Enda Kenny (Mayo, Fine Gael)

As the House is aware, I will travel to Brussels tomorrow for a meeting of the Heads of State or Government of the euro area. The meeting has been convened by the President of the European Council, Mr. Herman Van Rompuy, to discuss the future financing of the Greek programme and the stability of the euro area as a whole. These are vitally important topics and the meeting will be an important one. It is important to note at the start that it will not be the be all and end all. The crisis in the euro area will not be resolved overnight. There is no one magic solution or silver bullet. At our meeting tomorrow, we will consider important proposals but there will be further meetings and further steps to be taken before this matter is finally resolved.

Since the crisis began, a vicious cycle has emerged. Pressure builds, a meeting is convened and expectations are raised unreasonably. Decisions are taken but they are never sufficient to the address build-up. Rather than gaining confidence, the markets are disappointed and pressure begins to build again. The cycle continues. This is corrosive and damaging, and the consequences are real for countries that find themselves at the centre of attention. I hope we can have a measured debate which does not raise expectations beyond what can reasonably be achieved.

That is not to say we should abandon all ambition for a strong and clear outcome which is credible, workable and durable. The markets are watching and the pressure on member states has spread and intensified in recent weeks. In our work tomorrow, we will focus on progressing the agreement reached at last week's meeting of Finance Ministers, which has been the subject of serious work by officials since then. At their meeting, Ministers reaffirmed their absolute commitment to safeguarding financial stability in the euro area. They stated that they stood ready to adopt further measures to improve the euro area's systemic capacity to resist contagion, including through increasing and enhancing the flexibility and scope of the EFSF, lengthening the maturities of the loans and lowering the interest rates and collateral arrangements, where appropriate.

Ministers also discussed the main parameters of a new multi-annual adjustment programme for Greece. As the House is aware, the Greek Government has demonstrated political determination and courage in securing parliamentary support for the serious reform programme which will be necessary if the country is to recover. It deserves great credit for this and delivery on its programme will be tough but essential. At their meeting, Ministers called on the Greek Government to sustain its efforts and to meet commitments in full and on time. They noted that responsibility for resolving the crisis in Greece lies primarily with Greece but recognised also the need for a broader and more forward-looking policy response to assist the Greek Government in its efforts to achieve debt sustainability. It was also accepted that there is a need to safeguard financial stability in the euro area as a whole. In that context, Ministers asked officials to propose measures to reinforce the current policy response to the crisis in Greece, including exploring how a new multi-annual programme for Greece would be financed, steps to reduce the cost of debt servicing and means to improve the sustainability of Greek public debt.

The results of this ongoing work, which will be progressed later today at a meeting of key senior officials in Brussels, will form the basis of tomorrow's discussions. It is, therefore, not yet possible to say what precisely will emerge from our meeting and, as we know from hard-won experience, it is unwise to speculate on these matters. As I stated in the House yesterday, we need an outcome that offers certainty and security for the future. My main priority will be to ensure an agreement that has positive implications for Ireland. While the focus will be on Greece and the parameters for a new programme for that country, what is proposed for one member state cannot be taken in isolation. The countries, like Ireland, which are already in a programme, as well as those which are coming under pressure in the markets, are alive to the real danger of contagion and negative read-across. I will be watching carefully and working to ensure that what is agreed for Greece does not make our progress and eventual return to the markets more difficult.

I will also work to ensure that any element of the new arrangements for Greece which might be of benefit to us is given wider application. The Government has long argued for greater flexibility for the EFSF. I am pleased to see this is now back on the agenda. The point we have made all along is that the purpose of a programme is to contribute to recovery and growth. This is a shared goal of the recipients of loans and those who guarantee them. It is necessary that conditions be imposed but they should not be such as to undermine this fundamental and central objective or else we are all wasting our time. The type of elements now being considered, including lower interest rates, longer term loans and greater flexibility of instruments, have the potential to make a positive contribution. On interest rates, we know the specific issues that have arisen for Ireland and we will continue to press for the reduction in interest rates agreed in March to be applied to us. However, a wider question also arises. It is worth recalling that the complex method of calculating interest rates under the EFSF was agreed when no country had sought assistance from the facility and the question was, to an extent, academic. There were some who argued that there was a need for the margin imposed to be such as to deter any member state from entering into a programme lightly. This was presented as an argument against moral hazard. In light of experience more realism has entered the debate and there is a wider appreciation that the strictures of a programme, namely, the pain of adjustment and the accelerated pace of reform, are more than sufficient deterrent. No country would seek assistance other than in a situation of last resort.

A number of other possible adjustments to the operation of the EFSF are also under consideration. Until these are thrashed out more fully and tabled as proposals, there is little to be gained from speculating on what they might mean for Ireland and others. However, as I have already pointed out, the Government has supported the principle of increased flexibility and I hope a positive outcome on this can be secured when we meet tomorrow.

I will seek an outcome that is good for Europe and for the eurozone, settles nerves in the markets and sends a clear and positive signal that we are going about our work in a committed and productive way. We have all lost count of the number of times we have discussed in this House crunch meetings for Europe. The crisis has been long and sustained and criticism of the decisiveness and leadership of key figures has become widespread and commonplace. However, in the interest of balance it is important to remember that we are engaged in a process of learning in which new territory is being charted day by day. This week's meeting will be important. The danger facing the euro area and the very currency itself is real and present. This week's meeting will not resolve all these matters but I hope it will demonstrate our capacity to act in a way that begins to restore confidence and momentum and arms us well for what lies ahead.

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