Áine Collins (Cork North West, Fine Gael) | Oireachtas source

I welcome the opportunity to speak on this Bill. The European Stability Mechanism (Amendment) Bill is necessary because of the Government's continuing efforts to deal with retrospective repayment of capital pumped into banks by Irish taxpayers. It is, from the European perspective, an effort to put in place mechanisms that will allow Europe to provide loans to financial institutions. This is intended to help avoid the huge banking crisis that Europe as a whole continues to deal with.

The ESM was established to provide loans to member states. The direct recapitalisation instrument will be able to provide loans to financial institutions. The financial instrument deals with two issues, direct and retrospective recapitalisation. While this is welcome, it should be remembered that the requirements are quite restrictive. They require member states to contribute to any direct recapitalisation in the future. It is important to note that article 14 provides for retroactive recapitalisation. This could be decided on a case-by-case basis, by mutual agreement of the ESM board of governors. This instrument gives Ireland the option to apply to the ESM for the retrospective direct recapitalisation of the Irish banks. Nobody suggests that just because this instrument is being implemented, this will be an easy task. Such recapitalisation would require unanimous approval from the board of governors of the ESM.

The decision on whether or when it is appropriate to make such an application must be carefully considered by the Minister for Finance. Any retrospective recapitalisation will only be considered when the potential returns to the State from the banks now and in the future have been established. Responsible and sustainable management of the public finances is a huge commitment, and this commitment is agreed in the statement of Government priorities between Fine Gael and the Labour Party. In this context, the Taoiseach and Tánaiste recently highlighted Ireland's high level of debt as a risk to the economic recovery that is now taking place. Their analysis stated that the State investment in Bank of Ireland shows that careful management and disposal of our banks' holdings can result in a reasonable return for taxpayers and the disposal of the remaining banking assets will reduce the State's excessive debt levels. The outcome of this disposal will have a bearing on when and if the Government applies to the ESM, through this instrument, for retrospective recapitalisation of our banks.

Recent indications from the Minister demonstrate that he is considering how best to deal with the State's shareholding in AIB and Permanent TSB, with taxpayers' shares in Bank of Ireland and Allied Irish Bank valued at €13 billion at the end of 2013. With careful management and timing, disposal of the shares could lessen the need for retrospective repayment over time. In this context, we should remember that the Minister, Deputy Noonan, and the Government have an excellent track record to date. The renegotiation of the promissory note continues to save Irish taxpayers billions each year. The Minister's IMF negotiations will save Irish taxpayers €1.5 billion over a five-year period.

Apart from the direct effects of implementing this instrument in Ireland, it is designed to preserve the financial stability of the euro area as a whole by providing for specific cases when a eurozone state experiences acute difficulties with its financial sector. We have seen from the recent crisis that a mechanism is necessary to maintain fiscal sustainability in order to avoid the severe risk of contagion from the financial to the sovereign sector. To a certain extent, this is a minimalist effort to resolve a problem that should have been dealt with at the start of the euro process. The operation of the same currency in different countries with different economic activity and debt levels was inevitably going to cause problems. I hopefully this is the first step towards a more integrated and sustainable eurozone. I commend the Bill to the House.

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