Euro Area Loan Facility Bill 2010: Second Stage (Resumed)

May 18th, 2010 - Pat Breen

Deputy Pat Breen: I welcome the opportunity to contribute to this very important and topical Euro Area Loan Facility Bill 2010. The entire situation in Greece has dominated our television screens in recent months. There are very serious problems there and we have all seen the violence reported on television. Unfortunately, a number of people were killed as a result.
There has been much scaremongering in this House in recent days, with accusations of anti-European sentiments thrown across the floor at Fine Gael by Government Deputies when Deputy Enda Kenny and our finance spokesperson, Deputy Richard Bruton, raised legitimate questions regarding the future of Ireland’s budgetary process. As a result of the bailout package agreed for Greece last week by the EU Finance Ministers it appears Ireland will have to have pre-clearance from the European Commission before a budget can even be discussed in this House. It is a sizable sum of money but Greece is in dire financial straits. We do not want a rollercoaster effect if Greece fails to live up to its budgetary commitments.
I reject the accusations from across the floor of the House. They are completely unjustified. It is a sad attempt by a very tired Government to deflect attention—–
Deputy Michael Ahern: Here we go again.
Deputy Pat Breen: —–from the fact that the economy has been brought to its knees by the Minister of State’s Government. I must say that. We are supporting this Bill and have every right to question budgetary procedures and the plans for greater EU scrutiny of our country’s budget, as agreed last week. For years we have been demanding a radical overhaul and have sought greater transparency and a greater role for parliaments in the budgetary process. It is extremely important that Parliament has a role.
Nobody denies the doomsday scenario Greece is facing and the threat to the survival of the euro. Some years ago the European Commission celebrated the fact that the euro was one of the most successful currencies after being in place ten years. We are now in a very different scenario.
The €110 billion bailout agreed by the EU dwarfs any bailout ever witnessed for any other country. One might compare it to the IMF bailouts of Mexico and Argentina, of $30 billion and $8 billion, respectively, or that of South Korea, whose population was almost five times that of Greece, which received $58 billion in a rescue package during the Asian financial crisis in 1997. That bailout was unprecedented in European terms and it anticipated the revelation by the Greek Government which was elected last September that the country’s deficits had been understated for a number of years by the previous Government.
In other words, it had cooked the books and sent different figures to Brussels which put us in the situation we are in now. This drove the markets wild and many European countries became very concerned about their banking systems, fearing another collapse similar to what happened in Lehmans Bank in the United States some time ago. In particular, Germany had to cough up more than €22 billion for the loan to Greece. The German banks were saturated with Government bonds from Greece and it was that situation coupled with the fact that regional elections were taking place in the country which led to the reluctance on the part of the German Chancellor, Angela Merkel, to support the rescue package. Perhaps if Germany had acted sooner we might not be in this situation. However, that is politics and that is what happens when elections are coming up. There was a similar situation in the United Kingdom where hard decisions must be made now after the election.
It is important that Ireland shows solidarity for Greece. There is no doubt that the Irish taxpayer will have to pay a heavy price. The Minister stated today the money would be paid back but we are right to ask questions in this House. We must ask them on behalf of the taxpayer. That is why they elect us and that is why Deputies Kenny and Bruton asked those questions. Four billion euro was cut in last year’s budget and further cuts are on the way, as we have heard from Ministers who have four weeks to come up with another €3 billion worth of spending cuts. Further tax increases are probably on the cards for 2011. As a result of last week’s agreement front line services in health, education and social welfare are all expected to come under the spotlight again. Much pain has been inflicted already on the Irish taxpayer who has tolerated a lot already. Our situation is not the same as that in Greece but people are very angry. Last week there was a similar situation when the spotlight was put on old age pensioners. There are threats to cut the pension again and the situation is very uncertain for the future.
In spite of the Greek bailout the markets continue to be volatile and there is considerable uncertainty. When the word filtered through of the bailout at the weekend there was an initial surge in response in the US and European stock markets. Attention quickly turned to the high level of sovereign debt and whether this would add to the debt load of already over-indebted European countries. The interest rate for the Irish Government’s requirement to borrow from sovereign debt markets rose by 20 basic points, from 0.2% to 4.7% last week, the third highest rise in those markets in Europe after those for Greece and Portugal.
The austerity measures introduced in Greece and the bailout from European member states has done nothing to quell spectators, and government bonds traded in such small quantities, particularly in countries like Greece, Italy, Spain and Portugal, forced the European Central Bank to reverse a prior refusal and agree to purchase eurozone government bonds to help restore confidence in the market.
This shows how serious the position was, and some economists are worried that if the rescue package fails in calming the markets, European countries could end up footing a bill of €500 billion to save other countries. We need a strong euro and today we saw the currency hovering around its lowest level, at approximately $1.22. We all know that a weak euro will have significant costs when we buy our barrels of oil in dollars. There will be a real effect on everybody at the petrol pumps.
Everybody agrees that saving Greece is important and it is vital that we show solidarity with our European counterparts. There is no doubt that, like here in Ireland, ordinary people in Athens, on the thousands of islands and throughout Greece will have to suffer real hardship if the austerity measures are introduced. The EU governments must co-ordinate fiscal monetary policies, and Fine Gael agrees with such action.
I heard our spokesperson, Deputy Richard Bruton, arguing tonight that parliament participation is very important and must be a key element in these processes. Budgetary proposals should be scrutinised in this Parliament before any decisions are rubber-stamped at EU level. The Minister for Finance might clarify the position of this House, if any, in advance of agreeing budgets with the EU and what levels of scrutiny might be involved. Deputy Bruton said this evening that Ireland can correct the errors of the past but will not succeed if responsibility for the work is simply passed to others. More clarity is required on the implications of the agreement for the Irish taxpayer and I look forward to the response of the Minister tomorrow, as well as the contributions of others in this debate