Regina Doherty (Meath East, Fine Gael)

The European Stability Mechanism Bill 2012 outlines the legislation that underpins the ratification of the ESM, which will replace the European financial stability mechanism. This will mean there will be a permanent rescue fund for the euro area to replace temporary support mechanisms. The principal stated provision of the ESM is to provide stability and support, which is what this country and the eurozone so badly needs.

The ESM will be initially equipped with €80 billion in cash, and it will also have the provision to call upon another €620 billion in an emergency. This will enable it to lend €500 billion and still maintain a buffer to garner the AAA credit rating it needs when it is set up next month. The ESM is the centrepiece of Europe's firewall to stave off financial contagion from the debt crisis that has wreaked havoc on the markets and pushed Greece, Portugal and our country into a bailout position. When the Bill was published in May, the Minister for Finance, Deputy Noonan, stated that having the ability to access the ESM is essential to Ireland's return to the markets and serves as a backstop, or in the worst case scenario, ESM funds will be available to provide essential public service finances. This will result in monetary certainty while keeping the other instruments of economic policies in national hands. The effect of a division of authority was to create a heightened level of fragility in national member states. Investor concerns about national member states' abilities to repay debts can quickly transform into a liquidity crisis and ultimately degenerate into a fully blown insolvency crisis. The ESM will break this cycle.

The official strategy for resolving the eurozone's debt crisis originally developed in the wake of the Greek crisis in May 2010, and it comprises four key elements. There is the creation of new fiscal oversight and supervisory mechanisms, the formulation of new mechanisms to fund loan facilities, or the ESM, the extension of loan facilities to member states experiencing difficulties accessing the bond markets and the conditionality of policies on those member states in return for receipt of that loan funding. The ESM comes with strict conditions and requirements attached to the assistance. Much of the requisite framework of oversight and supervisory mechanisms have been installed during the past year. The criteria used are intended to limit moral hazard and to ensure the existence of the ESM do not weaken incentives for sound fiscal and macroeconomic policies in member states. Together with best practices in government procedures and a cap set for Ireland at €11.1 billion for capital, all such measures go towards protecting Ireland's maximum exposure to the ESM.

There have been critics of the conditions, such as extending the ESM's extensive powers; some have said it will be completely above the law. Currently, the IMF, which the ESM will largely mirror in many aspects of operation, has similar privileges and immunities. In recent days Mr. Draghi of the European Central Bank has indicated that the outcome of the Irish referendum showed that the Irish people believe that fiscal stability is a basic pillar for growth. Last week's referendum result will certainly go towards speeding up Ireland's return to the financial markets and give us the same benefits as other signatories to the treaty. However, in the current absence of market-based financing, our ability to access the ESM is essential. It is in all our interests that the European Stability Mechanism is established as soon as possible to enable the eurozone sovereign debt crisis to be dealt with through the creation of a permanent mechanism. Today's Bill is a crucial step towards stabilising the crisis.

In recent weeks Sinn Féin has decried the ESM, arguing that it brings about a loss of Irish sovereignty, but the party has missed the point. Regaining financial stability will mean that when we move closer to the day to day concerns of reeling in our nation, there is no silver bullet solution to the crisis. This financial backstop will nonetheless bolster growth and competitiveness. It supports the Government and members of the Opposition in their drive to press ahead with economic reform and recovery for our country and people.

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