Dáil Éireann Debate, Thursday - 10 April 2014
124. Deputy Pearse Doherty asked the Minister for the Environment, Community and Local Government the process of making representations to Irish Water; if there will be a point of contact to deal with representations; if Irish Water will be required to respond to parliamentary questions; and if he will make a statement on the matter. [17254/14]
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The House should note that the sale of loan books to unregulated third parties Bill, listed in the Government’s legislative programme, is intended to address concerns surrounding the continued applicability of the code after the sale of loan books to unregulated entities. The Government is committed to bringing forward legislation to protect mortgage holders and will work with other interested parties to achieve the best solution for consumers. Officials in the Department of Finance are actively examining this with the Central Bank and the Attorney General's office with a view to bringing forward legislation to address the issue. It is intended this legislation will apply to all loans which were issued by a regulated financial service provider and subsequently transferred to an unregulated purchaser.
Section 2 provides for certain payments from the Central Fund. Specifically, it is to provide a legislative basis for Ireland to make transfers to an intermediate account operated by the ESM, European Stability Mechanism, on behalf of the euro area member states. These transfers are to be in an amount equivalent to the income that accrues to the Central Bank of Ireland from the securities market programme, SMP, portfolio of Greek Government debt. The Bill provides that these transfers may take place up to 2026. However, as the amount in 2026 will be quite small, it is proposed that this will be paid in 2025.
In November 2012, as part of the package of measures designed to help Greece, it was agreed by the euro area member states that the securities market programme related income of member states would be transferred to Greece under certain conditions. Euro member states agreed in January 2013 that the ESM would be the agent for making such payments. It has, accordingly, established an intermediate account into which the euro area member states can place an amount equivalent to the income on the SMP portfolios accruing to their national central banks as and from budget year 2013. Member states under a full financial assistance programme are not required to participate in the scheme while in a programme. As Ireland exited its EU-IMF programme of financial assistance in December 2013, the measure now applies to it. The next transfer date for this measure is 1 July 2014, the earliest date by which Ireland could be required to make its payment of €31 million for 2014 and the necessary legislation will need to be in place by that time.
As is widely known, Greece is benefiting from its second programme of financial assistance, arising from the serious budgetary and economic problems it has experienced and its resulting inability to secure international funding at sustainable rates. On 27 November 2012, the most recent in a series of packages to assist Greece was agreed to by euro area Finance Ministers. It is designed to provide further assistance for Greece in putting its economy on a path to sustainable growth and its domestic finances on a sound footing. It was agreed in the context of the statement by euro area Heads of State and Government on 21 July 2011, reiterated in October 2011, that the Greek situation was different from that of other countries, therefore requiring an exceptional response.
One of the measures agreed to in November 2012 was the SMP measure, the subject of section 2. As Ireland has successfully exited its programme, we are now liable to make payments under this process, beginning in 2014. Legislative provision needs to be made to permit these payments to be made. The full package of measures agreed to in November 2012 includes a debt buy-back of bonds held by private investors; a reduction of 100 basis points in the interest rate margin on the Greek loan facility, bringing it to 50 basis points; the cancellation of the guarantee commitment fee on EFSF, European Financial Stability Facility, loans; the extension of maximum maturities of the loan to Greece by 15 years to 30; deferral of the interest payments on Greece's EFSF loans for ten years; and that member states will pass on to Greece's segregated account an amount equivalent to the income on the SMP portfolio accruing to their national central banks as and from budget year 2013. Again, member states, under a full financial assistance programme, are not required to participate in this scheme for the period in which they receive financial assistance.
The Euro Area Loan Facility (Amendment) Act 2013 provided for the interest rate reduction and the maximum maturity extension. The debt buy-back, successfully completed in December 2012, and the cancellation of the guarantee commitment fee did not require either the amendment of existing legislation or the introduction of new legislation here. It is also important to note that, as before, these concessions to Greece are to accrue in a phased manner and conditional on a strong implementation of the agreed reform measures in the programme period, as well as in the post-programme surveillance period. The current SMP measure, with the deferral of interest rates previously agreed to, provides an additional level of financial conditionality both during the existing programme and also in the period of post-programme surveillance which will apply when Greece emerges from its programme.
In Ireland, on the other hand, we have exited our programme. We are, therefore, subject to both the normal fiscal and economic policy co-ordination and oversight which applies to all EU and euro member states. We are also subject to post-programme surveillance but without the added potential financial sanctions which can apply to Greece as part of these measures. Both Greece and the other euro area member states agree that it is only through the full and strict implementation of the fiscal consolidation and structural reform measures included in their programme that Greece will regain competitiveness and be able to fund itself through the international markets.
Some ask why Ireland is not seeking or being offered the Greek package or one similar to it. It is important to differentiate between Ireland and Greece in this case. Ireland's situation differs in fundamental aspects of fiscal and economic performance from that of Greece. The approach to these issues is, accordingly, fundamentally different. Greece's public debt prospects are of a different order of magnitude to Ireland's. Notwithstanding significant private sector involvement in March 2012 in its autumn forecast later that year, the European Commission forecast that the Greek debt-to-GDP ratio would worsen, reaching over 188% in 2013. This outlook, with a worse than expected economic and fiscal performance up to that point, was what prompted a reconsideration of Greece's debt sustainability in November 2012. Even after the series of measures agreed to and taking account of the impact of structural reforms in raising both growth and revenue in the coming years, Greek public sector debt could amount to around 124% of GDP by 2020. The corresponding Department of Finance assessment of Ireland's public debt, published in the budget last October, is that the debt-to-GDP ratio peaked at 124% in 2013 and will decline thereafter.
The Greek economy has suffered a recession that was more severe than anticipated, with GDP declining by 23.5% from 2008 to 2013. Notwithstanding its difficult path, some welcome signs of recovery are emerging. On the fiscal side, Greece will record a primary surplus for 2013 which it expects to be larger than originally envisaged. Recent data support expectations that Greece should return to growth in 2014. Confidence indicators continue to improve, while hard data releases suggest the first signs of recovery. Structural reforms undertaken in labour and product markets have underpinned improved competitiveness leading to expectations for strengthened exports and investment. In addition, Greece's bond yields have also dropped sharply recently.
There is, nevertheless, some distance to go towards recovery. A critical difference between the two economies in this regard relates to the importance of international trade. In Greece exports amount to the equivalent of about 25% of GDP, resulting in export growth not being in a position to provide much by way of offset to the contractional effect of fiscal austerity. In Ireland, by contrast, exports amount to the equivalent of over 100% of GDP, meaning that the growth in exports can provide a powerful offset to the impact of fiscal consolidation on economic activity.
