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European Council Brussels: Statements (Continued)

Wednesday, 19 December 2012

Dáil Éireann Debate
Vol. 787 No. 4

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(Speaker Continuing)

[Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett] While the European elite throws out a few token mentions of youth unemployment and growth, the key watchwords that were repeated again at the most recent summit, the real priorities that are emerging from these summits, are budgetary discipline, economic co-ordination and increased competitiveness, which translates into more austerity for ordinary people that is dictated centrally by Europe, along with further attacks on the pay and conditions of ordinary workers and the welfare systems to increase competitiveness, while putting more power into the hands of the European Central Bank, the policies of which, as Deputy Donnelly outlined, have worsened the situation of the European financial crash.

To add to Deputy Donnelly's point, we bemoan the failure of the banks we bailed out to deal with the mortgage crisis, to lend to the SME sector or to behave in any way, as if they give a damn about what is happening to ordinary citizens in the economy, and the Taoiseach bemoans it, but he is moving towards giving more power to the institution that is dictating that policy to our banks. As soon as the crash hit at the end of 2008, the European Central Bank issued guidelines to the banks and to states demanding that even if banks were to be rescued with public funds, they must maintain profit maximisation as the key priority and should not be diverted into other social or macroeconomic goals. It was simple and clear. When Richie Boucher behaves like a belligerent thug at meetings of the Joint Committee on Finance, Public Expenditure and Reform, refusing to pay any attention to the interests of public representatives, it is because he is following ECB policy, which states profit maximisation is the only thing banks should care about. It is clearly the only thing they care about.

Acting Chairman (Deputy Tom Hayes): Information on Tom Hayes Zoom on Tom Hayes I ask the Deputy to refrain from naming people in the House.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett The resulting costs are very clear in Irish society. Despite all the European of the year awards, the backslapping and hugs between leaders at these summits, the Taoiseach is delivering nothing in terms of debt relief and it is becoming increasingly clear that he is not even asking for debt write-downs.

We are getting nothing to deal with the unemployment crisis. The Government's own medium-term fiscal framework tells us that even if the budget projections work out for the next two years, unemployment will only go from the current level of 14.8% to 13% by the end of 2015. That is what the unemployed can look forward to, a 2% reduction in unemployment by the end of 2015. In other words, there will be no end to the economic crisis and in the domestic economy growth will continue to fall. That is nothing to cheer about.

Deputy Mick Wallace: Information on Mick Wallace Zoom on Mick Wallace If the Taoiseach ignores the irreparable social damage austerity has caused and the destruction of our domestic economy, the test of whether austerity and structural reforms are working, according to those who manage to live out their existence in the financial bubble, is the ability of countries that have received bailouts to return to the capital markets. If this means anything, it must be that a country can borrow long-term funding from private investors at a sustainable interest rate that roughly resembles what it paid in the past. In 2005, Ireland could borrow for ten years at under 3%. Right now, it's notional ten year borrowing costs are 4.3% and may be higher in practice. If we find ourselves borrowing at rates close to double those for the stronger countries, we will continue to play catch up, falling further behind all the time. If the European Union is to take best care of all its members, there will have to be some form of debt mutualisation. The alternative will leave us permanently on the periphery.

  It was interesting to read the views of leading Financial Times correspondent, Wolfgang Münchau on Monday, when he said at the European summit that the German Chancellor said she rejected a mutualisation of debt and hidden transfer payments. In other words, she will reject a bank resolution mechanism that does what such a policy is supposed to do, take taxpayers' money and rescue a bank. Without a real resolution mechanism, there can be no banking union either, so what happened last week was that the political process stalled in a very big way. What was agreed last week is virtually cost-free, a single supervisory mechanism for about 2% of the banks in the Eurozone and based at the ECB. The common supervisory structure will affect between 100 and 150 banks out of a total of 6,000, those with assets of more than €30 billion. The €30 billion will become a target to circumvent. The practical outcome of this agreement will be a two-tier banking system, one for large banks and one for small banks. The ECB will deal with failing banks just as the Eurogroup has been dealing with failing states. It will replace existing debt with new debt and impose conditions. Just as the eurozone will try never to allow a member to default, the ECB will never close a bank, no matter what its problems. Bank resolution becomes a euphemism for exactly the opposite. This is about the pretence of resolution, not real resolution.

  That Financial Times commentator is well respected and he is not very impressed by what happened at the Council meeting last week. If we are to look at the status quo for the foreseeable future, continuing to drive down earnings and undermining the social welfare system, allowing women and children to suffer most from austerity, the brainchild of today's version of neoliberal thinking - austerity - will lead to the price being paid as a result of our adherence to the European powers being too high.

Acting Chairman (Deputy Tom Hayes): Information on Tom Hayes Zoom on Tom Hayes We will now move on to questions. I will take three questions at a time to allow everyone in.

Deputy Micheál Martin: Information on Micheál Martin Zoom on Micheál Martin On the single supervisory mechanism, would the Tánaiste accept it is a major disappointment that 98% of banks were, in essence, excluded? Does he accept the other key elements of the banking union have been undermined by this decision? A deposit guarantee scheme and a failed bank resolution mechanism have both been undermined by this decision. There is huge resistance within Europe, particularly from the German perspective, to any real banking union that has teeth and the scale to cover the 6,000 banks.

Could the Tánaiste confirm that he has not attended any meetings with the ECB on the renegotiation of the promissory note? Does he accept the basic principle that a host country does not use the Presidency to pursue its own agenda and does he accept the European Council does not have jurisdiction over the European Central Bank? Could he explain then how Ireland, as co-chair of the Council, can influence the ECB, given the Council has no jurisdiction over the ECB in terms of the resolution of the promissory note issue? How will we use the EU Presidency to advance negotiations with the ECB?

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