The position in Cyprus, a fellow eurozone country, is extremely grave. The country's banks remain closed today and it is uncertain when they will reopen. While the crisis is first and foremost one for the Cypriot people, it could also have major implications for the wider eurozone economy, including Ireland. Nine months ago, in June 2012, Cyprus first signalled that its banks would require a bailout arising from their exposure to the Greek debt crisis. At the weekend, emergency negotiations on Cyprus went down to the wire and resulted in deeply flawed proposals being made. The decision of European Finance Ministers and the troika to raid the private savings of ordinary Cypriot citizens was a serious mistake; they got it badly wrong. Incredibly, the Government welcomed this plan on Saturday morning as positive for Cyprus, the eurozone as a whole and Ireland. The decision to dip into personal savings and bypass the €100,000 deposit guarantee which applies across the eurozone will serve only to undermine the confidence of ordinary savers throughout the eurozone. Not surprisingly, the proposal was roundly rejected by the Cypriot Parliament. Despite reassurances that Cyprus is a unique case, the message that people will have received from the developments of recent days is that bank deposits are no long sacrosanct in the eurozone. A Rubicon has been crossed and a dangerous precedent set.

Given our repeated insistence that corporation tax is a matter for each member state, it is difficult to believe that under Ireland's Presidency the Government agreed to insert a condition in the Cypriot bailout requiring Cyprus to increase its corporation tax rate from 10% to 12.5%. If the European Union under our Presidency does not demonstrate it has the capacity to deal with the crisis in Cyprus without that country having to look east and turn to Russia for assistance, the entire eurozone will have been weakened. Will the Minister give an absolute assurance that there are no circumstances, including if it were to transpire that our banks needed additional recapitalisation, in which our citizens will have their private savings targeted in the manner in which Cypriots have had their savings targeted in recent days?

I share the Deputy's concerns about the plight of Cyprus. Many people view the images from the island with great concern and Irish people can relate to the events taking place in Cyrus given what has occurred here in the past five years. Deputy Michael McGrath is trying to turn a crisis for a small country in Europe into a problem in Ireland. His approach is irresponsible and not founded in fact.

The Minister should answer the question.

Let me set the record straight on a couple of issues. There is no evidence to suggest that what is taking place in Cyprus is having any impact in Ireland, whether in the financial markets, for example, in respect of the cost of funds, or on bank deposits. That is a simple fact. It is also a fact that the decision to raid deposits in Cyprus, as the Deputy describes it, was proposed by the Cypriot Government. Whereas it was not possible to put in place a programme with the previous Government of Cyprus, under the new government, an agreement on a bailout programme was reached in the Eurogroup of Finance Ministers chaired by the Dutch Finance Minister, rather than in the ECOFIN meeting which is chaired by the Minister for Finance, Deputy Michael Noonan. The proposal to introduce a one-off levy on deposits of under €100,000 agreed in the Eurogroup meeting was made by the Cypriot Government. It was not forced by other member states, as was proved only a couple of hours ago when the European Commission found it necessary to issue a statement on the matter in response to commentary by people such as Deputy McGrath. The Commission stated:

Regarding the one off levy on deposits BELOW 100.000 €: The Commission made it clear in the Eurogroup BEFORE the vote in the Cypriot parliament, that an alternative solution respecting the financing parameters would be acceptable, preferably without a levy on deposits below 100.000 €. The Cypriot authorities did not accept such an alternative scenario.

What is the alternative?

We have here a country which made a decision that was not forced on it.

Does the Minister believe that?

The difficulty facing Cyprus is the condition, as part of the bailout, that it raise almost €7 billion to trigger a financing mechanism of €10 billion under a programme. It needs to find a way of raising this money and it proposed to do so by imposing a levy on deposits of less than and more than €100,000.

The Government supported the proposal.

The proposal was rejected by the Cypriot Parliament and Cyprus is now seeking an alternative means of raising the money. Ireland, as a fellow European Union member state and holder of the Presidency, will monitor the position on a daily basis and assist in this crisis in any way we can, as will the Commission.

With respect, the Minister fails to appreciate the significance of what transpired in recent days.

What is the Deputy on about? His party fell asleep on the job.

From where did Deputy Byrne come?

He must be pleased that Russia seems set to bail out Cyprus.

I ask all sides to refrain from interrupting.

It is clear from the comments of senior spokespersons of various governments throughout Europe over the past 48 hours that they fully support the proposal to target the private savings of Cypriot citizens as part of the bailout for Cyprus. This proposal has now been rejected by the democratically elected Members of the Cypriot Parliament.

The Minister seems to fail to grasp the key issue, namely, the confidence of ordinary eurozone savers that the deposit guarantee scheme of up to €100,000 will be respected and honoured in all circumstances. There has been a breach of faith in this regard. It was news to me and millions of people across Europe that the guarantee could only be invoked in the event of, as official spokespersons put it, banks failing and that it does not apply now, as the current proposal is a fiscal measure.

The Minister failed to answer my question.

Which was?

It is important that the Irish people be given an absolute assurance to the effect that under no circumstances will the Cypriot proposal be applied to Ireland if our banks ever require further recapitalisation.

Let me deal with that question first. I should have dealt with it in the first round. I will give an absolute guarantee on behalf of the Government - under no circumstances will the Government look to introduce a Cypriot-style levy on deposits to raise money.

Just pension funds.

I have discussed this matter with the Minister for Finance. From the Government's point of view, I am clear as crystal. We will not target bank deposits for any purpose. I cannot be any clearer.

I grasp only too well the difficulties that Cyprus faces. I spent many hours last night in Brussels trying to put a Common Agricultural Policy, CAP, deal together. I spent a great deal of time with the Cypriot Minister, a new Minister who was trying to get the best deal for Cyprus that he could. He told me about the devastation in his country. I understand its situation only too well. What I do not understand is why the Deputy is trying to turn a difficult problem in Cyprus for which we are all trying to find a solution-----

Hear, hear.

Stop.

For God's sake.

-----into a scaremongering session for Ireland and Irish banks.

Absolutely not.

The Deputy should be more responsible.

Hear, hear.

He did not even know the troika was coming.

Are difficult questions "scaremongering"?

Deputy Michael McGrath should be more responsible.

Assurances from the Government are worthless anyway.

Last night, every voting Member of the Cypriot Parliament rejected the demands of the troika and the Eurogroup. To them I say, "Well done". Despite being a small, partitioned island with a population of just over 1 million people, approximately Munster's population, it sent out a clear signal to the effect that it would not be pushed around.

I refer the Minister to the President of Cyprus, who made a televised address to the nation. He is reported as saying that he felt blackmailed into signing up to the deal. That deal was an unprecedented assault on an EU country's sovereignty and a raid on its people's bank accounts. He claimed that he was blackmailed by the Eurogroup, of which the Minister for Finance, Deputy Noonan, is a member. The Eurogroup has crossed the line and the Minister should have said, "Stop".

Listen to the Deputy talking about blackmail.

The bullies got carried away with themselves. We are now in a farcical situation, in that a eurozone country cannot even re-open its banks. Depositors in many European states are afraid because the line has been crossed by the Eurogroup, in that levies can be imposed on depositors.

The Irish Government should not have signed up to this blackmail. For a country such as ours, the corporation tax rate of which has been in the firing line, it is foolish in the extreme to agree to a deal that would have forced Cyprus to increase its rates. Why was the Government a party to forcing Cyprus to raid the savings of EU citizens in order to pay for others' banking mistakes while letting senior bondholders off scot free?

Instead of piling pressure onto the Cypriot people, we should have been standing in solidarity with them and insisting on the full agreement of last June's Eurogroup statement. The European Stability Mechanism, ESM, should have been the vehicle to recapitalise Cypriot banks, not people's savings.

Or Russia.

How can the Government argue for the retroactive recapitalisation of our banks - we want the €30 billion that we pumped into the pillar banks back - with any legitimacy if we have just agreed that there will not be a separation of sovereign and banking debt in Cyprus and that the Cypriot people will bear the brunt? Does it not make a mockery of the Government's position? How can we claim that our corporation tax rate is sacred if we agree to force Cyprus to increase its rates? The Taoiseach welcomed that statement.

I thank the Deputy. I will provide some clarity on the corporation tax issue. It is important that people not try to muddy the waters. As part of an agreement to finance a programme in Cyprus, it and the other countries in the Eurogroup signed up to an increase in its corporation tax rates. The Deputy will remember that there was significant pressure on Ireland to do the same before, during and after our bailout negotiations. To the credit of the last Government, we resisted that pressure.

People will remember how, as soon as this Government took office, the first challenge to face the Taoiseach in Brussels was the considerable pressure to increase corporation tax rates, given Ireland's vulnerable position. We resisted. We showed that when a country wanted to resist tax measures, it could do so, since unanimous agreement is necessary if a change is to take place. Cyprus decided not to take this option. It decided that, as part of the package, it would increase corporation tax rates. It was entitled to do so.

There is no easy way to enter a bailout programme. Anyone who offers fairytale solutions for recapitalising banks without a cost being incurred by anyone is not living in the real world.

The Labour lads tried it for approximately four years.

Tell that to the Minister, Deputy Rabbitte, who is next to you.

Would you mind?

This is a crisis for a country that is entering a bailout, just as we faced a crisis that was very costly for the Irish people.

There he goes again, blaming the Opposition.

We are trying to undo some of the damage that was done when those decisions were made. The Parliament in Cyprus has rejected the deal done by its Government and the Eurogroup. I must say that this is understandable, but Cyprus now has a responsibility to find an alternative way to raise money. Those alternatives are being discussed today and will be discussed again tomorrow.

Banks in Cyprus are different from banks in many European countries, given the size of its banking system and the deposits held in same. Compared with the size of the Cypriot economy, its banking sector is approximately eight times larger. Much of that money has come from outside the EU. Indeed, much has come from Russia. It is not easy to apply a normal banking recapitalisation programme to banks that are primarily capitalised with Russian money rather than money from European banks. This complex situation is developing day by day. Countries like Ireland will, in solidarity with countries like Cyprus, search for solutions. If possible, we will try to be helpful in our Presidency, as will the Commission.

There is no easy way out. Cyprus needs to raise significant sums of money to trigger the €10 billion bailout fund on offer. We must monitor the situation and be as helpful as we can be during that process.

Cyprus deals in the euro. Last June, there was a seismic shift, as this Government called it, in terms of separating sovereign debt and banking debt. Cypriot banks need billions of euro. This is why the bailout is necessary. It has been agreed that the ESM will be the vehicle to bail out eurozone banks. We are hopeful about getting some of our money back because the ESM did not exist when we bailed out our banks.

Is the Government's argument not undermined if, in respect of a small eurozone nation, it signs up to an agreement under which the ESM will not bail out European banks, last June's seismic shift will be forgotten and the small nation must do it all by itself? The Eurogroup will provide Cyprus with a loan of a maximum amount, but the rest must come from increases in taxation-----

A question, please.

-----additional austerity for the Cypriot people and the raiding of bank savings. Does this not make a fool out of the Government's position? If a small nation is asked to take the same measures that we were forced to take a number of years ago, how can we legitimately argue for the retroactive recapitalisation of our banks?

It is true that we are looking for solutions to retroactively get a better deal for the Irish taxpayer for the cost of appalling policy and banking mistakes in this country. The ESM does not exist to solve all problems, regardless of the conditions. It is up to the Cypriot Government to make the case and it is then up to member states within the eurozone to consider the case. The ESM is not necessarily the answer to all problems. A case must be made and a case must be won in order for the purpose for which the ESM was set up to be used in terms of recapitalising banks. Clearly, that case has not been made and won in the case of Cyprus. Instead, what has been decided and supported by the new government there is that it would be able to borrow €10 billion on the back of being able to raise €6.8 billion. It had signed up to a plan to do that, which involved taxation and a levy on deposits which people have now rejected. It must now seek an alternative to that and it is looking to the country that is heavily involved in its banking system as a potential funder to do that, and it is also looking at other domestic ways in which it can raise money. Let us give it some time to do that and let us give assistance if and where possible in terms of policy options because we have explored practically every policy option in terms of reducing the impact of bank debt on taxpayers.

As much as the Deputy would like to think so, it is not as straightforward as making the case that because the ESM exists and is set up for the right purposes that there is some kind of simplistic solution to shift bank debt into the ESM, regardless of the complexity of the debt.

Raid the savings.