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

Wednesday, 7 March 2012

Dáil Éireann Debate
Vol. 758 No. 2

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Question again proposed: “That the Bill be now read a Second Time.”

Deputy Patrick O’Donovan: Information on Patrick O'Donovan  Zoom on Patrick O'Donovan  Bearing in mind the discussions on the forthcoming referendum, the main crux of the issue arising in respect of Greece is that we must be mindful of the member states of the European Union which make a net contribution to the financing on which the remaining countries rely. We must, therefore, establish structures to ensure the problems facing Greece and, to a lesser extent, Ireland, Portugal, Italy and Spain, cannot recur. While we have an economic union and a semi-political union in Europe, the strict criteria required to bind the Union together and provide governance and supervision was wholly absent in the case of Greece.

As I noted yesterday, the Greek people have taken on a major burden, as have people in this country. Comments made in the House yesterday about how the Greek Government has addressed problems in Greece were insensitive. It is a sovereign government which has dealt effectively with its problems and has taken some difficult decisions. In fairness to the other 26 member states, this has been shown to be the case.

Circumstances in Greece and, to a lesser extent, Ireland show the importance of passing the forthcoming referendum to secure access to the European Stability Mechanism in future. We do not know what lies ahead. Countries which find themselves in difficulty in future — I hope they will be few and far between and their difficulties will be much less severe than those Europe currently faces — must have access to the mechanism that will act as a firewall to prevent their economies from collapsing. There is currently no mechanism in place to allow a country to leave the euro, nor should countries be forced out of the single currency. We must ensure that taxpayers in compliant member states that live within their means have an assur[379]ance that their taxes are being spent wisely, their efforts respected by other member states and everyone is playing by the same rules. This has not been the case until now.

I wish the Minister well in the difficult negotiations that lie ahead and on Ireland’s role as EU President. I do so not only because he and I are both natives of west County Limerick but also because he has an unenviable task, one that could shape the future of the economy.

Deputy Paul J. Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  I welcome the opportunity to speak on the Euro Area Loan Facility (Amendment) Bill 2012. The legislation aims to ensure the financial stability of the European Union and safeguard the stability of the euro. It is required to give effect in law to amendments and measures agreed by EU Heads of State and Government last July. In recent years, we have had unprecedented volatility in the financial markets in Europe and every country has struggled to ascertain the implications of these developments for its citizens. During this time, debate on the European project has ground to a halt, as every country seeks to ameliorate the extent to which it is affected by the Europe-wide volatility. We must not lose sight of the tremendous benefits the European project has brought to Ireland and Europe, namely, peace and political stability, mechanisms for agreeing a way forward in the interests of all European citizens, the Single Market and the common currency.

The Euro Area Loan Facility (Amendment) Bill is a common sense measure. We must learn from the mistakes that led to the current financial impasse and plan ahead to ensure such mistakes are not repeated. Excessive lending and budget deficits were at the heart of the creation of the current crisis. The Bill seeks to establish protocols to avoid repeating the mistakes of yesteryear and create a financial environment that is safer for citizens across Europe.

There is a price to be paid for the Bill and the stability it aims to create. Essentially, the interest Greece is required to pay to Ireland will be reduced by €5.2 million. This is only a small part of the burden faced by our Greek partners. It should be noted that Ireland has benefited from a €9 billion reduction in the interest to be paid on our loans from EU sources. Some 400 years ago, the logic behind the euro area loan facility was recognised when the Bard of Avon stated succinctly:

We must look to the future, one in which neither excessive borrowing nor lending are features of our economic policy. To do otherwise would undoubtedly result in losses for Ireland and our friends in Europe and beyond. The Shakespeare maxim I cited is used in household budgets across the land. The same logic must be applied to the nation’s finances as we seek to keep borrowing and spending to a minimum to ensure essential services are maintained while constantly reducing the budget deficit.

The Minister for Finance has faced up to a number of difficult budget decisions and more will surely follow in the period ahead as he seeks to rectify the mistakes of the past when excessive borrowing dulled the edge of our economic husbandry. Ireland will clearly need to access finance in 2013. Thus, it is in the interests of all citizens that the groundwork be done now to reduce market volatility and plan a way forward. This would ease the current crisis and reduce the possibility of a repeat of the calamitous events of recent years. The Bill before us goes some way towards achieving this objective. While people’s fears and worries must be taken on board, it is fundamental to the future of the country that this legislation is enacted here and elsewhere in Europe in order that the Continent proceeds in a cohesive manner in terms of the parameters for the new loan facility.

[380]Deputy Peter Fitzpatrick: Information on Peter Fitzpatrick  Zoom on Peter Fitzpatrick  I welcome the opportunity to discuss the Euro Area Loan Facility (Amendment) Bill 2012, the purpose of which is to enable Ireland to confirm acceptance of the second amendment to the Greek loan facility, GLF, as part of the proposed new programme of assistance for Greece. While the legislation contains numerous measures, at its core it is simply about showing benevolence to our fellow man. This will have an economic cost to the State in the form of the reduced interest payments we receive from the Greek Government. At approximately €5.2 million per annum, these reduced sums are not insignificant. However, these payments are based on a sum of €345 million we provided for Greece before entering our EU-IMF programme. As Deputies will agree, those were different times.

The Government, specifically the Minister for Finance, Deputy Noonan, has since successfully and skilfully negotiated a €9 billion reduction in the interest cost associated with our borrowing from EU sources. Does anyone seriously suggest that we should benefit to the tune of €9 billion while denying or, to put it another way, begrudging a country such as Greece a reduction of €5.2 million? I may be many things but a hypocrite I am not. Given that the amendment is being made in the spirit of solidarity with our Greek colleagues, I share the Government’s view that this is a small amount to assist a country in serious difficulties.

Another aspect of the Bill should not be overlooked, namely, the objective of facilitating, in the public interest, the financial stability of the European Union and safeguarding of the financial stability of the euro area as a whole. Financial stability must be of the utmost importance because stability in anything, whether markets, currencies, interest rates or peace processes, has an immense collective benefit. It provides assurance, and when people are assured, they develop confidence, which opens up new opportunities and breathes life into communities and markets. I have witnessed this at first hand in Drogheda with the recent and continued success of the “Local Heroes” initiative. Not content with the success of an initial trade mission, a second trade mission will leave the town bound for Silicon Valley later this week, with the explicit aim of encouraging new business for the town and greater area. In addition, the mission will showcase some exciting new emerging companies from the greater Drogheda area.

Also in my constituency I have witnessed at first hand the benefits of stability and consistent tax rates with the recent high profile arrivals in Dundalk of companies such as Prometric and PayPal. These highly welcome investments provide a welcome boost to the town and will greatly change the unemployment landscape. As a result, it would be remiss and almost hypocritical of me not to favour bestowing such benefits on our Greek counterparts when they are in severe financial difficulty.

My constituency, in particular the town of Dundalk, has suffered more than most from currency and interest rate movements over the years. There is a simple saying in the greater Louth area which is particularly pertinent to our Greek friends: “One never kicks a man when he is down.” With that thought in mind, I do not have any hesitation in commending the Bill to the House.

Deputy Sean Fleming: Information on Seán Fleming  Zoom on Seán Fleming  I welcome the opportunity to contribute to the debate. The purpose of the legislation is to enable Ireland to confirm its acceptance of the second amendment to the Greek loan facility as part of the proposed new programme of assistance for Greece and to facilitate, in the public interest, with which all of us will agree, the financial stability of the EU and the safeguarding and financial stability of the eurozone.

It was agreed on foot of an intergovernmental treaty in May 2010 to set up the Greek loan facility to provide bilateral loans totalling €80 billion to Greece from eurozone member states in conjunction with an IMF assistance programme of €30 billion over a three-year period. This was a few short months before Ireland had to enter a similar agreement with the IMF, the EU and the ECB. All signatories to the Greek loan facility agreement have been requested to [381]provide their acceptance to this amendment to the facility by 13 March. This was finalised only on 27 February. The Bill has been presented to the House at the first available opportunity and we are happy on this side of the House to facilitate its passage. I understand the President will sign the legislation as a matter of urgency in order that there is no hiccup regarding the deadline.

One of the Bill’s provisions reflects agreement among the Eurogroup ministers on 20 February that there would be a reduction in the margin payable under this loan facility of 150 basis points. The Minister made it clear last night that Ireland provided €345.7 million to Greece through the original loan facility before it entered the EU-IMF programme. When we entered the programme, we left the Greek loan facility because countries in an IMF programme are not expected to contribute and, therefore, we are relying on countries that are not in such programmes to carry the can. However, it is important that quarterly interest payments are made by Greece. The reduction in the interest rate by 150 basis points will mean the Exchequer will receive €5.2 million per annum throughout the lifetime of the agreement.

An extension of the grace period from four and a half to ten years before Greece begins to repay the loan principal is provided for and the maturity of the loan will be extended from 7.5 to 15 years. Is it possible for Ireland to exit the agreement and seek early repayment of the €345.7 million we put in in good faith before we entered the IMF programme? I am not sure of the status of such a proposal but if there is a reduction in the interest repayment the Exchequer receives on an annual basis, I assume the capital amount we put in before we entered our IMF programme is still in this loan facility. Could a mechanism be agreed as part of the Minister’s discussions with the troika to retain the €345.7 million for at least the next ten years? Everybody knows the difficult position Ireland is in and would agree that this amount would be beneficial in the context of dealing with our own debts. I recognise we provided the money in good faith but events overtook us quickly and, perhaps, it is an issue that should be tabled for future discussions with the troika to ascertain whether a mechanism could be provided for Ireland to regain that funding to use it for its own purposes.

The agreement has not been arrived at without the people of Greece suffering a great deal of pain. We see Greek people on the streets almost every night. A new government and Prime Minister are in place but it must be recognised the government is not democratically elected. The democratically elected government had to be replaced at the insistence of the people who were owed money by Greece and I look forward to the return of democratically elected governments in Greece and Italy at the first available opportunity.

To achieve greater compliance, new efforts are under way to install “an enhanced and permanent troika presence on the ground” in Greece. I do not like this phrase used by the troika because it is too similar to “troops on the ground”. In addition, the troika will open an escrow account for Greece. In other words, from now on the troika will pay off Greek bondholders and withhold funds to the Greek Government. It is taking charge of banks accounts on behalf of the state and Greek acceptance of the new account was the greatest surrender of fiscal sovereignty by an industrialised country in recent history. A government, which was not democratically elected, has agreed to the troika taking control of its bank accounts and the troika will pay the bondholders and meet Greece’s international commitments before paying for health and social services. Apart from having people on the ground, the troika is taking full control. This is the equivalent of a company going into receivership with the receiver in situ on the ground.

Ireland is not Greece, as the Minister has stated several times, and it is important to restate that. Greece is in a much worse position. Part of the problem is people could not accept or believe some of the figures coming out of the country. An element of the agreement is private [382]sector involvement. It will be different from all previous agreements because it provides for a bail-in where Greece’s private sector creditors, albeit on a voluntary basis, will be encouraged to exchange their existing bonds for new ones with a lower nominal value. If this is done voluntarily, it will avoid triggering a credit default. Those who issue credit default insurance will not consider this to be a default and there will not be a payout. Some people in the private sector would prefer to trigger a default in order that they could cash in their insurance policies. However, under this agreement, they will voluntarily agree to exchange bonds under pressure from various governments. Private sector involvement will result in the value of debt held by Greek bondholders being reduced by 75% and with the additional participation of external bondholders, the debt burden will reduce by approximately €100 billion.

The ECB and the central banks of eurozone members are not included in the private sector deal. The ECB is the largest holder of Greek debt with some saying it is of the order of €40 billion. It was acquired as part of the securities markets programme last year. In the past year, because people were concerned about a Greek default, senior bondholders were selling off Greek debt because they were afraid they would take a hit in the long term and the ECB through various mechanisms purchased them at a reduced price. This means the bank will make a killing in due course.

Recently, the European Commission President, José Manuel Barroso, said more than €20 billion in Structural Funds are available to Greece under the 2007 to 2013 programme. To date, €8 billion has been released but there is scope to do much more between now and next year. Another €7 billion could be released. The Structural Funds are part of a long-standing set up where money is spread around the EU according to economic need.

  5 o’clock

In response to concerns about Greece’s history of mismanagement of EU funds, President Barroso stated, “Now the sense of urgency is completely different,” and hoped Greece would manage the structural funds properly from now on in the interest of achieving some level of growth in the economy. The head of the group of eurozone finance Ministers, Jean-Claude Juncker, said only a week ago — this is possibly the troubling aspect of what we are talking about — that Greece might need a third bailout. He also said, however, that he wanted to concentrate on the second bailout of €130 billion, which we are facilitating in this legislation and which aims to cut Greece’s debt to 121% of GDP by 2020. We must bear in mind that our debt is expected to be of that magnitude in the next few years. If Mr. Juncker is saying that a certain level of debt could lead to a further bailout, although he was not speaking about Ireland, it is not unreasonable to extrapolate that his comments could also apply to countries in similar financial situations. The Irish financial situation is not a whole lot different because our debt-to-GDP ratio will be of the order of 120%. In this regard, it is important that the Government seek a reduction in the bank debt portion of our overall Government debt. Overall, the banking crisis has cost us €60 billion to €70 billion, which represents about 40% of our total debt as a State. Most people will accept that a debt-to-GDP ratio of 120% is too high and too close to the Greek figure that is causing alarm. Those who are owed money as part of our bank debt must reduce this bank debt to Ireland. Our debt must be sustainable in the future. As I have just mentioned, Jean-Claude Juncker is afraid that a debt of 120%, which could be owed by Greece by 2020, might not be sustainable and might necessitate a further bailout. The view is that such a debt-to-GDP ratio is a particular difficulty. Our debt must be sustainable, but at that level it is on the edge of unsustainability.

I welcome the Government’s action, as mentioned in reports on RTE recently, on promissory notes. It should not be a matter of restructuring interest rates and schedules of repayment; there must be a reduction in the actual debt. I am separating the 40% or so of our total debt that relates to the banking collapse from the amount of money the State ran up in deficits on [383]an annual basis and that are still being run up, albeit at a lower rate, to pay for basic public services. Nobody can dispute that we did that to pay our doctors, nurses, teachers and social welfare recipients. We cannot get away from that. However, there must be a reduction in the bank debt. Those people who lent to Ireland for this purpose must agree to reducing the level of debt. They must be asked to do this by the Government and they must be genuinely pressed to reduce the amount. They must agree to an actual reduction in the debt and not just a jiggling around of rates of interest and schedules of repayment. Movement around the edges is not sufficient on this important issue. There have been bailouts in various countries, and these creditors must be now asked to bail in and be part of the solution. It is in their own financial interest to do this. They must, as part of this process, reduce the bank debt they are holding on behalf of the Irish State, which accounts for approximately 40% of the total Government debt. We can go nowhere in terms of revitalising the economy unless there is an actual reduction in the level of bank debt.

Deputy Dara Murphy: Information on Dara Murphy  Zoom on Dara Murphy  I wish to share my time with Deputies John Paul Phelan, Joe O’Reilly and Peter Mathews.

Acting Chairman (Deputy Tom Hayes): Information on Tom Hayes  Zoom on Tom Hayes  Is that agreed? Agreed.

Deputy Dara Murphy: Information on Dara Murphy  Zoom on Dara Murphy  I welcome the opportunity to speak on this debate and to show solidarity with our European partners and the people of Greece.

It is ironic, and worth noting by the members of the Fine Gael Party who are here — since there is nobody else in the House — that although there has been much criticism of the German parliamentary committees’ discussions of matters to do with Ireland, we now have the opportunity to discuss matters concerning Greece. It must be acknowledged that countries in a Union are linked in terms of their operation and functioning. It is a credit to the Minister, Deputy Noonan, that this morning the Opposition started to suggest that the once impossible prospect of any renegotiation of interest rates or rescheduling of loans will now not be good enough. One Independent Deputy, who is one of the most negative and pessimistic individuals in the country, said that even a full and total write-off of our banking debt would still not be adequate. This serves to show exactly how negative our Opposition has become. I wish the Minister continued success in that regard.

That Greece is in a worse position than Ireland is not something that should give us any satisfaction, but it is important to emphasise that the nature of our debt is very specific and is different not only from that of Greece but also from those of other European countries. Our debt was caused by a property bubble, bank failure and a failure of Government oversight in the past number of years. Our other key economic indicators are continuing to improve slowly but steadily, which goes against four or five years of steady disimprovement. Today we have seen small increases in the number of people in employment; our economy grew last year and it is believed it will continue to grow this year. Perhaps most importantly, our competitiveness has significantly improved in recent years. Those measures combined will show that Ireland has a strong future.

There has been discussion of a second bailout, and today I heard members of the Opposition talking about a third bailout for Greece. There is no doubt such talk, particularly in Ireland’s case, is extremely unhelpful. Based on most of the economic predictions, it seems we will not require a second bailout; nor should we wish to see a third one in Greece.

There has been some pretty unfair commentary about democracy in Greece. The leadership of Greece has been established as the democratically elected Parliament. While few could argue that it is ideal, it is wrong to suggest that somehow the people of Greece, and the people of Italy, have lost their democratic leadership.

[384]Acting Chairman (Deputy Tom Hayes): Information on Tom Hayes  Zoom on Tom Hayes  The Deputy has one minute left.

Deputy Dara Murphy: Information on Dara Murphy  Zoom on Dara Murphy  Excellent.

With the Greek write-down of debt, its debt-to-GDP ratio will come close to Ireland’s in the next few years. It is extremely important, however, to note that our projected debt-to-GDP ratio of 119% by 2013 represents a maximum figure which has been achieved by working through our programme. There is significant potential for reduction of that figure.

Deputy John Paul Phelan: Information on John Paul Phelan  Zoom on John Paul Phelan  I welcome the opportunity to speak on this Bill, the aims of which I support. Without repeating what previous speakers have said, I appreciate the difficulties and hardships that have been inflicted on people in Greece in recent years. They certainly do not deserve to be preyed on or spoken about in the House in the manner in which they have. People in Greece are suffering. This legislation is an attempt to provide a longer term solution to the difficulties in Greece. A number of important dates will emerge in the next few days with regard to what is proposed in the legislation. I understand tomorrow is the last day for signing up for private sector involvement, which is a crucial aspect of the legislation. Tomorrow, 8 March, is the last day to sign up for the Greek bond swap offer. This legislation is noteworthy in that it is very different from many of the discussions we have had on this issue previously. That private sector involvement is included is a significant new departure.

I commend the Minister, Deputy Noonan, for his ongoing negotiations on the promissory notes issue and wish him the best in that respect. To listen to several members of Fianna Fáil — essentially all the speakers prior to the previous one — talk about the urgent need to renegotiate the promissory notes and that action must be taken now, when that party so recently landed the country with the promissory notes as they currently exist, is the height of hypocrisy. The Minister spoke about the importance of this renegotiation long before it became popular in the mainstream media and I wish him well in that regard. I echo some of the sentiments expressed earlier about the possibility that it would include not only interest rates and the terms but the capital amount and the possibility that some negotiated settlement can be reached in that regard. I am not sure if that is feasible but it is that towards which we should negotiate.

I listened in almost disbelief to the previous Fianna Fáil speaker speak of the necessity for an agreement across Europe for a write-down of all of the banking debt. These are the people who made a political decision to nationalise Anglo Irish Bank, which effectively was the bank of their friends and cronies, and landed a significant amount of debt onto the shoulders of the Irish people. I cannot let that comment be made by that Member in this House without challenging the hypocrisy of it. I do not know if Deputy Fleming was using the royal “we” when he spoke about the debts we ran up and how we ran them up on the basis of paying doctors and nurses. His party ran them up on the basis of winning elections and buying people’s votes and perhaps that is what he was trying to get at in the point he was making.

It is worth pointing out that in respect of the difficult decisions the Minister has had to take since he assumed office, we have heard as recently as last week the ESRI state that the Government is on target for its budget deficit targets for the end of the year. Last year it exceeded those targets and that has a real impact on people’s lives. Often politicians and members of Government lecture households and businesses on the need to balance their books and that is why I particularly support the stability treaty. Twice in my lifetime, once when I was very young in the late 1970s and now in more recent times, the Fianna Fáil Party has broke the country by ramping up public expenditure on the back of election promises and gimmicks. The stability treaty is to be supported because it will not allow it, in whatever incarnation it takes in the future, to do that ever again. For that reason the treaty is to be welcomed. I fully support [385]the Minister and his officials in the difficult task of trying to negotiate a better deal than the deal Fianna Fáil left for them as they go about their business in the European Union.

Deputy Joe O’Reilly: Information on Joe O'Reilly  Zoom on Joe O'Reilly  I support the legislation which essentially gives effect to a second bailout for Greece. I do so in solidarity with the Greek people and our euro partners. It is important that we do that while recognising the suffering of the Greek people. This measure will facilitate €130 million additional funds being made available to Greece, it will allow for the Greek private sector to take a 53.5% write down of its debt, a longer grace period of up to ten years for paying back the loan principal and a lengthening of the maturities of the loans to 15 years. It will mean the interest we will receive from Greece will be reduced by €5.2 million annually but this is not significant in terms of this exercise in solidarity.

It must be borne in mind that we benefited from a €9 billion reduction in our debt through the reduction of interest rates. It is in the context of that reduction and the saving of the €9 billion that I pay a warm tribute to the Minister for Finance, Deputy Noonan, for the way he has built up confidence in this country among our euro partners within the enlarged EU and at an international level generally, which will have implications for inward investment. That €9 billion saving is a derivative from that confidence building. Similarly other benefits will accrue from it. I wish him and the people around him well in the renegotiation of the promissory notes in terms of the implementation of the payment patterns.

I could not adequately endorse the words of my colleague, Deputy Phelan, regarding the hypocrisy of Fianna Fáil on this issue and its failure to publicly admit on each occasion its members speak that the entire issue has its origins in its profligacy, mismanagement and viewing of the national finances as an election slush fund.

We should note the suffering of the Greek people. Rather than engage in triumphalistic talk about us thankfully being in a better position than Greece, we should acknowledge the pain they have gone through and the huge sacrifices they have been making. I had the privilege of meeting Greek parliamentarians through my membership of the Council of Europe and I have anecdotal evidence to support that they have suffered a great deal. It is an arguable thesis that they may not have been as fit or as well prepared initially as other countries for entry into the eurozone, and they did have structural difficulties but that makes their achievements and the pain they are enduring all the greater. It is in that spirit we should address the issues.

We should not only pass this Bill before the House but endorse with enthusiasm the fiscal compact treaty and the referendum thereon. It is very important that we do that. Our membership of and access to the European Stability Mechanism will act as a safety valve for us. We do not aspire to a further bailout, which we are hoping to avoid, but the ESM will act as a security net for us in that it will make it easier for us to borrow on the open markets in the future because of the realisation that we have a fall-back position. It will also facilitate and provide confidence for inward investment. Were we not to pass the referendum we would not be as attractive as a window into Europe or as an English-speaking country into the eurozone. It is important that we support it from that perspective and from the perspective of organising an effective job stimulus which is allowed within the fiscal compact treaty, despite Opposition attempts to portray it as an austerity measure. It will bring only best budgetary practice into place. It will allow expenditure. We will not be affected by its terms while we remain under the EU-IMF programme, but it will allow expenditure for job creation projects and constructive economic activity.

I endorse the legislation. I believe it is another sign of us, as a mature Parliament, taking our place within the eurozone. I think we will go from strength to strength and all the indications are that we will do so.

[386]Deputy Peter Mathews: Information on Peter Mathews  Zoom on Peter Mathews  I welcome the opportunity to speak on this Bill. Greece needs the support of all the members of the eurozone. This Bill seeks to support the legislation which will achieve the second Greek bailout. However, we must consider what has happened in the past 18 months. It is as if a storm cloud has gathered over what is normally the sunny parts of Europe and the Mediterranean. As Deputy O’Reilly pointed out, the pain and suffering in Greece is enormous. It is not true, as sometimes has been suggested in low tones, that the Greeks did not face up to their responsibilities. Greek expenditure has been slashed by one third. For every €3 million Greece was spending before the crisis became chronic, it is now only spending €2 million. These cuts are twice as high as the cuts in Ireland, five times higher than the cuts in Portugal, eight times higher than the cuts in Spain and 17 times higher than the cuts in Italy. This is severe and it suggests where the dominant political countries of Europe have been making the formulas for recovery and for rehabilitation. There is a slight ring of the word “reparations” because the Greeks overspent, did not work and indulged. That is not the case.

Helmut Kohl, one of the really outstanding leaders of Europe some years ago, only last Tuesday week pointed out that the so-called evil spirits had not totally gone away. He said that hand wringing and petty politicking should be set aside and that leadership of stature was now required. I agree with that. While we look at fiscal adjustments and fiscal architecture for the years ahead, there is now a huge debt burden that is patently unsustainable across the eurozone, and particularly in Ireland. I have just come from a meeting of the Joint Committee on Finance, Public Expenditure and Reform where statistics showed the increased levels of household debt, non-financial corporate debt and national debt. Our national debt is growing as we have to attend to paying out on foot of the promissory note.

I would like to make one last point. There is a misunderstanding about this promissory note construct. Under the euro system rules, which apply to the ECB and to the central banks under its umbrella, there is a prohibition against lending to any institutions that are deemed to be insolvent or approaching insolvency. In order to redeem the bondholders in the busted banks, namely, Anglo Irish Bank and Irish Nationwide Building Society, and because the loan losses had not been estimated at that stage, there had to be a manufacture or construct of the promissory notes to give the viability of those institutions some substance. However, the lending was provided by our Central Bank and the ECB to those institutions which enabled them to redeem the bonds in full. Therefore, that is where the problem lies and tomorrow we hope the Governor of the Central Bank, Patrick Honohan, will insist yet again that the restructuring of that creditor obligation to the Central Bank of Ireland under the euro system can be written down in order that the promissory notes on the other side can be extinguished rather than restructured. If they are only restructured, the liability still remains.

Acting Chairman (Deputy Tom Hayes): Information on Tom Hayes  Zoom on Tom Hayes  I believe Deputy Boyd Barrett is sharing with Deputy Catherine Murphy.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett  Zoom on Richard Boyd Barrett  We have ten minutes each.

Acting Chairman (Deputy Tom Hayes): Information on Tom Hayes  Zoom on Tom Hayes  I will let you know when you have two minutes left.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett  Zoom on Richard Boyd Barrett  I will need at least a two minute warning.

The Government has sadly parroted the lie that this programme for Greece is a bailout or some kind of act of solidarity with or assistance to the Greek people. Nothing could be further from the truth. This programme for Greece is purely and simply a bailout for the banks and the bondholders in Greece and across Europe who turned the European economy into a gambling casino. They caused the crisis, but ordinary Greek people are being asked to pay the [387]price with the most savage austerity. We need to be absolutely clear. This is not an act of solidarity. It is not a bailout. It is a crucifixion of the Greek people and a robbery of their state assets, state enterprises and natural resources.

The proof of these assertions is that the loans being given to Greece are not even being given to the Greek Government or state and they are most certainly not being given to the Greek people. They are being put into a special account which is not controlled by the elected representatives of the Greek people and has as its priority the repayment of the gambling debts of the bankers and the bondholders. That is what it is about. Who pays for that? The Greek people pay for it with the most destructive, barbaric austerity measures imaginable. The consequences have been absolutely devastating for the Greek people.

One in five Greek people is now unemployed. Fifty per cent of Greek youth are unemployed. There are 22,000 people homeless in Athens alone. An estimated one quarter of the population are dependent on soup kitchens and charity and voluntary organisations to eat. A huge proportion of the population is not even eating every day. Virtually every state asset, enterprise and natural resource is up for sale. Greece’s assets are literally being stripped away.

Has this resulted in any improvement in the economic fortunes of Greece? No. It has led to a devastating collapse of the Greek economy. It contracted by 7% last year and it is estimated to contract again by 7% this year. That makes a complete mockery of all the targets of the so-called programme. The Government often suggests that we live in fantasy land on this side of the House. The Government and other EU leaders are living in fantasy land if they think that Greece will be able to reach the debt to GDP ratio of 120%, given the collapse of the Greek economy. Their entire programme is based on renewed growth in the Greek economy. They must be living in cloud-cuckoo-land if they think that the Greek economy can grow under the conditions being imposed on it.

All the evidence has shown that the Greek economy is collapsing and that the collapse will continue. Therefore, it will miss its targets and its debt-to-GDP ratio will almost certainly rise. Even a couple of percentage points off the mark on the growth projections would mean that their debt-to-GDP ratio could go as high as 160% or 170%. After all this suffering, asset stripping, the imposition of brutal austerity and suicide and poverty rates having gone through the roof, the end result is that the Greek economy will be in a far worse position than it was before this programme began. Of course, that should not surprise us because that was the consequence of the first so-called Greek bailout. They cut jobs, they cut pay and incomes, they cut social welfare and they privatised state assets, and the position got worse. That is why they were unable to meet the targets of the first programme, why they were forced into a second bailout and why the austerity demands put on Greece were ratcheted up to an even greater and more intense degree. That is the working out of this insane logic of austerity being imposed on the Greek people.

The only bright spark in the Greek picture is the tremendous resistance of the Greek people, who are making it extremely difficult for the troika and their Government to impose this austerity on them. Massive demonstrations, strikes and protests have physically prevented some of the austerity being imposed. The popularity of the parties in Greece which have imposed this — the Government should watch this space — has collapsed such that the political parties of the left of the sort which oppose this austerity agenda in this country are now up to 40%.

The response to the dramatic collapse in support for the pro-austerity parties in Greece and the dramatic rise in support for those who oppose the austerity of, for example, the German Finance Minister, Mr. Wolfgang Schåuble, is that perhaps we should call off the elections that are due in a few months, and that really sums it up. This austerity is rammed down people’s throats, poverty, destitution and suicide increase and the country is asset stripped, and when [388]the people revolt against it and threaten to put in power a different Government that will not go along with the austerity agenda, the EU masters state we should consider calling off the elections. That just about sums up the trajectory of the austerity that is being rammed down the throats of the people of Greece and, increasingly, of the people across Europe. It is a devastation of society and the economy and a subversion of democracy to ensure they can carry it all through.

The important point to make about what is happening in Greece is that it is not by any means an isolated phenomenon. It is living in fantasy land if the Government consoles itself with some notion that we are not Greece. All that is stopping Ireland being in the same appalling position as Greece is that approximately 150,000 people have left this country in the past two years. That is all that is saving the Government. Otherwise we would be at similar levels of unemployment and social destitution as Greece. However, when we are forced into a second bailout programme because we will still not be able to access borrowing on the international markets given the fact that we have taken on the bankers’ gambling debts, the same intensification of austerity demands that has been imposed on Greece as part of the second so-called bailout will then come visiting these shores, and then even the escape channel of emigration will not save the Government.

All the people of this country need to learn from Greece, or for that matter, increasingly, from Portugal and Italy, and clearly the Government will not learn it, is how to protest, how to get out on the streets and resist this madness because this juggernaut is devastating our society. All the signs are there: 14% or 15% unemployment, rising suicide rates, rising child poverty, hospitals or services being closed, just like in Greece, and more austerity promised year on year until we go into the second bailout when it will be intensified.

We must stop this madness, and one opportunity for the public to do that will be on the 31st of this month when the Government plans to hand over another €3 billion to the toxic Irish Bank Resolution Corporation. I believe Fine Gael is also holding its conference on that day. There will be a massive demonstration in Dublin, from Parnell Square at 1p.m., and I hope we will see thousands, if not tens of thousands, taking Greece lessons in how to protest on that day.

Deputy Catherine Murphy: Information on Catherine Murphy  Zoom on Catherine Murphy  There is a real desire, right across Europe and in this country, for certainty and stability. That is understandable because there have been several years of near chaos. The word “bailout” tends to suggest something positive. If I was getting a bailout from someone, I would expect to feel better about it and that it would lead to something more sustainable. When one looks at the numbers, that is not what is happening here. The numbers are impossible. The people are reaching to turn off the television. They have stopped buying newspapers. They want to switch off from the bad news. However, we must look at the numbers, at what underpins what is being proposed and at the vision that might be behind it. What worries me is there is no hope in this for people in Greece and there is no group of people more dangerous than one which has nothing to lose. As I say, the numbers will tell us everything.

The current Greek sovereign debt is in the order of €325 billion. The agreement reached, which depends on buy-in by Thursday from those who hold Greek Government bonds, involves an acceptance of a 53% haircut. From bonds worth roughly €206 billion, the haircut will be approximately €100 billion. Theoretically, that is supposed to reduce the debt-to-GDP ratio from 163% in 2011 to 120% by 2020, but that will only happen if there are other developments in the economy such as growth.

One positive aspect, if one is looking for positives in such an awful situation, is that there is an acceptance that the banks and the bondholders should accept a write-down. When the [389]Minister for Finance, Deputy Noonan, dared suggest that when in some part of the United States, he was quickly rebuked by the European Central Bank, which stated that could not be done. If there is a positive in it, it is that it certainly shows that it can be done.

This will be put across as if it were positive because Greece can remain inside the eurozone, but I would ask the question, for how long? I looked at some of the numbers. If one puts them on a table, one can ask what this means. The population of Greece is approximately 10 million. They have roughly the same GDP as ourselves. Obviously, their debt is slightly different in that there is a bigger sovereign debt and less personal debt. However, when one starts looking at the numbers, they go right to 2026, when the last payment would be made. In 2021, for example, they must make the following quarterly payments: €2.3 billion, €2.6 billion, €2.6 billion and €2.6 billion. That is set out, right up to 2026. When one begins to realise the scale of this, given one was already at the point of cutting into bone, the figures are phenomenal. The timeframe does not allow for inflation to make the kind of dent that would be required.

Theoretically, this so-called bailout stops contagion in countries like Ireland, Italy and Portugal, and in practice it reduces the overall burden of debt on Greece. However, it must be asked what kind of a country there will be and what kind of a Europe this is. Where is the community method, the social solidarity or the Charter of Fundamental Rights? The only thing we seem to talk about when talking about Europe is the money markets. There is a huge population in Europe. When do we begin to talk about the people of Europe and the vision for the kind of Europe to which we want to belong? This has to be talked about in the context of how we lead countries to recovery. There must be hope, but hope is not a long-term emotion. It has to be within the sight of people because it is very dangerous not to have hope.

An astonishing level of debt servicing will go with this so-called bailout. It is clear that no longer can one country take on board the responsibility for the banking system. We have to get to a point where there is a united approach and where we get to some measure like eurobonds in order that countries are not exposed in the way many have been.

I go back to the question of the Lisbon treaty and this whole intergovernmental approach. Intergovernmentalism is not necessarily a bad thing but the particular approach taken here flies in the face of what was proposed in the Lisbon treaty, where it was suggested that, instead of the two or three strong countries dictating, it would be possible to have a consolidation of smaller countries that would together wield a power that would at least not expose them in the way this intergovernmentalism is exposing them. Obviously, that refers to the fiscal compact. This approach is very one dimensional. It refers only to the financial side of things whereas Europe was supposed to be about so much more than just the financial side.

Many left-wing parties bought into the European constitution through the Lisbon treaty because it had the European social charter, where civic, political and economic rights were afforded. They might as well forget about that. In that context, one would have to ask what exactly the project is here. There is a very definite politics underpinning it, and a very conservative, Christian democratic axis driving it, without reference to the weaker people within societies. It involves issues such as being able to afford schooling for children, supports for people who are sick and pensions for those who have gone past their working life. These are issues one would not expect to see in a modern society such as that of Greece.

The numbers tell us that we are looking here not at saving the euro or giving the kind of certainty we all would like. Instead, we are looking at postponing a problem and we are looking at conflict. If people are not given hope, there is nothing surer than there will be some sort of response. We have already seen some of that response but it is not the response I want to see. I want to see people saying we can work our way out of this situation. However, what is happening in regard to what is on the table for Greece will not be a solution that puts hope [390]into the equation in anything like an acceptable timeframe. We are storing up terribly serious problems in a continent that knows what conflict is about, given two world wars have started from it. We had better keep our eye on the bigger picture, namely, why the European Union was founded in the first place. I have real fears about what is being proposed.

Deputy Arthur Spring: Information on Arthur Spring  Zoom on Arthur Spring  I wish to share time with Deputies Olivia Mitchell, Jim Daly, Regina Doherty and Kieran O’Donnell.

An Leas-Cheann Comhairle: Information on Michael Kitt  Zoom on Michael Kitt  Is that agreed? Agreed.

Deputy Arthur Spring: Information on Arthur Spring  Zoom on Arthur Spring  The purpose of the Bill is to provide further financial stability in the interest of the public, the European Union and the safeguarding of the financial stability of the euro area as a whole. Members will notice that it is in the interest of the public, not in the interest of one particular party. It seems that some in this Chamber do not understand the importance of financial stability and are willing to run the gauntlet on this matter, or they do not comprehend the implications of financial chaos.

The Greeks are a proud people and, as we are unfortunately well aware in Ireland, it is a very sad day when a nation loses control of its economic sovereignty to the troika, a lender of last resort, due to reckless fiscal planning by previous governments. However, the sovereign debt levels in Greece got to a point from which there was no returning without external aid.

The rationale of the lending facilities within the euro area is to counteract the unsustainable fiscal policies that were being implemented by governments within Europe and the ECB. As a Labour Party member, I resent having to push through very painful spending cuts, which can push economies into recession, without counteracting growth agendas. The euro area loan facilities are in place to counteract the huge rise in the cost of borrowing that these countries faced recently and to ensure wages and services are not slashed or cut off overnight.

As we all know, Greece’s national debt-to-GDP ratio was as high as 160% recently. Its borrowing costs were unsustainable and, following lengthy negotiations, another bailout for Greece was agreed recently as €14.5 billion of Greek bonds were about to expire.

What went wrong in Greece? Some of this story may sound familiar. Upon joining the euro, it became easier for the country to borrow money. Greece went on a debt-funded spending spree, including paying for high-profile projects such as the 2004 Athens Olympics, which went well over budget. The country was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics. Greece’s economic problems meant lenders started charging higher interest rates to lend it money. Widespread tax evasion also hit the Government’s coffers, as has been well documented throughout.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett  Zoom on Richard Boyd Barrett  Is it Ireland or Greece the Deputy is talking about?

Deputy Arthur Spring: Information on Arthur Spring  Zoom on Arthur Spring  I told the Deputy it would sound familiar. Greece has won a 53.5% reduction in its debt burden to private creditors, while any profits made by eurozone central banks on their holdings of Greek debt will be channelled back to Greece. It has secured a second bailout worth €130 billion and, in return, its lenders have attached strict conditions to the loan. This new bailout requires that the Greek Government considers by 2015 whether the position of 150,000 public sector workers is sustainable. This is the gravity of the situation the Greeks are left with. As an Irishman, I am proud we are tackling the eye of the storm without having to go down the same road. I accept there will be further negative implications for [391]Greece, which is unfortunate. As previous speakers pointed out, this measure is not enough. We must have a growth pact and the ECB must acknowledge this.

There is an element which proves that, as a Continent, we acknowledge the problems among us. Among the rich, the poor, programme countries and non-programme countries, there is a generation of people whom I call the jinxed generation — the young people of Spain, Greece, Ireland, and the migrants to whom previous speakers referred. They must be given the capacity to develop a substantial standard of living. I constantly refer to the need for quantitative easing. We know what austerity is, but we must have growth. There must be more co-operation throughout Europe. The idea that conflict is far away is nonsense given that a German flag has been burnt in Greece. It shows that people are at the end of their tether. We will take this step, which I welcome, because we are helping the Greek people. I truly believe that. However, a great deal more must be done not only for Greece but for the Continent also.

Deputy Olivia Mitchell: Information on Olivia Mitchell  Zoom on Olivia Mitchell  I support the legislation which is aimed at the financial stability of Europe. It is not just Greece; it is this country and all of the other countries in Europe. This is the second Greek bailout, bringing it to an eye-watering €240 billion. Our contribution is small enough but it is a considerable sum given our domestic circumstances. However, it is correct that we show solidarity with our partners in Europe, in particular as we expect the same from them. It is encouraging that one aspect of the package is the troika’s willingness to retrospectively reduce interest rates, which can bring down the debt burden for countries, not just for Greece but for other countries such as this one with high debt levels.

The entire package for Greece, the debt write-down, the restructuring of bond maturity, interest rate reductions and a direct cash transfer has, just by the promise of it, settled markets. I hope it will help Greece survive at least temporarily because settling markets is vital to their interests, our interests and to the interests of the entire European Union. It should be the focus of all our endeavours.

To be honest, however, I do not have great confidence that it will be a long-term solution to Greek woes as their problems are enormous with debt to GDP ratios of 168%. Even with the most imaginative financial gymnastics and the most optimistic assumptions no one can quite make Greece’s debt to GDP forecasts reach 120% by 2020. A ratio of 120% for debt to GDP is regarded as sustainable only in efficient and growing economies. I am afraid Greece is neither of those. It is a country of the most unwelcome superlatives. It is receiving the world’s largest ever financial restructuring deal. It has the largest balance of payments in the industrialised world as a share of GDP. It is less competitive than Rwanda and Namibia. Now there is also political uncertainty in Greece at a time when it is least needed. All of that has the potential to be serious trouble for the future of Greece but also for the future of Europe, in particular for peripheral countries such as this one and others with ailing economies.

Greece is in the unhappy position where neither austerity nor a stimulus package can work because of the total inflexibility of its economy and the absence of public support for the kind of change and the quantum of change that is needed. There are lessons for those in this country who resist change. Unlike in this country, despite the grave position in Greece, prices there have not fallen significantly. That is largely due to inflexible wage rates and practices. For instance, the price of houses, which as we know has fallen by 50% in this country, has fallen by only approximately 13% in Greece. Labour costs have risen in the past decade by 35% compared to 2% in Germany which has killed its tourism industry on which it is totally dependent. Greece remains uncompetitive and it continues to import more than it exports and, as other speakers have said, its economy continues to contract. Without structural reform to drive down costs the economy cannot grow and Greece’s debt will remain stubbornly high. It is not [392]austerity alone that is causing that; it is the inflexibility of the economy and the resistance to change.

A stimulus package for Greece now would be a waste of money because it would feed into higher wages rather than growth. Everyone in Europe knows that. Investors know it. The troika knows it. The eurozone countries know it. The European Union has done the unthinkable — the thing it said it would never do — it wrote down debt. It went further; it legislated to prevent the write-down of the replacement debt in Greece. That leaves Greece with nowhere to go. It cannot write down further debt. No private investor is willing to lend to Greece and now the appetite in Europe for further bailout is lessening by the day. I do not know where Greece can turn for further bailouts. It has been almost conceded, if not publicly, that Greece may well exit the euro before very long. The lesson for this country is that it must strengthen our resolve to sort out our finances and restructure the economy so that if the worst does happen to Greece we are not so vulnerable that we are caught in the maelstrom of the contagion that will undoubtedly follow.

Deputy Jim Daly: Information on Jim Daly  Zoom on Jim Daly  It is an interesting debate with many angles but one must look at the bigger picture and view everything in a European context. For the past 30 years we no longer have the luxury of discussing countries on their own and examining their individual merits and attributes. We must see the bigger picture. I was in Brussels at the beginning of last week. One of the interesting things I learned there is that it is not possible for Greece to exit the euro without exiting the Union. The scenario of breaking up the Union bit by bit is a scary one and one that cannot be lightly contemplated.

Many are complaining about the austerity that is being implemented in this country and how we have, collectively, as a nation reduced our living standards. Comparatively, we are in or around the standards we enjoyed in 2005. One can only imagine what we would have to return to if we were to take the Union apart, forgo the currency and return to the living standard we enjoyed in the 1980s. What we would have to do is unimaginable.

A total of 23 million people are unemployed across the Union. Unemployment is the single greatest threat to the European Union. It was interesting to hear our colleague members of other parliaments compare their experiences. Our Spanish counterparts have 5.3 million people unemployed, which is almost a quarter of the workforce. Up to 60% of people under the age of 25 years are unemployed in certain regions and the rate is 40% and 50% in other regions. There is no doubt the issues and the challenges they present are stark. Without a shadow of doubt, unemployment is the single greatest challenge we face.

It was also interesting to note the divide in ideas and ideologies in Europe. In particular, I noticed that our colleagues in Britain are divided among themselves on the approach the EU should take on the future of the Union, the currency and on the future of Greece. The experience provided much opportunity for learning.

One of the solutions proposed was obvious, namely, that while there are 23 million people unemployed there are 23 million small to medium enterprises in the European Union and if each one of them was facilitated to create one single job it would provide a solution to the unemployment crisis. One could ask how we would go about that. It is important that with a 10% budgetary deficit and 190% debt, we have strong trading partners surrounding us in the Union. It is important for our viability and future that there is a strong Union. That is why the debate brings a focus to the Greek situation but it also introduces the bigger picture of stability across the Union if we are to trade our way out of the current difficulties.

In bringing growth we must also deal with austerity. I said previously that austerity is not a dirty word; it is not a word that should have negative connotations. Austerity is merely cutting [393]one’s cloth according to one’s measure. It is a pity we did not have austerity in this country in the decade preceding this one. Austerity is needed across Europe. People must stay within budget and deal with deficits, which has absolutely nothing to do with the banking debt. It is a question of bridging our income and expenditure on an annual basis.

Deputy Regina Doherty: Information on Regina Doherty  Zoom on Regina Doherty  I welcome the opportunity to speak to the Bill, the purpose of which is not simply to bail out Greece. It is also in the interests of the Irish economy by ensuring the financial stability of the European Union and safeguarding the financial stability of the euro as a whole. It is in all our interests to support Greece because we have been supported.

I disagree with Deputy Catherine Murphy’s view that the Bill provides no hope. It provides much hope, in particular to the people of Greece, this country and Spain, as we have found ourselves in serious difficulties in recent years for a variety of reasons.

Without measures like this, we would have no hope. It is the responsibility of every euro country to provide hope for those countries in difficulty. In strengthening the crises tools within the euro area we will make further progress in integrating economic and fiscal policies and reinforcing co-ordination, surveillance and discipline which, sadly, was lacking in recent years.

  6 o’clock

It is evident from the troika’s report of October 2011 that the Greek economy is in deep recession. Greece will not be able to sustain recovery without official debt relief. Ireland has benefited from a €9 billion reduction in the interest costs associated with its borrowings from EU sources. The German Chancellor, Dr. Merkel, stated in 2011 that Ireland had not only met but surpassed its deficit targets, had carried out important reforms, particularly in the financial sector, and that, on foot of rising competitiveness, investors were returning to Ireland, which was welcome. In the true spirit of the European Union it is not only equitable but fair that Greece receive similar assistance.

The new Prime Minister of Greece, Mr. Lucas Papademos, is a breath of fresh air and a steadying force in favour of a rational approach to the enormous problems facing his country and its people. Greece has taken decisive and swift legislative action in the area of fiscal consolidation, revenue administration, pension reform, financial sector regulation and supervision and growth enhancement of structural reforms. In the spirit of solidarity with our Greek colleagues, I support the Bill which will assist a country in serious difficulty. It will be a long and painful process, but there is no other palatable alternative, politically or socially, for Greece.

The purpose of the Bill is to further 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. In supporting Greece we are also supporting the recovery of the eurozone and the Irish economy, something of which Members on all sides should be supportive.

Deputy Kieran O’Donnell: Information on Kieran O'Donnell  Zoom on Kieran O'Donnell  I welcome the opportunity to contribute to this debate. In discussing the Bill and agreeing to an additional bailout programme for Greece we are showing our solidarity with the Greek people. It is extremely important that Greece, like Ireland, meet its requirements under the programme.

In the limited time available to me I would like to touch on Ireland’s solidarity with its European partners. It is stated in media reports that the Governor of the Central Bank, Professor Honohan, is attending a meeting of the ECB Governing Council in Frankfurt today. What we need is solidarity from the European Central Bank, the European Commission and the EFSF. We also need flexibility, in particular from the ECB which of late has shown a degree of flexibility not seen heretofore by way of the provision of €1 trillion in funding for three years at a rate of 1% to the banking system, in respect of which banks can bid on an unlimited basis.

[394]We need flexibility on the Anglo Irish Bank promissory note for a number of reasons. The promissory note, in terms of construct, was artificial. Interest was set at the prohibitive rate of 8%, which has had a major effect on our budgetary position on an annual basis and debt levels. If we are given flexibility in this area, particularly by our European partners and the ECB, we will be in a position to meet our 8.6% deficit to GDP target for the current year and our deficit to GDP targets in future years. We would also save approximately €1.9 billion in interest charges, which would have a positive impact on our day-to-day expenditure and benefit the European Union.

The Anglo Irish Bank promissory note needs to be restructured. The Government is in negotiations with the troika in this regard. It is important that sufficient time is provided to get this right. In the meantime, deferral of the €3.1 billion due on the promissory note at the end of this month should be facilitated by the ECB, the European Commission, the EFSF and our EU partners. This deferral could be accommodated by way of Government bonds or an additional promissory note. Sufficient time must be provided to allow the troika consider how best to restructure the promissory note, thus ensuring the burden on the general public and Irish taxpayer is reduced and our recovery continues. What is good for Ireland is good for the European Union. It must be made clear to our European partners that a restructuring of the promissory note and, in the event of a conclusion not being reached by the troika, deferral of the payment of €3.1 billion due at the end of this month would benefit Ireland and the European Union, as we are in this together. This is all about solidarity which we are showing today for Greece. We need continued solidarity throughout the European Union. I wish the Government and Professor Honohan well in their discussions on the restructuring of the promissory note.

Deputy Stephen S. Donnelly: Information on Stephen Donnelly  Zoom on Stephen Donnelly  I wish to share my time with Deputy Thomas Pringle.

An Leas-Cheann Comhairle: Information on Michael Kitt  Zoom on Michael Kitt  Is that agreed? Agreed.

Deputy Stephen S. Donnelly: Information on Stephen Donnelly  Zoom on Stephen Donnelly  It is welcome that there has been a move towards a significant write-down of the debts the Greek people are being asked to repay. It is true that serious structural reforms are needed in Greece and that the Greek Government needs to modernise several of its national institutions, particularly its tax collection service. It is also true that Greece has unsustainable practices in some sectors, including its low retirement age relative to that in other European countries. However, we must be cognisant of the extraordinary social pain the Greek people are being asked to endure to secure these write-downs. Every day we hear stories of pension funds being wiped out, hospitals being unable to afford life saving drugs and workers in the public and private sectors taking enormous pay cuts. I have heard that doctors are taking pay cuts of 80%.

It is clear that the Greek people are being asked to endure a level of austerity which no one else would accept. I do not believe we would accept it or that the German, French, Italian or Spanish people would accept it. In this context, we need to be aware of the arrogance and condescension in our tone when speaking about Greece. One often hears on radio that Greece is a dysfunctional society, that Greek people are lazy and will not work long hours and so on. I recently read a piece of research that the average working week in Greece was significantly longer than in Germany. I am sure other Deputies have, like me, noted the tone of arrogance and condescension of people in Ireland and across Europe when speaking about Greece. We need some humility in Ireland — we have made a lot of mistakes — and throughout Europe. Some of the commentary I have heard from senior European officials has been condescending. I note it comes from those same officials who are making mistakes year after year that are [395]driving the European crisis from bad to worse. Consequently, a little humility would be in order for everyone. I will support this Bill because the Greek people need this significant write-down. However, I do not believe it will be enough as it will reduce their debt from 160% to approximately 120% of GDP and, therefore, the Greek people will be back for a third write-down, this being their second major write-down.

This Parliament and the Irish people can learn from what is going on in Greece and can learn a thing or two from the Greek Government. Whenever I suggest in this Chamber that Ireland could learn a thing or two from Greece because, unlike Ireland, it has managed to secure write-downs and has managed to bring bondholders voluntarily to the table to take write-downs of between 70% and 75%, members of the Government throw their arms in the air and state that I want Ireland to be Greece, want the hospitals to be closed down and wish for riots in the streets. Of course I do not and it is nonsense to suggest that I or anyone else does. An analogy that occurs to me is that of a man who is sitting at home, having let himself get out of shape. He has put on a lot of weight and has not been exercising. He then looks out the window and sees his neighbour who is in even worse shape but who has decided to go out jogging. Sweat is pouring off the neighbour and he is in a great deal of pain but while he wishes he was not obliged to jog to get fit, he is doing it anyway. The man sitting at home thinks he could learn a thing or two from that guy and that perhaps he needs to go jogging, only for someone else to tell him that is ridiculous because he then would end up like his neighbour. That is how I consider the response given whenever I suggest there is something we could learn from Greece. The response is Ireland could not possibly do so and that I want Ireland to become like Greece when, obviously, I do not.

There are some serious lessons Ireland can learn from Greece. One is that senior bondholders voluntarily will take write-downs of 75% in their bonds. Another is that other private sector investors will take massive write-downs in sovereign debt once they accept the ability of the country in question to pay them back the full amount of that debt is gone. If one applies this lesson to Ireland, I note that next year our debt will hit approximately 120% of GDP. Depending on who one believes, unsustainable national debt kicks in somewhere between 90% and 120% of GDP. The argument with Greece is easier as its debt is at 160% of GDP and no one is suggesting the Greeks ever will be able to pay down that quantum of debt without having their own currency, quantitative easing and so on. My assertion is that for Ireland, a debt level of 120% of GDP is unsustainable. It is right at the top end of what any commentator suggests can be done.

Ireland has paid back most of the senior bondholders. That argument has been fought and unfortunately it has been won by the bondholders and speculators. I accept no Deputy in this House wanted to pay back the full amount to the bondholders. When appearing on “The Frontline” television programme on Monday night, the Minister for Agriculture, Food and the Marine, Deputy Coveney, stated the Government made an explicit decision to pay the senior bondholders to try to get a massive write-down in respect of the promissory notes. I wish the Government well in this regard, as there is a huge amount to play for and I hope it succeeds. However, I keep hearing phrases from the Taoiseach and the Tánaiste to the effect that Ireland will pay its debts, is not seeking a write-down, has never sought a write-down and never will seek a write-down in its debt. This is a perpetuation of a mistake made by Fianna Fáil in the previous Government, when Ireland paid the bondholders month after month. The rationale people then were given was the Government was obliged to pay them or they would lock it out of the markets. However, exactly the opposite is true. They saw Ireland mounting up this debt, which consisted of other people’s debts, and locked us out of the markets. They decided not to lend Ireland any more money because it was trying to pay its own debt and everyone [396]else’s debt and therefore they certainly were not going to lend any more money to it. My concern is the Government continues to do this.

When I hear the Taoiseach state that Ireland is not seeking and never will seek a write-down in the debt, there is a certain moral tone that states Ireland is a country that will pay its way. I understand that, as everyone wishes to do so and no one wishes to look for a write-down in the debt. However, this is not what the markets have been telling me. I spent two days in London last week when I spoke to venture capitalists, specialist investors and bond traders, who are the people who buy and sell sovereign debt. They told me they did not really care about the fiscal compact, as it did not make Ireland more or less attractive as a country to which to lend money. They really only care about the total quantum of Ireland’s debt and, because it stands at 120% of GDP, they will not lend Ireland any money. Furthermore, they were perplexed that they keep hearing from our senior team, that is, from the Taoiseach, the Tánaiste and the Minister for Finance, that under no circumstances will Ireland seek the one thing they, the people who actually buy and sell debt, believe we need. These words matter. When the Taoiseach and the Tánaiste state that under no circumstances will Ireland seek a write-down, it matters because it makes it more difficult for Ireland to get a write-down. When the Minister for Finance, Deputy Noonan, declared in the New York Stock Exchange that Ireland would not pay the senior Anglo Irish Bank bondholders all of their money, it mattered and the senior debt dropped dramatically on the markets immediately.

As for what Ireland can learn from our partners in Greece, we can learn that a pure austerity-based approach does not work. When one does not have one’s own currency, does not seek a write-down and enforces austerity while hoping for growth, it does not work. Economic history shows this does not work. Moreover, when one’s debt is unsustainable and one names it as being such, it matters and it brings people to the table. Furthermore, attempting to pay debts at a level of 120% of GDP will condemn Ireland to a decade or more of increasing economic and social pain. Earlier today, a Government Deputy mentioned that he did not want to see a return to the conditions that obtained in the 1980s. Unfortunately, that is precisely what is happening and the social indicators are moving backwards. I have learned from the Greek situation that there is nothing shameful about seeking a reduction in the debt. It is not immoral and is not selfish. It is prudent, is good economics and is good finance.

Ireland has paid in excess of €60 billion to a bunch of people to whom it did not owe the money and consequently, its debt will hit approximately €200 billion next year. I believe a €60 billion reduction in that debt probably would mean we still were in the markets and the troika would never have been here. There is a very strong argument for naming our debt as being unsustainable. There is an argument for learning from the Greeks by telling Europe and those in the private sector who hold Ireland’s debt that while we cannot manage 120%, we want to help them and will negotiate. Ireland should then try to get the debt down to a level at which the markets consider it to be low enough to again lend to this country at reasonable rates and then, we can begin to invest. While I believe we must cut the deficit as fast as we can, we must have real stimulus, which we are missing.

I support the Bill and will vote for it. I wish our colleagues in Greece the very best and call on the Government to learn a thing or two about what can happen if one changes the narrative in respect of getting a write-down.

Deputy Thomas Pringle: Information on Thomas Pringle  Zoom on Thomas Pringle  This Euro Area Loan Facility (Amendment) Bill has led to an interesting debate in this House. As it is related to Europe, unlike most other Bills no amendments can be tabled. There is no debate about the detail of the Bill and it is not being dealt with section by section to ascertain what can or should be changed or what is required. The [397]Government has portrayed this Bill as being required simply as a measure of support for the Greek people and as a measure to reinforce Ireland’s solidarity with them. This is because there are no financial implications for Ireland in respect of this legislation because like the Greeks, we are in a bailout programme and therefore will not be required to contribute to this loan facility for them as envisaged under this legislation. The debate on this Bill has developed into an interesting discussion that has given Members an opportunity to discuss the Greek situation, make comparisons with our own position and tease out ideas in that regard.

The Greek situation is very interesting. Like Ireland, Greece is a former colony and for many years the Greeks were subject to a colonial power. In their case, they were under the Ottoman Empire, while Ireland was under the British Empire. Thereafter, they suffered under dictatorship for many years until finally in 1974, Greece became a democracy. Many of the problems with the Greek economy stem from that time. When a country is being run by a colonial power or a dictatorship, people indicate their opposition — there is still an element of this in Ireland — by refusing to pay taxes. They refuse to fund the entities responsible for keeping them down. Such entities use the mechanisms by which they remain in power to punish either their colonial subjects or their own people, whichever is the case. A culture has developed in Greece that the way to oppose those in power is to withhold one’s taxes. As a result, people do not see the payment of taxes as a way to contribute to the functioning of the state. Neither do they perceive the payment of taxes as being essential in ensuring services will be provided for all citizens.

I read an article late last year in which it was indicated that in the first three months of 2011 in the city of Sparta which has a population of 40,000 only €24,000 was raised in VAT. If one considers the position in Dundalk or any other town of similar size in Ireland, one will discover that many millions in VAT would be raised in such a period. This underlines the problems in Greece, particularly in encouraging its people to accept that the duly elected government is theirs and that it is their state. The Greeks must be encouraged to have a sense of ownership and belonging when they pay taxes and make their contributions.

I was interested to discover the extent of tax evasion in Greece. I have seen evidence to the effect that in the region of €40 billion in tax goes unpaid each year. In most cases, it is those in the professional classes who are avoiding paying tax. There are stories which indicate that hospital consultants who live in the richest parts of Athens are declaring incomes of between €3,000 and €5,000 per year. It is not that long ago that similar things were being done in this country. All through the 1980s there was massive tax evasion on the part of the professional classes. They used Ansbacher accounts, other offshore accounts and various tax-avoidance measures in order to avoid paying their dues.

We should act in solidarity with the Greek people by helping them to develop a new taxation system in order that they might develop a sense of ownership of their state and feel they are contributing to it by paying tax. If the Greek Government could target those who are not paying tax and collect the €40 billion in unpaid taxes to which I refer, it would solve many of the problems Greece faces. However, we have seen fit to force on the Greek people further austerity and increased taxation. Greece has a huge public sector and those who work in it pay their taxes. Therefore, it is they who are suffering most as a result of the austerity programme. We are also forcing on the Greeks a massive programme of privatisation. I accept that they are getting a debt write-down which is welcome, but it remains to be seen whether this will actually come to pass. There has been a slight fudge in the context of some of the money involved being made available and a deal has still not been concluded on private sector involvement in the write-down. I hope this write-down will come to pass because it might be of some benefit to the Greeks in the future.

[398]In the interests of solidarity, we should be assisting the Greek people and helping them to grow their economy and change their taxation system in order that they might collect the funds needed to run their state. We should not be forcing them to sell off their assets, mineral rights, airports, ports and all those public sector companies which could generate income for the Greek state. We should not be enforcing an ideologically-driven austerity programme which has been foisted upon us by Germany, France and, in view of David Cameron’s comments in recent days, Britain. The model being imposed is one the proponents of the belief the market is king and should be protected at all costs.

In the context of the referendum on the fiscal compact treaty, Ireland is moving into territory where the ideology to which I refer is going to be enshrined in the Constitution. It will also be enshrined in law in other European Union member states. This ideology will tie us into austerity programmes and ensuring we will have balanced budgets forever more. That runs contrary to the previous orthodoxy which held sway in economics, namely, that in a time of boom taxes should be increased, while spending should be increased in a time of decline. Although we had boom and bust cycles, to a large extent, this approach worked for many years. Forcing austerity on the peoples of Greece, Ireland and other states across Europe is to the detriment of democracy and will only benefit the European banking system and the leaders of France, Germany and Britain.

An Leas-Cheann Comhairle: Information on Michael Kitt  Zoom on Michael Kitt  I call Deputy Alex White who is sharing time with a number of other Deputies.

Deputy Alex White: Information on Alex White  Zoom on Alex White  I will take five minutes and the remainder of the time can be divided among those who are due to follow me.

I agree with Deputy Thomas Pringle that this has been an extremely interesting debate which has given Members the opportunity to discuss the various issues relating to both the economic situation across Europe and the fiscal compact treaty which we will, of course, be debating in the coming months. It is important, however, to remind ourselves of what we are being asked to do in respect of the legislation before the House. As the Minister pointed out and Members are aware, we are being asked to give our consent — nothing more — to the implementation of amendments to the Greek loan facility already in existence. In saying this, I am not stating our consent is not worthy of consideration.

I am fundamentally of the view that this is an issue of solidarity and that this debate ought to centre on the necessity for and importance of solidarity expressed by Ireland to a fellow member state of the European Union and the eurozone. I agree to a large extent with what Deputy Stephen Donnelly stated about the general approach which should be taken to this matter. If I understood him correctly, he made the point that it was a pity that there appeared to be so much moralising taking place — there has been a certain amount of it in this debate — across Europe in respect of the situation in Greece and other countries. The finger is being pointed at countries because they are supposed, as a result of some historic considerations, not to be able to manage their own affairs. Countries are also being accused of acting in a profligate way at all times and it has been stated they do not understand financial or economic management. In parts, Deputy Michael McGrath’s contribution smacked of being a lecture. Giving a lecture to the Greeks does not reflect, in any shape or form, where we stand.

I do not believe people in this House or elsewhere should engage in arrogant posturing which, in some quarters, is becoming part of the debate on the situation in Greece. Unfortunately, as Deputy Stephen Donnelly or another Member indicated, this attitude of finger-pointing is reflected at high levels throughout Europe. It is fair to state the difficulties being [399]experienced in Greece are attributable, perhaps in considerable part, to domestic developments. However, they are also a feature of the crisis at the heart of the eurozone project and what happened during the past eight to ten years. Very serious macroeconomic and other imbalances have emerged in Europe. I am not making excuses for particular forms of conduct, whether in respect of the payment of taxes or otherwise, in certain countries. The serious and major imbalances to which I refer have emerged at the very heart of the eurozone project and an attempt is being made — perhaps belatedly — to address them. It is not, however, merely a case of wagging the finger of blame at one country simply because it seems to be the one which is in the eye of the storm. I am not seeking to imply that reforms are not necessary.

The post-colonial comparative analysis in which Deputy Thomas Pringle engaged of the situation in Greece may have a great deal going for it. The Deputy recounted the history of that country and referred to the reasons for people’s unwillingness to pay taxes, etc. When he was speaking, I could not avoid thinking there might perhaps be a basis for believing there is an element of this in our own political culture and that we need to realise and understand — I do not wish to be accused of wagging the finger at anyone in this regard — that there is a need to pay for public services. Public services must be paid for and there are not that many ways of doing this other than through the payment of taxes which sometimes include income or property taxes. We should be clear that in order to provide public and local services, we may need to levy property taxes. I wonder, however, if we have such support in all quarters.

If I was abroad and looking at Ireland to judge its mood, I might look at the media if I was not Irish. I might also talk to people I know. Ultimately, however, I would look to the Parliament, as no matter what has been said, this Parliament is the democratically elected body which represents the people. Members ranging from Deputy Richard Boyd Barrett to those on the Government side were elected by the people. I would apply this to Greece when considering what has happened there. I know people had to make a choice in that parliament between what was bad and what was catastrophic. I watched events unfolding on television, but the Greek parliamentarians made a choice in their democratically elected parliament. I remember watching politicians from my own European grouping some weeks ago, including a former finance Minister in the PASOK party whose name I cannot remember and which I probably could not pronounce. He was practically in tears, but he understood the choice was between something terrible and something catastrophic. Those politicians made the choice and are entitled to receive the solidarity of this House and the Irish people in what is being proposed. People are entitled to vote as they choose, but I strongly urge Members to recognise that this is an issue of solidarity and support the Greek people at this time.

Deputy Jerry Buttimer: Information on Jerry Buttimer  Zoom on Jerry Buttimer  I wish to share time with Deputy Nicky McFadden.

An Leas-Cheann Comhairle: Information on Michael Kitt  Zoom on Michael Kitt  Is that agreed? Agreed.

Deputy Jerry Buttimer: Information on Jerry Buttimer  Zoom on Jerry Buttimer  The Minister of State, Deputy Sean Sherlock, has joined us. It is important to focus not just on the Bill but also on the issue of innovation, research and how we can, as an economic community, ride out the storm. Deputy Alex White is correct; this is about giving consent and working in collaboration with our Greek neighbours and the European Union. He is also correct that this is not about lecturing, pointing the finger or scoring political points but ensuring the European Union can learn from mistakes made and help our Greek neighbours in this case. It is important that we look at the European Union as a partnership that works and which can benefit the Irish people. Greece requires a write-down and is looking for assistance. We did the same. It is not about us being like Greece or the good boys of Europe; rather it is about solidarity and partnership in the Union. It is not about Ms Merkel [400]or Mr. Sarkozy being the top tier pointing the finger and waving a flag but about the European Union and the eurozone.

This is the only English-speaking country in the eurozone and although we are situated on the periphery of Europe, we have an ideal role to play in seeking the renaissance of the country. It is important that we show leadership as democratically elected politicians. That means we should realise the commentators, academics, economists and others with opinions and who like to pontificate are not all right and all wrong. Those of us in government across the eurozone must make decisions to benefit the membership of the European Union. This is about responsibility and duty.

Deputy Alex White spoke about the mood in Ireland. If one goes canvassing, one will hear people saying times are tough and that the level of disposable income is not what it was; people have made sacrifices, but they expect and want those in government to deliver. In its first full year the Government has been moving towards this goal, focusing on the creation of confidence in the country. There are two elements to this, the first of which is foreign direct investment which, as the Minister of State knows from his work in the Department, is starting to arrive in droves. It will lead to job creation.

There is also the question of restoring our reputation internationally. It is important, therefore, that Ministers not just go on junkets for St. Patrick’s Day celebrations but also try to sell the country, the workforce and particularly our educated young people and the skills set of the nation. They should point out that we have brought stability and are focusing on growth and the creation of jobs. International confidence requires a sound Government and the implementation of financial policies which will attract jobs and investment. There is an example of this in my own city and county of Cork in the shape of Eli Lilly which involves an investment of €330 million and the creation of 220 jobs. Considering what IDA Ireland achieved last year, one can see that the Government has brought stability and certainty and that it is delivering on job creation. It is important for it to implement policies that will not damage confidence but will build on the progress made in the past year.

Deputy Stephen Donnelly spoke about the Government and the European issue, but within a period of 12 months the Government has renegotiated part of the EU debt settlement deal, worked with the troika and secured a reduction in the amount we must pay. There is more to be done, but it is working towards this end. It is important to realise that we are working with a troika. We have lost our sovereignty and ability to determine by ourselves. We must take steps to regain that sovereignty in order that we can go to the markets and be freed from the requirements of the EU-IMF-ECB deal. It is important that European Union member states work together rather than be preoccupied with internal electoral contests or what is best for individual countries.

The upcoming referendum offers an opportunity to inform the people about what the treaty is about. The challenge for those opposing the treaty is not to introduce the issue of septic tanks, the household charge or the local backyard project. This is about what is best for Ireland and its people, not just today but in ten or 15 years time. We can learn much from what happened at the RDS last week, not at the Fianna Fáil Ard Fheis but from the queues at the jobs fair. The same is happening in Cork today. We have people who want to work and have the opportunity to engage in the workforce. We must face that issue as a reason the referendum is important. It is important that we vote “Yes” to bring certainty to the issue. It is vital that we have access to the European Stability Mechanism which will provide the certainty the markets require. We must have confidence in order that there can be investment in job creation in Ireland. Those opposing the treaty for ideological reasons should listen and ask what the people want. The political landscape has changed and the leader of Fianna Fáil, Deputy [401]Micheál Martin, has spoken about the end of the “Punch and Judy” show. I welcome his support for the treaty.

We require certainty and leadership, as does the European Union. The peoples of Europe emerged from a dark era in the last century not once but twice. In this century we can emerge from a period of economic darkness. That is the challenge faced by all of us and it will require leadership to be shown. Everybody must live up to that task.

Deputy Nicky McFadden: Information on Nicky McFadden  Zoom on Nicky McFadden  I welcome the opportunity to speak to the Euro Area Loan Facility (Amendment) Bill. Strengthening the financial sector is a key part of restoring economic growth across the eurozone and ensuring long-term sustainability. In receiving an extension of the terms of existing loans from euro states and €130 billion in funds Greece has a responsibility to implement the necessary policies that will stabilise its economy and boost growth and employment. The agreement hopes to reduce its GDP by 40% and cut its national debt by up to €107 billion. It is welcome that additional funding will be provided for the purposes of interest rate support and supporting the banking sector. Tourism, in particular, has been the lifeblood of the country’s economy. It is important that the country generate other sources of finance and look to the export market and foreign direct investment.

I agree with Deputy Alex White that there should be no finger-pointing, as the Greek people are suffering. My five most recent summer holidays were spent in Greece and I know they are a hard-working people.

The loan agreement is not centred on Greece, as it has wider implications for the entire eurozone, Ireland included. The same principles apply to Greece as to Ireland and every other eurozone country. There must be a fair taxation system, a more efficient public service and an improvement in business conditions, while the availability of credit for small businesses is essential. While stabilising finances is critical, if we really want to see the European Union progress and flourish in the future, reformation cannot be focused on financial matters alone.

Since the financial crisis erupted a certain level of euroscepticism has been evident. While mistakes were made, we must be sure not to disregard the very positive aspects of our membership of the European Union. The bureaucratic nature of the eurozone and systems has made it particularly difficult for people to see these very positive aspects. What is required is political and social reform to foster a natural sense of unity among member nations. The relationship between European nations and interdependence can offer much in opening up markets and creating employment opportunities. It is not a case of them versus us and should not be viewed as such. It is in each country’s interests that the other does well. To achieve this, political and social reform is needed to make clear the objective of the European project. This critical juncture is the perfect opportunity to examine the basis of the European Union and generate policies that will allow for greater political and cultural unity.

The Bill is focused on securing the future financial stability of the European Union. It offers an opportunity to eurozone nations to look to the future in a united way. Ratifying the Greek loan facility is one step in achieving this objective. The forthcoming referendum on the EU stability treaty will also have huge implications for Ireland’s economic recovery. Constructive debate on the European Union is welcome. It should be discussed in an open fashion in order that any necessary improvements can be made to ensure the long-term success of the Union.

I welcome the Bill and commend the Minister for Finance for all his work and efforts in the European Union. I also commend the Minister of State, Deputy Sean Sherlock, for being here to listen to me.

Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív  Zoom on Éamon Ó Cuív  If I have time left over, I will be willing to share it.

[402]Acting Chairman (Deputy Joanna Tuffy): Information on Joanna Tuffy  Zoom on Joanna Tuffy  I must call the Minister for Finance at 7 p.m.

Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív  Zoom on Éamon Ó Cuív  I will need the quarter of an hour remaining until 7 p.m., as I have spent a long time preparing what I have to say.

John Healy, a journalist with The Irish Times, once wrote a famous book entitled, No One Shouted Stop. Democracy, the cornerstone of the European Union, is under threat and those who question this are subjected to slogans and told they are eurosceptic. This does no service to the European ideal.

We all know one of the main causes of the Second World War was the imposition of unsustainable debts on the German people under the Treaty of Versailles. We should never be so arrogant and complacent as to think the imposition of unsustainable debts on countries such as Greece in 2012 will not lead, in the very least, to social unrest on a massive scale, perhaps even worse. The European Union was founded to ensure this would never happen.

The European project was built on the twin pillars of democracy and acting on a communautaire basis. As the European Union departs from its founding principles, it will sow the seed of its own destruction. Those who most admire and respect the European ideal should be the first to criticise it when it abandons these praiseworthy ideals in times of crisis such as this. The actions of the member states and the European Union in trying to undermine democracy, a basic pillar of membership of the Union, by successfully imposing a technocratic government in Italy and attempting to impose a technocratic government in Greece show how fragile is democracy and the European Union itself.

The Greek problem is not comparable to Ireland’s in its origins, as our difficulties are essentially rooted in a banking problem wherein European banks lent colossal sums of money into the economy, sparking a lending frenzy, a property boom and an old-fashioned bubble. The Greek crisis was due to a lack of budgetary control, leading to large budgetary deficits. While it is clear the origins of the crises in the two countries are quite different, the consequences in both have been high unemployment, no or low growth and an unsustainable debt burden.

When a country falls into debt — similar to a person or a company — lending it money at high interest rates to repay exorbitant debts, while undermining its ability to earn, which for a government means economic growth, can never form the basis of a lasting solution. These crazy economics seem to have become the orthodoxy in Europe, yet most people who rely on everyday experience and many reputable economists realise that this does not work.

We have to grasp the nettle and accept there were major flaws in the construction of the euro. There were serious flaws in the reporting mechanisms; in the absence of central control over the financial and banking system across the eurozone; and in not providing for curbs on the transfer of large amounts of money between banks in different states in the eurozone, thus allowing the creation of the bubble that appeared in Ireland and Spain.

When one examine the remedies being offered to Greece, the focus of the European Union, the ECB and the IMF is to try to recover the maximum amount of money for private investors. The Greek Parliament has already been forced to pass a law giving priority to debt repayments over other government obligations. This bailout makes debt the number one priority rather than seeking to create a financially secure and socially just Greece. This is being done through voluntary credit swaps which have been sweetened for investors by ensuring GDP-linked securities will pay out a little more generously if Greece avoids another default.

In their recent decisions on Greece European leaders have obtained the political benefit from scalping private creditors fully aware the actual payouts to these creditors could increase if there is growth above the projected estimates which remain ridiculously conservative. The main beneficiaries will again be the investors rather than the Greek people. This will put [403]Greece in a straitjacket for many years and possibly depress effort because one could ask what is the point of increasing output if gains are being siphoned off to pay a bottomless pit ofdebt.

In seeking a solution to the Greek problem policymakers have largely ignored Greece and its people, preferring instead to concentrate their efforts on the markets, recovery for private investors and minimising the contagion risk. As many economists and academics have noted, the process is no longer about assisting Greece, rather the primary concern is to minimise potential losses to German and French banks. It is against this background that the European Union must accept its share of responsibility for the Greek crisis which was largely caused by the flaws in the system it created and take drastic action to alleviate the burden imposed on the Greek people. This could be done by means of an official debt write-off or by the European Central Bank deciding either to issue bonds to sovereigns at 1%, as it has been willing to do for private banks, or engage in quantitative easing. In addition to the extraordinary measures that should be taken by the ECB, member states must seek to restore European economies to growth. In the long run, this is the only viable way forward.

The solutions I advocate are recognised daily in business through the examinership mechanism. Used even for the largest corporations, examinership recognises the reality of a fundamentally sustainable business with an unsustainable debt which further borrowing will not resolve. Through this process, a write-off of as much of the debt as is required to ensure sustainability takes place. Irrespective of how long we wait, the inevitable will happen sooner or later. The question we must ask is this: how much misery will be caused before we realise our folly?

As I indicated, a number of measures are needed to resolve the crisis, including a sustainable employment and growth package and a recognition that imposing enormous debts on countries arising from the follies and failures of international banking and finance corporations is neither just nor sustainable. Further, we need to have a strong central bank in the eurozone, rather than what is effectively a federation of 17 national central banks. A strong eurozone central bank would control the banking and financial sector, in particular, financial flows from stagnant growth areas to high growth areas in the eurozone, thus avoiding the attendant bubble effect which such transfers ultimately provoke.

We should all stand back and look objectively at the big picture. The Stability and Growth Pact implemented under the Maastricht treaty failed because action was not taken against France and Germany when they broke the pact’s rules. Already the Prime Minister of Spain has ignored the European Commission on Spanish budget deficits this year, while the leading candidate in the French general election, Mr. François Hollande, has stated his desire to renegotiate the fiscal compact agreement. This brings to mind the Treaty of Limerick which was broken “ere the ink wherewith ’twas writ could dry.”

In this time of crisis, instead of acting in a communautaire fashion, the larger countries in the eurozone are intent on protecting their national and electoral interests and private finances. The European Union and the European Central Bank refuse to control and regulate private banking and financial services, choosing instead to focus almost exclusively on national deficits and thereby force hardship on ordinary people. The EU and ECB theory of uncontrolled competition is seen to have failed. This issue needs to be examined further. If this House is to be relevant, it needs to question objectively and scrutinise every policy proposal. Failure to do so is an abdication of duty and will lead to a further discrediting of the Oireachtas. In a world where large countries jealously guard and protect their own interests Ireland must stand up for fair play, equity and natural justice for all the small nations in the European Union. This is the [404]best way to protect our interests, those of other vulnerable small nations and, ultimately, those of the European Union.

Tá sé an-éasca do dhaoine a bheith ag caitheamh clocha le héinne a dhéanann ceistiú ar bith ar an Aontas Eorpach. Tá sé faiseanta sa lá atá inniu ann gur ionann ceistiú ar rudaí atá ag tarlú san Aontas Eorpach agus a bheith in aghaidh na hEorpa. Chonaic muid san am atá caite an chontúirt a bhaineann leis an mheon sin, nuair a bhí institiúdí eile ar nós na neaglaisí Caitlicigh, An Garda agus go leor institiúdí eile nach raibh daoine in ann a ceistiú nó deirtí go rabhadar in aghaidh na n-eagraíochtaí sin. Tá a fhios againn an tubaiste a tharla dá bharr.

Is iad cairde an Aontais atáá cheistiú. Is iad na daoine a chreideann na hidéil, a bhí mar cúis le bunú an Aontais, atáá cheistiú. Iis iad naimhde an Aontais na daoine sin nach bhfuil sásta a thuiscint nach raibh eagraíocht ar bith a bunaíodh riamh sa saol nach raibh lochtaí uirthi nach bhféadfadh dul ar bhealach a aimhleasa mar nach raibh daoine sásta í a ceistiú. Le bliain anuas feiceann muid Merkel agus Sarkozy ag leagan síos don gCoimisiún céard atá le déanamh, ach de réir rialacha na hEorpa, tá sé sin glan in aghaidh na rialacha. Is é an Coimisiún amháin atá ceaptha le bheith ag leagan amach polasaí. Eagraíodh sin d’aon turas le nach mbeadh forlámhas ag tíortha móra san Aontas nua seo ar na tíortha beaga.

Tá súil agam go n-éisteoidh an Rialtas agus nach mbeidh bodhar Uí Laoire i gceist ionas nach dteastóidh uatha scrúdú a dhéanamh ar chéard atá ag tarlú. Tá a fhios againn, san am atá caite nuair a rinne daoine dearmad gan éisteacht le tuairimí daoine eile, gur rugadh orthu sa deireadh mar nach raibh siad sásta rudaí a cheistiú. Tá obair fíor-thromchúiseach le déanamh. Tá intinn an Rialtais, is cosúil, socraithe sula dtagann sé faoi bhráid an Tí seo le na moltaí casta atá le déanamh aige. Is bocht an scéal é sin. Bhí an Rialtas seo ag rá an t-am ar fad nuair a tháinig sé i gcumhacht, go gcaithfeadh freagracht níos mó a bheith ar an Oireachtas, go gcaithfeadh sé níos mó ceisteanna a chur agus go gcaithfeadh sé neamhspleáchas a thaispeáint ag scrúdú moltaí an Rialtais. Focail bhreátha, focail folamha. Séard atá an Rialtas ag déanamh anois ná ag rá gur féidir leis rudaí a scrúdú nuair a shocraíonn sé gur ceart iad a scrúdú——

Deputy Sean Sherlock: Information on Sean Sherlock  Zoom on Sean Sherlock  Is the Deputy willing to yield to allow me to make a debating point?

Acting Chairman (Deputy Joanna Tuffy): Information on Joanna Tuffy  Zoom on Joanna Tuffy  The Deputy has only one minute of speaking time remaining.

Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív  Zoom on Éamon Ó Cuív  If the Minister of State wishes to make a point, I will listen, as I always do when a point is made.

Deputy Sean Sherlock: Information on Sean Sherlock  Zoom on Sean Sherlock  I thank the Deputy sincerely. While I respect what he is saying, it should be acknowledged that, while in power, his party caused this country to be reduced almost to penury and signed up to a memorandum of understanding. In discussing the situation in Greece, the European Union and the treaty we must not revise our history. The Deputy should acknowledge the factors that lead to the economic circumstances in which we find ourselves. Our economic sovereignty has been lost as a result of the actions of his party.

Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív  Zoom on Éamon Ó Cuív  The Minister of State did not listen to what I said. I would be the first to admit that we made two absolutely fundamental and monumental mistakes in this country without criticism from the then Opposition. The first was the construction of the euro, which was flawed because it believed in the power of competition to ensure good governance. I am willing to learn from my mistakes. I agree the second mistake——

Deputy Sean Sherlock: Information on Sean Sherlock  Zoom on Sean Sherlock  Where was the Deputy’s voice in Cabinet?

[405]Acting Chairman (Deputy Joanna Tuffy): Information on Joanna Tuffy  Zoom on Joanna Tuffy  Deputy Ó Cuív, without interruption.

Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív  Zoom on Éamon Ó Cuív  I am honest enough to admit that I did not fully understand the catastrophic mistakes in the construction of the euro, but I understand the greatest minds in the financial system, including some in the Minister of State’s party, did not recognise them either.

Second, light touch regulation in the financial sector worldwide, including in Ireland, led to serious consequences. I am also honest enough to admit that if someone had told me five or ten years ago that AIB and Bank of Ireland — everyone is focused on the IBRC but it holds more than half the bank debt — would not be able to run their own businesses in a proper way, I would have been sceptical about that being the truth. We have found out since, however, that they were unable to do so properly and effectively. That came as a surprise not only to me but also to many Government Members.

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan  Zoom on Michael Noonan  I thank the House for agreeing to discuss the Bill in order that we can conclude the debate tonight. 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. I thank Deputies on all sides of the House for their constructive and considered contributions to this discussion and, although I fundamentally disagree with some, it was good to have the debate. I welcome Fianna Fáil’s statement that it intends to support the Bill and I appreciate the responsible and realistic stance its Members have adopted on this.

Many speakers referred to the burden of austerity facing the Greek people. Strong opinions have been raised about whether the amendment Bill and the other components of the Greek programme of assistance will be successful in restoring the Greek economy. I recognise there are sincerely held positions on all sides. However, the stated aim of these measures, as set out by the euro group president last week, is to “allow the Greek adjustment effort to regain momentum, which — together with a rigorous implementation of the agreed policy package for the new programme — constitutes the basis for putting the public finances and the economy of Greece back on a sustainable path”. The Greek Parliament has discussed these issues and voted to approve the conditions attached to the new programme of assistance.

A number of Sinn Féin and socialist Members referred to the undemocratic nature of the decision-making process. There is a technocratic Prime Minister in Greece but he was put in place on the basis of all-party agreement and he drew his Ministers from the three main parties in Greece. The Finance Minister also served under former Prime Minister Papandreou. The cabinet was voted in by the Greek Parliament. We vote our Prime Minister in by parliamentary decision as well.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett  Zoom on Richard Boyd Barrett  Not by all parties.

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  We do not vote in our Prime Minister by a vote of the people and, therefore, I do not see how the charge that the Greek Administration is not democratic stands up. It was a free choice. The government is an all-party coalition. The centre right parties would not agree to participate in government with Mr. Papandreou continuing as Prime Minister and the arrangement was to appoint a new Prime Minister. It was announced earlier that elections would be held in Greece in early May. I do not see what is undemocratic about that.

In the case of Italy, a similar arrangement prevails. Mr. Mario Monti was voted in as Prime Minister by the Italian Parliament. He has selected his Ministers principally from the technocratic class, and while they are not Members of Parliament, the Parliament, by a huge majority, voted in favour of and voted confidence in his Government and has implemented his programme. In addition, the Greek Parliament, by a huge majority, voted in favour of its new [406]programme and the prior conditions attaching to it. As a result, I hope tomorrow that Greece will be in a position when the PSI is completed to avail of the €130 billion that is being provided under the new programme.

I do not understand the Sinn Féin position. Its Members weep for Greece. They weep for hungry children and families who have been bereaved because of the high suicide rate but then they will vote against the provision of the €130 billion that will allow education, social welfare and health services to continue. They weep, cry and get passionate about conditions in Greece but they purport to deprive the country of the very aid it requires. That is a ridiculous position.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett  Zoom on Richard Boyd Barrett  The money is not going to the Greek people.

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  That is also reflected by some of the socialist Members. Deputy Boyd Barrett said this will not work. Does he believe we should turn off the tap, not give them any money and put them in a position where services are closed?

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett  Zoom on Richard Boyd Barrett  They are not getting the money.

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  Does the Deputy think that is support for the Greek people? It is a ridiculous position to maintain and if he had any sense of embarrassment or shame, he would not vote against the Bill because it is intended to aid the Greek people. It is essential that they get this money quickly.

Deputy Joe Higgins claimed that the problem in Greece was German capitalism. In one of our frequent interchanges, I asked him before Christmas what was his solution and he replied that it was socialism. He must have forgotten the government that put Portugal into a programme was socialist and the socialist party, PASOK, was the sole party in government in Greece. Whatever socialism is, it is not the solution. It seems to be the cause of the problem. Even the former Taoiseach, Bertie Ahern, claimed to be a socialist and he described Deputy Higgins as the only other socialist in the House at the time along with an anonymous third party. I do not know who the third socialist was. Perhaps he was talking about me, as I had left wing tendencies in the past. Socialism is the problem, not the solution.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett  Zoom on Richard Boyd Barrett  That is a leap in logic.

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  Socialist governments in Portugal and Greece were unable to manage the problem.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett  Zoom on Richard Boyd Barrett  Were the banks socialist?

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  Of course, the banks caused the problem as well, but the Sinn Féin and socialist position that Greece might need the money and people might go hungry but, for the sake of a principle, they will not give them €130 billion they need to keep the country going for the next few years is ludicrous.

These amendments will allow for three key changes to the loan facility: 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 timely acceptance of the Bill will allow for the next phase of the Greek loan facility to proceed as planned. These changes to the facility are in conjunction with a number of other changes to the Greek programme, including the provision of additional funding of €130 billion [407]and changed private sector involvement, PSI. In the case of the PSI exchange offer, the closing date is tomorrow, 8 March. Additional funding is also provided for interest rate 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 structural reforms included in the programme that Greece will regain competitiveness and be able to return to the markets. These changes are intended to put Greece on a sustainable path. I have emphasised the importance of showing solidarity with it.

  7 o’clock

We should also note that there is a significant contrast between our position and that of Greece. Our capacity to recover from our current difficulties is well recognised, given the right mix of policies at home and internationally. The economy is estimated to have returned to growth last year and the outlook is for continued growth this year. We have a strong export sector, with multinationals performing well, and a strengthening indigenous sector. We are also seeing a resumption of inward foreign direct investment, which points to the fact that many of the underlying strengths of the economy remain, including a well educated workforce, favourable demographics, an open and flexible economy and a pro-enterprise environment. Moreover, the labour market is showing welcome signs of stabilisation. It is particularly encouraging that we saw an increase of 10,000 in the number in employment in the fourth quarter of last year on a seasonally adjusted basis, the first such increase since 2007. Our programme implementation has been exemplary, as the troika team mentions regularly when discussing Ireland. We have met all of our commitments to date, representing more than 90 actions. We have met and, in some cases, exceeded all of our fiscal targets. For 2011, our general Government deficit, at around 10% of GDP, was well within the 10.6% specified in the programme conditions.

Our strong programme implementation performance and the underlying strength of the economy are being recognised by the financial markets. In recent days the ten year bond yield has moved below 7%, a considerable reduction from the 14.1% peak in July 2011. I also remind the House that the NTMA has successfully re-engaged with the bond markets and extended the payment date of some €3.5 billion of debt which will mature just after the programme ends. This is a significant first step in managing Ireland’s post-programme funding requirements.

This is a time for unity among euro area countries to try to ensure stability within the euro area. Ireland must play its part and stand in solidarity with its fellow euro area member states. It is in the interests of the country, the euro area, the European Union as a whole and the broader world economy. Therefore, I urge Deputies to agree to ratify the changes to the Greek loan facility. I commend the Bill to the House.

Question put.

The Dáil divided: Tá, 106; Níl, 19.

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Níl
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Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Richard Boyd Barrett.

Question declared carried.


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