I propose to take Questions Nos. 91, 94 and 95 together.
Actions taken at the European level since the onset of the sovereign debt crisis clearly show that policy makers across Europe accept the necessity of a European response to the prevailing crisis. This is evident from the establishment of various institutions, such as EFSF and ESM, as well as from ECB involvement from the outset, notably as provider of liquidity. With the June 29 Heads of State or Government statement, these responses have been placed within an overall framework with a declared intention to break the link between banks and sovereign. Indeed, markets’ reaction to this announcement as well as ensuing measures has been broadly positive and has already helped to reinforce Ireland’s efforts to regain market confidence, as also substantiated by our recent return to longer-term capital markets. Further, economic growth is an important cornerstone of this framework, as the adoption on June 29 of the Compact for Growth and Jobs reflects. Finally, the June 29 statement clearly states that "[s]imilar cases will be treated equally."
The June 29 statement and ensuing measures at Member State and European level have resulted in a general fall in sovereign funding costs across Europe, especially in programme and vulnerable countries, including large ones. As we further implement the agreed upon measures, one would expect sovereign funding costs to continue their move to more reasonable levels. This includes larger countries, which have benefitted from the greater flexibility and efficiency with which European support can be delivered without having drawn on these innovations. An instance of these is the August announcement by ECB President Draghi that the ECB will do whatever it takes, within its mandate, to ensure the integrity of the euro area. Of course, this had a significant and immediate impact. The concrete announcement on Outright Monetary Transactions resulted in further reassurance. Similarly, ratification in Germany and other Member States of greater flexibility and efficiency of use of EFSF and ESM instruments in the following weeks has a very positive effect, in particular on Spain and Italy. While the positive effect on Ireland will likely not be limited to this, it is clear that Ireland has already benefitted from the wider improvement in confidence, especially regarding the stability of larger Member States. Looking ahead, one would expect that Ireland will continue to benefit from implementation of the agreements and, of course, we would expect equal treatment.
In recognition of the fact that countering high public and private sector debt can have limiting effects on growth, Europe has acted to stimulate growth by adopting the Compact for Growth and Jobs. Necessary conditions within this framework are the tackling of public sector deficits with measures as friendly as possible to growth and differentiated across members as well as the normalisation of financial sector conditions. Indeed, for markets to be reassured, it is necessary that measures ensuring fiscal sustainability are being taken. To the degree that this is achieved, sovereign funding costs would fall, as also witnessed in Ireland. These lower funding costs should eventually trickle down to the wider economy. Facilitating this process would be a sound and stable banking system. In regard to achieving this, Europe has already agreed wide-ranging measures to ensure sustainable fiscal positions and financial stability are ensured.
Further growth boosting measures have been taken at the European level, also in light of the fact that private sector debt is elevated in a number of countries. I believe the cumulative impact of all of these measures will have a positive impact in terms of supporting economic activity in the EU at this difficult juncture. This, in turn, can be expected to benefit Ireland, given the importance of the EU as a trading partner.
At EU level, the growth-boosting measures announced include a deepening of the Single Market and reducing the regulatory burden. Another important measure is the mobilisation of €120 billion - about 1 per cent of EU gross national income - to boost European growth. These funds will be made available via EU structural funds, the Project Bonds initiative, and EIB lending. We continue to make progress in terms of maximising the amount of funding that can be made available to Ireland in these regards.
Finally, as regards the interaction between Central Banks, I am not privy to the discussions that take place between member states’ Central Banks and the ECB. The Deputy should be aware that the Governor of the Central Bank has sole responsibility for the performance of the functions imposed, and the exercise of powers conferred, on the Bank by or under the Rome Treaty or the European System of Central Banks (ESCB) Statute. Section 6A(3) of the Central Bank Act 1942 provides that the Minister for Finance may not request information relating to those (ESCB) functions from the Governor or the Bank.
That said, I do believe that there is widespread recognition generally of the need for the implementation of a coordinated approach at European level to tackle the very serious financial and fiscal problems that are evident at present and as I have alluded to earlier in my answer, action is being taken to address these problems.
