Banks need to get lending again.

EU/IMF Programme Statements- Wednesday 4th May 2011

The Government has successfully concluded the first and second quarterly programme reviews with the European Commission, ECB and IMF. The EU and IMF have endorsed actions taken and to be taken by the Government regarding our public finances, the banking sector and jobs. The thesis which came across during the general election campaign and in the House today from Members of the Technical Group and Sinn Féin that in some way we should default unilaterally does not hold up in reality. I agree with the Minister, Deputy Joan Burton, who suggested that we need a specific debate on the matter. If we were to default unilaterally the following questions arise. From where would we source money? What interest rate would we pay? How would we pay our public servants and how would we maintain our public services? These are critical questions and people who use the bland, evocative and populist terms such as “burning bondholders” and “defaulting” are failing to fill in those blanks. I challenge Deputy Boyd Barrett to come into the House soon and fill in those blanks. He should suggest to us where he believes we will get the money, what interest rate we will need to pay, how much we will get, how we will pay it and how we will maintain our services. If he takes up that challenge, then it would be worthy of discussion, but until then we have an empty formula.

I congratulate the Minister for Finance, the Taoiseach and the Tánaiste on their initiatives in seeking a pan-European solution. We need to continue with the diplomatic offensive, which is in place. We need to continue to build credibility. We will eventually achieve a reduction in interest rates and an improvement in the general terms of the bailout, but it is a marathon. It is not a matter to which there is a magic solution. With the greatest respect to Deputy McDonald, it is not tenable to suggest that we can deal with this matter instantly; it must be dealt with on a pan-European basis. I maintain the view we put forward before the general election that the deal is not sustainable in its current form and merits renegotiation. While we cannot achieve it overnight, it is being gradually achieved and results will accrue from that.
We are successfully restructuring the banking sector and the establishment of the two pillar banks and their rationalization is a step in that direction. Its success is reflected in a reduction of the degree to which deposits are being withdrawn from those institutions and reform will ultimately be achieved. I come across this every day in my constituency work and I know it is repeated across the House. Despite what we hear from the banks’ PR, there is a major problem with finance for small businesses. I know of viable businesses that are being refused term loans and overdrafts, thereby jeopardizing two or three jobs, and therein lies the future of our country. It is important to get the banks into a position to lend and to get the money flowing through our banks into the economy. The restructuring is a critical first step, but we are by no means finished with that. I urge the Minister to stick with the idea of getting money flowing.

I commend to the Minister the idea that we should implement the provision in the programme for Government to guarantee small loans in the business sector to get over this problem. Credit is crucial to getting investment going.
The memorandum of understanding contains an acceptance of the jobs initiative, which represents progress from where we stood before. It would be lovely if a Minister could come into this House and announce that billions of euros would be injected into a jobs programme, which is the ambition and what we ultimately want to get, but the jobs initiative will be a critical first step. We need to restore the dignity of work to people and end the lines of young people in the departure lounge at Dublin Airport going to Australia. While it is fine for people to go abroad voluntarily to gain experience during a gap year, it is a tragedy when people are going against their wishes because they have no option. While it is a tragedy for their families, it is also a tragedy for the future of our economy and society, and it must be reversed. The training programmes and propositions included in the programme for Government which will be implemented through the jobs initiative to be announced next week are crucial first steps in dealing with unemployment. We need to deal with this issue immediately.

It is important that we maintain the fiscal ambition to keep the deficit at 3% of GDP by 2015. It is important to our international credibility and the project of achieving a pan-European solution to the unacceptable bailout. With regard to the bailout, bondholders will have to take a hit. However, we cannot act unilaterally as a small country that depends on international conditions and that has such a great need for money to pay for services and maintain the apparatus of the State. Doing so would not make sense to me.

We should examine the Japanese mortgage model which I commend to the Minister for consideration. We should consider intergenerational mortgages and mortgages extended in time. This would involve putting more finance into the banks such that they would be in a position to act in this regard. There are too many people in negative equity and too many families whose income has been reduced by the universal social charge and other charges. In some cases, their income, or 50% thereof, has been eliminated. Such families are having a shocking problem trying to make mortgage repayments. Even to have them investing and serving as confident consumers in the economy to get the economy moving, it is vital that there be mortgage restructuring.

The proposition in the programme for Government and the proposition of the Minister for Finance, Deputy Michael Noonan, outlined in a number of speeches today, that Departments consider the Canadian model of departmental expenditure, is critical. This process is in train. One can prune expenditure without causing vulnerable people to suffer. I would be aghast and horrified if vulnerable people still suffered, perhaps through the withdrawal of a bus service to a special school, when wasteful expenditure was eliminated. There is potential for cuts in expenditure that would ultimately protect the vulnerable by making more cash available.

The Croke Park deal offers a great avenue to achieve an outcome that will maintain industrial peace and a fair society and keep people working together. The deal must be exploited to the full. Since the Government has been in office, serious strides have been made. Real confidence has been built outside the House by a leaner, fitter Government.
Something must be done to tackle exorbitant salaries, bonuses and ludicrous payments for failure. If we cannot tackle them because of contractual law, I support the proposition that we proceed through taxation measures in future budgets. We must have equity and fairness across the board. We should be saluting the Government and revel in the House in the fact that so much has been achieved in such a short time. This augurs well for the future.

Senator Joe O'Reilly representing Cavan & Monaghan 2010. | An ExSite website