Vol. 788 No. 2
1. Deputy Sean Fleming asked the Minister for Finance if a technical paper has been agreed with the troika in respect of the options for restructuring the Irish Bank Resolution Corporation promissory note; if he intends to publish such a paper; the potential benefit to the State from the options under consideration; the timeline he envisages for conclusion of negotiations in respect of the promissory note; and if he will make a statement on the matter. [2063/13]
2. Deputy Pearse Doherty asked the Minister for Finance if he will provide an update on the ongoing negotiations with the ECB on the promissory note; if an agreed technical paper has been concluded between the troika and his Department; if not, if he will indicate whether such a paper is still being worked on; and if he will detail the terms of a deal on this debt that he considers to be acceptable. [2113/13]
I propose to take Questions Nos. 1 and 2 together.
As the Deputies are aware, the Government has been working extremely hard to secure a deal on the Irish bank debt with our European partners, and detailed work will continue to ensure that positive moves in Europe are harnessed to maximise the benefit to the Irish taxpayer. The focus of the ongoing detailed discussions has progressed to consideration of all options in regard to the promissory notes, such as the source of funding, the duration of the notes and the interest rate applicable, as well as potential avenues for the wider bank debt deal and the impact of these options on IBRC. This work is one of the Government’s key priorities and will remain a key focus during the EU Presidency.
As previously advised to the House, the terms sought by the Government are those which achieve the best possible outcome for the Irish taxpayer. It is not possible to give guidance on the timing or potential outcome of the discussions, as to do so could impede our ability to achieve the best possible results, but every effort is being made to expedite the ongoing process. I am satisfied that every available and appropriate opportunity to advance Ireland’s position with regard to legacy bank debt with our European partners is being availed of and that every effort to keep the issue of the Irish bank debt at the top of the European agenda is being made.
I have stated previously that I am working to try and achieve a solution before the next scheduled instalment on the promissory note, scheduled for March. The numerous references in Europe to Ireland’s special status in regard to discussions on these matters gives comfort and the Irish Presidency will build on this in the coming months. The recent comments of the President of the European Council, Herman Van Rompuy, following his meeting with the Taoiseach and Tánaiste in respect of his support for a positive outcome in our negotiations is to be welcomed. I have always stated that our problems are part of a wider European dilemma and any solution to address the Irish situation must be as part of an overall eurozone and global solution. The shift in European policy in terms of breaking the vicious circle between the banks and the sovereign is to be welcomed and represents a major step forward.
It would be difficult for Ireland to make a payment on the promissory notes, and so we continue to work on a deal with our European partners to resolve this issue. I am glad to say that we meet with strong appreciation of our situation and are able to have very constructive dialogue on our approach to this question, and I believe a deal is likely in advance of the March deadline.
As the Governor of the Central Bank stated yesterday to the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, there has been an intensive process of discussion and negotiation on this matter, which is one of the main thrusts of the Government’s policy in Europe. It is not easy to find a generally acceptable solution and an initiative of this type must take into account both the statutory position and wider policy stance of the ECB. We have been working carefully to build understanding and confidence around a set of proposed transactions designed to deliver for Ireland.
I am pleased that the Minister has confirmed to the House in public that this deal is likely. I honestly believe he would not have made such a statement unless he was 100% sure we would get the deal. The Taoiseach stated some days ago he was confident of it and yesterday, at the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, the Governor of the Central Bank stated that the ECB is an organisation that seeks to proceed as far as possible by consensus. It is not surprising that this work has been taking quite a while. I believe what we have designed is largely in the interest of the euro system as a whole. Professor Honohan made it clear yesterday that something has been designed. I accept there are probably some i's to be dotted and t's to be crossed. It is now clear that the deal is essentially ready and just remains to be signed off. The Minister's confirmation that the deal is likely is confirmation enough as far as I am concerned because I do not believe he would have used those words if the deal was not likely to happen.
The question now is what will be the benefits for the general Irish public this year given that the deal has been made. It has not been officially announced or signed off but essentially it is in the melting pot, to be delivered before 31 March. Has the Minister been looking at issues such as the minimal interest rates of close to 0%? When the deal is done, even though the loan may be extended over a period - I would ask for a deferral of the principal until the end of the loan - what we do not want is to have to pay more interest over a longer period than is scheduled under the current arrangement. As part of the talks, has the Minister asked for any reduction in the actual principal? He may not be able to confirm this, but I believe that if one does not ask for this one will certainly not get it. We would like to think that every effort is being made on every front in regard to this deal.
I am pleased that the deal is all but announced. The big question the people of this country want answered today is what the benefits will be for them in terms of the austerity programme and the expenditure cuts announced on the day of the budget, and whether there can be any relief on these during the course of this year.
The Deputy is incorrect in assuming that a deal is certain. What I said was that it was likely. In saying that, I reiterate what I said in advance of the Eurogroup meeting in Brussels last December. I was asked if Ireland would be paying the promissory note and I replied that because a deal was likely it was unlikely that we would be paying it in full. There is no advance on that. The Deputy should not assume a deal is certain. There are still significant parts of the negotiation to be completed.
There has been a great deal of talk about the deal and the Minister's comments today are welcome. The Minister of State, Deputy Lucinda Creighton, and the Minister for Communications, Energy and Natural Resources, Deputy Pat Rabbitte, probably said more than the Minister, Deputy Noonan, would have wished. The comments from the Taoiseach and those made yesterday by the Governor of the Central Bank all indicate that a deal is very likely.
Given that, the real question is what is a deal. Last year, the Minister, Deputy Noonan, announced a deal that was a five-hand trick with the IBRC, the State, NAMA, Bank of Ireland and back again to IBRC, in which the ECB got its money and we ended up worse off in terms of our budgetary position. We paid the capital but there is still liability and our debt did not decrease.
The real question the people to whom I speak want to have answered is what impact it will have on them. According to the Governor, something is being engineered by the Central Bank. It has not been signed off on, as he has not got complete agreement on it. Will the Minister provide clarity for the House and the public at home on the proposal before the ECB? Will it lead to a reduction in the debt-to-GDP ratio and the liability on taxpayers to pay back €28.1 billion to the IBRC, which is what the promissory note is worth at this point in time? Will there be a reduction in the amount of capital? Will we end up paying more or less in interest as a result this year?
When I put these questions to the Governor, it appeared that the engineering of a deal would mean that our debt would not decrease, that we would end up paying back all of the capital and that the amount in interest we would pay this year would increase rather than decrease. That was the sense I took from him and I stand to be corrected. I, therefore, seek clarification from the Minister on where the issue lies. I understand there will be benefits in the medium term in terms of profiling and also that there could be significant benefits in the budgetary position next year. However, when Fine Gael spoke about burden sharing, most believed it would be between the bankers and the bond holders; we did not think it would be between one generation and the next. It is clear that the deal being orchestrated involves passing the burden from this generation to the next, but that is not the burden sharing most people want to see.
As I said, while a deal is likely, it is not certain. It has not been concluded. There are significant outstanding matters that have yet to be concluded and they are of sufficient magnitude to derail a deal. There are also some moving parts; therefore, it is not possible for me to discuss the elements of the deal until it has been finalised, which is obvious.
I accept Deputy Sean Fleming's good wishes and acknowledge his concern that we negotiate a deal because the promissory note has been a significant burden on the taxpayer. Relieving the burden of the promissory note would be welcomed by all taxpayers. I am also well aware that there are certain commentators and Deputies in the House who, regardless of whether there is adeal, will spend the next couple of weeks positioning themselves to oppose it, regardless of what is included in it, and to rubbish it, but I cannot control this.
I accept that a deal is not certain. If it was, the Minister would announce it, but I hope one is close. My party hopes the Minister will get a good deal but not at any cost. There is one issue I ask him to put into the melting pot. I do not have the figures, but perhaps the Minister does and can work on them. In recent years when Irish Government bonds were trading at a figure of about 80% against par at some stages, inevitably the European Central Bank would have purchased some of them to have a floor in the market. Some commentators have said the European Central Bank is sitting on a profit of €3 billion to €4 billion on Irish Government bonds that it bought at the time and which are now trading above par, which is a good sign. Will the Minister ask the European Central Bank in the discussions on reducing the principal figure of €28.1 billion not to make a profit on the backs of the Irish people by speculating in the bond market to make a profit of €3 billion or €4 billion? Perhaps the money could be used to reduce the principal at no loss to it.
This is the first Question Time in 2013. We can have all the smart aleck comments the Minister wishes for the next year, but I asked him three specific questions. I know he cannot go into detail, but is it the Government's intention that the debt-to-GDP ratio will be reduced as a result of the successful negotiation of a deal? Is it the intention that the taxpayer will be spared from paying some of the capital? Is it the intention that we will pay at lower interest rates on the portion of the capital included as part of a deal? These are three genuine questions the Minister may wish to dismiss, but I have a democratic right to ask questions. I also have a right to expect answers from him.
As I said, since a deal has not been concluded and is not certain to be concluded, I cannot describe the elements of a deal that has not yet been concluded. It is idle to speculate about something that is not yet in place and may not be. I am not stalling. I am saying that while the negotiations have proceeded in a satisfactory manner, they have not been concluded and there are significant outstanding items. If a deal is concluded, I will come into the House to explain it in detail and people can see what is in it and judge it on its merits. Until that happens, however, I am not in a position to do so. This is not an attempt not to answer questions fully or to show disrespect to Deputy Pearse Doherty or any other Deputy. The negotiations have gone well, but there are serious outstanding matters which could still prevent the conclusion of a deal. Also, there are some moving parts. Therefore, it is idle to speculate, but if I negotiate a deal, I will explain it fully in the House.
3. Deputy Joe Higgins asked the Minister for Finance his views on the assertion that further tax increases on high earners, corporation profits and employers would adversely affect investment rates when within the EU15 despite Ireland having the fourth lowest tax rates on high earners, the lowest corporation tax and the lowest employers PRSI, instead of being rewarded with high rates of investment Ireland instead has the lowest rate of investment as a percentage of GDP. [2127/13]
I remind the Deputy of the long-established Government strategy to use the tax code to attract jobs and investment to Ireland, in particular foreign direct investment. This strategy precedes the current Government. We have used a competitive tax system in this way for more than 50 years, but it underpins the Government’s key objective to create jobs and economic growth by attracting foreign direct investment and encouraging enterprise. Further, as the Deputy is aware, the programme for Government states that, as part of the Government’s fiscal strategy, we will maintain the current rates of income tax ,together with bands and credits, and not increase the top marginal tax rates. I should highlight that the current prevailing low investment levels to which the Deputy refers can be attributed to the deterioration in the Irish property market. The contribution to GDP of investment in building and construction fell from close to 20% in 2007 to around 5% in 2011. This reflects the sharp decline in housing activity and the Government’s ability to provide an impetus for this industry has been limited. Domestic firm level investment has also been constrained, even though investment in machinery and equipment has remained relatively robust in recent years.
In the light of the domestic investment environment, strong FDI performance in recent years has been a welcome boost and the tax system is particularly suited to encouraging this type of activity. The positive impact this has on domestic demand, as well as on employment and exports, remains important. As an example, estimating the size of the behavioral effect of a further increase in corporate tax rates is difficult, but it is likely to be relatively significant. An OECD multi-country study in 2008, OECD Tax Policy Studies No. 17, found that a 1% increase in the corporate tax rate reduced inward investment by 3.7%, on average. On this basis, it would take only a 2.5% increase in the rate to 15% to decrease Ireland’s inward investment by nearly 10%.
Additional information not given on the floor of the House
Ireland, like other smaller member states, is geographically and historically a peripheral country in Europe. A low corporate tax rate is a tool to address the economic limitations that come with being a peripheral country, as compared to larger core countries. Ireland’s low corporation tax rate plays an important role in attracting foreign direct investment to Ireland and thereby increasing employment here. In another report by the OECD in 2010, OECD Tax Policy Studies No. 20, corporate taxes were identified as the taxes which were most harmful to economic growth prospects.
Competitiveness is a crucial factor in achieving sustainable growth in a small open economy such as Ireland’s. The economy’s competitiveness is the result of a wide range of factors, with the National Competitiveness Council’s scorecard analysing Ireland’s international competitiveness using 127 individual indicators. These range from measures such as economic growth and quality of life to the policy inputs that will drive future competitiveness such as the education system and the delivery of infrastructure. Taxation is one element of this policy mix, as taxation rates impact upon the attractiveness of an economy as a place to do business and work.
However, speaking generally, the marginal rate of income tax which is described as the tax rate that applies to the last euro of the base is an important consideration in the formulation of tax policy. Marginal tax rates are important because they influence individual decisions to work more. The OECD in its working paper, Tax and Economic Growth, points to the “possibility that high top marginal rates will increase the average tax rates paid by high-skilled and high-income earners so much that they will migrate to countries with lower rates resulting in a brain drain which may lower innovative activity and productivity”.
It should be noted that the top marginal tax rate for employees, including USC and PRSI, is now 52%. It has increased from 43.5% in 2008. The top marginal tax rate for self-assessed individuals is now 55%. It has increased from 46.5% in 2008. Not only have the top marginal rates increased significantly but marginal rates on lower income levels have also increased. In addition, the top marginal rates take effect at significantly lower income levels. For example, the top marginal tax rate for employees in 2008 was 43.5% and took effect at an income level of €100,101 and above. In 2012 the top marginal tax rate for employees is 52% and takes effect at an income level of €32,800 and above. It is also important to point out that higher marginal tax rates for high earners may also incentivise a greater level of tax evasion and contribute to the development of a shadow economy.
The fact that foreign direct investment in Ireland was particularly strong in 2012 reflects Ireland’s competitive position and that the current Government strategy in relation to tax is working.
The purpose of the question was to ask the Minister his views on the assertion, by Fine Gael Ministers particularly, that further tax increases on high earners and corporations would adversely affect investment rates when the evidence in the European Union is that countries which have much higher rates than Ireland have immeasurably higher investment and projected investment rates. Does the Minister agree that data from agencies such as the OECD, EUROSTAT and the IMF disprove comprehensively that right-wing argument that increased taxes on high earners and corporations would be a major barrier to investment and economic activity?
Is the Minister aware that, for example, the effective tax rates on the highest income-earners in Austria is 37%; in Sweden, 37.4%; and in Germany, 44%, compared with 31.5% in Ireland? Is he aware that corporation tax rates are 25% in Austria, 26% in Sweden and 30% in Germany, compared with 12.5% - much less than that, effectively - in Ireland? At the same time IMF projections for 2017 for total investment which is critical to the future of the economy, put Austria, Sweden and Germany way ahead of Ireland which lags at 10.7% projected. Is it not clear that the Fine Gael-Labour Party policy is to protect the billionaire tax exiles, the rich, the elite in society, rather than being based on a solid economic policy which has not been proven?
I have given the OECD view from its survey. According to the OECD, even a 2.5% rise from 12.5% to 15% would reduce inward investment by nearly 10%. The OECD in its working paper entitled, "Tax and Economic Growth", states:
The possibility that high top marginal tax rates will increase the average tax rates paid by high skilled and high income earners so much that they will migrate to countries with lower rates, resulting in a brain drain which may lower innovative activity and productivity.
Where would they go?
I am not avoiding what the OECD has said. I am quoting from two separate OECD studies, one on corporate taxation rates and the other on personal taxation rates, both of which sustain my argument that higher taxes reduce foreign direct investment and they can lead to the migration of the very highly skilled workers whom we need to grow the economy and create further employment.
Why, then, do we not have a flood of migrants of the wealthy and very high earners from Germany, France and Denmark, into Ireland to avail of the significantly lower tax rates here? The Minister's argument begs that question. The evidence is that investment in all other economic indicators are much better even though still reflecting the crisis in European capitalism overall.
We do not have a flow of migrants into Ireland to avail of lower personal tax rates because we do not have lower personal tax rates than the rest of Europe. We have very high marginal rates of tax in Ireland. The marginal tax rate for employees, if the universal social charge and PRSI are included, is now 52%. It has increased from 43.5% in 2008. The top marginal rate for self-assessed individuals is 55%. The top marginal rate is also being applied to much lower incomes. For example, the top marginal rate of tax for employees in 2008 was 43.5%. It took effect at income levels over €101,100. In 2012, the top marginal rate of tax is 52% and it takes effect at income levels of €32,800. Is it any wonder that a flood of high-skilled individuals are not coming in? We are not saying we have low marginal tax rates. We are saying we do not want them to rise any higher because we will drive people out. That is the point.
4. Deputy Sean Fleming asked the Minister for Finance if he is satisfied that necessary logistical preparations will be completed in time for the scheduled introduction of the local property tax; if he is considering any amendments to the provisions of the tax prior to its commencement; and if he will make a statement on the matter. [2064/13]
I am advised by the Revenue Commissioners that significant progress has been made with regard to their preparations for introducing local property tax. The legislation governing local property tax is contained in the Finance (Local Property Tax) Act 2012 which was signed into law by the President on 26 December 2012.
The Revenue Commissioners have already had extensive contacts with a wide range of Departments and agencies through the interdepartmental group which was set up to oversee the introduction of local property tax. They advise they are getting good co-operation from all parties. For example, significant progress has already been made with the Departments of Social Protection and of Agriculture, Food and the Marine, to ensure that the deduction at source option from certain payments administered by the Departments will be available to property-owners.
In addition, detailed discussions have already taken place with a number of other private sector stakeholders such as service-providers for cash payments, payroll administrators and payroll software specialists, regarding the implementation of a deduction at source option. I am informed that there is a clear, shared understanding of the requirements involved and that they are all actively working to meet agreed timelines. A key element of the design of the tax is that property-owners will have as much flexibility as possible to spread the payment of tax in equal instalments throughout the year. This is the reason the facility to deduct the tax at source is of such importance.
Regarding the resources required by Revenue, I previously advised the House in my reply to Question No. 57388/12, that the Revenue Commissioners would be resourced to ensure the successful implementation of the tax. The additional resources required for 2013 are noted in the Department of Public Expenditure and Reform expenditure report 2013. The employment control framework includes 100 additional posts approved by my colleague the Minister for Public Expenditure and Reform, in the context of the introduction of LPT. The Revenue Commissioners further advise that they have established the nucleus of the local property tax branch in Ennis, where staff are likely to become available for redeployment in the context of the Government's policy on shared services, specifically in the areas of payroll, banking and financial management. The Revenue Commissioners are deploying additional staff to this branch by reconfiguring their district structure in the south west and by relocating functions from Clare to Limerick. I am satisfied that if the Revenue receives the additional 100 staff which were sanctioned in 2013, it will be in a position to prioritise its resources to ensure the successful implementation of LPT. In addition, Revenue is contracting for external service delivery of some data capture and call centre services.
I am also informed by Revenue that substantial progress has been made on the development of the IT systems for administering and collecting LPT and its incorporation into Revenue’s existing IT infrastructure. A key aspect of the work being undertaken by Revenue is the compilation of a comprehensive register of residential properties in the State which will be used to correspond with all property-owners and will be ready in time for a general issue of LPT returns to property-owners in March next.
Additional information not given on the floor of the House
This register is being developed using data drawn from a range of sources including Revenue’s own databases, the Local Government Management Agency database as well as data from utility companies. The use of multiple databases does, however, bring the risk of duplication and the Commissioners are working to lessen this risk. Local property tax is a self-assessment tax. Revenue is actively preparing valuation guidance and developing tools to assist liable persons in assessing the value of their property which will be made available as soon as possible. Beginning in March 2013, the Revenue Commissioners will be issuing an LPT tax return to all property owners together with an information booklet. Property owners will have the option of completing and submitting their LPT return in paper or by electronic means. I am advised that the development of the paper LPT return form and an on-line system for completing and submitting LPT returns are well advanced. Similarly, I am assured that all the processes and procedures required to handle the completed LPT return forms from property owners by the relevant due dates of 7 May 2013 for paper forms, and 28 May for on-line forms, will be in place. The general issue of returns will also include a Revenue estimate of LPT. This Revenue estimate is not based on a valuation of the individual property, but is an amount of tax which will be collected in the event that the liable person does not submit a return. If the estimate is paid the person is still obliged to submit the return.
On the communications front, extensive frequently asked questions have already been made available by Revenue in the context of the budget and the Finance (Local Property Tax) Act. Closer to the general issue, Revenue will engage in a public communications campaign. In particular, Revenue will provide detailed guidance on how the tax will operate and the obligations for owners of residential properties. There is no doubt that introducing a new tax regime for residential property in a such a tight timeframe is a significant challenge for the Revenue Commissioners along with all of their other responsibilities, but I am fully satisfied that they will meet the challenge involved and deliver all of the necessary milestones prior to the commencement of the new regime on 1 July 2013.
The scale of the logistical preparations for this tax is significant. One reason for enacting the Finance (Local Property Tax) Act in December last was to provide the basis for the development of the systems which I have outlined above. A small number of amendments, which will not impair the delivery of the project, are under consideration, including, as I indicated on Second Stage of the Finance (Local Property Tax) Bill 2012 last December, that certain residential properties that have suffered damage due to pyrite, to be prescribed by the Minister for the Environment, Community and Local Government, would be catered for.
The Minister has provided detailed and specific information on the arrangements. I ask if he can say why the Revenue Commissioners intend to use call centres on a contract basis to help with this work. Will people be asked for their telephone numbers in order to receive phone calls? The private sector will need to amend its payroll systems in mid-year to take account of this payment. Will this result in a cost to the private sector employers? It can take up to eight weeks to arrange for deduction at source for social welfare recipients who wish to pay council rent. The timescale will be very tight.
The big issue was alluded to by his colleague, Deputy Olivia Mitchell. She said that if people in Dublin realise they are paying five times more than people in Donegal for the same service they will just stop paying it. Deputy Dowds of the Labour Party said he wants at least 80% of the funds collected in Dublin to be retained in Dublin. He said the majority of houses in Donegal sold last year were sold for less than €100,000. Both Fine Gael and the Labour Party seem to be picking on Donegal with its low valuations. They resent the fact that people in some counties will have a lower rate because their houses are valued at a lower value. This is an anti-Dublin tax, an anti-urban area tax. The Minister's party colleagues are clearly reflecting that issue. Will the Minister consider some amendments along those lines to the Bill?
The Government decided to have one standard rate of tax for the country as a whole, based on the value of houses. At present, as the Deputy will be aware, some of the funding for local government comes from motor taxation. The incidence of motor taxation falls heavily on the Dublin area and on the main urban centres also. The difference here is that unlike motor tax, which goes into a fund which is allocated around the country, it is the intention that arrangements will be made between the Minister for Public Expenditure and Reform and the Minister for the Environment, Community and Local Government, to ensure that the tax is spent where it is collected. It will take some time to get to the figure quoted by the Deputy.
The intention is that the full amount of the tax will be spent where it is collected. It is a major reform in local government that those who pay most will have funding for the most services. In addition, from 2015, local councillors will have discretion to increase or reduce the rate of the tax by up to 15%. That will give real power to councillors. Future Governments may decide to give more discretion in that regard but, in accordance with the Act, full discretion amounts to plus or minus 15% at present.
With regard to the other issues raised, the Office of the Revenue Commissioners realises this matter is quite complex. It wants as much assistance as possible for taxpayers so it will be operating a significant number of helplines. It will be necessary for employers who deduct the tax at source to change their payment systems, but this is no different from what they must do if VAT, personal taxes, PRSI or the universal social charge are changed on any budget night. The Office of the Revenue Commissioners has never paid for this facility. Employers are obliged to collect taxes and pass them on to the Revenue Commissioners. There is no question of agency payments being available for these facilities. The Minister for Social Protection has already made or is making arrangements within her Department so there will be an easy payment facility available through the social welfare system, if desired. The payment date is 1 July, which is a long way down the road.
I am concerned that all the money collected will ultimately go to the county concerned. People are entitled to equal treatment regarding services. What the Minister is saying is almost like saying that if there are more people in Dublin, they will have more hospital and medical services. All counties should be treated equally regardless of where tax is collected.
Deputy Stephen Donnelly is unavailable and sought my permission to allow Deputy Boyd Barrett to ask his question, No. 5, in his stead.
5. Deputy Stephen S. Donnelly asked the Minister for Finance his plans during Ireland's presidency of the EU to progress a deal on the bank debt for Ireland, including scheduled meetings; and if he will make a statement on the matter. [1978/13]
I am satisfied that every available and appropriate opportunity to advance Ireland's position in regard to legacy bank debt with our European partners is being availed of. As the Deputy is aware, the Irish Government has been working extremely hard to secure a deal on the Irish bank debt with our European partners and detailed work will continue to ensure that positive moves in Europe are harnessed to maximise the benefit to the Irish taxpayer. On 14 December 2012, the European Council stated:
[O]nce an effective SSM is established, the ESM will be able to recapitalise banks directly. An agreement on the operational framework supporting this possibility, including the definition of legacy assets, should be agreed as soon as possible in the first semester of 2013.
Aside from the issue of when this new instrument will become available, there are a number of other issues that have yet to be worked through, such as how these banks would operate under ESM ownership, what governance arrangements would be put in place between the fund and the banks themselves and between the ESM and member state governments. We need to consider these wider considerations in the months ahead.
Ireland continues to be fully engaged in this process within the Eurogroup and among Heads of State or Government. Furthermore, officials from my Department participate in technical meetings with the ESM and other member states. In this regard and despite recent media reports, discussions remain ongoing and no conclusion has been reached. This issue is not on the formal agenda for EU meetings but it is discussed in the context of our successful programme and we continue to work with our troika partners towards a solution.
In regard to the issue of the IBRC promissory notes, I am glad to say we meet with strong appreciation of our circumstances and we are able to have very constructive dialogue on our approach to this question. This work is one of the Government's key priorities and will remain a key focus during the EU Presidency.
I have stated previously that I am working to try to achieve a solution before the next scheduled instalment on the promissory note at the end of March. It would be very difficult for Ireland to make a payment on that date so we continue to work on a deal with our European partners to resolve this issue.
The European Commission, in its recent review of our circumstances, suggested that if growth, particularly that in the domestic economy, continues to remain poor and does not rise to the desired level and if the issue of chronic mass long-term unemployment is not dealt with, there is a real danger that our debt will become unsustainable. The rating agencies consider our debt to be junk. Most important, we will have to pay €9.1 billion this year in interest on our enormous and clearly unsustainable debt, at a terrible cost to the citizens of the country. It is the equivalent of the whole education budget being paid in interest on debt.
Will Ireland's EU Presidency just be a load of pomp and ceremony signifying nothing? Alternatively, will it be used as a platform and pressure point to obtain fairness and sustainability and relief for ordinary Irish citizens from the absolutely intolerable and unsustainable burden? Can the Minister give us concrete reasons to hope that, by the end of the Presidency, we will obtain the relief we deserve and desperately need if the economy has any chance whatsoever of recovering? Can the Minister give us concrete assurances or outline plans that could lead us to believe this might be the case?
Rating agencies are paid by financial organisations to measure risk. One should never expect rating agencies to come out singing and dancing and giving one a whole lot of good news because their business is to measure risk, which they are assessing constantly. The rating agencies do not say Irish paper is junk as we have a rating of BBB+. During the week, Fitch said that if Ireland got a significant deal on its debt, it would upgrade its rating to A. Therefore, we are moving in the right direction. Irish paper has a value. As a matter of fact, in the first half of today the NTMA sold three-month treasury bills worth €500 million and the rate achieved was 0.2%. This is the lowest rate at which any Irish Government ever raised funds on the market according to the Central Bank. We are, therefore, moving in the right direction. I acknowledge that some kind of deal on bank debt is probably being factored in. If we do not get a deal on the bank debt, the interest rates will move in the opposite direction.
The Commission, in its latest report, pointed out again the risks associated with our programme. Overall, it gave a strong endorsement of the progress we are making but it said there are still risks. I agree. All I have ever claimed is that we have made significant progress, but there are still risks. If we stop doing what we are doing, those risks will be realised and some event outside our control and our jurisdiction could occur that would magnify the problem. We certainly have not reached dry land and are still working on this. It is work in progress but progress is being made; that is all we are claiming. I assure the Deputy that we will continue to work on this and try to get the economy to grow and the growing economy to create more jobs. As the Deputy rightly identified, long-term unemployment is one of the significant corrosive elements in society. It is very hard to fix it once it gets into the system.
