The recent very welcome Euro Area summit statement represents a major shift in European policy in terms of breaking the vicious circle between the banks and the sovereign. The Irish government has been working extremely hard to secure a deal on the Irish bank debt. It is particularly pleasing to note that last Friday's summit agreement reflects the proposals set out in the Taoiseach's letter to other Heads of Government that was sent following the approval of the Fiscal Stability Treaty. Our objective remains the same; break the link between the banks and the sovereign making the debt more sustainable and to maximize the benefit to the Irish taxpayer.
The summit agreement provides, in principle, 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 indeed, it would not be possible at this stage of the process to attempt to quantify the benefits which will accrue to the Irish economy. The details of how to separate banking from sovereign debt must now be discussed in detail.
The European Council has asked the Eurogroup to discuss the details of the agreement at its 9th July meeting. This meeting will begin the detailed discussions and negotiations. While the details, structures and arrangements have yet to be finalised the policy statement provides a basis for a Euro-Area solution to what is essentially a Euro-Area problem. This will be one of our key priorities between now and the end of year with the initial formal steps, at a European level, taking place at the Eurogroup meeting on 9th July.