As I have stated before, the European Stability Mechanism (ESM) Treaty, was signed by Euro Area Member States on 2 February 2012. The original version of the Treaty was signed on 11 July 2011, but it has been modified to incorporate decisions taken by the Heads of State and Government (HoSG) of the Euro Area on 21 July, 9 December 2011 and 2 March aimed at improving the effectiveness of the mechanism. These decisions included the agreement on the Treaty on Stability, Coordination and Governance (Stability Treaty) in the Economic and Monetary Union.
In my previous replies to the Deputy on this issue, I outlined that the original ESM treaty, signed in July 2011, needed to be updated to take account of the additional flexibilities agreed by the HoSG for the EFSF in late July 2011. As I also outlined there were further developments in Europe, particularly in relation to the Stability Treaty, by the time discussion on the revised ESM Treaty had resumed.
Our approach to these negotiations was informed by the need to secure agreement on the revised ESM Treaty, including the additional flexibilities and the commitment to a review of its capacity. We viewed these as positive developments which are in Europe's interest and in Ireland's interest. In this context, it is worth noting the review of the ESM capacity, recently conducted by Eurogroup Finance Ministers, has resulted in the agreement to expand the level of support funding to €700 billion.
While the Government did not actively seek to include the link between the two Treaties, it did suggest that before creating any such link that careful consideration be given to any possible market implications. The linkage between the ESM and Stability Treaty ratification was accepted in the interests of securing agreement on the ESM and its accelerated entry into force by July 2012. In the negotiations, the Government sought to ensure that it was made clear that the link between ratification of the Stability Treaty and the ESM Treaty applied only to new applications for assistance under the ESM, and that it will not affect the transfer to the ESM of undisbursed amounts under the European Financial Stability Facility (EFSF) for Ireland and other programme countries. The Government also sought to ensure that sufficient time was provided for ratification of the Stability Treaty before the link enters into effect.
The Stability Treaty is part of a broader package of measures aimed at improving confidence in the Euro Area, which include the ESM. As I have said in previous replies, it is entirely logical and reasonable that a country receiving the support of its partners under the ESM should be prepared to run sensible budgetary policies as required under the new Treaty. That is the basis of the linkage. We believe the linkage between the Treaties will further contribute to confidence, solidarity and financial stability in the euro area.
