that is the case. For instance, if one compares Greek and Irish exports, one finds that Ireland is in a much stronger position than Greece to drive its way out of its difficulties.

That being said, as a member of the European Union, should Ireland wash its hands of countries that find themselves in difficulty or should we try to help them? I welcome the opportunity to discuss the European treaty and put it to the people in a referendum because it will be the first time we will have a proper, informed debate on the issue. The fiscal treaty is relatively small and those who seek to drag irrelevant issues into the debate will soon be found out. The first set of opinion polls since the treaty was signed was published at the weekend. The polls show that if issues are distilled for members of the public, they wish to be central to rather than on the periphery of Europe or left behind.

One speaker referred to Greece signing up to austerity for posterity, while another argued that the European treaty would enshrine austerity in law. To be fair to the speakers concerned, they may need a dictionary. Countries are being required to live within their means. One hears socialist parties argue it is a bad thing to live within one’s means. Many of these parties had close associations with some of the former Soviet leaders and many have admirers in the last remaining Soviet outposts of North Korea and Cuba. They appear to believe it would be a bad thing to make it legally binding on countries to live within their means. Greece finds itself in its current position because governance, oversight, accounting and reporting were lacking. We heard about similar problems in this country. Fortunately, however, Ireland’s economy is export led.

Deputy Mick Wallace is correct that austerity measures are having a major impact on families. There comes a time, however, when people must take responsibility. In fairness to the Leader of the Opposition, he attempted to take some responsibility at the weekend when he issued an apology. Others must also ask themselves whether they acted responsibly or treated people fairly in the past 14 or 15 years.

Debate adjourned.


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