I propose to take Questions Nos. 109 and 125 together.
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 recapitalise banks directly. It also agreed that the Eurogroup would examine the situation of the Irish financial sector with a view to further improving the sustainability of the well-performing adjustment programme.
Since June 2012, we have successfully negotiated the Promissory Notes transaction; a further extension of maturities on our EFSF and EFSM loans; and the inclusion of a provision for retroactive recapitalisation on a case by case basis in the operational framework of the ESM direct recapitalisation instrument.
In February 2013, 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.
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. It also has a positive impact on the cost of Exchequer borrowing by creating further downward pressure on our borrowing costs.
There has also been progress on the ESM Direct Recapitalisation Instrument (DRI). The Eurogroup meeting on 20th June 2013 agreed on the main features of the 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.
All of these actions are tangible achievements which reduce the burden of Ireland's national debt.
