Vol. 866 No. 2
1. Deputy Michael McGrath asked the Minister for Finance when the National Asset Management Agency will wind up its operations; if he will provide an estimate of the financial outturn for the taxpayer from NAMA; if he envisages any further role for NAMA in the medium term beyond its current mandate; and if he will make a statement on the matter. [4823/15]
The purpose of this question is to establish when the Minister expects the National Asset Management Agency, NAMA, to wind up its operations, the current estimate of the financial outturn from NAMA and whether he envisages any further role for NAMA beyond its current mandate and perhaps beyond its current expected lifespan.
I thank the Deputy for the question. I am advised that the NAMA chief executive, in his opening address to the Committee of Public Accounts in December 2014, stated that NAMA is aiming to redeem a cumulative 80% - that is €24 billion - of its senior debt by the end of 2016 and that it hopes it will have redeemed all of it by the end of 2018. He stated that those targets were predicated on conditions in the Irish market remaining favourable and on NAMA being in a position to retain sufficient specialist staff to enable it to generate the optimal financial return from the realisation of its residual loan portfolio.
I am also advised that the chief executive indicated at a meeting of the joint finance committee in October 2014 that NAMA projected a financial surplus of the order of €500 million over its lifetime. I understand that this estimate was based on financial projections as at end-June 2014 and that an updated projection is currently being prepared as part of NAMA's end-2014 impairment review.
The Deputy will be aware that, in the context of the section 227 review of NAMA carried out in 2014, I agreed to a set of strategic priorities with the NAMA board. In addition to its commitment to redeem a minimum of 80% of its senior debt by the end of 2016, the NAMA board also undertook to facilitate the timely and coherent delivery of key grade A office space, retail and residential space within the Dublin docklands strategic development zone and Dublin's central business district and to maximise the delivery of residential housing units in areas of most need.
Given that these commitments were agreed with NAMA only in July 2014, it is too early to speculate as to what date in the future NAMA will have made sufficient progress on its objectives as to warrant consideration of its dissolution.
It should be noted that NAMA's progress in repaying its debt - it has already repaid more than 50% of its senior bonds - has been a very important contributory factor in the recent upgrades of Ireland's credit rating. Of particular importance has been the manner in which NAMA has not just consistently met but has exceeded its targets.
Additional information not given on the floor of the House
NAMA's primary objective is, as the Deputy is aware, to repay its senior debt, the €30.2 billion issued to the banks in 2010 and 2011 as consideration for its acquired loans, and to recover its carrying costs and advances to debtors. It is NAMA's view, based on the assumption that current market conditions will be sustained, that it will meet this primary objective and that it will also repay its subordinated debt.
The additional commitments agreed by the NAMA board in July 2014 did not involve any change to NAMA's mandate. I am not currently contemplating any additional role for it beyond that existing challenging mandate. Its role in relation to both the Dublin docklands strategic development zone and residential development is entirely consistent with its mandate of achieving the best financial return for the State from the loans acquired by it and the active management of the underlying security. The provision of development funding to enhance the ultimate disposal value of assets securing its loans is a key part of its mandate. NAMA has to date advanced, on a commercial basis, more than €1 billion in development funding for Irish projects and has indicated that, if required, it could advance up to a further €3 billion to support delivery of commercial and residential accommodation.
I welcome the fact that it appears that the contingent liability which the State is carrying in respect of NAMA will not now be required because it appears NAMA will at least break even and hopefully generate a surplus for the Exchequer over time. When, in the Minister's view, can we expect that NAMA will have concluded its operations? NAMA's chairperson indicated that it hopes to have redeemed all of the senior debt by 2018. Does the Minister envisage that is around the timeframe when NAMA will have completed its work? There were reports last weekend that NAMA is about to sell €8 billion of loans in respect of its debtors. Can the Minister confirm if that is accurate? Also, can he give us any further information about the financial outturn he is expecting from NAMA?
There is no change in the indicative dates given by the chairman and the chief executive and it is hoped, market conditions permitting, that NAMA will have disposed of all its assets by 2018. It expects also to show a surplus at the end of that period. The stories there were a few years ago of a black hole emerging in NAMA are not correct. As the Deputy said, it will at least break even but, in all probability, it will now have a profit of the magnitude I indicated in my reply. That means then that there is no contingent risk for the State coming from NAMA, which is one of the reasons our credit rating has been increased substantially.
As a type of special project, I agreed with NAMA last year that it would develop the docklands because there is a shortage of significant and much needed office space between the canals in Dublin in particular. NAMA is moving very quickly now to help to fill that gap in the property portfolio in Dublin.
As the Minister knows, about 90% of what NAMA has sold has been bought by US private equity funds. Their intentions in the medium term for the assets they have acquired from NAMA remains to be seen. Will the Minister speak about reports that NAMA is preparing to sell €8 billion worth of loans? If such a large tranche is sold, the loans could be bought by foreign investors, which would have a fundamental impact on the nature of the relationship between the debtors and their lenders. Many of them are viable trading businesses, despite having an overhang of property-related debt. Will the Minister confirm to the House if the reports that NAMA is preparing to sell €8 billion worth of assets are accurate? Some markets sources are indicating that there has been a change of attitude within NAMA, that there is now a much greater emphasis on disposing assets quickly and that there is, perhaps, some pressure on NAMA to wind up its operations more quickly than was originally intended. Will the Minister confirm, in respect of the €8 billion worth of assets, if NAMA is making plans to sell such a large tranche?
There is no pressure from me or the Department of Finance. What I have outlined in the House is the mandate for NAMA which it is fulfilling very satisfactorily. As market conditions and its perception of them change, NAMA speed up or slows down disposals. I understand market conditions are very good and that NAMA is speeding up disposals. I do not know where the figure of €8 billion came from, but it is obviously a punt in the dark. It is true that there was a speeding up of disposals in 2015 and at the back-end of 2014. However, this was not in response to any instruction from me. It is not my business how the property market is. NAMA is trying to match disposals to the best opportunities in the market and it considers now is a good time to speed up. However, the date for full disposals remains 2018. NAMA's role as a developer of the Dublin docklands and for office and residential projects has allowed it to retain its legal position, but an additional mandate is now being emphasised.
2. Deputy Pearse Doherty asked the Minister for Finance his views on the need for a European debt conference to discuss and take action to reduce the high levels of debt of some EU countries, including Ireland. [4821/15]
What is the State's position on having a European debt conference and the need for such a discussion to take place in order to reduce the high level of indebtedness of some EU countries, including Ireland? There has been much debate about what words were used by the Minister to the ambassadors. The Minister has said his words were taken out of context. However, it is very clear that the Tánaiste and leader of the Labour Party agrees that there would be merit in having a debt conference. Why would the fourth most indebted state in the European Union actively oppose having such a debt conference? This appears to be the current approach of the Government.
Prior to the recent elections in Greece, I was asked my view on the need for a European debt conference, given the high level of public debt in Greece. My position was and remains that the best method of addressing the issue is through multilateral discussions, rather than unilateral action. Specifically, in the case of euro area member states, all programme negotiations have been conducted within the Eurogroup and ECOFIN, with IMF involvement, as appropriate. My view is that these are the appropriate fora in which to resolve outstanding issues.
The Deputy also questions the high level of public debt in Ireland. While our debt-to-GDP ratio is undoubtedly high, Ireland is in a very different position to Greece when it comes to debt. For a start, our debt ratio has peaked and is now on a firm downward trend. In fact, our net debt amounted to an estimated 91% of GDP at the end of last year. The Government has been very proactive in ensuring the affordability of our debt remains low. For instance, we replaced €9 billion of IMF debt last year with cheaper market debt and the intention is to refinance another €9 billion in the first half of this year. These early repayment transactions alone will deliver a saving of over €1.5 billion over the lifetime of the loans. We also restructured the promissory note, reducing the State's borrowing requirement by €20 billion in the next decade or so. We have succeeded in gaining concessions from our European partners in the form of maturity extensions and lower interest rates. The maturity extension removes a market refinancing requirement of €20 billion for the period 2015-22 and the interest rate reduction delivers savings each year in the annual budget. We have also put the public finances on a more sustainable path. We are on track to correct the excessive deficit this year.
In summary, we have the strongest economic growth in Europe, robust employment growth, a more sustainable deficit and a falling debt ratio. These are the main reasons we can now borrow at record low levels.
The Minister has not given us an indication of why it is the Government is resisting the idea of having a debt conference. One thing for sure is that we would not know the outcome of any such debt conference. Whether it would take place in the context of the Eurogroup or somewhere else is largely irrelevant. What is relevant is the need for a shift in thinking at the heart of Europe. The European Union must accept that it has a debt problem.
The Minister spoke about the Eurogroup. Its six-month plan does not contain any significant mention of dealing with debt in a serious way. Will the Minister put the issue of debt on the European Union's agenda? The Union and Ireland are in denial about the extent of member states' debt. It is very clear that the Greek Government wishes to have this conversation and wishes to have it now. It is not a butting of heads or an ultimatum but a desire for the European Union to face up to the reality that there is a problem with the high level of indebtedness of many member states and that it needs to be dealt with in a fair and logical way. However, we have a Government that has closed its eyes and ears to such a call.
Why is the Minister's personal position and that of Fine Gael at such odds with the position of the Labour Party, which believes such a conversation should take place? As night follows day, Greece will have its debt written down, whether it is through engineering or otherwise. It will happen because it has to happen. Whether Ireland wishes to be part of this is the question the Minister, on behalf of the Government, must answer.
The Irish debt position is entirely sustainable. The problem is in Greece, not in Ireland. If one looks at the money raised by the NTMA since Christmas, yesterday a 30-year bond was issued for the first time in the history of the State. Some 380 investors wished to buy 30-year Irish paper, at just over 2%. If we are getting money for 30 years at a rate of 2%, it is very hard to say anything other than that Irish debt is entirely sustainable. A week ago our three-month T-bills were at a zero interest rate. In effect, people gave us €500 million to mind with no interest rate charge. At the end of January a seven-year bond was issued. The rate was 1.867%, well below the rate of 2% for seven-year money. That is what has happened since Christmas.
The position of Greece is different. The talk about a debt conference, in respect of Greece or the European Union at large, arose from the election manifesto of the party that won the election in Greece. However, I have been very careful in reading everything that has been said that I can find by the Prime Minister of Greece and its Minister for Finance, neither of whom has pursued the debt conference idea. They seem to be in discussions with their partners across Europe, the Commission and the ECB. This seems to be the route they are going down. This was the route followed by Spain, Portugal, Cyprus, Ireland and every other country which was in difficulty, namely, to engage with the Eurogroup and ECOFIN.
The Minister will be aware that the Greek Minister for Finance tweeted, prior to the election, that the Minister was his first ally on the debt conference issue. This does not just concern what is happening in Greece, although I believe there is a genuine obligation on us, as a member state, to stop the absolute torture being imposed by the European Union. The Minister spoke in the House about arrangements dealt with at the Eurogroup which were supposed to make Greece's debts sustainable. The proposal put €240 billion of debt on the shoulders of that country, of which 11% was used for its benefit. The rest went to repay debt and interest rate charges. There is an obligation on us to stand up in solidarity and say we support Greece in its endeavour to have its debt reduced.
There is also a responsibility on us to state on behalf of our electorate that we also need to reduce the level of debt the State has. In did not mention sustainable or unsustainable debt. I stated we are the fourth-largest indebted country in the European Union and the fourth-largest country which pays interest on debt as a proportion of GDP. It appears that if the Minister's partners in the Eurogroup, the ECB or the IMF told him they would reduce some of our debt he would tell them we are okay and we do not need it. This seems to be the position the Government has adopted.
I do not know what the new Greek finance Minister is tweeting because my Greek is very poor.
It is in English. I thought the Minister stated he read all of his material.
I have friends in strange places so I am looking forward to meeting the Greek finance Minister for the first time at the next Eurogroup meeting in Brussels. It is up to the Greek Government to bring forward proposals on how to deal with its problem. It is not up to the other partners in Europe to be the initiators. It is up to the Greek Government to ask for what it wants. When it asks for what it wants Ireland will consider it, as will every other European country and then we will react to the request. As I stated, I understand the difficulties of Greece as a nation. I am very sympathetic towards the Greek people. I read the Syriza election manifesto, which contains very interesting and illustrative points. A major political party which puts in its manifesto that it needs to give food stamps to 300,000 of its citizens is indicative of the problem in Greece. A country which has 25% unemployment but after 12 months the unemployed no longer receive social welfare payments is a country which has big difficulties. I am sympathetic towards Greece, but it is up to it to ask for what it wants and then we will see whether it can be met.
3. Deputy Paul Murphy asked the Minister for Finance his views on the matter of a proposed European debt conference in the view of the recent Greek parliamentary election. [4708/15]
This is also to ask the Minister his views on the question of a European debt conference. In particular I ask whether there has been a change of position here from the point of view of the Government. Were the remarks about broad support from the Minister for Finance to the idea of a debt conference wrongly ascribed to him? Was the Tánaiste and Minister for Social Protection, Deputy Joan Burton, wrongly quoted in stating the idea had merit? Is it not the case that a change of position has taken place because political self-interest has come to bear? There is a very serious conflict of interest between the interests of Fine Gael and the Labour Party and the interests of the majority of people in the State. It is not in the interests of the political parties to have success for a Greek strategy because it would embarrass the Government.
I thank the Deputy for his question. While the Greek debt to GDP ratio is currently very high, my view is that when countries encounter difficulties, a process of negotiation is always better than one of conflict. Specifically in the case of euro area member states, all programme negotiations have been conducted within the Eurogroup and ECOFIN, with IMF involvement as appropriate. My view is that these are the appropriate fora for resolving outstanding issues such as this.
The vast majority of the Greek debt is official debt and is owed to the IMF and to European taxpayers. Even before we entered a programme, we contributed almost €350 million by way of bilateral loans to Greece. Spain would face a liability of €30 billion if it wrote off its commitments to Greece and the figure for France would be €43 billion. One can see our amount is very small comparatively. These are big issues for big European countries and their taxpayers.
The issue now for Greece is not around cancellation of debt; it is about the affordability of the debt, which means looking at the interest rates and the maturities. The private and public sectors have already contributed to improving the affordability of Greek debt. In the case of the public sector, there are, of course, the options of further maturity extensions and interest rate reductions. No doubt these options will be discussed in due course. The Eurogroup is the appropriate forum in which to consider such options.
If one looks at the Irish situation, we have been negotiating our debt burden all the time. Before Christmas we restructured €9 billion of IMF debt and we will restructure another €9 billion in the first half of this year. We will be able deal with €3.5 billion of the €9 billion tomorrow because the NTMA has the cash. This is not what it raised in the 30 year bond as it had cash at its disposal. All of the legal arrangements have been made for this payment tomorrow. One can see this goes on all of the time. We also restructured the promissory note and the official debt through the extension of maturities and reduction of interest rates.
Let me be clear when I state we will respect the democratically-elected Greek Government. I and my Eurogroup colleagues look forward to hearing the views of the new finance Minister at the next meeting, scheduled for mid-February.
If the Minister has been following Syriza and the Greek finance Minister, Yanis Varoufakis, as closely as he proclaimed in answer to Deputy Doherty, he will know there is no proposal from Syriza for any taxpayers in Ireland, Spain or anywhere else to take the hit. Its proposal, contained in an academic paper, is for the debt of all indebted countries to be written down to 50% of GDP, with the ECB to take the balance, and it will come back on balance sheets as the debt comes down to a sustainable level of 50% or lower. Does the Minister agree that such a solution, if it were agreed on a European-wide basis, would save the Irish taxpayer €3.7 billion a year, which would go towards major infrastructural projects, house building and job creation? It would be a much better use of the money. It is inexplicable that the Government refuses to take advantage of the political opportunity opened by the election of the Syriza Greek Government to row in behind it and stake a serious demand for a significant write-down of the debt. The only explanation is because it will leave egg on the face of those who said we had a game-changer and had achieved a seismic shift as a result of being good pupils of austerity.
Different things have been said by the representatives of the new Greek Government during the election campaign and since the election. So far there has not been a consistent set of demands. Different people have said different things, or at least different people have been putting a different degree of emphasis on what they have been saying. We will see what the Greek ask is at the end of the day when it comes to the negotiating forum. There is always an element of what I believe somebody said about President Obama, which is that one campaigns in poetry and governs in prose. We are all familiar with this.
That is the Labour Party.
I would not exonerate anybody. There is always poetry during the campaign and prose when one must govern. Greece is in the prose stage now and we will see the hard proposals. I read with interest the reports of the press conference in London with Chancellor George Osborne and the Greek finance Minister. I thought an interesting set of proposals emerged.
It is incorrect to state a reduction in interest rates would allow us to invest in infrastructural projects. Interest is not calculated in the new expenditure benchmarks in Europe, so whether there was a reduction in interest rates or not it would not free up any more elbow-room for spending on capital in Ireland.
I was not referring to a reduction in interest rates but rather a reduction in the principal, with the reduction in the total amount of debt to 50% of GDP as per the Syriza proposal. This is not a question about the Greeks seeking a "Greek ask" and we, the Irish as creditors, all of a sudden seeing how we would react to it. It is a question of whether an ask can be made by the 99%, the mass of people in Europe, who have all suffered at the hands of this austerity policy to bail out bankers and bondholders. The mass of people in Ireland should be allies of the people in Greece as we are on the same page. The Government likes to emphasise that Ireland is not Greece and all of the differences which exist. Greece has €100 billion more debt than Ireland but pays only €500 million more in interest last year. We paid €7.5 billion and it paid €8 billion. Our private banking debt as a percentage of GDP in Ireland is 25% whereas the Greek debt is 12.2%. Similarly, all the money that has gone to Greece and Ireland has gone back out to pay the banks and the bondholders. There are differences, but fundamentally people have suffered and it is not sustainable from the point of view of ordinary people to continue the policy of austerity, and have massive primary surpluses targeted in Greece and in Ireland which will only come at the expense of public services, jobs and living conditions.
Austerity in Ireland ended more than 12 months ago.
The most recent budget imposed no new expenditure cuts or no new taxes, and a significant amount of tax relief was given in the budget, both in terms of reductions in universal social charge and in income tax. Deputy Paul Murphy can keep singing the same song, but it is the hit parade of last year or two years ago. There is no austerity programme in Ireland now. The budget was mildly expansionary and that will be reinforced by reductions in energy prices and by the quantitative easing proposals from the European Central Bank. There will be quite significant stimulus in demand coming through. Anybody one talks to will tell one it is there already on the January pay cheques.
The reason Greece's fundamental statistics, as Deputy Paul Murphy describes them, are lower than Ireland's is that in my time in the Eurogroup three separate deals have been done for Greece. The reason they are paying less interest is they are on an interest moratorium and on their official debt, they are not paying interest until 2023. It also means there is little scope to cut another deal. There is little headroom left, but there is some. The European colleagues have done a lot for Greece, but the Greek position was dire and its economy is a weak economy. I do not want to get into any detail because it is not for me to criticise the present management and the previous management of the Greece economy, but there are difficulties. There are historic difficulties in Greece as well of which the Deputy will be aware.
4. Deputy Michael McGrath asked the Minister for Finance the reason for the delay in extending the 1% betting duty to online gambling; when the duty will be applied to bets placed online; the estimated amount that will be raised on an annual basis; and if he will make a statement on the matter. [4824/15]
This question relates to the ongoing delays in implementing the Betting (Amendment) Bill 2013, in particular, the 1% levy on online gambling. The continuing delays in implementing that levy are costing the State a lot of revenue. It is estimated that €5 billion of bets have been placed online over the past three years escaping the 1% levy, which has cost us approximately €50 million. I am aware of the technical reasons this was delayed at EU level, but can the Minister clarify whether those obstacles have now been removed and when he expects the 1% levy to start applying to online gambling?
The Betting (Amendment) Bill 2013 has been the subject of a number of delays, primarily arising from the need to ensure that the provisions relating to prosecution and enforcement were robust and the need to notify the EU Commission under the EU Technical Standards Directive. The Bill was first published in July 2012 but further work was required around the area of prosecution and enforcement. Given the resulting significant changes to the Bill, it was republished in July 2013. On publication, the Bill entered a standstill period of three months under the EU technical standards directive.
The Bill was amended on Committee Stage in the Dáil to allow the Revenue Commissioners to take on the functions ascribed to the Minister for Justice and Equality around compliance. The advice from the Attorney General's office was that these amendments constituted a substantial policy change and, accordingly, had to be notified under the EU technical standards directive. Said notification took place in June 2014, giving rise to a standstill period of three months to the end of September 2014.
At the end of this period, the Department received detailed opinions from the Commission around provisions in the Bill restricting service providers in their engagement with unlicensed remote operators and also raising concerns at the prohibition on any person, who may be licensed by another jurisdiction, from offering betting services to persons within the Republic, unless the person holds a licence issued by the competent authority in Ireland. There interventions under the EU technical standards directive necessitated an extension of the standstill period until January 2015.
The standstill period has now ended and Committee Stage is provisionally scheduled for the Seanad on 11 February.
While a period of time is required to allow remote operations to become licensed, the betting duty will be applied to the remote sector as soon as possible once the legislation has been enacted. It is impossible to accurately estimate the additional revenue which will be raised for the Exchequer. However, using available data, it has been estimated that the extension of the betting duty to remote operations could raise up to €25 million in a full year.
I thank the Minister for his reply.
I am glad that this issue is finally progressing and I hope that we can get it over the line on this occasion. The extension of the 1% levy to online gambling was first provided for in the Finance Act 2011, subject to a licensing regime. Then there was a Betting (Amendment) Bill in 2012, as the Minister indicated, a subsequent one in 2013, and the last movement in the Oireachtas was in September last, and it has cost us a lot of revenue.
Perhaps €50 million has not been collected by the State because of the delays in implementing this betting duty. It is, according to the estimate I had, approximately €1.5 million a month and, as the Minister indicated that the annual revenue that could be raised is estimated to be €25 million, it is perhaps more than that. It is significant.
The Minister indicates he hopes Committee Stage will be on 11 February in the Seanad. Is there any indication, once the Bill is enacted, when this can be implemented in practice and the State can start collecting the revenue?
Obviously, the delays were unsatisfactory but they were out of our hands. Most of the delays were caused by the directive of the European Commission to which I referred. The Committee Stage is now scheduled for 11 February in the Seanad.
The Deputy will recall that we took out a whole section of the Bill about the longer opening hours for bookies' premises, etc., and enacted it in the Finance Bill. It is now a much slimmer Bill and it is down to the net issues of online betting. I would hope that once we get it enacted and the President signs it, shortly afterwards it will be operational.
Have the other issues, such as the prosecution and enforcement issues and the technical issues around the implementation of this levy on online gambling, been overcome by the Revenue and the Department? As far as the Minister is aware, will we be in a position once the Bill is enacted to commence the collection of this revenue? Fundamentally, that is the question we need answered.
As the Minister indicated, the opening hours in betting shops have been extended. We are still awaiting the gambling control Bill, which is important in this area. Fundamentally, the extension of this levy to online gambling is about fairness and ensuring that the existing betting offices can compete with the online gambling because, with the emergence of applications, apps, people are gambling 24 hours a day and it is easy to do. The State is missing out on a lot of revenue. I welcome the fact that there appears to be progress. As far as the Minister is aware, once the Bill is enacted, are there other obstacles to prevent this from coming on stream and being live?
Agreement between my Department and the Revenue Commissioners was achieved last summer. The further delays were to do with the technical directive from Europe. At the end of the process, an objection was submitted to the Commission from the Maltese authorities and that had to run its course as well. After that three-month period elapsed, the European authorities are satisfied with the enforcement provisions. There is agreement between the Department and Revenue and there should be no further delays as soon as we enact it.
5. Deputy Paul Murphy asked the Minister for Finance if he will report on the appointment of a banking firm (details supplied) as advisers on the sale of the State's share in AIB; his views on the matter of the sale of the State's stakeholding in the banks; and if he will make a statement on the matter. [4709/15]
I ask the Minister for Finance to report on the appointment of Goldman Sachs as advisers on the sale of State's share in AIB, and to make a statement on why Goldman Sachs was chosen and on his views of the sale of shares in the banks.
As the Deputy will be aware the Irish banking system is in a much stronger position than it has been in recent years. Profits are recovering, balance sheets have been restructured and we have started the process of returning cash to the taxpayer following the huge investments that were made over the 2009-11 period.
Much of the banking-related work in the Department of Finance this year will focus on AIB. Given the scale of the State's investment - some €20.8 billion - and the range of options available to recoup value from the bank, officials within my Department are working with AIB on reconfiguring its capital structure. Goldman Sachs International has been appointed to provide financial advice to the Department in this regard.
The appointment follows the establishment by the Department last year of three separate panels of financial advisers. These panels were put in place to facilitate the provision of timely advice in relation to our banking investments though the panels are available for the wider Department to use in other areas if deemed necessary.
The award of the current contract followed a competitive tendering process with each of the eleven firms on panel 1, which covers capital markets, strategic, M&A and restructuring advice, being invited to submit a tender. Prior to the year end, each of the firms accepted the invitation and the tendering process included face-to-face presentations by each of the firms to a panel of Department of Finance officials. Arising from these presentations, each of the firms was scored across a number of standard criteria with Goldman Sachs International being adjudged to have achieved the highest aggregated score. Accordingly, it was awarded the contract.
The focus will be on ensuring that the best decisions are made regarding potential capital restructuring options and sequencing in order to maximise the return of cash to the State from our AIB investments over time. While this is just the start of the process, it is an essential first step on the road to recovering value for the taxpayer. All options remain on the table and it is too early to specify what steps will be taken next or to put a timeline on decisions.
As I have previously stated on numerous occasions, Government policy is that we will not remain a holder of our banking investments in the long term. Given our high debt-to-GDP ratio, we do not have the luxury of holding all of these investments indefinitely and I envisage receipts from the gradual sale of these investments helping to play their part in reducing the State's overall debt burden in the coming years.
Why does the Minister think that Goldman Sachs has agreed to this on a pro bono basis similar to four other groups on the panel he mentioned? Was it simply because they are nice, kind people and they want to help us out bearing in mind that an article in Rolling Stone accurately described them as "a great vampire squid wrapped around the face of humanity relentlessly jamming its blood funnel into anything that smells like money"? Could this perhaps smell like money? Is there not a clear conflict of interest given the fact that Goldman Sachs advises so many investors, which at a later stage may look to buy bank shares? Is the company doing this pro bono because it will gain access to confidential information, which it can later use for its own financial advantage? The conflict of interest is blatant given the company's history, including being found guilty of defrauding investors in the US and playing a role in the Greek debt crisis. Why would the Minister trust this company to do this without seeking its own return?
I am not sure of the weight that should be attributed to Rolling Stone magazine in terms of being a financial adviser. If it was me, I would telephone Mick Jagger rather than read the magazine if I was looking for financial advice.
Has the Minister his number?
The position is that we anticipated a year or so ago that we would have a need for advice and three panels were put together of possible advisers with different areas of expertise. The panel from which we were getting advice to restructure AIB had 11 advisory groups on it, including Goldman Sachs. All 11 tendered and there was an objective selection process. Goldman Sachs was marginally first on the aggregate score. I had no involvement in this whatsoever. I was simply told the result of the competition and I agreed to the proposal that Goldman Sachs, because it had come out of the competition, should be the winner. Five of the 11 groups that tendered offered to do the work for nothing. It is common practice seemingly, especially in the city of London, that finance houses such as Goldman Sachs feel their reputation will be enhanced for other work if they act as advisers to sovereign governments for key pieces of work. An IPO to sell even 25% of AIB would be one of the biggest ever on the London stock market and obviously great attention would be paid to who are the advisers.
There is no commitment at the point of sale that Goldman Sachs will get additional work. There will be a separate tendering process for the advisers that are required. Goldman Sachs is retained to advise on the restructuring of the bank and when that work is finished, any new work will have to be re-tendered.
It is naive or disingenuous to consider that Goldman Sachs staff are just interested in the high visibility work and that it does not enter their minds that future clients will say Goldman Sachs saw the inside of AIB and that will encourage them to go to the company rather than another firm.
I refer to another aspect of this. Is this an admission that the Minister is giving up on the retrospective recapitalisation of the banks? He has come into the House on numerous occasions and said that once the SSM is set up, we can apply. He has still not applied through that. Government sources are reported as saying Ireland has little or no chance of ever recouping the billions of euro pumped in to rescuing the banks from Europe. Is this the wrong moment to make that admission and to accept that defeat, particularly in the context of the previous questions around the election of Syriza and the change that will make to the European picture, including the possibility of a European debt conference? Surely now is not the moment to sell to private investors and lose State control over a key bank. Instead, the Minister should seek retrospective recapitalisation.
I have answered this question on innumerable occasions. The Government's policy position is that we do not intend retaining the banks and, in particular AIB, in public ownership indefinitely but indefinitely could stretch out a long way. I have been advised by my Swedish colleague that the last of the shares held by the Swedish Government in its banking system following the country's banking crisis in the early 1990s was only disposed of in the second half of last year, more than 20 years after the event. We are not talking about a sudden sale or a fire-sale; we are talking about getting the bank's books in order so that it is structured in a way that it is saleable and then we will consider best advice on what quantum we will put on the market. That does not mean that we have abandoned the idea of a retrospective or retroactive recapitalisation. The same initial mechanism is involved whether we sell on the market or to the ESM. They give us money for shares and whether it is the market or the ESM, it is an exchange of money for shares. I am totally non-ideological on this. We will give the shares to the people who give us the most money and at the moment it looks as if the market is disposed to giving us more money than the ESM. One monopoly purchaser is in a stronger position than a number of willing buyers on the market but we will see. This is one of the reasons we have Goldman Sachs in. It will evaluate the full scenario and advance it.
