Brian Lenihan Jnr (Dublin West, Fianna Fail)

I am responding to Deputy Noonan's party leader. I am not aware of any particular difficulties; I am making this statement in response to a request by Deputy Noonan's party leader. I have met this request, which was a reasonable request to make, and I am simply making clear what the position is. The position is that the necessary cash is provided for the Irish banking system through the European Central Bank and is available.

With regard to the question of European financial stability, we should always put these developments in context. The ECOFIN Council decided in May 2010 on a package of European financial stability arrangements in conjunction with the IMF. These are intended, if needed, to safeguard the financial stability of the EU and the euro area and to support member states in difficulties caused by exceptional circumstances beyond their control. The initiative for requesting this assistance, both from the European Union and the IMF, rests with the member state. There is no arrangement whereby a member state can be invited by the European Commission or the European Central Bank to request such assistance. A request under these facilities is a matter for decision by the Government in the member state concerned.

As I told the House last Thursday, we agreed with our euro area colleagues at the eurogroup meeting on 16 November to hold a short and focussed consultation between the Irish authorities and the Commission, the ECB and the IMF. Its purpose was to determine the best way to provide any necessary support to address market risks, especially relating to the banking sector, in the context of the four-year budgetary plan and the upcoming budget. This proved to be a very constructive and positive engagement and dialogue. The Government then met on Sunday afternoon to consider the outcome of that engagement. We agreed to request financial support from the European Union, the euro area member states and the IMF in the context of a joint EU-IMF programme. The request for external assistance has been made under the terms of the European financial stabilisation mechanism, the European financial stability facility and the IMF assistance programme.

As Deputies will be aware, this matter was discussed at the eurogroup meeting held by teleconference last Sunday. However, the formal decisions were taken by the Ministers of all 27 member states at the ECOFIN meeting held later that evening, also by teleconference. Following the meetings, a statement was issued by the eurogroup-ECOFIN Ministers welcoming the request of the Irish Government for financial assistance from the European Union and euro area member states and noting this assistance is warranted to safeguard financial stability in the European Union and in the euro area.

The European Union and euro area financial support will be provided under a strong policy programme which is being negotiated with the Irish authorities by the Commission and the IMF, in liaison with the ECB. This programme will address the budgetary challenges of the Irish economy in a decisive manner, building on the budgetary adjustment and comprehensive structural reforms that will be contained in the Government's four-year plan. The eurogroup-ECOFIN statement, pointing to the strong fundamentals of the Irish economy, said that decisive implementation of the programme should allow a return to robust and sustainable growth, safeguarding economic and social cohesion. The financial assistance programme may be supplemented by bilateral loans to be provided by EU member states. I would like to take this opportunity to thank the Governments of the United Kingdom and Sweden which stand ready to contribute bilateral loans. I also welcome the statement of the Danish Prime Minister that Denmark will offer a loan having secured cross-party support.

As the Government said in its statement issued last Sunday, a central element of the programme will also be to support further deep restructuring and the restoration of the long-term viability and financial health of the Irish banking system. It will build on the extensive measures taken by Ireland to strengthen its banking sector via guarantees, recapitalisation and asset segregation. These measures have helped to maintain financial stability in the Irish banking sector at a time when both the banking system and the economy have confronted significant challenges reflecting both domestic and international factors. The EU Ministers noted that the programme will also include a fund for potential future capital needs of the Irish banking sector. By building on the measures already taken by Ireland to address stress in its banking sector, a comprehensive range of measures, including deleveraging and restructuring of the banking sector, will contribute to ensuring that the banking system performs its role in the functioning of the economy.

My Department, along with the Central Bank of Ireland and the NTMA, has commenced detailed discussions with a joint European Commission-IMF mission, with a view to finalising the details of the programme of financial assistance and associated policy actions. This programme will build on the fiscal adjustment and structural reforms that will be put forward by the Government in the four-year plan to be published on Wednesday. After approval by the Government, the programme will be endorsed by the ECOFIN Council and the eurogroup, in line with national procedures, on the basis of a Commission and ECB assessment. The programme will also be endorsed by the IMF. The negotiations have started in earnest and, while ongoing, will be completed as soon as possible.

With regard to the budgetary challenges, the Government agreed to publish its four-year plan this week. The strategy reaffirms our commitment to deliver a fiscal consolidation of €15 billion by 2014, of which €6 billion will be front-loaded in 2011. This is on top of the €14.5 billion consolidation delivered by the Government since mid-2008. By the end of 2011, we will have delivered approximately two thirds of the total consolidation over the period out to 2014. The four-year plan will also include significant structural reform measures, which will help underpin and enhance growth in the years ahead. It will also achieve the target of reducing the general Government deficit to 3% of GDP by 2014. It will achieve this through a combination of expenditure reductions, tax increases, a renewed focus on growth and competitiveness, structural reform and public service transformation.

I wish to emphasise that we have many positives at this time. The underlying fiscal position has stabilised this year, with a deficit, excluding the effect of the promissory notes, below 12%. Our GDP will record a very small increase this year based on strong export growth. Exports are expected to grow by about 6% in real terms this year, driven by improvements in competitiveness and a strengthening of international markets and conditions in the labour market are also beginning to stabilise.

With regard to banking, clearly we along with the eurozone as a whole remain in very stormy financial waters. Last week, the House agreed to extend the revised bank guarantee in accordance with the advice of the Governor of the Central Bank. There is a broad European consensus for the need for the continuation of Ireland's banking guarantee. As I have said repeatedly, had the bank guarantee not been introduced two years ago, we would not have an economy today, never mind a banking system. The entire banking system faced collapse at the time, funding for it had all but dried up and the banks faced closure within days. That is not an opinion, but a fact that was starkly illustrated in Governor Honohan's report. Unfortunately, some commentators have chosen to ignore entirely Professor Honohan's conclusion and indeed sought to obscure it and confuse the position in the public's mind by relying on the criticisms that the Governor made to the scope of the guarantee, for example, the inclusion of dated subordinated debt. I have responded to and addressed these points on many occasions. Guarantees were a common feature in the response of many EU member states to the ongoing financial crisis. We were the first to introduce a guarantee, but we were quickly followed by other member states in the European Union. Recent figures from the European Commission indicate since the onset of the crisis in 2008, the Commission, under state aid rules, authorised some €3.6 trillion in guarantees in various member states.

Last Thursday, I also took the opportunity to reiterate the State's commitment to safeguard the interests of depositors in Irish banks and this sentiment was shared with other members of the House. This objective is shared by the eurogroup and supported by the European Commission, the ECB and all authorities with an interest in continuing to maintain the stability and of the Irish banking system. In that regard, it is important to point out to the House that the European Central Bank continues to meet the funding cash requirements of the banking system. As the House will be aware, this scheme guarantees the security of all deposits in the participating institutions in the scheme, along with that of other bank liabilities guaranteed under it. The extension of the guarantee has been approved by the European Commission and was endorsed by the European Central Bank on financial stability grounds. Deposits are safe. Nothing in the content of the discussions under way or anything that may arise thereafter will affect that fact. The scheme complements the protection afforded to all depositors under the permanent deposit guarantee scheme. Those that have funds and deposits in Irish banks can be assured that we have the stability and support of the ECB. It is important that the structural problems that are identified in the market reactions are addressed in a systematic manner and that is what this intensification of engagement is about.

With regard to the issue of a bank resolution regime, which was raised by Deputy Noonan last Thursday, I recently indicated in the House that I was examining options for the introduction of a legislative regime to deal in a systematic way with distressed financial institutions. This is to ensure the State has in place a range of tools to address problem institutions effectively in the interests of maintaining financial stability, minimising reliance on public money and ensuring continuity of key banking activities. In view of the central role performed by central banks in resolution frameworks for financial institutions, the Department is consulting with the Central Bank to develop the necessary legislative proposals. I expect that this process will lead to the introduction of an appropriate legislative framework for bank restructuring.

The provision of financial assistance to Ireland is necessary not only to support our banking and budgetary situation, but also to safeguard financial stability in the European Union and in the euro area. The European Union has acted in a spirit of solidarity with Ireland to ensure stability on behalf of its citizens. We have challenges, but we have responded in a timely and appropriate manner to the challenges that have been presented. I have already stated that we are now seeing the benefits in terms of a stabilisation of the public finances and renewed export-driven economic recovery. The Government is grateful to our European partners for providing assistance at this difficult time. Our strong underlying economic performance, combined with the fiscal correction and reform measures contained in the plan to be published tomorrow, will provide the foundation for recovery. We will emerge from this programme as a vigorous economy and nation once more.

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