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

At the summit leaders signed off on the final elements of what is called a banking union but it is no such thing. The toxic link between financial debt and sovereign debt has absolutely not been broken. The Taoiseach confirmed that in his speech. National interests have prevailed. The core principle of sharing risk so that risk is minimised has been ignored. There are pieces of progress, but nothing near the scale of what should have been agreed.

The most important final agreement for a banking union, as described by the Taoiseach, will cover 128 banks in total. Many banks which have the capacity to cause systematic problems will not be covered. The proposed single supervisory mechanism will initially be more about co-ordination than common supervision, but the European Central Bank has the potential to push this further. Ireland should join the European Central Bank in calling for the removal of any opportunity for governments to interfere in oversight matters that should be independent.

To break the link between sovereign and banking debt there must be no expectation that the State has an implicit guarantee to fund banks in trouble.

This requires the availability of a large backstop of funds because markets know that states will not allow their banking systems to collapse. This will not be available.

The bank resolution fund to which the Taoiseach signed up will take ten years to build up and after a decade it will have €55 billion available to it. This has been estimated at only 0.2% of the total asset base of the covered banks. The fund could realistically cover no more than one or two mid-sized European banks. It is so small that the Commission is trying to stop it being used for as long as possible. Ireland should not have agreed to this as a final deal. At the very minimum, we should have put on the table the need for the funds available for safeguarding the banking system of the euro to be greater than 0.2% of the assets base. In the two years a banking union has been debated the Government has refused to ever state publicly what it wants from the process. There is no public record of any statement by the Taoiseach setting out what would be required to break the toxic link between banking and sovereign debt. How can he claim to be happy with this deal? It is not what was promised and does not provide long-term stability for the financial system of the euro.

The most significant thing to come out of the summit for Ireland was unplanned - the confirmation that the Commission was no longer supporting retrospective bank recapitalisation for Ireland.

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