Micheál Martin (Cork South Central, Fianna Fail)

I raised the question of the European Stability Mechanism becoming involved in buying Italian bonds on the secondary market. A central dynamic of the crisis has been investor fear about the lack of a lender of last resort. In essence, the ESM will replace the European Central Bank in terms of buying bonds on the secondary market. The ECB did this for some time, but it did not work. I refer the Minister of State to Professor Colm McCarthy's article "The Devil is in the Principles", in which he makes the important point that there is no longer a buyer of last resort for weaker sovereign bonds and that the unwillingness of the ECB to play that role means Spain and Italy might be forced out of the markets. The fundamental driver of the crisis has not been addressed in the summit's conclusions. Professor McCarthy views the transfer from the ECB to the ESM as a retrograde step. What is the Government's position in this regard, given the dangers inherent in the ESM buying bonds on the secondary market? The ESM does not have the necessary firepower and is not a lender of last resort.

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