Martin Mansergh (Tipperary South, Fianna Fail)

I will come to that within two minutes. The Deputy is raising the matter of the cost of funds to Ireland if the guarantee is called. The framework agreement provides within its structure of fees and expenses for a margin to be charged to borrowers to remunerate guarantors. It is envisaged that in the event that Ireland or any other member state faced a relatively larger cost of funds to meet guarantees, it would as far as possible, as in the case of the Greek facility, be made good to guarantors. The decision to issue guarantees is in all cases subject to unanimity among the member states concerned. These provisions will protect the interests of the taxpayer should the issue arise.

Deputy O'Donnell raised the question of whether the 120% requirement would increase the €7 billion exposure. I admit this is a question I have tried to get my head around as well. The answer is that it will not increase the €7 billion ceiling because the 120% requirement only relates to each individual funding instrument. Annex 1 sets out an aggregate ceiling for all guarantees from each guarantor. To put it another way, let us suppose there is a loan of €10 billion to country X. Our guarantee is for €10 billion multiplied by the contribution key, which is derived from multiplying by 0.0164%. This corresponds to the reference to 1.64% multiplied by 120%. If the amount guaranteed is €1 million, we guarantee €1.2 million. However, the sum of all our guarantees is still limited to €7 billion.

Deputy O'Donnell also raised the broader issue of the availability of a contingency fund in each year's budget for financial crises. During the past 30 years I recall budgets, which may well have been introduced by Fine Gael and Labour Party Governments and as part of which there was a contingency fund. However, I am speaking from memory.

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