Fergus O'Dowd (Louth, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

Ba mhaith liom buíochas an Aire Airgeadais a chur faoi bhráid na Dála as ucht an Bille seo a thógaint anocht. Tá sé tábhachtach go dtógfaí an Bille mar tá sé práinneach ó thaobh an mhargaidh nua atá déanta idir an Ghréig, an tAontas Eorpach agus na hAirí Airgeadais go léir.

I thank the House, on behalf of the Minister for Finance, for agreeing to discuss the Euro Area Loan Facility (Amendment) Bill 2013 today. This Bill allows Ireland to ratify the changes to the Greek loan facility required to implement the new programme of assistance for Greece as agreed by the Eurogroup finance Ministers in December last year. In order for the enhanced assistance provided under these amendments to the Greek loan facility to be made available to Greece as quickly as possible, all eurozone member states have been asked to complete their national procedures by early next month. The Bill is therefore being treated as urgent, with all stages in the Dáil being taken this week, and all stages in the Seanad scheduled for next week.

The purpose of the Bill is, first, to further facilitate, in the public interest, the financial stability of the European Union and the safeguarding of the financial stability of the euro area as a whole. Essentially, the amendment agreement is required to facilitate implementation of changes to the Greek loan facility approved by the euro area finance Ministers in December 2012, subject to national ratification procedures. These measures are the lengthening of the term of the loan to a maximum of 30 years, and a further reduction in the margin to 50 basis points. The second purpose is to provide that subsequent amendments to the Greek loan facility agreement can be approved by a resolution of Dáil Éireann pursuant to Article 29.5.2° of the Constitution, subject to certain conditions.

This is the third amendment to the Greek loan facility, so the House is by now familiar with its terms. However, I will give a brief outline of the development of this facility before addressing the changes covered by this Bill. As is widely known, for the last number of years Greece has been experiencing serious budgetary and economic problems and remains unable to secure international funding at sustainable rates. In order to safeguard the financial stability of the EU and the euro area, intergovernmental agreement was reached in May 2010 to provide a programme of financial assistance to Greece. This resulted in the provision of bilateral loans totalling €80 billion to Greece by the euro area member states along with IMF assistance of €30 billion over a three year period to mid-2013. The Euro Area Loan Facility Act 2010 ratified Ireland's participation in the agreement. Ireland loaned a gross amount of just above €347 million to Greece under this facility. When we entered our own programme of assistance in late 2010, we stepped out of the Greek loan facility. However, as Ireland is an original signatory to the Greek loan facility, our consent is required to implement any amendments to it.

Two previous amendments have been made to the Greek loan facility that required amendment of the Euro Area Loan Facility Act 2010. These were dealt with under the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011 and the Euro Area Loan Facility (Amendment) Act 2012. The Euro Area Loan Facility Act 2010, as amended, must now be further amended before Ireland can confirm acceptance of the third amendment to the Greek loan facility.

In June 2011, euro area finance Ministers agreed to amend the Greek loan facility. These changes provided for the extension of the maturity period for loans from five to ten years, a change in the calculation of the margin on loans to Greece to give it a lower interest rate, and the extension of the grace period between drawdown and commencement of repayment from three to 4.5 years. Ireland ratified this first amendment to the Greek loan facility through the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011 and our agreement to the amendment was confirmed with effect from 23 September 2011. It soon became evident that these amendments were insufficient and a need for further measures was recognised.

On 20 February 2012, Eurogroup finance Ministers approved a programme of assistance for Greece, including the second amendment to the Greek loan facility. This amendment included three key elements: a further extension of the grace period, of up to ten years, for paying back the loan principal; a further lengthening of the loan maturity to a minimum of 15 years; and a further reduction in the margin to 150 basis points to apply from the three month interest period that ended on 15 June 2011. These amendments were ratified by the Euro Area Loan Facility (Amendment) Act 2012.

Greece's problems have, however, continued, and its financial position remains a major cause for concern. In late 2012 it was agreed that additional measures would be required to assist Greece to meet its commitments under its programme of financial assistance. The measures agreed for this latest set of changes include a debt buyback of bonds held by private investors; a reduction of 100 basis points in the interest rate margin on the Greek loan facility, bringing it to 50 basis points - I would note here that other programme countries, such as Ireland, are not required to participate in this reduction while they are in receipt of financial assistance; the guarantee commitment fee on European financial stability facility, EFSF, loans to be cancelled; the maximum maturities of the loan to Greece to be extended by 15 years to 30 years; interest payments on EFSF loans to be deferred for ten years; and member states to pass on to Greece's segregated account an amount equivalent to the income on the securities market programme portfolio accruing to their national central bank as from budget year 2013. Again, member states under a full financial assistance programme are not required to participate in this scheme for the period in which they receive financial assistance.

All signatories to the Greek loan facility agreement have been requested to notify acceptance of the third amendment by 10 February 2013. This is to ensure the next phase of the Greek loan facility can proceed as planned from that date. It has been necessary therefore to bring forward the Euro Area Loan Facility (Amendment) Bill 2013 as a matter of urgency to ensure Ireland can confirm acceptance by that date.

It is also important to note that, as before, the new concessions to Greece will accrue in a phased manner and are conditional upon a strong implementation of the agreed reform measures in the programme period as well as in the post-programme surveillance period. Given this package of measures, particularly the extension of the loan maturities, it is likely that Greece will be subject to troika review for decades to come. In Ireland, on the other hand, we are currently preparing to exit our programme. Both Greece and the other euro area member states agree that it is only through the full and strict implementation of the fiscal consolidation and structural reform measures included in its programme that Greece will regain competitiveness and will be able to fund itself through the international markets.

As I have already mentioned, the Bill also contains provision for subsequent amendments to the Greek loan facility agreement to be approved by a resolution of Dáil Éireann pursuant to Article 29.5.2 of the Constitution, subject to certain conditions.

This is the third time that the Oireachtas has been asked to approve amendments to this legislation since it was enacted in May 2010. Since amendments to its terms are becoming more common, the Bill provides a mechanism to amend the Greek loan facility which will be recognised by way of primary legislation in the Bill and may be recognised as binding the State in the future by way of Dáil resolution made under Article 29.5.2° by amending the definition of that agreement to include such amendment as approved by positive resolution under Article 29.5.2° with a motion published in Iris Oifigiúil. This is similar to the approach taken in the Development Banks Act 2005.

It would appear to the Government to be more appropriate to provide for the ratification of technical amendments agreed to the Greek loan facility by way of resolution rather than through continued amendment of the legislation. This will apply to variances of terms and conditions such as interest rates, margins, maturity periods and grace periods. Changes to the Greek loan facility which require substantive changes to primary legislation or to substantive Irish law, including any proposal to raise the amount to be spent by non-voted expenditure, will still require new primary legislation. The inclusion of the provision to allow for certain future changes to the Greek loan facility agreement to be agreed by resolution of the Dáil is not to be taken as indicating any particular expectation of further changes. It merely facilitates a more efficient means of giving effect to certain types of future such changes if they were to arise.

Some will ask why Ireland is not seeking or being offered the Greek package, or one similar to it. I would respond by strongly emphasising that it is important to differentiate between Ireland and Greece. Ireland's situation differs in fundamental aspects to that of Greece. Therefore, one would want to approach the issues in a fundamentally different manner. In terms of fiscal and economic performance, there are several key differentiating factors. Greece's public debt prospects are of a different order of magnitude to Ireland's. Notwithstanding significant private sector involvement in March 2012, in its autumn forecast the European Commission still projected the Greek debt to GDP ratio to reach 188.4% at the end of 2013. This, combined with the worse than expected recession, prompted a reconsideration of Greece's debt sustainability. Even after the recent debt swap and taking account of the impact of structural reforms in raising both growth and revenue over the coming years, the IMF still expects Greek public sector debt to remain above 124% by 2020. The corresponding Department of Finance forecast for Ireland's public debt, published in last December's budget is for it to peak at 121% in 2013 and begin to decline thereafter.

The Greek economy is still in the throes of a recession that is more severe than anticipated. The troika expects Greek GDP to have contracted by 6% in 2012. Greek GDP has been contracting since 2008 and is expected to shrink by another 4.25% in 2013. By contrast, the Department of Finance estimates that GDP grew by 0.9% in Ireland last year and it is projected to increase by 1.5 % this year, with average annual growth of 2.7% forecast for the period 2014 to 2015. In Ireland's case, therefore, economic growth is helping to ensure debt sustainability. In Greece, the economy is shrinking and this is compounding the problem of an unsustainable debt burden.

A critical difference between the two economies in this regard relates to the importance of international trade. In Greece, exports amount to the equivalent of about 25% of GDP. This means that export growth is not in a position to provide much by way of offset to the contractionary effect of fiscal austerity. In Ireland, by contrast, exports amount to the equivalent of more than 100% of GDP which means that the growth of exports can provide a powerful offset to the impact of fiscal consolidation on economic activity. It therefore follows that what is appropriate for Greece is not necessarily appropriate for Ireland.

Ireland's route back to economic stability and financial sovereignty is different, shorter and less severe than that of Greece. That is not to play down the pain being experienced by many in this country, but this is not a case of one size fits all. Each programme is tailored to the economic factors at play in the relevant member state. In this context, in terms of the economic challenges facing Ireland and Greece and the best way to deal with them, Ireland's needs as a country exiting a programme are very different from those of Greece. We are, however, examining the Greek package to see if aspects of it offer any possible benefit to Ireland, particularly in the context of our programme exit.

The Bill provides for amendments to the Euro Area Loan Facility Act 2010, as amended by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011 and the Euro Area Loan Facility (Amendment) Act 2012. The Bill has four sections with the amendment of December 2012 to the loan facility agreement set out in the Schedule. The first section provides the definitions to the legislation. The second section provides for the third amendment to the Greek loan facility, dated December 2012, to be included in the references to the Euro Area Loan Facility Act 2010, as amended by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011 and the Euro Area Loan Facility (Amendment) Act 2012. The second section also provides that subsequent amendments to the Greek loan facility agreement may be approved by a resolution of Dáil Éireann, pursuant to Article 29.5.2° of the Constitution, to be published in Iris Oifigiúil. The third section provides for the third amendment to the loan facility agreement of December 2012 to be inserted as Schedule 4 to European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. The fourth section provides that the Act may be cited as the Euro Area Loan Facility (Amendment) Act 2013. The Schedule contains the text of the amendment to the €80 billion loan facility agreement dated 19 December 2012.

This amending legislation includes the two elements I have outlined: the lengthening of the term of the loan to a maximum of 30 years and a reduction in the margin to 50 basis points. When we entered our EU-IMF programme we stepped out of the Greek loan facility. Before that happened, Ireland had provided a gross amount of €347.44 million to the Greek loan facility in 2010. Greece in fact received a net sum €345.7 million from Ireland as 50 basis points in commission was deducted from the gross amount. Quarterly interest payments are being made by Greece on the gross amount. The 100 basis point reduction in the interest rate provided for in this set of amendments will apply once Ireland is no longer in receipt of financial assistance under a programme. When it does take effect, it is estimated that the interest we receive will fall by €3 million per annum to €6 million per annum. In addition, the extension of the maturity will extend the timeframe for repayment of the moneys advanced.

I look forward to a constructive debate on this Bill. It is essential that all eurozone countries answer the calls made on them to help the currency zone achieve renewed and sustainable financial stability fully and promptly. This Bill represents Ireland's latest contribution to this unquestionably desirable cause, and we must play our full part. Therefore, I would urge Deputies to agree to ratify the changes to the Greek loan facility. I commend this Bill to the House.

See this speech in context