Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank both Deputies for their questions. The answers to many of their points lie in paragraphs 41 to 44 of the conclusions of the European Council. On Deputy Dooley's question, the Government is very much focused on ensuring that the commitment made to breaking the link between the sovereign and banking systems will be upheld. We have been very clear that, in order to do that, a robust banking union must first be set up to provide a framework in which these issues can be dealt with. Paragraphs 41 to 44 make clear the commitment of the Union to doing this.

The last statement on the role of this system in dealing with existing difficulty came from the statements from the Eurogroup at the ECOFIN before the summer. It was made very clear there that, on a case-by-case basis, other member states would examine the application of the fund. The priority of the Government is very clear; we want to ensure that when a banking union is in place, such a mechanism will be an option for our country in dealing with the sustainability of our debts and creating a banking system that will be capable of meeting the needs of the people we all represent.

On Deputy Pringle's specific point about the interplay between European banking stops and national banking stops, which formed the thrust of his earlier contribution, the aforementioned conclusions cover the matter. Paragraph 42 states, "Member States should make all appropriate arrangements, including national backstops, applying state aid rules." It is also acknowledged in the conclusions that the ESM will play a role in dealing with that difficulty. That forms the heart of the discussion that is taking place. There is an understanding that national backstops will play a role. The documentation refers to the Deputy's point on the hierarchy of needs. Depositors with deposits above a certain threshold would be asked to make a contribution to the cost of a failing bank. One would then look at the role bondholders would play. One of the very important areas of the negotiation that is to take place over the coming months will be determining the interaction between European and national backstops. The Government is very clear that there ought to be a robust European backstop system in place. We believe this because unless there is complete clarity regarding where the money will come from in the event of a banking collapse, the kind of difficulty our country has gone through in the past could be created again. We do not believe it is in the interest of Ireland or of Europe for this to happen.

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