Enda Kenny (Mayo, Fine Gael) | Oireachtas source

Kilkenny was always on the left wing.

Commissioner Rehn mentioned the fact that he hoped to have a deal concluded by October. I recall saying that I did not think that was possible and, clearly, that did not become a reality. We are conscious that there is a real understanding from both a political and a leadership point of view and among the IMF, the Commission and the Parliament, of the need for a deal to be done for Ireland but this is a matter for discussion between the Government, through the Department of Finance and the Minister, and the European Central Bank, which comprises the central bank governors of the 17 different countries. Many of them have their own views. We need the deal on that end and the other end will follow through from the legal framework and the discussions at the other side where the decision was made to break the link between sovereign and bank debt. As I said in reply to Deputy Ross earlier, what I would like to see out of that is that this would be re-engineered similar to the replacement of an overdraft with serious challenges by a long-term low interest mortgage. It is in that area that the discussions are taking place and I hope that the Minister will be able to bring that to a conclusion before the next payment due date in March 2013.

When I discussed the question of the view of the ESM with Chancellor Merkel and others, the decision on 29 June was that the vicious circle between sovereign and bank debt should be broken and once that happened, the banking union with the supervisory role would be set up, which would allow for potential recapitalisation of banks from the ESM. The issue then was whether a country had responsibility for legacy debt or not and, obviously, different comments were made about this by different people. That is why it was important to be able to explain to other leaders that, in the case of Ireland, the recapitalisation had taken place because when the Administration of which the Deputy was a member made its decision in respect of the bank guarantee, the banks were then recapitalised but the taxpayer was required to pay for them. That is a fact that happened and the nature of these discussions is how creative we can be with the ESM in dealing with this when it is now accepted that Ireland has particular circumstances arising out of that historic decision. Its case, therefore, is special and different from countries that may go into a programme or those that are in a programme, which will find themselves with a need for funding.

The joint communiqué that we issued was clearly of that understanding and the agreement at the meeting of the Heads of Government was that this particular situation would be taken into account in the discussions that take place at the Eurogroup between the Ministers for finance. That does not mean that we have to wait for the end of the structure - the banking union and supervisory role - to be completed before Ireland's particular circumstances and special case can be considered. That is something, I believe, that can proceed in parallel with that work. I cannot say when that will happen. When will the banking union and supervisory role be effective? Mr. Draghi was clear on this when he spoke at the meeting and there was general agreement that, given the range of banks involved, the requirement for national supervisory capacity to be restructured and the need to recruit personnel from Frankfurt and so on, it certainly could not be done in the first half of the year. People will read into this that it was never going to happen before the federal elections in Germany next autumn. Be that as it may, Mr. Draghi was confident that they could get a great deal of work done in the first six months once the legal framework was set in position.

While there have been comments from different financial people and various elements of different governments, it is clear that there is an acceptance and an understanding that our circumstances are different and that, due to the fact that bank recapitalisation had already happened, the matter needs to be treated as a special case. It will require some creative thinking to bring about a reduction in terms of our capacity to meet that debt. That is understood. The question for negotiation and discussion is how one does it. Deputy Martin may have views that are helpful in this regard. It is in the country's interest that we get a deal on this, following the decision of the European Council to break that link in the first place. The Deputy will recall that people said - not just in here but outside the House - that this would never happen, no more than they said there would never be a permanent bailout mechanism in Europe or a European financial stability facility, yet all of these things have come to be a reality. We will continue to press the case for a reduction in the level of debt arising from the decision made on 29 June, and I hope we can be successful in that.

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