Euro Area Loan Facility (Amendment) Bill 2013: Second Stage 23rd January 2013

I welcome the opportunity to speak on this Bill which is important for all of us in Europe. I looked at what I stated last March when we agreed the previous bailout for Greece. I stated then I did not have great confidence it would be a long-term solution when one looked at Greece’s eye-watering debt to GDP ratio. I suppose I should not claim any great level of insight for coming to this conclusion because I do not think any observers at the time had great expectations of the package. Nevertheless, it did settle the markets for a number of months, but it was only temporary and what followed in the summer and in the months running up to the deal prior to Christmas looked to many observers as a doomsday scenario with the euro tumbling, and great concerns about the future existence not only of Greece in the euro but of the euro itself. This uncertainty continued until the new deal was agreed. This is the deal we are now confirming in legislation, albeit some months later.

The deal was very much bolstered, was made acceptable and did the job because of statements by EU leaders that whatever was required to save the euro would be done and would be forthcoming. This commitment was underpinned and demonstrated by the EU doing what it had stated in previous years it would never do, which was to offer debt relief and retrospectively reduce interest rates. It was this unequivocal commitment to underpin the euro which had immediate and dramatic results. The euro has recovered and is still recovering in value. The interest has fallen on EU bonds and continues to fall. The biggest winner of all, amazingly, is Spain which has managed to avoid a bailout simply on the promise there would be one if it needed it. Its bonds are now being underwritten and viewed in the markets as being as solid as German bonds because they are underwritten by this promise. The bonds are virtually risk-free. As an Irish person I am a bit miffed this deal was available, and I believe we all are miffed that the later deals were better.

These developments which reflect the current approach in Europe to indebted countries, such as the debt relief for Greece, the extension of debt maturity and the restrictive reduction in interest rates, together with the huge confidence boost to the markets of a promise to support the euro at all costs highlight the disadvantage Ireland suffered by being an early mover and being the country which went for a bailout very early on. To the extent we know what happened we did not go for a bailout; we were bounced precipitously into a very onerous bailout to protect the euro. Highlighting the different treatment of the troubled eurozone countries strengthens our hand in negotiating a better deal and pleading our case in a rational way and in a reasonable manner, while at the same time trying to do what we can at home to ensure we put our own finances in order.

These negotiations are beginning, and I completely accept it is tortuously slow, to bear fruit. I refer particularly to the crucial decision of the Eurogroup on Monday to examine the extension of debt maturities for Ireland and Portugal arising from loans from the EFSF.

The ECOFIN meeting is reporting a similar commitment as far as the EFSM is concerned. These developments come on top of the €9 billion in cost savings to us as a result of interest rate reductions which we negotiated in 2011.

The promissory note is an outstanding problem but we are now assured there is some improvement in this mechanism in the offing, although we do not yet know the nature or extent of the better terms we will achieve. Apart from the burden of other debt, the €3.1 billion annually required to fund this is an intolerable burden and it is a completely unjustifiable burden to place on the shoulders of the Irish taxpayer. Any change must be welcome and is long overdue. I know the Government is fighting tooth and nail for the best possible deal for taxpayers.

We also have other battles to fight, such as that for sovereign responsibility for bank debt. Perhaps we have greater grounds for optimism in this regard. We have had other good news in recent times, for instance earlier this week a report from Morgan McKinley showed an increase in the number of professional job vacancies being advertised. We know the IDA has had its best year in a decade in attracting jobs to the country. I am very cautious about speaking about green shoots. I would not dare do so because we know from the experience of the previous Government that to do so prematurely and then subsequently see every possible economic indicator moving in the wrong direction is hugely demoralising for people and is counter-productive. I certainly will not speak about green shoots. However, after almost five years of bad news, when every indicator was going the wrong way and when the outcome of every situation was worse than we ever anticipated or forecast, at last when we get good positive news, however modest it may be, and have a series of positive developments as we have had in recent months we should welcome them and at least acknowledge them and be encouraged. There is nothing wrong with being encouraged by good news; even if it does not fit into our scenario of how the world works and what we would like to see happening we must be positive.

It will take a long time for these positive developments to be felt at an individual level by people who have lost all their savings, assets, shares and jobs. It will take time to translate into a positive impact on every individual. It will also take time for domestic demand to take off. This is when we will begin to see jobs being created in the Irish economy. It is absolutely essential for job creation. With these changes on the macro front we will get growth and confidence. This is how we will see recovery. The only way recovery can happen is through increased confidence in the bond markets, IDA successes, debt reduction deals with the EU and the good figures we hear with regard to export growth. This is what will feed down and into every constituency in the country with regard to jobs. This is why I was very taken aback when I heard Deputy Donnelly yesterday on “Morning Ireland”. He made very negative remarks in respect of the Eurogroup’s commitment to look at the extension of bond maturities. Apart from the fact he was completely wrong in what he stated in suggesting the bulk of money we are borrowing will pay for the banks, what is worse is that he knows it is wrong. He is not a fool and knows exactly what the money we are borrowing is for.

Before the break I was speaking about the small but positive signs which may presage a recovery not only here in Ireland, but in Europe. I spoke about the fact that last year was the IDA’s most successful year in bringing jobs to Ireland in the past ten years, the commitment by the EU to look at possible debt reduction for us, growth in confidence in the bond market with the drop in interest rates, the recovery of the euro itself and, more importantly, stability in the euro. Given this background, and I am not trying to overstate what is happening, I stated I was rather taken aback by Deputy Donnelly’s remarks on RTE yesterday morning, which I felt were churlish to say the least, when he was responding to what the rest of the world regarded as some good news. Of course we could get better news, and it would be great if our lenders told us we did not have to pay interest or that we did not have to pay back the money, but in the real world these things do not happen. I do not expect Deputy Donnelly to congratulate the Government because in the real world these things do not happen either, but I believe that on hearing good news for Ireland, and God knows it is rare enough, any Deputy would at least be pleased for the country and for its citizens, particularly those he or she represents. Instead, the impression came across that Deputy Donnelly would have been happier if RTE had him on to respond to bad news. This is what I objected to.

I know there is a very fine line between fanciful optimism and realistic positivity. I certainly try to draw the line and not be fanciful because it is important to be honest with people and be realistic. The negativity of Deputy Donnelly was not only churlish but potentially damaging, and not only to the economy. On Leaders’ Questions this morning Deputy Boyd Barrett spoke about the depressing and tragic suicide numbers and the growth in suicide particularly among young people. This was also raised in the Topical Issue debate by Deputies Troy and Wallace. I do not know whether there is a causal effect between the economy and unemployment and suicide, but there is definitely a relationship between loss of hope and suicide and this is a point worth making. It behoves us as society leaders, if not to be completely positive, then at least to be temperate and honest in our comments and not to plunge people continually into eternal gloom. I would be the first to acknowledge that we in Ireland have had precious little to be happy about in recent years. I heard Deputy Ross make the same point. If Deputies Ross and Donnelly know the importance of perception and confidence and its impact on the economy, and if we want to increase confidence in our people and investors here and abroad, it does not make any sense to constantly denigrate the precious few positive developments we have had.

The overall purpose of the Bill, as the Minister of State stated yesterday in his opening speech, is to facilitate in the public interest the financial stability of the European Union and safeguarding the financial stability of the euro area. Nobody could quibble with this or be against it. It was and is clear the first and second Greek bailouts were not sufficient, or the terms were too onerous, for Greece to ever reach the type of sustainable levels of national debt which would bring the type of recovery it desperately needs. The amendments to the Greek loan facility were agreed before Christmas and have already worked to reduce the crisis and the near catastrophic situation we appeared to be in before Christmas. This is in all our interests and not only in the interests of Greece. Whether it is a permanent turnaround we do not know, but it is a positive development and this is my point. We all hope Greece will weather the extremely difficult times ahead for its citizens, and to call them “difficult times” is to understate it. It will run to certainly two and perhaps three decades for them. Their best case scenario is to reach 110% of GDP by 2022 and this is not a pretty prospect.

The conditionality of the rescue package is extremely onerous and the recent IMF report on Greece was, to say the least, very sobering. It pointed out total lending to Greece since the crisis started three years ago is more than €255 billion and the programme remained at high risk of missing its revised goals. It also pointed out Greece is attempting to achieve an unprecedented amount of fiscal and current account adjustment under a fixed exchange rate with a massive debt overhang and weak confidence. It also stated many of the conditions which caused the problems in Greece still exist as it still has a bloated public sector, rigidity in the jobs market and inflexibility with regard to wage rates. The report also referred to an astonishing scale of tax evasion among the wealthy in particular. I mention this because it may be that someday Greece may decide the demands of remaining in the euro are too much and too demanding, notwithstanding the Eurozone’s commitment to do everything necessary to save the euro. It may be that someday the eurozone itself will take the view that keeping Greece in the euro is no longer consistent with saving the euro.

In saying that, I am conscious that it is a doomsday scenario for Greece and probably for the rest of us, too. However, the chances of that happening are less now than they were. I think the EU means it when it says it will do everything necessary to save the euro, but we should probably interject the words “within reason”. It is not just to save Greece but to save any country, including ourselves, should that become necessary. The caveat of “within reason” must be borne in mind. Given the cost of saving a country could be so huge and the implications for citizens so large, every country should continue to exercise a significant level of democratic control over such decisions. For that reason, I have some reservations about the section in the Bill which permits future adjustments to the Greek loan facility to be approved simply by way of a Dáil resolution rather than by new legislation.

It may be that Greece will never have to come back to the well, and I hope that is the case, but maybe it will, perhaps under some future government in five, ten or 15 years’ time. I understand perfectly that it would be far more efficient if we could just nod it through by resolution of the Dáil rather than having to introduce some legislation. However, it is absolutely essential that we have some democratic control. It would be both prudent and desirable to do so. While democracy is never the most efficient form of government and there is often a conflict between democracy and efficiency, in this case, which could have such implications for citizens, it is important to come down on the side of democracy.

I ask the Minister to consider examining the legislation with a view to amending it, not necessarily to require legislation if a further bailout is required but at least requiring a fully informed Dáil debate and a vote of the Dáil before significant decisions are taken in the name of the people which could have such an important impact on them.

I am not sure  this is implicit because we have had resolutions of the Dáil that were nodded through without debate. It is important, therefore, to insert a provision in the legislation that there would have to be a debate.

Overall, however, I completely support the Bill’s import. I believe in the mutual solidarity of our membership of the EU and of the euro. We have received international funds to help pay for key services such as health and education, and we would want to support at least some of those services for the citizens of Greece. Even if we were to be brutally self-interested, a stable Europe and a stable euro is in all our interests. That is achieved by passing this Bill.