Micheál Martin
Question:140. Deputy Micheál Martin asked the Minister for Finance the progress he and his officials are making with the EU regarding dealing with Ireland's debt; and if he will make a statement on the matter. [25779/14]
View answerTuesday, 17 June 2014
Questions (140)
Written answers
There have been a number of improvements to the terms and conditions of our Programme loans, since the initial agreement in late 2010, including reductions of the interest rates and, in the case of the EU facilities, extension of maturities.
In July 2011, the Euro Area Heads of State or Government (HOSG) agreed to reduce the cost of the European Financial Stability Facility (EFSF) loans, and similar reductions were subsequently agreed for the interest rates on the loans provided by the European Financial Stabilisation Mechanism (EFSM) and also by the bilateral lenders (UK, Sweden, Denmark).
In April 2013, EU Finance Ministers agreed in principle to further extend the maximum weighted average maturities on our EFSF and EFSM loans by up to 7 years, over and above the extension agreed in 2011. This further maturity extension removes a refinancing requirement of some €20 billion for the Irish State in the years 2015 to 2022. This extension of maturities has a number of significant benefits for Ireland, including smoothing our redemption profile, improving long term debt sustainability and it also has a positive impact on the cost of Exchequer borrowing through creating further downward pressure on our borrowing costs.
In February last year, the Irish Government replaced the Promissory Notes issued to IBRC with a series of longer term, non-amortising floating rate Government bonds. This has resulted in significant benefits to the State including spreading the cost of the Promissory Notes from a weighted average life of c.7-8 years to c.34-35 years at a lower funding cost for the State, resulting in significant annual interest savings.
As I have outlined in my replies to a number of previous related 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 on 20th June 2013 agreed on the main features of the European Stability Mechanism's Direct Recapitalisation Instrument or DRI. 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.
On 10 June 2014 the euro area Member States reached a preliminary agreement on the European Stability Mechanism's (ESM) direct recapitalisation instrument (DRI). This now requires a decision by mutual agreement of the ESM Board of Governors to create a new ESM instrument in accordance with Article 19 of the ESM treaty and the aim is to have this process completed by November this year. This would allow the ESM DRI to come into effect once the Single Supervisory Mechanism is in place and operational which is expected to be in November of this year. It will not 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 ensure that Ireland's case for retrospective direct recapitalisation is 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.