Fine Gael leader Enda Kenny has declared his party will vote against the National Asset Management Agency (Nama) legislation when it comes before the Dáil in September.
Speaking at the Humbert Summer School, Mr Kenny said the "unfair and unwise gamble" of Nama would see people's taxes used to "shore up a massive spending spree" by developers outside the State.
"We are constantly being told by the Government and its supporters that there is no alternative to Nama. This is absolutely untrue. What is true, is that this Government has refused to consider any alternative. Instead, it is trying to soften up the public for a sweetheart deal for the banks," Mr Kenny said.
"At its core, Nama is a €90 billion “double or quits” gamble by Fianna Fáil on the property market. A €22,500 bet for every man, woman and child in this country. But the recent High Court and Supreme Court cases have called the Government’s bluff. The courts asked for convincing evidence and argument that property prices in Ireland are only temporarily depressed. Of course, they didn’t receive it.
"The whole Nama gamble is fundamentally unfair and unwise. It transfers the responsibility for dealing with toxic loans from the banks who made them, and the investors who funded them, to the Irish taxpayer," he told the summer school in Ballina, Co Mayo.
For these reasons, Mr Kenny said, his party could not support Nama and would vote against it. The Fine Gael leader said he would instead propose a "good bank" with a credit facility of up to €20 billion, to help get Ireland out of recession
This "national recovery bank" would have no toxic assets on its balance sheet and would therefore be able to lend to small businesses at reasonable rates.
"This is not a new idea. Variations of our proposal are already working in other European countries, including France and Denmark, funded by the ECB. So the question must be asked: Why isn’t the Government establishing a "good bank" right now?
Mr Kenny said existing banks would be given until September 2010, when the current bank guarantee expires, to restructure so as to place the risk with the shareholders and the bondholders.
After new stress tests carried out on banks by the regulator, the Government could inject additional financing into the banks, while those that failed to make "real progress" would be nationalised.
Mr Kenny said bad assets from those banks would be put in a separate property management company that would be owned by investors and bondholders.
Questioned on how much his party's proposals would cost, Mr Kenny would not give a specific figure. "It's not a question of determining how much it would cost now . . . I haven't worked out a final figure on this [the toxic debts]."
Speaking on RTÉ radio, he said: "What I do have a ballpark figure for is the fact that we're playing with a gamble of €90 billion being foisted on the back of the Irish taxpayers when banks knew very well what was happening at the higher echelons," he said.
"The extraction of the good loans and the performing assets from the banks would attract serious money from the ECB, which would allow for small business and medium enterprises to continue . . . who are starved of credit at the moment, and the big advantage is that it doesn't screw the Irish taxpayer."
"We believe our plan is a better plan. Obviously if Government were to change their tune, and change their attitude toward Nama . . . we might consider the implications of what they say."
Mr Kenny said the Government avoided the "good bank" model because its is nervous about how bond markets will respond. The State may sell €20 billion of bonds next year, the treasury agency said on August 18th. It has raised about €24 billion from debt sales this year.
In his address in Ballina, Mr Kenny also said the State's political system had lost its legitimacy and that the country had undergone an "abduction" by vested interests.
"The reality today is that our political system has not lived up to the vision of its founders. It has lost its sense of direction and legitimacy. Ninety years on from the assembly of the First Dáil . . . we see that power has been sucked away from the Oireachtas to the Government. I believe that we need to reinvent our Republic and that fundamental political reform is central to its creation.
"We must reverse the abduction of our Republic by vested interests. For the last decade our country was run for the benefit of the few rather than the many, an elite governing for a clique," Mr Kenny said.
"We are in the slow lane because during the time of plenty, we failed to prepare for the future. The greatest of the many missed opportunities during the past 12 years has been the failure to reform during the times of plenty."
In another speech to the school, Fine Gael Senator Eugene Regan said a vote for Nama was a vote to bankrupt the State.
"I will not vote for the Nama 2009 Bill as I do not believe the plan reflects the best possible effort to mitigate the disaster that has been brought upon us, the party's Seanad spokesman on justice, equality & law reform said.
"On the basis of my analysis, the Nama scheme is fundamentally flawed, is the wrong method to deal with the crisis we have to confront and unnecessarily places the State's financial viability in jeopardy."
