Today saw the publication of the worst ever results from Allied Irish Banks with losses of €3.5 billion. When the guarantee scheme went though the House, the Minister for Finance said that we were now deeply embedded in the banking sector. Conditions were laid out for recapitalisation and what its consequences might be. It is coincidental that the amount of recapitalisation put in by the Irish taxpayer is also €3.5 billion. In the intervening period we have had no credit being loaned, no return for the taxpayer and no dividend.

Hear, hear.

As I understand this, Allied Irish Banks will come cap-in-hand to the Government for a further recapitalisation sum of between €3 billion and €5 billion. When the banking crisis started, the Taoiseach's response was to say that we would write whatever cheque was necessary. When Allied Irish Banks come to the Government for more money, on top of what taxpayers will have to pay for toxic loans transferred to NAMA, what conditions will the Taoiseach lay down to protect Irish taxpayers? Will he tell Allied Irish Banks that there will be no more money unless they dispose of assets that are of no value to the Irish taxpayer or will he bail out the banks and drown the next generation of taxpayers in debt? What conditions will he lay down before he considers giving any further money to Allied Irish Banks?

As the Minister for Finance has pointed out, we are preparing a comprehensive response to all of those issues. Today's issue, however, relates to the results that have arisen in AIB. Those results show that NAMA is forcing the banks to face up to the reality of their bad loans. Everybody knows that the banks loaned far too much to speculative property development. NAMA is making the banks take the losses on these property loans up front. That is what is reflected in the large losses that AIB is reporting. Without NAMA the banks would have inevitably tried to do what Japanese banks did in the 1990s, which was to spread out the losses over the next decade to the detriment of lending to viable small businesses and households.

I am glad to note that when he addressed the Committee on Finance and the Public Service earlier today, the Governor of the Central Bank said he believes NAMA and the recapitalisation of the banks will create the foundations for the recovery of banking. It is important to point out that from the Government's point of view, we stand ready if necessary to provide recapitalisation to the banks.

Under what conditions?

The indication that they are seeking to raise private capital, in the first instance through the disposal of assets or a rights issue, is an option that is available to the banking sector. We have made it clear in our recapitalisation statements that we will be prepared, if necessary, in the interest of a viable banking sector to proceed on that basis.

The Taoiseach did not answer my question. I asked what conditions the Government was prepared to lay down before it considered giving any further taxpayers money to Allied Irish Banks. Is the Government prepared to make AIB dispose of overseas assets that are not of any interest to the Irish economy? The Exchequer figures for February will be issued at 4.30 p.m. today and these will, more than likely, indicate that the Government will have to borrow a further €20 billion this year. Whatever case can be made for Allied Irish Banks, no case can be made for giving another €6 billion of taxpayers' money to Anglo Irish Bank. It is, effectively, a dead bank which will not lend any further moneys.

The Taoiseach has said he will write whatever cheque is necessary. Postbank is being let go although it has been providing services in every community for 200,000 customers and consumers.

Has the Deputy a question?

However, the Taoiseach will come in here and say we need a further €6 billion of taxpayers' money for Anglo Irish Bank. There will be revolution on the streets if the Taoiseach does that.

Hear, hear.

The Fine Gael Party put forward a credible and workable solution for Anglo Irish Bank. We suggested it should be broken up into a good bank and a bad bank. Is the Taoiseach prepared to tell the Dáil and the country that he will not put one further cent of taxpayers' money into Anglo Irish Bank unless it comes to him with a proposal to break the bank up into a good bank and bad bank? He must do this so that those who invested in speculative fashion for return can share some of the pain and so that the Government can see to it that good loans that are prepared to work and where there is a possibility of future jobs can be protected.

Hear, hear.

The management plan from Anglo Irish Bank, which has been submitted to the European Commission, suggests, in the aftermath of the relevant loans being transferred to NAMA, setting up a self-contained bad bank within Anglo Irish Bank and providing for a new good bank. This plan has already been submitted to the European Commission, but it remains to be seen whether it will be approved. There is ongoing interaction on that. Therefore, this is not a Fine Gael idea. It is an idea that has come from the executive management of the board of Anglo Irish Bank.

Fine Gael put forward that idea.

The Government dismissed it out of hand.

This has been in the public domain since well before Christmas. On the other matter, the issue then was that the bank would be nationalised, long before we nationalised it. That would have meant plugging a large hole in the bank's balance sheet at that time, but the funding position for the State and the banks was very challenging at the time. The State was paying an interest rate of more than 6% on its borrowings then, compared to 4.5% today. That approach would have forced the State to try to borrow huge amounts of additional money at the worst possible time. At best, that would have been a very expensive mistake for the taxpayers.

Fine Gael claims it has a credible banking policy alternative. As I said last week, Fine Gael's banking policy is to threaten to default. We are somehow led to believe that threatening to default on those who provide funds to the banks will reduce the cost of funding the banks. In other words, we say will not pay, but we want more money at a lower interest. That is how credible Fine Gael policy is. Its other idea is to set up a national recovery bank.

I asked about paying another €6 billion? I asked what ideas the Government has.

Fine Gael claims the ECB will fund the national recovery bank idea, but there is no basis upon which a bank will be funded solely from ECB funds. Were one to seek to obtain funds and chase deposits from other banks in the system, that would clearly increase the demand on funding and increase interest rates. Therefore, the Fine Gael proposals would create an even more difficult situation.

The Governor of the Central Bank and others have confirmed that the approach we are taking is the best possible approach. NAMA is forcing the banks to face up to their losses and take those losses up-front. The policy of the bank has been to indicate that asset disposal and rights issue is a possible means of raising private capital, if it is possible to do so, but obviously the State must stand ready, if necessary, to provide capital as well.

Some €6 billion.