Ciarán Lynch (Cork South Central, Labour)
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No. 5 on our agenda is the pre-ECOFIN Council briefing for February 2014. I welcome the Minister for Finance and his officials. The purpose of the meeting is to consider items on the draft agenda for the meeting next week of the Economic and Financial Affairs Council. The Minister will make his opening remarks which will be followed by a question and answer session. I remind members, delegates and those in the Visitors Gallery that all mobile telephones must be switched off in order to avoid interference with the broadcasting of the meeting.

Michael Noonan (Limerick City, Fine Gael)
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I thank the Chairman and committee members for inviting me to speak to them in advance of the meeting of the Economic and Financial Affairs Council of Ministers, ECOFIN, next Tuesday, 18 February, in Brussels. Members will be aware that I have agreed, subject to scheduling arrangements, to attend the committee on a quarterly basis to update them and discuss developments at ECOFIN. In addition, my officials provide a written briefing on a monthly basis. This is a very useful and positive development and I look forward to this morning's engagement. Greece took over the Presidency in January and next week’s meeting will be the second of its Presidency. I understand the committee has already received the draft agenda and background material for the February meeting. A number of key issues are listed for discussion and it is hoped significant progress will be made at the meeting.

As the committee also asked if I would also provide a brief overview of proceedings at the January meeting, I will turn to that issue. The aforementioned meeting took place in Brussels on 28 January and the agenda was relatively light, which was to be expected. Generally, the first meeting under any Presidency is light because the previous Presidency would have made a big push to finish off items at the end of its term. As is customary at the beginning of a new Presidency term, the Greek Presidency presented its work programme on economic and financial matters. The Council took note of the Presidency's work programme and its key objectives of supporting economic growth and employment and restoring confidence in the financial sector. The Greek Presidency has set out a busy schedule for its six month term and I expect that in the early months it will focus on the files where it might be possible to reach agreement with the European Parliament before the Parliament’s term ends. The Greek Presidency is the final leg of our Presidency trio. It has chosen “Europe: our common quest” as its theme and I wish it all the very best in its term in office.

At the ECOFIN meeting in January there was also an update by the European Central Bank on the implementation of the single supervisory mechanism, SSM, for banks. The regulations establishing the SSM were adopted in October 2013 and it is scheduled to come into operation in November 2014. The SSM will cover the euro area, as well as non-eurozone member states that choose to participate. The ECB will have direct oversight of banks in these countries and work in close co-operation with national supervisory authorities. In preparation for taking over this task the ECB, in co-ordination with the European Banking Authority, will conduct an asset quality review and stress tests as part of its comprehensive assessment of the banks over which it will have direct oversight.

The January ECOFIN meeting also followed up on December’s European Council meeting and focused on implementation of the Compact for Growth and Jobs. The Compact for Growth and Jobs was agreed in June 2012 with the aim of boosting economic growth, investment and employment, as well as making Europe more competitive. While progress has been made in this area, efforts are ongoing to ensure it is fully exploited. With this mind, at the January ECOFIN meeting the European Commission and the European Investment Bank updated the Council on initiatives to restore normal lending to the economy.

In January the Council also adopted a decision regarding the existence of an excessive government deficit in Croatia and issued a recommendation to correct the deficit by 2016. That morning, as usual, Ministers held a breakfast meeting to review the economic situation. There was also an update on the state of play in the negotiations on an intergovernmental agreement on the single resolution fund for banks.

I will now turn to next Tuesday’s meeting. Members will see that there are important items to be discussed. I propose to outline the key issues likely to arise, after which I will be happy to take questions and observations from members. I remind them that this is a draft agenda and that there can still be changes between now and the meeting in terms of content and the order of the discussion. In addition, work is ongoing at the level of officials and there may be more substantial changes in terms of how the discussions will evolve. The formal ECOFIN meeting is scheduled to commence at 10 a.m. on Tuesday. Earlier that morning we will have a breakfast meeting during which I expect the Commission Vice President, Mr. Olli Rehn, to comment on the economic situation in Europe, as well as allowing Ministers an opportunity to consider economic matters more broadly.

According to the draft agenda, the first items to be considered are the legislative deliberations. These will, as normal, take place in public session. Based on the draft agenda, two items are scheduled for discussion, namely, savings taxation and the single resolution mechanism, SRM. The Presidency will also provide us with an update on the ongoing work on financial services dossiers. However, at this stage, we understand the savings taxation file may be taken off the agenda for next week’s meeting. This issue relates to EU rules regarding the tax treatment of interest income. We expect it will be discussed instead at the March meeting.

On the issue of a single resolution fund, I expect the Presidency to inform Ministers about the trilogue process under way with the European Parliament. The SRM is an essential step in creating the banking union and completing all aspects of banking union is urgent if we want to break the link between the sovereign and the banking sector. This is a priority issue for Ireland. While there is a divergence of opinion between the Council and the Parliament on issues such as scope, financing and governance, the Presidency will work to progress this issue, with a revised mandate, if necessary. In that context, Ministers will also have a special meeting in Brussels on Monday evening to discuss the intergovernmental agreement on the single resolution fund. Last December the Council agreed a general approach on a proposed single resolution board and a single fund for the resolution of banks. The compromise agreement consisted of a draft regulation on the SRM and a decision by the euro area member states committing them to negotiate by 1 March 2014 an intergovernmental agreement on the functioning of the single resolution fund. The intergovernmental agreement will facilitate the gradual mutualisation of the fund over a ten year period. Officials have been meeting to discuss these issues and I expect Ministers to be updated on these discussions. I also expect an effort to be made to make progress and resolve the outstanding issues at a political level. This is an important dossier and one we wish to progress to a satisfactory and timely outcome.

I refer to non-legislative activities. There are two related important items under the annual semester process - the annual growth survey and the alert mechanism report, AMR. The semester process allows for stronger economic governance and co-ordination at EU level. This is the fourth year that the process has been in operation but it is the first that Ireland will be fully integrated into the process, as we have now exited the EU-IMF programme. On an annual basis the EU semester begins with the publication by the Commission of its annual growth survey which member states take on board in their budgetary and economic plans. The Commission's assessment is that growth is beginning to return and that member states are making progress. The Commission has targeted the same five key priorities as published in last year’s survey: pursuing growth-friendly fiscal consolidation; restoring lending to the economy; promoting growth and competitiveness; tackling unemployment and the social consequences of the crisis; and modernising public administration.

The annual growth survey will feed into national economic and budgetary decisions and be reflected in our stability programme update and national reform programme, which all member states produce in April. The Commission then assesses the plans of member states and makes a series of country specific recommendations, CSRs, to each member state. The draft Council conclusions under consideration at this ECOFIN meeting have been prepared by officials. The conclusions endorse the findings of the annual growth survey and provide macroeconomic and fiscal guidance for member states.

The alert mechanism report, AMR, is also part of the annual semester process. The Commission checks member states’ performance through the AMR against a scoreboard of economic indicators to determine which require further investigation through an in-depth review. Draft ECOFIN conclusions on the AMR have been prepared at official level. At the time of drafting the report in November 2013 Ireland was still in the EU-IMF programme and, therefore, not included in the list of countries proposed for an in-depth review. However, now that Ireland has exited the programme, the conclusions consider that it should be integrated into the semester framework and propose that the Commission consider preparing such a review. A long discussion is not expected at ECOFIN on this item. This process will unfold in the coming months and Ireland will play a full part in the governance and semester process this year.

There will also be an exchange of views on preparations for the G20 meeting of finance Ministers and governors in Sydney later this month. The purpose of this discussion will be to endorse the EU terms of reference for the meeting which has been prepared by officials.

The final two items on the agenda are annual items related to the EU budget. One item is a "backwards" looking item and the other looks "forward". First up is the discharge procedure in respect of the implementation of the budget for 2012. "Discharge" is the technical term under the EU treaty given to the approval procedure for the implementation of the EU budget. At the meeting Ministers will be asked to agree to a Council recommendation which will then be forwarded to the European Parliament to grant discharge to the Commission for the manner in which funds were managed in 2012. In other words, it is the sign-off on the 2012 European budget.

The other EU budget item relates to the budget guidelines for 2015. This is also an annual item. The Council agrees a set of guiding principles for the Commission to take into account when preparing its draft proposal for next year's EU budget.

Under the heading of any other business the ECB will provide its first quarterly report on implementation of the SSM to which I referred.

We will cover a range of issues at the meeting, particularly related to banking matters and the EU semester process. These are important areas of interest to all citizens of Europe. It is important that we get it right and we will work with the Greek Presidency and our colleagues from other member states to ensure progress is made. I thank members for their attention and will be happy to respond to questions or observations they may have.

Ciarán Lynch (Cork South Central, Labour)
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As we need to conclude the meeting by 11 a.m., we will have eight minute slots.

Has there been any indication of what the CSRs will be for Ireland? The most significant issue appears to be the German imbalance, on which there will be a report at the meeting. What is the current state of play in the context of how this will be monitored and addressed in Germany's CSRs?

Michael Noonan (Limerick City, Fine Gael)
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This is a journey or process. First, we have the growth forecast which is the starting point, from which we will move on and incorporate the data in our budgetary forecast and plans for the next three years or so. The big change for Ireland is that while we were in a programme, we did not have to participate in this process, but we will be integrated with everybody else for the first time.

It is expected that Ireland will receive CSRs. It is too early to say, but based on our contacts with the Commission, it appears that issues that were addressed in the EU-IMF programme but not fully resolved will feed into the recommendations. In addition to taking a country-specific approach when formulating CSRs, the Commission also uses a thematic approach. Therefore, a number of member states will receive similar recommendations. All member states receive recommendations on their public finances. We will, therefore, most likely receive a recommendation to continue on our current path of deficit reduction. It will be a reaffirmation of the targets we had, for example, reducing the deficit below 3% of GDP by 2015. The follow through from the programme is to continue the structural reform of the economy. Then there are items pending. For example, the legislation to reform legal practice is one of the major Bills to be introduced. A series of amendments were made on Committee Stage of the Bill some time last week. That issue will be mentioned, but we are on target to fulfil that reform. The detail of the CSRs is not important but the fact that we will enter the mainstream. I do not know whether Ireland will be subject to a country-specific review. There will be 16 reviews and may be a review of Ireland, but that is the norm rather than the exception.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister and his officials for attending. Based on his opening remarks and the agenda for the ECOFIN Council, the February meeting, like the meeting in January, will be dominated by aspects of banking union and the EU semester process. I am most interested in how all of this affects Ireland and the issues that are of importance here. The SSM is due to become operational in November this year. Is there an agreed division of duties between the ECB and the Central Bank of Ireland, as an agent of the ECB, in the context of the day-to-day supervision and regulation of the banks that come under the SSM? Will this be formalised in a memorandum of understanding between the ECB and the Central Bank? How will it work? Will the changed role of the Central Bank have implications for its headcount?

Michael Noonan (Limerick City, Fine Gael)
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The bank in Frankfurt is the overriding and superior authority and the Central Bank will act as an agent of the ECB, but some of the supervision will be undertaken directly by the new regulatory office that will operate out of Frankfurt.

I have a further note which may be helpful to the Deputy. The ECB will be the direct supervisor of banks with assets of more than €30 billion or assets to national GDP ratio of 20%. To ensure the SSM is truly the European level supervisor it will involve banks in all member states covering at least the three most significant banks in each participating member state, which effectively is Allied Irish Banks, Bank of Ireland and PTSB in our case. Ireland's credit unions will be exempt from regulation by the supervisory authority.

The method of how it works is as follows. The European Central Bank will be responsible for the single supervisory mechanism and will begin to supervise all major or systemically important banks in the eurozone and in those countries that choose to join the mechanism. The ECB, as common supervisor, will take over responsibility for these banks from the national central banks from November 2014. National central banks will continue to play an important role, but the ECB will have the ultimate responsibility for the system. The system provides for a differentiated approach to supervision depending on the size and significance of the banks. It provides for the equal treatment for euro area and non-euro area member states to allow banking union to be attractive to all 28 member states thereby protecting the Single Market. Smaller institutions will not come under the direct supervision of the ECB but the ECB will remain responsible and can step in to supervise these institutions.

The agreement provides that in most cases the newly created supervisory board within the ECB votes on a one-member-one-vote principle. This will ensure the correct balance in decision making between larger and smaller members states. The system also ensures that monetary policy remains separate from supervisory policy, something that was important to Germany.

The Central Bank is independent in how it operates and I can read another note on it. At the meeting under any other business we will discuss implementation of the single supervisory mechanism. The SSM regulation requires the ECB to send a quarterly progress report to the Council, the European Parliament and the Commission from 3 November 2013. The purpose of this report is to provide these institutions with an update on the progress in operational implementation of the SSM. The first of these reports covering the period from 3 November 2013 to February 2014 issued recently. I expect this report will form the basis of our discussion on this matter at ECOFIN.

I was asked about issues the ECB highlighted in the first quarterly report. The briefing answer is as follows. The report, which is required under the SSM regulation, not only covers the three months up to 3 February 2014, but also the preparatory work undertaken by the ECB in close co-operation with national supervisors and the central banks since the euro area summit of 29 June 2012. The transitory structure set up by the ECB to prepare for the start of the single supervisory mechanism has already made significant progress thereby enabling a smooth entry into force of the SSM regulation on 3 November 2013. The supervisory model of the SSM has largely been developed as reflected in the draft supervisory manual of the SSM, which covers all the tasks and supervisory processes of the SSM, including the relations between the ECB and the national competent authorities. The key concept of the supervisory manual is that joint supervision teams will directly supervise the approximately 130 banks considered significant in accordance with the SSM regulation. The composition of the ISTs was defined in the first meeting of the supervisory board.

On the staffing levels in the Central Bank, since the authorities in Frankfurt will have direct supervisory authority for the three main banks, it would be unusual if our Central Bank required extra regulatory staff, but of course it is independent.

Michael McGrath (Cork South Central, Fianna Fail)
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It might need fewer.

Michael Noonan (Limerick City, Fine Gael)
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It may need fewer, but I do not direct that. It is independent in the exercise of its functions.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister. All those notes are great but unfortunately I am on a stopwatch and they are eating into my time.

Ciarán Lynch (Cork South Central, Labour)
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I might give the Deputy some time.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Cathaoirleach. The Minister referred to the asset quality review and the stress tests later this year. Will the ECB have to carry out the asset quality review of the Irish banks again on foot of the work done in recent months by agents on behalf of the Central Bank of Ireland?

Michael Noonan (Limerick City, Fine Gael)
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Yes.

Michael McGrath (Cork South Central, Fianna Fail)
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Alternatively, will it accept the work that was done as the starting point? Does it have to do all that again?

Michael Noonan (Limerick City, Fine Gael)
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It will accept it, but it will repeat it. The issue for it is that it wants to be sure of what it is taking over in terms of institutions it will regulate. So it will carry out full asset quality reviews of all the banks across the banking union, including Ireland. From our point of view there is an advantage in it because the date of the last quality review was June 2013. The asset quality review the ECB will carry out will be aligned with the rest of Europe, which is the last day of December 2013. It is an asset quality review six months later and the Deputy will recall that property prices particularly in Dublin have increased quite substantially in that part of the year.

The Deputy knows how the stress test works. There is a normal line and a stress line, and assumptions are made about the stress. One of the assumptions made previously was to consider what would happen if property prices reduced by, maybe, 20%. That is how it is measured under stress and the risks are built in. It would be unreasonable to make an assumption now that property prices would reduce by significant amounts; if anything they are going in the opposite direction.

As the value of the collateral that underpins the loan book is increasing, we should get a better result. However, it is not possible to predict the result with accuracy because if it was we would not need a stress test at all. It is a test to find out what the situation is, so we have to wait to get it. All the advice we are getting is that we will not need additional core tier-one capital.

Michael McGrath (Cork South Central, Fianna Fail)
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I have just one more question.

Ciarán Lynch (Cork South Central, Labour)
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The Deputy many ask a brief question, but I do not think the Minister will give him a brief reply - that is the difficulty.

Michael Noonan (Limerick City, Fine Gael)
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It is very intricate.

Michael McGrath (Cork South Central, Fianna Fail)
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I am sure my colleagues will go into breaking the link between the sovereign and bank debt to which the Minister referred in his notes. Under the growth and jobs compact, and lending to the economy, what is the status of the initiative with KfW, the German development bank? Has an agreement been reached? Is there any indication of the quantum of lending likely to be available to Irish SMEs from that source? When does the Minister hope to have it operational?

Michael Noonan (Limerick City, Fine Gael)
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There have been a number of meetings at official level. We have not taken it up at political level yet. We are waiting for more advances at official level. The Deputy might not like me to read out a long note, so I will give him a short one.

Michael McGrath (Cork South Central, Fianna Fail)
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As my time is up, the Minister may read away.

Michael Noonan (Limerick City, Fine Gael)
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Officials are working through the technical discussions and the precise arrangements are not in place yet. The additional piece of news that I have not given the Deputy previously is that the European Investment Bank is also anxious to get involved. It is making signals that it might match whatever KfW does. If that is the structure, we will try to establish a fund in Ireland to deliver funding to SMEs, in which KfW, the European Investment Bank and our own investment fund would operate. That is how I envisage it playing.

Ciarán Lynch (Cork South Central, Labour)
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Before I call Deputy Pearse Doherty, I must excuse myself for a few minutes. Deputy Creed will take the chair. Is that agreed? Agreed.

Pearse Doherty (Donegal South West, Sinn Fein)
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Cuirim fáilte riomh an Aire. Deputy Michael McGrath spoke about the separation of sovereign and banking debt and I will pick up on that point.

As I have limited time I will not ask the Minister again whether he has raised the matter or whether he will do so. I welcome the comments the Minister made publicly last week on this issue. When will real negotiations begin on this? I understand the Government's stated position is that it will be when the fund is up and running and we have an EU banking union. When does the Minister believe intense negotiations on the commitment given in June 2012 will be thrashed out around the table?

Michael Noonan (Limerick City, Fine Gael)
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There was general political agreement on the separation of sovereign and banking debt at the end of the Lithuanian Presidency. It is a matter for co-decision with the Parliament. It is before the Parliament at present. It is important to Ireland because we have spoken much about separating sovereign and banking debt. When the general political agreement was arrived at, the Deputy will recall a fund into which each participating country-----

Pearse Doherty (Donegal South West, Sinn Fein)
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For clarification - I do not think I was clear enough; I thought it would be understood given the track record of this interaction - I am speaking about the retroactive recapitalisation of Irish banks. When will this part be thrashed out? When does the Minister think real negotiations will begin?

Michael Noonan (Limerick City, Fine Gael)
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The possibility of retroactive recapitalisation is in the guidelines, which are agreed. The legal possibility is in place and this has come through the Council. The European stability mechanism, ESM, has been established, but the part which will involve the recapitalisation of banks is not in place yet. It should be in place at the end of 2014 or at the start of 2015. All decisions on the ESM require unanimity. Putting in place the €55 billion or €60 billion fund and having guidelines which allow retroactive recapitalisation is only the first step. What will be difficult is getting the agreement of other member states to do it. The commitment made at the Heads of State and Government meeting in June 2012 stands and Ireland is certainly not taking it off the table.

Pearse Doherty (Donegal South West, Sinn Fein)
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I presume from the Minister's answer that real negotiations will not begin until 2015 when the fund is up and running and in place. Is this correct?

Michael Noonan (Limerick City, Fine Gael)
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The conclusions of the October 2013 European Council outlined the hierarchy of decision-making for bank recapitalisation, which continues to provide for ESM direct bank recapitalisation as part of the process. The conclusions called on the Eurogroup to finalise guidelines for ESM direct recapitalisation so the ESM would be able to recapitalise banks directly following the establishment and entry into operation of the single supervisory mechanism. Officials are preparing draft guidelines for consideration by the Eurogroup shortly. The time I mentioned is the end of 2014, with an operational start in 2015. The primary focus is on allowing the mechanism to directly recapitalise banks. If a bank goes insolvent-----

Pearse Doherty (Donegal South West, Sinn Fein)
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I understand this.

Michael Noonan (Limerick City, Fine Gael)
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The retrospective aspect is a subset.

Pearse Doherty (Donegal South West, Sinn Fein)
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I understand, and it is probably the most important part from our point of view. I will move onto the fund itself. The Minister mentioned the items for discussion at the meetings this month and last month. No reference has been made to the ongoing debate, of which we understand the Minister is part, on when mutualisation of the fund will take place. Will it take place over a ten year period or a five year period? Should the fund reach its target within five or ten years? The banks seek a 15 year period. Is it accurate to state that the Minister supports the cause of Mario Draghi that the fund be mutualised within a five year period? Does he believe we should have a single fund? Is this something for which he will argue on behalf of the State at the ECOFIN meeting?

Michael Noonan (Limerick City, Fine Gael)
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This is one of the sticking points with the Parliament. The Greek Presidency cannot amend what has been proposed without political guidance from ECOFIN. On Monday night a Eurogroup plus meeting will take place, which is ECOFIN chaired by the President of the Eurogroup, Finance Minister Dijsselbloem from the Netherlands. It is agreed that the separation of sovereign and banking debt will happen, but not fully for ten years. This period is too long. I agree with Mr. Draghi's position that it should be over five years, but the Finance Minister of Germany stated he had no problem with this provided everybody paid their full levy over five years also. Our position is to mutualise over five years but build up the fund over ten years. This is our position and this is what I will argue. It will be in the context of giving permission to the Greek Presidency to negotiate a compromise with the Parliament along these lines. There are different views.

Pearse Doherty (Donegal South West, Sinn Fein)
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I understand this. We are clearly in support of the Draghi position. I know it is impossible to state exactly, but will the Minister indicate to the committee whether he believes this position could win out at the end of the day in the discussions that will take place?

Michael Noonan (Limerick City, Fine Gael)
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Germany moved into a position in which it stated it had no problem with five years so long as the full levies were paid up over the five year period also. We think this is onerous for our banking system. We would like a fund to be fully mutualised by year five and to continue to be built up. The instalments made from year six should also be mutualised at the point of entry.

Pearse Doherty (Donegal South West, Sinn Fein)
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The fund of €55 billion seems small in comparison with the banking sector, which throughout Europe is worth €33 trillion. We would like a good share of this €55 billion for retroactive recapitalisation. Deputy McGrath touched on the asset quality review that will be conducted with regard to stress testing. The banks have not been informed of the exact terms of the asset quality review. We understand new criteria will be used by Europe for this asset quality review which may not have been used in the asset quality review that took place in our banks last year, particularly as trading assets and not just loan assets will come under the review. How many of our financial institutions will come under the EU stress test and the asset quality review?

The growth strategy for Europe is on the agenda. Last year the Minister announced that growth for this year would be between 2% and 2.3%. We are approaching our stability programme update. Is there anything in the conclusions to be reached at the ECOFIN meeting next Tuesday, or anything else in the Irish economy, that would lead the Minister to increase the level of growth he sees in the Irish economy in 2014 or the opposite?

Michael Noonan (Limerick City, Fine Gael)
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The banks subject to stress testing will be Bank of Ireland, AIB and PTSB. The full mandate and exact detail for the stress testing that will be applied is not fully known. It will be very much along the lines of what was done previously, but there may be some variations. There is nothing that causes us concern at this stage.

With regard to growth levels, we built the budget on 2%. There are more optimistic growth forecasts at present and even the Central Bank is stating 2.1% for 2014 and 3.2% for 2015. The employers' organisation has mentioned 2.8% for 2014. We will not move; we will continue to work on the basis of what we forecast at budget time. We are only in the seventh week of the budgetary year and we will not vary forecasts at this stage.

Pearse Doherty (Donegal South West, Sinn Fein)
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The Minister is happy enough. It is to be welcomed that the analysis at present is that we are on course.

Am I reading the Minister correctly? Anything that varies it would be a positive rather than a negative.

Michael Noonan (Limerick City, Fine Gael)
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It is too early to say, but nothing negative has emerged so far. The stability programme update, SPU, will be published in April. It is within that framework that we will indicate whether we are sticking to the same figure or varying it.

Michael Creed (Cork North West, Fine Gael)
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The Minister referred to country-specific proposals that were under consideration. There is a trauma associated with outside bodies establishing the agenda for recovery in recent years, but we have now emerged from that. In this light and instead of pursuing an agenda driven by the Council of Ministers and the Commission, does the Government believe there is merit in Ireland establishing its own agenda across a range of departmental initiatives, implementing it with the same rigour and submitting it as the country's post-bailout management programme? Psychologically, there is something about being in control of our own destiny and establishing the next steps to managing our emergence, our recovery and, hopefully, our march towards prosperity instead of perceiving that the agenda is again being established by outside agencies. A number of issues are involved, for example, youth unemployment and taxation, which the Taoiseach referred to in terms of how it can be constructed to deliver recovery. The deficit reduction remains the overwhelming issue that we must meet, but we should establish Ireland's country-specific proposals and control the agenda instead of letting the agenda be determined by others, as happened during the bailout.

Michael Noonan (Limerick City, Fine Gael)
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That is what we are doing. They are not alternatives. The Acting Chairman will recall that, after the exit from the programme, the Government published a medium-term economic strategy setting out the framework. All Departments are operating within that framework and making plans for their areas of responsibility. That work is being driven by Ministers. For example, there is a specific set of proposals for agriculture. The same applies across other Departments.

Driven by Europe, the fiscal rules have changed since the crisis. There is a greater degree of European oversight of every country's budgetary matters. As well as doing exactly as the Acting Chairman has suggested, if there is any suggestion that the situation is not quite right or could be better, country-specific advice will emanate from Europe. Normally, it is more general than specific.

Michael Creed (Cork North West, Fine Gael)
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In contrast with the plan published post our emergence from the bailout, the bailout programme had timelines. There were to be achievements in quarters 1, 2, 3, etc. In many respects, the objectives laid out in the document in question are not timelined. In that sense, they are aspirational. To control the agenda of our recovery without being distracted by events, we should apply the necessary rigour to meet our ambition to reach what is a better financial position for citizens. This can only come by having a timelined series of objectives across Departments. Regrettably, even the best intentions get waylaid. The Departments do not have the same rigour as applied during the bailout. The good governance of recent years was driven by that timelined series of events. There is a danger. Everyone is drawing a deep breath because the bailout has concluded, but we are not being driven by the same level of rigour that the bailout imposed on us as regards the significant objectives that remain to be achieved. Youth unemployment in particular is a major problem. Work needs to be done in every Department, for example, public sector reform, etc. We should drive that agenda relentlessly in the interests of the citizen. The rigour and timelining of events are missing. The Minister referred to reform of the legal profession, but that work drifted. Obviously, it has resumed and amendments have been agreed, but a range of issues across all Departments need to be driven with the same urgency if we are to get to where we want to be.

Michael Noonan (Limerick City, Fine Gael)
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I do not disagree with the Acting Chairman. What he has suggested is what is actually happening, but it is being driven by the Taoiseach's Department through a series of Cabinet sub-committees that meet regularly. They have timelined agendas and it is being driven forward hard. What there is not is a document wherein one can check the timeline. However, I have exactly the same opinion as the Acting Chairman. It is the policy of the Department of Finance to continue from the programme with timelined implementation strategies across all Departments. We are certainly doing it in our own Department.

Joe Higgins (Dublin West, Socialist Party)
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In practice, what does the resolution of credit institutions and certain investment firms in the framework of a single resolution mechanism, a single bank resolution fund, etc., mean for the ordinary citizen of the EU and the affairs of financial institutions that become bankrupt or broken? How would this process make a difference for the 13,000 mortgage holders whom the Minister and IBRC's liquidator intend to package off to vulture capitalists from the US and elsewhere, leaving them at the tender mercies of the financial markets?

Regarding the European semester, the six-pack, the two-pack and the considerable surveillance operation established by the EU in an open way to monitor deficits, borrowings and so on, having forced the Irish people through the agency of two Governments to take on a massive debt that wrecked our domestic economy and caused significant deficits, the EU is quite intent on sitting on top of that situation to ensure that the deficits are driven further down with a squeezing effect on the economy. How does this relate to the 25 million or 26 million people unemployed in the EU, including the crisis of youth unemployment in Ireland, Spain and so on? Can the Minister resolve this contradiction?

Michael Noonan (Limerick City, Fine Gael)
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The resolution fund is part of the new rules for resolving banks or financial institutions entering insolvency. This is the purpose of the resolution policy. The essential difference for the taxpayer is that, instead of insolvent financial institutions being bailed out by the taxpayers, which is what happened in Ireland and elsewhere, they will be bailed in by accessing in the first instance their assets. The shareholders go first and have their assets bailed in, then subordinate bondholders, then senior bondholders and then corporate deposits. There is a guarantee that personal deposits of up to €100,000 are sacrosanct. There is a bail in process involving participants in the bank, either at shareholder level or lender level, and the taxpayer is not approached. This separates the banks from the sovereign.

If there are still losses in the bank after the bailing in, a backstop is necessary to provide additional funds.

The resolution fund can then be accessed. As that becomes mutualised, there will be a significant fund available to resolve the banks. Also, as a fund of €55 billion to €60 billion is insufficient for a banking system that has more than €30 trillion on its balance sheets, it can be leveraged up and borrowed against. During the initial phases of the process the different sovereign components can borrow from each other, thereby assisting the sovereign that requires additional resources. As a further backstop there is the ESM funding. That is the big difference. It is a movement from bailouts by taxpayers of insolvent banks to a bail in of the assets of the bank to resolve the bank and put it on a new footing. That is the principle difference.

It is hard to envisage some of these things before they happen. In the United States, there has been a common currency for years, the dollar, and a common banking system. It has been the case for a couple of hundred years that if a bank went bust in Texas it was not the responsibility of only the Texan authorities rather, they bailed in the assets and the Fed went in and assisted with it. What happened in Ireland with Anglo Irish Bank and the other banks would never have happened in the United States. The banking system there would have had to take the hit. This dates back to around 1790 in the US but is only now developing in Europe. We have moved from having a common currency with a defective architecture underpinning it in times of distress to a currency union supported by a fiscal union with the six pack, two pack, European semester and all the other systems mentioned by the Deputy, which is also underpinned by a banking union. What we are witnessing now is all of the elements of a functioning common currency area being put in place. The nearest analogous situation is the United States even though the mechanisms are different.

Joe Higgins (Dublin West, Socialist Party)
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That the taxpayer should not be saddled with the speculative gambling debts of private institutions goes without saying. How will this impact mortgage holders whose only crime was to borrow money to put a roof over their heads etc, in particular the 13,000 mortgage holders of the former Irish Nationwide?

Michael Noonan (Limerick City, Fine Gael)
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Bank resolution registration across Europe is an entirely different matter to that of how mortgage holders of an individual institution which is in liquidation might be treated. There is a misunderstanding about what is happening. An independent liquidator has been put in place under law. Specific legislation in this regard was put through the Houses of the Oireachtas. His responsibility is to get the best deal possible for the taxpayer and value for money. What is on the market are the mortgage books of former Irish Nationwide, which were transferred into IBRC. There is a great deal of misunderstanding about this. The holder of a performing mortgage who has met each monthly payment of the mortgage for the past 15 years and now owes only €50,000 might well ask for a discount. However, a performing mortgage does not get discounted because the value of it is par. Only impaired mortgages are discounted. It is like the bag of apples, some of which are good and others of which are not so good. The value for the purchaser is not in the performing mortgages but in the impaired mortgages because by definition the value of a performing mortgage is par. Basically, the profit to be made by anybody who purchases is on the better management of the accounts.

Deputy Higgins asked how the individual mortgage holder will be affected. First, their mortgages are held under contract and there will be no change in the contractual position regardless of who purchases them. It is the additional protocols put in place by the Central Bank in regard to how a person with an impaired mortgage could be approached and treated by the banks that will not apply if a purchase is outside of the Irish regulatory system. We have had two examples of this already because this is not the first mortgage book that has been sold. Two tranches of mortgages have been already purchased. In both cases, the purchasers who were outside of the Irish regulatory system voluntarily agreed to apply all the protocols. Any legal adviser would tell them that is what they should do because in the exceptional number of cases that have gone before the court for repossession the first question asked by the judge was if all of the obligations that are supposed to be fulfilled under the Central Bank protocols have been. If a lending agency has not done so the court will not give an order to proceed with a repossession. I am fully aware of what the Deputy is saying. However, we are going to wait to see who buys the mortgage book, following which we will do as we did in the other two cases. My officials have already had discussions on this with the Central Bank. The purchaser will be told of the protocols applicable in Ireland which we expect him or her to fulfil, advising that it is in their own interest to do so.

Deputy Michael McGrath will shortly publish a Bill to enshrine this in law. If at the end of the day legislation is required we will look at whether that Bill would fulfil the objectives. It is my objective too that when the mortgage books are sold the mortgage holders will have the same level of protection as they currently have.

Joe Higgins (Dublin West, Socialist Party)
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There is no point in hoping for the good will of vulture capitalists who roam the world picking up what they can. They will not hesitate to squeeze decent people by way of interest rate increases or, in the case of people in trouble, repossession, if it suits them. However, I will follow up this matter further next week with the Minister during Question Time.

Ciarán Lynch (Cork South Central, Labour)
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I must ask the Deputy to move on as we are almost out of time.

Joe Higgins (Dublin West, Socialist Party)
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How will Ireland be represented at the G20 this year? I presume it will be represented through the European Union.

Michael Noonan (Limerick City, Fine Gael)
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The representation at G20 for Europe is Commissioner Rehn, the Finance Minister of whichever country holds the Presidency and the Head of the European Central Bank, Mr. Draghi.

Joe Higgins (Dublin West, Socialist Party)
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Will taxation issues be a feature of the G20 discussions this time?

Michael Noonan (Limerick City, Fine Gael)
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Yes. They always are. There is a movement in all of the democracies now which suggests that the corporate sector is not providing a fair share of taxation to countries. That is a general view across democracies. The G20 mandated the OECD to look at corporation taxation and to come up with recommendations. That is reviewed at every meeting.

Joe Higgins (Dublin West, Socialist Party)
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The most recent controversy about Irish taxation of multinationals and the figures produced by Professor Stewart of TCD of an effective rate of 2.2% gives added urgency to the situation. Even if the Minister does not accept that or Mr. Coffey's estimate of 8%, there are serious anomalies and problems in this regard. In 2013, Apple had savings of €146 billion, Microsoft, €80 billion, Google, €56 billion and Samsung, €49 billion. Leaving aside the Irish controversy, these major corporations are free to roam the globe.

They are playing a major anti-social role in just hoovering up whatever they can in massive profits, paying as little tax as they can or no tax. They are hoarding what they have because they are not convinced they will get sufficient return on it if it is invested. Does that not need to be tackled head on with a major taxation change that will take the billions of euro from these funds so they can be put into productive investment by State infrastructure? In other words, these funds can be transferred to the public so the 25 million or 26 million unemployed people in Europe can have a hope of a future. Is that not obvious?

Michael Noonan (Limerick City, Fine Gael)
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The participants of the G20 would not put it as graphically as the Deputy but there is a general view that the corporate sector worldwide should contribute more to the budgets of countries. The only feasible way of addressing multinationals is on a multinational basis, and no one small country can remediate an international practice. The Deputy would agree with that as well. This is why the G20 has asked the OECD to bring forward recommendations on how the international community can move on a reform agenda on corporate tax. As that is happening, I expect the OECD to publish recommendations during the summer, with a view to them being discussed by the G20 in September or October. That is the timeline, although there is significant movement.
In the meantime I do not want Ireland to be beaten up with false information, because we are not a tax haven and we are totally transparent. The likes of Google has 3,000 people in the docklands working, and they are not a fiction for tax purposes. The problem with the work produced by the professor in Trinity College is that he has taken American data and included all companies incorporated in Ireland, even if they have not a presence here. As he includes those factors, he has formulated the 2% figure, which is incorrect. Taking the companies that have established in Ireland and make profits here, one would get a much higher figure. There is a very clear and transparent system but we took some reputational damage because of misinformation.
In the last Finance Bill I dealt with the issue of companies incorporated in Ireland which are not liable for tax anywhere. With the international movement emanating from OECD recommendations, most countries will have to make a similar move, although we are not yet sure where that will be. The most recent publication on the matter is a statement by Commissioner Almunia, who is responsible for state aid matters. He is reported in the business pages of The Irish Timesthis morning with quite a long statement. He indicates that while certain aspects of the Irish tax system are being examined, there is no suggestion that Ireland is a tax haven, and the 12.5% rate is not being examined. That is the most recent piece of available information.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I will pick up on that issue in the context of the G20 and the Minister's ongoing engagement with the OECD. It should be a matter of deep concern for any Minister responsible for finance that we have approximately eight different estimates of the effective corporate tax rate in this country, varying from the rather fantastic figure of 14% - referred to briefly by the Taoiseach - down to a figure which the Minister does not take seriously of 2.2%, which was produced by an eminent Trinity professor. It is worth saying that the professor is not on the radical fringe of political thought.

Michael Noonan (Limerick City, Fine Gael)
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The 14% figure is a European Commission estimate.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Yes. As I pointed out to the Minister before, and which he ridiculed, in between there is a Central Statistics Office and EUROSTAT figure. It was confirmed by Mr. Seamus Coffey yesterday at the finance committee meeting. It is somewhere between 6.3% and 6.4%. I am glad I have some backup for that figure, which has been ridiculed fairly regularly by the Minister. I am in the middle or somewhat mainstream in terms of the figure I am touting as the effective rate.

Whether we take the fantastic 14% figure or what the Minister considers as fantastic at 2.2%, or even somewhere in the middle with a rate of 6%, 8% or 10%, it remains a serious issue that we cannot get any kind of agreement or consensus on what is the corporate tax. We are at the centre of an international controversy with the issue and there are billions of euro at stake in terms of potential tax revenue. Considering this ourselves and through engagement with European partners, the OECD and so on, how will the issue be clarified? How can we resolve the controversy so we can come to something like an agreed methodology for assessing the effective corporate tax rate in this country?

Michael Noonan (Limerick City, Fine Gael)
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There are different ways of approaching this and there are different answers. Percentages do not buy the bread and milk. My opinion is that the best source is the Revenue Commissioners, which published statistical reports on corporation tax which are now more lengthy than they used to be. In the 2012 Revenue Commissioners statistical report, which refers to 2011 data, it was indicated that the aggregate net taxable profits, after taking account of various deductions, allowances, charges, reliefs and so on, amounted to €40 billion. That is the earnings of the multinationals working and making profit in this country. On that sum, €4.2 billion in tax was paid. That is the hardest data we have, as it is the pounds, shillings and pence, or the euro. It is not a percentage but rather hard cash. That works out for 2011 at an approximate rate of 10.5%. It is somewhere around there.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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At least we are on some common ground because these are the precise figures in which I am interested. These are hard facts and not a fictional ceramic company that would be atypical of companies at the centre of the issue. The pre-tax or gross profits in the Central Statistics Office figures do not indicate €40 billion but rather €69 billion. That is approximately €70 billion. How we go from €70 billion pre-tax to €40 billion-----

Peter Mathews (Dublin South, Independent)
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Assessable.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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-----assessable is a pretty big jump. The Minister has indicated in the past that this concerns standard accounting practice, reliefs and so forth. There must be a very serious discussion about that. It is a pretty big jump, as far as I am concerned, and we need to drill down into the matter. We need to examine what measures have been included in Finance Bills over the past ten to 20 years that have got us to this point. Frankly, we must consider the justice of this. That level of a gap between the gross income of a family or household and assessable income does not exist. Deputies earn €70,000 in theory, although in my case I earn €36,000 as we give back the remainder-----

Michael Noonan (Limerick City, Fine Gael)
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The Deputy should call to the one-stop shop as he is being short-changed.

Ciarán Lynch (Cork South Central, Labour)
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The Deputy, without interruption.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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This is a hypothetical "I".

Let us say somebody earns €70,000 per year, but only €35,000 or €40,000 is assessable. A sum of €30,000 is taken out of the equation because it is not assessable. That would be wonderful. Many families here would be delighted with that, but that is not what happens. Why does it happen in the corporate sector? No doubt, the Minister will say it is because it is making all sorts of investments and so forth. However, according to the CSO figures the Minister mentions, approximately 600 firms account for the vast bulk of the profits. I worked out that the ones that earn over €10 million in profits per year, and they account for almost three-quarters of all the gross profits per year, make an average of €103 million in profit each year. That is a great deal of money. When one compares the gross figure and how much they actually pay, it is approximately 6.3%. I believe they can afford to pay a little more. Why not impose a minimum effective rate on them so they pay a little more, given that everybody else is being screwed to the wall?

Michael Noonan (Limerick City, Fine Gael)
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We have set out our tax policy for the corporate sector. The IDA is a very successful organisation. The low tax rate of 12.5% is obviously part of the attraction of setting up a business in Ireland, but there are other attractions, such as the availability of educated people who are flexible in the workforce and have a very strong work ethic. There are many other factors also. On the last budget day we published the tax strategy in which we dealt with issues such as the reputation of the country, the regime we apply and the tax rate. That has been set out. At present, I have no proposals to change that.

If the Deputy wishes to get an insight into how corporate accounts are prepared for submission to the Revenue Commissioners, the committee should invite some of the leading tax practitioners to appear before it so they can be asked all these questions. There are write-offs in every system. The Deputy speaks about the ordinary folk, among whom he includes himself, paying tax on every euro. That is not true either. Everybody has tax credits. One does not pay tax on every euro.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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They are nothing like the tax credits we are discussing here.

Michael Noonan (Limerick City, Fine Gael)
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What the Deputy is saying is incorrect. There are allowances and reliefs for companies, but if the Deputy wishes to go through them in a systematic way, the committee should invite a couple of the tax practitioners who deal with this to appear before it. I am sure they will give the Deputy satisfactory explanations for the reliefs and write-downs.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I am simply pointing out that if one calculates the effective rates for personal income taxation in the same way as the effective rates for corporations, particularly the ones in the top bracket that are making €10 million in profit per year, which is the majority of them, there is a big difference between the tax credits that the ordinary worker gets and those the corporations get. That is at least part of the answer to the question about our effective corporate tax rates-----

Ciarán Lynch (Cork South Central, Labour)
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Deputy, you must conclude because we are running out of time.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Does the Minister not think that we should have an open debate in which the public can compare and contrast the regime for corporate tax with the regime for personal income tax?

Michael Noonan (Limerick City, Fine Gael)
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That is a false comparison. Corporations are different from individuals and income tax is different from corporate tax. They are different regimes. One does not get a valid comparison when one does it that way. One must look at the write-downs and make a case for whether they are justifiable. If they are not justified, the Deputy is correct, but if they are justified with normal accountancy practice to the reasonable person, I do not see the problem.

Ciarán Lynch (Cork South Central, Labour)
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I call Deputy Mathews. He must be very brief because the meeting must end at 11 a.m.

Peter Mathews (Dublin South, Independent)
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I thank the Minister and his officials for attending. I wish to reverberate the questions Deputy Boyd Barrett posed. Increasingly, as I approach the completion of my third year in the Dáil, it is disappointing that a full discussion has not really taken place in ordinary and conversational English about the fairness of the taxation system, how incomes are generated, whether they are corporate or personal incomes, and how the burden of contribution to society through taxation is distributed across the society. I am a chartered accountant and I have had experience in preparing and auditing accounts across the different sectors in this country, ranging from insurance to manufacturing, distribution, exporting, agriculture, co-operatives and so forth. I have been very lucky in that regard. If one reports an operating profit and takes off the financing costs of that operating profit, one arrives at the net operating reported profit. One pays a tax bill in a given year in respect of the net operating reported profit of the same year. Then it is very fair and reasonable to say the effective rate-----

Ciarán Lynch (Cork South Central, Labour)
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Deputy, I asked you to be brief. Questioning is not evidence. If you want evidence, you talk to a witness. I told you this meeting will end at 11 a.m. and the Minister must get some time to reply, so if you wish to continue with the narrative, I will just end the meeting when you finish the narrative.

Peter Mathews (Dublin South, Independent)
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This is part of the ECOFIN debate. Countries across Europe in the eurozone, which are now seeking monetary union and so forth, must address these problems. As recently as last Friday, the German constitutional court said that the actions and operations of the ECB in its OMT operations are unconstitutional from the German point of view. That affects all financial legislation going through this House. We are inclined to bury it, but we should be addressing it. It should be at the top of the agenda.

Ciarán Lynch (Cork South Central, Labour)
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I am finishing the meeting at 11 a.m. You are talking about global economics-----

Peter Mathews (Dublin South, Independent)
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I am not. They affect the country.

Ciarán Lynch (Cork South Central, Labour)
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-----and I am trying to explain simple time keeping. This meeting will end at 11 a.m.

Peter Mathews (Dublin South, Independent)
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We are a small cog in the machine.

Ciarán Lynch (Cork South Central, Labour)
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I call on the Minister to reply.

Peter Mathews (Dublin South, Independent)
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It is unbelievable.

Ciarán Lynch (Cork South Central, Labour)
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What is unbelievable is that you do not understand the clock. You are talking about global finance and I am trying to tell you that this meeting ends at 11 a.m. There are three minutes left. I call on the Minister to reply.

Peter Mathews (Dublin South, Independent)
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I am trying to be helpful. I am trying to help people in this country to see things as they are, not the misperceptions.

Ciarán Lynch (Cork South Central, Labour)
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I call the Minister.

Michael Noonan (Limerick City, Fine Gael)
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Thank you, Chairman, for facilitating us today and I thank the members who contributed.

Ciarán Lynch (Cork South Central, Labour)
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Is the Deputy waiting for the response?

Peter Mathews (Dublin South, Independent)
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No. I have been cut off. I have not been allowed to contribute to this discussion.

Ciarán Lynch (Cork South Central, Labour)
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With the Minister's permission I will bring the meeting to a conclusion.

Michael Noonan (Limerick City, Fine Gael)
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I might have lost touch with the rules of committees, but there used to be provision for committees to do a piece of research work. Funds were available to do that work and a member could be appointed as a rapporteur. There are ways and means of addressing precise issues within committees.

Ciarán Lynch (Cork South Central, Labour)
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You might have a word with your colleague in the Department of Public Expenditure and Reform, because they are no longer available.

Michael Noonan (Limerick City, Fine Gael)
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When I was Chairman of the Committee of Public Accounts, we did that on a number of occasions. The Chairman could get a discrete piece of research work done, spend a small amount of money on it and appoint one of the members as a rapporteur to report back. That might get to the bottom of the matter.

Ciarán Lynch (Cork South Central, Labour)
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I will take the Minister's suggestion on board. I could think of other things to do with committee members as well, but we will bring the meeting to a conclusion now at 11 a.m. I thank the Minister.