Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

As widely known, the Heads of State or Government stated at the 29 June meeting "that it is imperative to break the vicious circle between banks and sovereigns" and that "the Eurogroup will examine the situation of the Irish financial sector with a view to further improving the sustainability of the well-performing adjustment programme."

The European Council on 18-19 October subsequently reaffirmed that the "the Eurogroup will draw up the exact operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism (ESM), in full respect of the 29 June 2012 euro area Summit statement. It is imperative to break the vicious circle between banks and sovereigns.”

The key timeline in regard to the realisation of these commitments is the establishment of the Single Supervisory Mechanism. The European Council stated on 14 December 2012 that "once an effective SSM is established, the ESM will be able to recapitalise banks directly. An agreement on the operational framework supporting this possibility, including the definition of legacy assets, should be agreed as soon as possible in the first semester of 2013".

Aside from the issue of when this new instrument will become available, there is a host of other issues that have yet to be worked through such as how these banks would operate under ESM ownership, what governance arrangements would be put in place between the fund and the banks themselves and between the ESM and member state governments. We need to consider these wider considerations in the months ahead.

Ireland continues to be fully engaged in this process within the Eurogroup and among Heads of State or Government. Furthermore, officials from my Department also participate in technical meetings with the ESM and other member states. In this regard and despite recent media reports, discussions remain ongoing and no conclusion has been reached.

As the Deputy is aware, Ireland is a special case due to the unique circumstances behind our banking and sovereign debt crisis and the fact that our banking crisis emerged at a time when the full range of European mechanisms were not available to us. The Government has been working extremely hard to secure a deal on the Irish bank debt and detailed work will continue to ensure that the positive moves in Europe are harnessed to maximise the benefit to the Irish taxpayer.

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