Michael Noonan (Limerick City, Fine Gael)

It is not clear what other source of funding would be available if the stability treaty is rejected, with the resulting loss of access to the ESM. However, what is clear is that any funding that would be available would cost considerably more than any prospective ESM funds. The IMF has indicated that it will provide funding to Ireland only as part of a European initiative. I have consulted with the NTMA and it considers that a "No" vote in the referendum on the stability treaty would mean in all likelihood that it would not be possible for Ireland to re-enter the bond markets at sustainable rates. Ireland's programme of financial support runs to the end of 2013. It remains on track. Based on current projections and assuming no market access, the State has access to sufficient funds for its needs well into the second half of 2013. The continuation of the strong programme implementation will ensure that we emerge successfully from this programme. It is the NTMA's stated intention to return to sovereign debt markets as soon as market conditions permit.

The availability of ESM funding is an important part of facilitating our return to the markets as it provides reassurance to the financial markets. The ESM treaty sets out the arrangements for loan pricing. In summary, it will be the financing and operating cost plus an appropriate margin. It is not appropriate to speculate on the interest rate that would apply in the event that funding were to be sought from the ESM. However, the average cost of our current EU-IMF funding is 3.46%. This is well below the current market rates for Irish bonds – where the ten year rate has been around 7% in recent months.

The capital structure of the ESM was designed to ensure that it would receive the highest possible rating, thus ensuring the lowest possible cost of funding. The principle that the EU funding mechanisms should not generate a profit is now well established following the reductions to the EFSF and EFSM rates agreed in 2011.

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