Enda Kenny (Mayo, Fine Gael)

A number of options would be open to the ECB if Ireland were to refuse to pay the bond in question. It could, for instance, increase the interest rate, which would result in substantial difficulty for this country. It could lend at a higher rate than 1.5% to banks that it felt were overly dependent on central banks, and that would have an absolutely devastating impact on Irish banks and on the wider Irish economy.

Deputies are aware that Irish banks can borrow at present from the ECB at 1.5%, and the only other option would be to seek this funding through customer deposits, for which the bank pays 4%. That is one central issue. The ECB could raise the interest rate if we decided not to pay, which would have even worse consequences than paying the bond.

Deputy Donnelly asked a legitimate question about reputational damage. There are a number of areas in which this applies. The first is foreign investors. As the Deputy is aware, there have been investments in Bank of Ireland, and banking deposits are starting to grow here, but in addition, the foreign direct investment line in the country is strong because potential investors in business see this as a country with a clear view and with certainty attached to its decisions - a country that knows where it is going. Second, there is the attitude of the EU institutions and authorities to a country that has a clear focus on where it wants to be and how it intends to get there. That is important from their perspective in working with us here in Ireland. Third, and most important, we expect to return to the markets by mid-2013, and the market reaction to a country such as Ireland, which wants to get out of the bailout situation as quickly as possible, is absolutely fundamental. That market reaction would not be favourable if the country were jumping from one situation to the next.

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