I propose to take Questions Nos. 93, 94 and 104 together.
European Union Member States, in general, and euro area Member States, in particular, are obliged, under the treaties, to treat each others’ economic and financial affairs as matters of common interest. Further, Member States have committed themselves to undertake measures necessary to correct harmful imbalances. In a consultative process, typically a co-ordinated and unified approach emerges naturally and extends to economic and fiscal issues. This is also in the interest of even-handedness. While I cannot speak for each and every Member State, the need and desire to protect the common EU and euro area good is felt generally. This includes reducing fiscal deficits and consolidating debt with an aim to reducing the high interest rates resulting from high levels of indebtedness. Since the onset of the financial crisis and the subsequent entry of Greece, Ireland and Portugal into Programmes of Financial Assistance, the EU and the eurozone have taken measures to reduce the cost of programme funding.
The interest rates on EU funding mechanisms (the EFSF and EFSM) were reduced significantly in 2011 and are now provided at rates close to the cost of funding. These rates apply equally to all countries availing of these mechanisms. The maturities of these loans were extended at the same time. For example, the Euro Area Heads of State or Government agreed on 21 July 2011 to reduce the cost of the European Financial Stability Facility (EFSF) to interest rates equivalent to those of the EU Balance of Payments facility i.e. close to, without going below, the EFSF's cost of funding. Lengthening of maturities provides benefits in terms of phasing of loans and ensuring that the profile of redemptions is more orderly, avoiding as far as possible exceptionally large amounts in particular years. By contrast, money borrowed at longer maturities is generally more expensive. However, on balance, savings arising from maturity extension are significant though complex to calculate. The interest rate reductions for the EFSF and the EFSM have also been reflected in the rates charged on Ireland's bilateral loans from the UK, Sweden and Denmark.
As noted above, our EU programme funding is being provided at, or close to, the cost of funds for the lenders. The scope for further changes to our programme interest payments is therefore very limited. However, we are also seeking ways to alleviate the burden on the sovereign of assisting the banking sector. Arising out of the 29 June 2012 statement by the Euro Area Heads of State or Government that "it is imperative to break the vicious circle between banks and sovereigns", work is continuing at a technical level to put in place the single supervisory mechanism and the European Stability Mechanism’s direct banking recapitalisation facility at the earliest possible date. In short, every effort has been and is being made at EU and eurozone level to ensure the burden placed on Programme countries is reduced in order to support the success of their programmes.
