Dr. Michael Somers:

The ECB is doing a great service for the State in that it is providing a very large amount of money at an interest rate of 0.75%. It has also provided three year money, which is quite unusual for a Central Bank. Usually the period of lending by a Central Bank is much shorter. It has also undertaken to buy up bonds. Many people say the ECB should take some of the pain for what has happened. There is an issue about the ECB and I am telling members what I understand the scene to be because there may be subtleties that are lost to me, but its share capital is €10 billion, and effectively if it loses money it has to be recapitalised in some way or another. It can be recapitalised by the regional Central Banks and if it cannot do it, it will have to come from the Exchequer. It does not have the ability to take on board losses. People have also spoken about the ESM and some people have suggested that the €20 billion put in by the State could be taken over by the ESM. Frankly, I do not think it can because the ESM will have to borrow its funds on the international markets. It needs a good rating. As far as I know, it has been downgraded to AA plus and it does not even have a AAA credit rating. It cannot afford to take any losses either or else it will not be able to raise money at a reasonable rate on the market. The idea that the EMS would be the solution to our problems in taking on board the losses of the Irish Banks would not work. I do not think there are any free lunches in this game.