Thursday, 5 July 2012

Questions (60)

Catherine Murphy

Question:

53 Deputy Catherine Murphy asked the Minister for Finance if he has carried out an assessment of the debt redemption pact which was proposed by the German Council of Economic Experts on 10 of November 2011; if he or any other Department have had any discussion with the authors of the report or with the German Government regarding the possible inclusion of Ireland within such a pact should it be introduced; his views on whether the establishment of such a fund would be beneficial to the Irish State; if the establishment of such a fund will affect Ireland’s case for other debt management measures; and if he will make a statement on the matter. [32846/12]

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Written answers (Question to Minister for Finance)

The study referred to by the Deputy concerns one possible approach to the debt crisis that Europe is trying to deal with at the moment. The particular approach envisaged would involve the effective mutualisation of eurozone sovereign debt above the level of 60% of GDP. As the Deputy will be aware, the statement issued following the Euro Area Summit on 29 June envisages the European Stabilisation Mechanism having the possibility of recapitalising banks directly, once an effective single supervisory mechanism for financial institutions is established. The statement issued also states that the Eurogroup will "examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme."

This is a very welcome development from the Euro Area summit and it represents a major shift in European policy in terms of breaking the vicious circle between the banks and the sovereign. It is an agreement in principle and the detailed work will now begin to maximize the benefit to the Irish taxpayer. The Irish government has been working extremely hard to secure a deal on the Irish bank debt. This agreement provides an opportunity for the issue of the bank debt to be addressed at an EU level. There will be further discussions at the Eurogroup meeting on 9 July 2012.