Written Answers Nos. 41-49
41. Deputy Peadar Tóibín asked the Minister for Finance if he will detail the outcomes from his series of meetings in Northern Ireland on Friday, 27 September; the persons he met and the content of his discussions. [41512/13]
View answerOn Friday September 27th I travelled to Belfast to speak at the Confederation of British Industry’s, Northern Ireland Annual Lunch at a time when economic fortunes on both sides of the border are showing positive signs of recovery. I discussed how our economies have gone through a major transformation over the last number of years and we are finally starting to see signs of stability and growth. I indicated that while no two economies are identical, there are many similarities between the causes of the crisis both sides of the border, there are common symptoms, and in my view, there are also common solutions evident in our recovery.
On both sides of the border, families and businesses borrowed heavily to invest in residential and commercial property. People got drawn into the property market with many small businesses moving beyond their core business and building up property portfolios. These same families and business are now struggling under the weight of this debt. As a result we have a situation where thousands of families and business cannot fully engage with the economy. At the broader level the bursting of the bubble has forced Governments to introduce measures that would not be contemplated in normal times. NAMA, our asset management company, is one such example.
Consistent with that theme, I met with First Minister, Peter Robinson, and the Finance Minister, Simon Hamilton at Stormont Castle in advance of the lunch to discuss NAMA’s activity in Northern Ireland. First Minister Robinson had raised concerns in the press earlier in the week that NAMA’s policies in Northern Ireland may constrain Northern Ireland’s recovery and so it was opportune that we were able to discuss this very important issue. We discussed NAMA’s involvement in Northern Ireland’s economy generally. NAMA’s strategy in Northern Ireland is aimed at generating sustainable activity and transactions in the Northern Ireland property market – both through orderly sales and through targeted initiatives such as vendor finance and joint ventures that are designed to overcome the lack of funding in the market and enhance the future value of Northern Ireland assets through a programme of investment funding. We also discussed how NAMA’s concerns reflect the concerns of members of the Northern Ireland Executive about the negative impact fire sales would have on the economy.
We discussed the very strong level of engagement NAMA has in Northern Ireland with all key stakeholders, which is supported by NAMA’s Northern Ireland Advisory Committee. NAMA is investing to enhance the value of its assets in Northern Ireland and has advanced significant amounts of new money into the Northern Ireland economy to assist in such projects as the construction of a new 95-unit housing development in Milmount, Dundonald, close to Belfast and to complete Lanyon Plaza and the Soloist Building which form part of a landmark office development in the centre of Belfast. This investment comes at a time when there are very few other sources of funding for projects in Northern Ireland. As has also recently been reported in the press, NAMA is working closely with local housing authorities and approved housing bodies in Northern Ireland and recently announced the sale of over 50 apartments to Oaklee Housing Association in Belfast.
Our meeting was very constructive with both sides sharing an understanding of the importance of NAMA to the economy in Northern Ireland and of the care NAMA is taking in its dealings in Northern Ireland through on going measures of support and considerations regarding the management of the portfolio into the future.
42. Deputy Thomas P. Broughan asked the Minister for Finance the likely financial facility or line of credit that will be required from the financial institutions of the European Union for Ireland when it exits the current bailout programme later this year. [41298/13]
View answer57. Deputy Martin Ferris asked the Minister for Finance the options being considered for additional funding or credit lines if Ireland leaves the troika programme and the level of conditionality each option would bring. [41504/13]
View answerI propose to take Questions Nos. 42 and 57 together.
As the Deputy is aware, the EU-IMF Programme of Financial Support runs to December this year. The Government’s focus is now firmly fixed on achieving a successful and durable exit from our programme. In this regard we are doing all that we can to achieve this end. We continue to meet our programme conditions and our strong implementation record has been recognised by our external partners and the financial markets.
The options available to Ireland on exiting the programme fall into two broad categories. A successful exit without any further support or a successful exit supported by the European Stability Mechanism’s and the IMF’s precautionary backstop facilities. The second option has been referred to as Ireland having an ‘insurance policy’ to guard against the possibility of unfavorable external events that might arise.
By way of information, both the IMF and the European Stability Mechanism (ESM) have a number of options available in relation to the precautionary financial assistance as follows. The ESM’s Treaty provides, in Article 14, that the Board of Governors may decide to grant precautionary financial assistance in the form of a precautionary conditioned credit line (PCCL) or in the form of an enhanced conditions credit line (ECCL). It also provides, at Articles 17 and 18 for primary and secondary market support facilities. The Treaty also provides for the conditionality, terms and conditions to be attached to such assistance. Further information in relation to these instruments is available on the ESM website at http://www.esm.europa.eu/.
The IMF has a number of precautionary or standby type facilities including Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL), the Extended Funding Facility (EFF) and the Stand By Arrangement (SBA). These different instruments are designed to address different sets of circumstances, and the terms and conditions attaching to them are structured accordingly. Further information on these instruments is available on the IMF website at http://www.imf.org/.
In the case of both the ESM and IMF precautionary facilities, the nature of the conditionality would depend on the type of facility agreed and also the specific circumstances of the country making the application. In general, such conditionality seeks to address the reasons underlying the application for assistance.
The ECB’s Outright Monetary Transaction (OMT) is another potential support for countries exiting a programme. The Governing Council of the ECB made a decision to establish Outright Monetary Transaction (OMT) on 2 August 2012, and issued a Press Release on 6 September 2012 which outlined its technical features. According to this ECB Press Release, the purpose of OMT is: “Safeguarding an appropriate monetary policy transmission and the singleness of the monetary policy”. In the Press Release, the ECB noted in relation to the coverage of OMT that it “will be considered for Member States currently under a macroeconomic adjustment programme when they will be regaining bond market access.” The Press Release also sets out that a necessary condition for OMT is strict and effective conditionality attached to an appropriate European Financial Stability Facility/European Stability Mechanism EFSF/ESM programme.
Such programmes can take the form of a full EFSF/ESM macroeconomic adjustment programme or a precautionary programme (Enhanced Conditions Credit Line), provided that they include the possibility of EFSF/ESM primary market purchases. Finally the Press Release also notes that the ECB’s Governing Council will decide on the start, continuation and suspension of OMT, following a thorough assessment, in full discretion and acting in accordance with its monetary policy mandate. The decision on whether to grant OMT or otherwise in any particular case is a matter for the ECB, which is an independent body.
Ireland will be the first euro country to exit an EU-IMF programme of this type. In this context, discussions on Ireland’s exit from the Programme took place during the recent review missions and some further clarity on the possible options that might be available in terms of exit strategy was achieved. The issue will be considered further at the forthcoming Troika review scheduled for the second half of October. No decisions have been taken to date by Government on any of the possible options that Ireland might wish to pursue in this matter. However, all options that assist in supporting durable and sustainable future market funding will be considered in the light of what is appropriate for Ireland.
43. Deputy Thomas P. Broughan asked the Minister for Finance if he will include a stimulus package in budget 2014; if he will provide capital investment to build social housing units to address the ongoing housing crisis and to provide much needed employment for those on the live register. [41299/13]
View answerAs the Deputy will be aware, my colleague Brendan Howlin, the Minister for Public Expenditure and Reform announced at the start of the summer, a stimulus package which included €150 million to be invested school projects, local road maintenance and repairs, and a Local Authority Energy Efficiency Scheme. This package will help create jobs throughout local communities as it is focused on small scale capital works which tend to be more labour intensive than major new build projects. With regard to further a stimulus package in Budget 2014, I am not prepared to be drawn into speculation on budgetary matters at this time. However, I will say that preparations for the Budget are well underway in my Department, in the Department of Public Expenditure and that expenditure on capital investment is a matter for my colleague Brendan Howlin, the Minister for Public Expenditure and Reform.
44. Deputy Joe Higgins asked the Minister for Finance the amount paid in interest on the national debt in the past year; and the amount of that interest due to debt arising from the capitalisation of the banks and other supports given by the State. [41477/13]
View answerThe end September 2013 Exchequer Returns published on 2 October show that interest expenditure on the National Debt was €4,793 million in the first nine months of the year. State support, on a gross basis, for the banking sector has amounted to approximately €64 billion, which includes Exchequer payments, promissory notes in respect of IBRC and EBS, as well as funding from the NPRF. The proceeds of all borrowing as well as revenues including tax and non-tax, and capital receipts are lodged to the Exchequer account to fund general expenditure. In general, no specific tranches of borrowing were undertaken solely for the purpose of recapitalising the banking sector. Therefore, it is not possible to accurately quantify that part of the debt interest bill that relates to the borrowing undertaken to recapitalise the banks.
The Deputy will be aware however that the €3.06 billion Promissory Note instalment due to IBRC at end-March 2012 was settled with a Government bond. The NTMA issued bonds with a nominal value of €3.46 billion in order to meet the payment. The yield on the bonds and, therefore, the effective interest rate on the repayment of the €3.06 billion, was just over 6.8%. In February 2013, the IBRC Promissory Notes were cancelled and replaced with a portfolio of eight floating rate Government bonds for a total amount of €25 billion. The bonds pay interest every six months (June and December) based on the six month Euribor interest rate plus an interest margin which averages 2.63% across the eight issues.
45. Deputy Alan Farrell asked the Minister for Finance if he will consider increasing the credit limit for the Credit Review Office to investigate loans that have been refused to small and medium business; and if he will make a statement on the matter. [33281/13]
View answerThe Deputy may be aware that the Credit Reviewer stated in his eleventh quarterly report that he had asked that the threshold by which the Credit Review Office (CRO) review decisions to refuse, reduce or withdraw credit facilities (including applications for restructured credit facilities) be raised from €500,000 to €3 million. I published an assessment of the Credit Review Office late last year which contained a number of recommendations to make the CRO more effective in encouraging and increasing the supply of credit to SMEs. One of these recommendations was to increase the resources of the CRO and I sanctioned the appointment of additional reviewers at budget time last year. The procurement process for additional reviewers has been completed and the possible implementation of a number of the remaining recommendations in the assessment is being examined.
In looking at the implementation of other recommendations, my officials have also been considering where the CRO should fit into the broader overall strategy of ensuring credit availability for viable SMEs and the level of the threshold is one aspect of this strategy.
47. Deputy Dessie Ellis asked the Minister for Finance if he has considered requesting that the ESM take on the tracker loan book of Irish banks. [41502/13]
View answerDuring recent Review Missions of the Troika the Irish authorities have discussed the issues relating to the high cost of funding banks’ tracker mortgage books and the related impact of the negative carry, relative to the interest rate received on the mortgages, on net interest margin and profitability. It was agreed that the Irish authorities will present a report on this matter to the Troika in advance of the final review mission. As these discussions are on-going it would not be appropriate for me to comment further on this matter.
48. Deputy Niall Collins asked the Minister for Finance when he envisages the Ireland Strategic Investment Fund will commence investment of assets from the National Pension Reserve Fund; the scale of investment that can be expected in 2014; and if he will make a statement on the matter. [41448/13]
View answerAs recently announced, the Government has decided to establish the Ireland Strategic Investment Fund (ISIF) which will absorb National Pensions Reserve Fund (NPRF). The discretionary fund of the NPRF, of approximately €6.4 billion currently, will be channelled towards productive investment on commercial terms in the Irish economy. Officials of my Department are currently preparing the necessary legislation which I hope to see enacted this year.
Using the Ireland Strategic Investment Fund, we will maximise our resources to enhance growth in the Irish economy and improve key infrastructure to maintain Ireland's attractiveness as a place to do business and to create jobs. It is not really possible at this time to estimate the expected effect on employment, although we do expect very significant economic activity and the creation of thousands of jobs. My Department is working alongside the National Treasury Management Agency (NTMA) to develop the broad parameters for the investment strategy for the ISIF, in parallel with developing the legislation, and it is envisaged that that work will align with the work being done by my Department and the Department of Public Expenditure and Reform on a medium-term economic plan.
It is envisaged that the ISIF will seek to leverage and maximise its resources by attracting private sector co-investment. I am conscious that it is important that a level of independence is maintained in order to attract that private sector co-investment. To do this, the fund will need to demonstrate clearly that it acts on a commercial basis, so that the very fact that it is prepared to finance a proposal will reassure other potential investors that the project is sound. While the need for the State to provide for social welfare and public service pensions obligations has not abated, fostering economic activity and employment is currently a greater priority and this will in turn put the State in a better position to meet its pension obligations in the longer term.
49. Deputy Timmy Dooley asked the Minister for Finance if he expects payments to be made in 2013 from the credit union fund established to facilitate the restructuring of the sector; if he expects additional funds will be required over and above those already allocated; his plans for the future of the fund; and if he will make a statement on the matter. [41453/13]
View answerThe Credit Union Fund was established by ministerial order under the Credit Union and Co-operation with Overseas Regulators Act 2012. Under section 57 of the Act, I contributed €250 million to the Fund in December 2012. This funding is designed to support the restructuring of the credit union sector by the Credit Union Restructuring Board (ReBo) as set out in the 2012 Act and in line with the recommendations of the Report of the Commission on Credit Unions which was agreed with all credit union stakeholders. No further Exchequer contributions to the Fund are planned. ReBo is working to the timetable set out in the Report of the Commission on Credit Unions with a view to completing its work by the end of 2015 with any necessary disbursement of funding taking place before then. I have also been informed that to date ReBo has received over one hundred expressions of interests from credit unions and that it is engaging with these credit unions with a view to developing restructuring proposals where appropriate. I am not in a position at this stage to say whether that engagement will lead to any disbursements from the fund this year.
