Dáil and media business last week was dominated by the Government proposals to recapitalise Allied Irish Banks (AIB) and Bank of Ireland (BofI),in exchange for preference shares the govt is to invest €7,000 million of taxpayers money.

Fine Gael voted against the proposal as we don’t believe there are guarantees that it will be successful. Such recapitalisation programmes have not worked in other countries and Governments have been forced to reinvest further funds. I think it is safe to say that €7,000 million is not enough and our Government will be called on again.

The problem we see with the system the Government is committing us to is that we have no idea of the level of debt these banks are dealing with and it is likely that the Banks will continue to nurse along these bad debts rather than support small business and kick start the economy.

Our preferred approach would be to separate the debt away to “bad banks” and let the new “good banks” get on with what they should be doing like supporting business and facilitating enterprise.

The bad debts could be ring fenced and the purpose of these banks would be to manage the debt and recoup as much of the value as possible. This approach was advised by the ECB in a report produced this week and to me seems far preferable to pumping taxpayer’s money into banks so they can continue to operate as if it was “business as usual.”

Legislation is currently being drafted for approval by Dáil and Seanad.