As you will be aware, Ireland’s implementation of the EU/IMF Programme has been recognised, and indeed lauded, both at the ECOFIN and at Eurogroup meetings. There has been wide-spread acknowledgement of our commitment to the Programme, a commitment evidenced by the fact that we have met all of our Programme conditions to date. Ireland’s exit from our programme of financial support will represent a success for both Ireland and the broader Euro-zone. Continuation of our strong implementation record to date is critical to such a successful exit.
There is a very keen awareness, by Member States, of the difficulties faced by programme countries, and the efforts being made are well recognised and acknowledged.
Our strong performance has already been recognised in a tangible way. The agreement on 21 July 2011 by the Euro-area Heads of State or Government to reduce to reduce the interest rates to close to the cost of funding and extend the maturity of the EFSF loans, has been reflected in similar changes to the terms of the EFSM loans. They were also reflected in the interest rates for the bilateral loans from the UK, Sweden and Denmark.
The Euro-area Heads of State or Government agreed on 29th June this year that “it is imperative to break the vicious circle between banks and sovereigns”. The Statement of 29th June also stated that 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. The establishment of a single supervisory mechanism for euro area banks is a prerequisite for any direct recapitalisation facility.
Discussions are continuing at a technical level to put in place both the single supervisory mechanism, and the European Stability Mechanism’s direct banking recapitalisation facility, at the earliest possible date. Ireland is participating constructively in these technical discussions.
The most recent European Council on 18/19 October 2012 concluded that:
“The Eurogroup will draw up the exact operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism (ESM), in full respect of the 29 June 2012 euro area Summit statement. It is imperative to break the vicious circle between banks and sovereigns. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly.”
Given that the establishment of the single new supervisory mechanism is a pre-requisite for direct banking recapitalisation, it has become obvious that reaching an outcome here will take longer than our discussions in relation to the promissory notes. Aside from the issue of when this new instrument would become available, there is a host of other issues that have yet to be worked through such as how the ESM would run these banks, what governance arrangements would be put in place between the fund and the banks themselves and indeed between the ESM and Member State governments. We will need to examine these wider considerations in the months ahead.
It is important from Ireland’s perspective, that progress towards these goals is made as quickly as possible, and as I have already mentioned we are playing our full part in this work.
We take every opportunity to promote Ireland’s case for improved terms on the cost of our banking support measures, through contacts at Ministerial, Diplomatic and official level.
