Micheál Martin (Cork South Central, Fianna Fail) | Oireachtas source

I refer the Taoiseach to the joint statement of the Ministers for Finance from Germany, Finland and Holland on the separation of bank debt from government debt and the June European Council decision. By any reading of the statement, it must be seen as a grave disappointment and extremely depressing in terms of their interpretation and understanding of the June deal and their articulation of principles which will govern the so-called separation of bank debt from sovereign debt. Alarmingly, they describe the role of the European Stability Mechanism, ESM, in recapitalising banks as a longer term issue. They state, "Regarding longer term issues, we discussed basic principles for enabling direct ESM bank recapitalisation, which can only take place once the single supervisory mechanism is established and its effectiveness has been determined". It is not that it can take place when it has been established; we have to wait to see if it is effective before recapitalisation can take place. The statement continues:

The ESM can take direct responsibility for problems that occur under the new supervision, but legacy assets should be under the responsibility of national authorities ... the recapitalisation should always occur using estimated real economic values.

This latter point will have real implications for us. The statement then goes through the basic order of bank recapitalisation of, first, using private capital, then national public capital and, only as a last resort, the ESM. Mr. Karl Whelan, an economist who enjoys acceptance across the House, has interpreted this as a message from the three countries to Ireland and Spain to drop dead. By any analysis, it is either a significant resiling from or a different interpretation entirely of the decision at the June meeting.

Has the statement come as a surprise to the Taoiseach and the Minister for Finance, Deputy Michael Noonan? Did he have any inkling at all that it was coming? Last week in the Dáil the Taoiseach confirmed to me that since the June meeting he had only met the Slovenian Prime Minister. He has not met the Dutch or Finnish Prime Minister or the German Chancellor. Clearly, the grass has grown under his feet since the June summit meeting. It speaks of an approach that he has adopted to avoid hands-on negotiations himself or direct engagement with other leaders who are key to the working out of the eurozone crisis. Will he commit to undertake an urgent diplomatic initiative with the Prime Ministers of the three countries to have a clear and honest articulation of what they are prepared to do to genuinely separate bank debt from sovereign debt?

See this speech in context