Dáil Éireann Debate, Thursday - 20 February 2014
83. Deputy Michael McGrath asked the Minister for Finance if Ireland has made a formal case to the ESM for the manner in which retrospective recapitalisation of the banks could take place; and if he will make a statement on the matter. [8835/14]
View answerAs I have outlined in my replies to a number of previous Parliamentary Questions, the Euro-area Heads of State or Government (HoSG) agreed in June 2012 that "it is imperative to break the vicious circle between banks and sovereigns", and that when a Single Supervisory Mechanism, involving the ECB, is in place and operational, the European Stability Mechanism could recapitalize banks directly.
The Eurogroup meeting of euro area Finance Ministers on 20th June 2013 agreed on the main features of the European Stability Mechanism's Direct Recapitalisation Instrument. There is a specific provision included in those main features, which states that "The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement." Therefore, the agreement, that we were active in negotiating, keeps open the possibility to apply to the European Stability Mechanism for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it.
As the single supervisory mechanism is not expected to be in place and operational until later this year, the ESM's Direct Recapitalisation Instrument cannot take effect until then. It would not therefore be possible to make a formal application to the ESM for retrospective recapitalisation in advance of the Instrument being in place.
However, both I and my Government colleagues will ensure that Ireland's case for retrospective direct recapitalisation will continue to be made at all levels as appropriate. I remain confident that the commitment made by the Euro-area Heads of State or Government in June 2012 to break the vicious circle between banks and sovereigns will be respected.
