Michael Noonan (Limerick City, Fine Gael)

I thank Deputy Mathews for raising this very important issue. The repayment of the bond in question is an obligation of the bank and will be repaid by the bank. It is important to be clear that it is the bank and not the Exchequer which will meet this obligation.

The Government has committed to ensuring that there is no forced or coerced involvement by the private sector burden sharing on Irish senior bank paper or Irish sovereign debt without the agreement of the ECB. This commitment has been agreed with our external partners and is the basis on which Ireland's future financing strategy is built. While the cost to the Irish taxpayer has been and will remain significant, the Government clearly recognises the need to work as part of the eurozone in order to ensure a return to the funding markets in the future. The only EU state where private sector involvement will apply is Greece. The following was agreed by all 27 member states at the euro summit last October:

15. As far as our general approach to private sector involvement in the euro area is concerned, we reiterate our decision taken on 21 July 2011 that Greece requires an exceptional and unique solution.

16. All other euro area Member States solemnly reaffirm their inflexible determination to honor fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms. The euro area Heads of State or Government fully support this determination as the credibility of all their sovereign signatures is a decisive element for ensuring financial stability in the euro area as a whole.

This was agreed by the Heads of State and Government at their meeting in October, and Ireland was included in the 27 states that agreed to it.

It is not correct to state that only taxpayers have borne the burden of rescuing the Irish banks. Holders of equity in the banks have been effectively wiped out in burden sharing while holders of subordinated debt have incurred a €15.5 billion share of the burden to date, including €5.6 billion since this Government took office less than a year ago.

To impose burden sharing on senior bondholders, or to postpone the repayment of this bond at this point in time, is not in Ireland's best interest. What is in the Irish people's best interest is that we regain our financial independence and that we place ourselves in a position to re-enter the financial markets at the earliest possible date. Reputation, reliability and commitment are essential elements of this proposition and reneging on senior debt will not enhance the Irish position. The implementation of the programme is going well. We are working out of a very deep hole and we are making very real progress. We do not need to scupper our recovery, scupper the goodwill generated or alienate our partners by taking unilateral action which in the medium to long term will prove wholly counterproductive.

If we were to postpone or suspend payments to creditors of IBRC, this would have a significant impact on both the bank and, ultimately, the State. The senior debt, unsecured as it is, is an obligation of the bank. If the bank does not meet such an obligation, it would lead to a default and, following that, most likely insolvency. Insolvency would result in a very significant increase in the cost to the State to resolve the IBRC. In such circumstances, the State's negotiating position is, contrary to what is suggested, seriously weakened, if not wholly undermined. Further, the financial market's view of Ireland as a place to do business or invest would be seriously undermined.

We should also consider that the value of support, present and future, we receive from our European partners far outweighs any short-term gain from imposing burden sharing on these bonds in the face of European opposition to such a move. For example, €110 billion of funding is provided by the ECB and the Central Bank of Ireland to the Irish banks at a cost below which they could borrow in the market. This is in addition to the €85 billion set out in the programme with the troika. Nonetheless, let me state clearly that we still have unfinished business with our partners to find the most cost-effective way of resolving the IBRC over the long term. We will seek any and every opportunity to put Ireland's case forward to achieve the best possible outcome for the State.

In conclusion, as I have indicated, there is no private sector involvement for Irish senior bank paper or Irish sovereign debt without the agreement of our external partners. This commitment has been agreed with our external partners and is now the basis on which Ireland's future financing strategy is built. This, I strongly contend, represents the best approach which will achieve our re-entry to the financial markets.

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