The Government welcomes last Friday's euro area summit statement. As the Deputy is aware, it has been working extremely hard to secure a deal on the Irish bank debt. The recent euro area summit statement represents a major shift in European policy in terms of breaking the vicious circle between the banks and the sovereign. It is particularly pleasing to note that last Friday's summit agreement reflects the proposals set out in the Taoiseach's letter to the other Heads of Government that was sent following the approval of the fiscal stability treaty. The Government's objective remains the same, which is to break the link between the banks and the sovereign, thereby making the debt more sustainable and to maximise the benefit to the Irish taxpayer.
The summit agreement provides an opportunity for the issue of the bank debt to be addressed at an EU level. It has been agreed that when an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area, the European Stability Mechanism, ESM, could have the possibility to recapitalise banks directly. While the policy position is very positive, it is not possible at this stage of the process to attempt to quantify the benefits that will accrue to the Irish economy. The details of how to separate banking from sovereign debt must now be discussed in detail, including the capital already injected into the Irish banking system.
While the details, structures and arrangements have yet to be finalised, the policy statement provides a basis for a euro area solution to what essentially is a euro area problem. This will be one of the Government's key priorities between now and the end of year with the initial formal steps, at a European level, taking place at the euro group meeting on 9 July.
