Michael Noonan (Limerick City, Fine Gael)

I move: "That the Bill be now read a Second Time."

I thank the House for agreeing to discuss the Euro Area Loan Facility (Amendment) Bill 2012. The Bill is needed urgently to allow Ireland to ratify the changes to the Greek loan facility to implement the new programme of assistance for Greece as agreed by the euro group Finance Ministers on 20 February 2012. The purpose of this Bill is to facilitate, in the public interest, the financial stability of the European Union and the safeguarding of the financial stability of the euro area as a whole.

As the House is aware, Greece has been beset by serious budgetary and economic problems for some time and is unable to secure international funding at sustainable rates. In order to safeguard the financial stability of the EU and the euro area, it was agreed on foot of an intergovernmental agreement in May 2010 to provide a programme of financial assistance to Greece. This was done by way of a bilateral loan totalling €80 billion to Greece from the euro area member states in conjunction with IMF assistance of €30 billion over a three year period to mid-2013. Ireland's participation in the agreement was ratified in the Euro Area Loan Facility Act 2010.

On entering our own programme of assistance in late 2010, Ireland stepped out of the Greek loan facility. However, as an original signatory to the Greek loan facility, Ireland's consent is required to implement any amendments to the Greek loan facility. The Euro Area Loan Facility Act 2010, as amended, must be further amended before Ireland can confirm acceptance of the second amendment to the Greek loan facility.

In June 2011, Finance Ministers agreed with the euro group to revise the Greek loan facility. These revisions provided for the extension of the grace period between drawdown and commencement of repayment from three to four and a half years, the extension of the maturity period for loans from five to ten years and a change in the calculation of the margin relating to loans to Greece to give it a lower interest rate. The Commission signed the loan facility agreement for Greece on behalf of euro area member states on 14 June 2011, pending ratification by the individual euro area member states. Ireland ratified the first amendment through the European Financial Stability and Euro Area Loan Facility (Amendment) Act 2011, and issued formal confirmation of our agreement to the amendment with effect from 23 September 2011.

However, these amendments have proved insufficient and need to be supplemented. On 20 February 2012, euro group Finance Ministers approved the new programme of assistance for Greece which includes approval of the second amendment to the Greek loan facility. This amendment includes three elements: a further increase of the grace period, of up to ten years, for paying back the loan principal, a further lengthening of the loan maturity to a minimum of 15 years, and a further reduction in the margin to 150 basis points to apply from the three month interest period that ended on 15 June 2011.

The Bill provides for the ratification of these amendments to the Greek loan facility agreement. The finalisation of the amendment, by way of signature of the European Commission on behalf of member states and Greece, was not in place until 27 February 2012. The Bill is thus being presented at the earliest possible date following this finalisation.

All signatories to the Greek loan facility agreement have been requested to provide their acceptance to the second amendment to the Chairman of the euro working group not later than 13 March 2012. This is to ensure that the next phase of the Greek loan facility can proceed as planned for that date. It has, therefore, been necessary to bring forward the Euro Area Loan Facility (Amendment) Bill 2012 as a matter of urgency to ensure Ireland can confirm acceptance by that date. It is intended to bring forward an earlier signature motion in the Seanad for the President to sign the Bill.

These changes to the Greek loan facility are in conjunction with a number of other changes to the Greek programme, including additional funding of €130 billion and changed private sector involvement, PSI. A common understanding has been reached between the Greek authorities and representatives of the private sector on the general terms of the PSI exchange offer, covering all private sector bondholders. Private sector investors are asked to accept a bond exchange providing for a nominal haircut amounting to 53.5%. The closing date for the PSI exchange offer is 8 March. The additional funding is also provided for interest rate support and banking sector support. Greece and the other euro area member states agree that it is only by fully and strictly implementing the fiscal consolidation and the structural reforms included in their programme that Greece will regain competitiveness and will be able to return to markets.

The Bill provides for amendments to the Euro Area Loan Facility Act 2010, as amended by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. The amendment Bill has four sections with the amendment of March 2012 to the loan facility agreement set out in the Schedule. The first section provides the definitions to the legislation. Section 2 provides for the second amendment of February 2012 to be included in the references to the Euro Area Loan Facility Act 2010, as amended by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011.

Section 3 provides for the second amendment to the loan facility agreement to be inserted as Schedule 3 to European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. Section 4 sets out the Short Title of Act. Annex 1 contains the form of legal opinion, Annex 2 contains the amended scheduled principal repayments, and Annex 3 contains the list of contacts. The Schedule contains the amendment of February 2012 to the loan facility agreement. The amendment includes the three elements I have already outlined, namely, a longer grace period, a lengthening of the loan maturity, and a further reduction in the margin.

Ireland provided €345.7 million to Greece under the Greek loan facility before entering our EU-IMF programme, when we stepped out of the Greek loan facility. Quarterly interest payments are being made by Greece on this. The reduction in the interest rate chargeable on the loan under the second amendment will reduce the interest we receive each year by €5.2 million, or roughly one third at current rates of interest. We expect that this will be offset by the provision for the distribution of profits from the ECB's secondary market programme for Greek bonds. A further result of the amendment is that the grace period before Greece begins to repay the principal of this loan will be extended from four and a half years to ten years. The maturity of the loan will be extended from seven and a half years to 15 years.

I look forward to a constructive debate on the Bill. Now is a time for unity among euro area countries to ensure financial stability within the euro area. The purpose of the Bill is to facilitate the stability of the European Union and the safeguarding of the euro area as a whole. Ireland must play its part and stand in solidarity with its fellow euro area member states. It is in the interests of this country and the euro area. Therefore, I urge Deputies to agree to ratify the changes to the Greek loan facility.

I commend this Bill to the House.

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