Dáil Éireann Debate, Thursday - 15 November 2012
23. Deputy Willie O'Dea asked the Minister for Finance if he has given detailed considerations to the benefits and costs associated with the European Stability Mechanism taking equity stakes in the State owned banks; and if he will make a statement on the matter. [50503/12]
Amharc ar fhreagra52. Deputy Brendan Smith asked the Minister for Finance the alternatives to the European Stability Mechanism of taking a direct equity state in the pillar banks, such that the bank debt will be reduced in a manner consistent with the declaration at the June summit; and if he will make a statement on the matter. [50505/12]
Amharc ar fhreagraI propose to take Questions Nos. 23 and 52 together.
As you will be aware, the Euro Area Summit Statement of 29th June affirmed that it is imperative that the vicious circle between banks and sovereigns be broken. The Statement of 29th June also stated that it has been agreed that when an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area, the European Stability Mechanism (ESM) could have the possibility to recapitalise banks directly. This would be dependent on appropriate conditionality, including compliance with state aid rules, which should be institution-specific, sector-specific or economy-wide and would be formalised in a memorandum of understanding.
Work is continuing at a technical level to put in place both the single supervisory mechanism, and the European Stability Mechanism’s direct banking recapitalisation facility, at the earliest possible date. Ireland is participating constructively in these technical discussions.
The most recent European Council on 18/19 October 2012 concluded that: "The Eurogroup will draw up the exact operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism (ESM), in full respect of the 29 June 2012 euro area Summit statement. It is imperative to break the vicious circle between banks and sovereigns. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly." It is important from Ireland’s perspective, that progress towards these goals is made as quickly as possible, and as I have already mentioned we are playing our full part in this work.
The implications of any ESM participation in Irish banking recapitalisation are being considered as part of our overall approach to these discussions. However, at this stage it is not possible to form a definitive view on this matter. The government is pursuing a twin track approach in relation to our banking related debt with the other track designed to secure a better deal on the promissory notes in IBRC. Both routes are designed to enhance our well performing adjustment programme and put Ireland’s economy and indebtedness on a more sustainable path.
