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

I welcome Deputy Paul Murphy to the House. I do not know whether he has contributed already, but I was interested in his remarks this morning. I hope during his time here he will have the job satisfaction necessary for all Deputies to keep up their morale.

I do not propose to accept the amendment tabled by Deputy Doherty. It bears a very strong resemblance to one he tabled on Committee Stage which was not accepted. This amendment seeks to oblige the Minister for Finance to make an application for retroactive recapitalisation in 2014. As the Deputy will be aware, it will not be possible to make an application while the instrument is yet to be put in place. The decision on an application subsequent to that is a matter of timing.

As I indicated on Committee Stage, I do not think that it should be rushed. In that context it would not be appropriate to tie my hands as to timing to any degree, as this amendment seeks to do. Deputy Doherty, in particular, referred to various European personalities who expressed the view that an application would not be successful. Europe, like Ireland, is run by laws not personalities. Many of the personalities who made statements are not longer in offices. Only one of the three finance ministers who signed the Helsinki press release statement to which the Deputy referred during this debate and on Committee Stage is still a finance minister in his jurisdiction. I have been in office for three and a half years and of the 18 euro zone countries only two people have more service than do I. The pace of change in Europe is very rapid, but what is enshrined in law is by what Europe runs and lives. The provision to enable the ESM to recapitalise the banks retroactively is being enshrined in law in this Bill.

Some factual remarks were made both explicitly and implicitly. Deputy Murphy suggested the debt was peaking at 125% of GDP. As I said in my Budget Statement, the debt will peak this year at less than 111% of GDP, a level 14 points adrift of what Deputy Murphy thought it was. While there is interest to be paid on the national debt of something north of €8 billion, only €1 billion of it is attributable to the bailing out of the banks. The other €7 billion of interest is due to the accumulated deficits over the years when the amount collected in taxes did not match the amount being spent. Huge gaps emerged after the collapse in the property market when all the transaction taxes went out of the budgetary calculations. We have been unwinding deficits very slowly since.

In the budget for 2014 the deficit was calculated at around €8 billion, but is coming in at a level significantly below €7 billion. The deficit for the budget introduced this week will be approximately €5 billion but there are still deficits. Every time we run a deficit we add to the quantum of debt and interest rates have to be paid on it. I suggest to the Deputy that the significant issue is whether the debt is sustainable, and I believe our level is entirely sustainable now. The significant statistic is the amount that is paid in interest. Of the €8 billion or so that Irish taxpayers contribute to servicing the debt, €1 billion comes from the banks. The other €7 billion comprises accumulated deficits. That does not reduce the pain, but it corrects the record to show from where the liabilities are coming.

I will not accept the amendment for the reasons I outlined in detail on Committee Stage and which I reaffirmed today. There is also a suggestion that the terms of the treaty on application are totally confused and confusing. Again, for the record on 10 June 2014 the euro area member states reached a preliminary agreement on the operational framework for the ESM's direct recapitalisation instrument, DRI. The draft guidelines on financial assistance for the direct recapitalisation of institutions clearly establishes the scope of eligibility criteria for and operational process of the DRI. Article 14.2 of the guidelines sets out the operational basis for an application with the detailed modalities to be agreed by the ESM's boards of governors on a case-by-case basis. From our point of view, that provides a broad degree of flexibility of interpretation. Demanding more detail would most likely have resulted in a more restrictive retrospective instrument which would not have been in our interests.

The SSM, according to current scheduling, comes into effect on 4 November and the ESM direct recapitalisation instrument is expected to be approved by the ESM governors on 6 November. Those are the deadlines against which we operate for acceptance of this piece of policy. As I said, I do not want my hands to be tied in the negotiations which will take place in the future. I do not want to be tied to a particular timeline. I thank Deputies for their contributions. The asides were even more interesting than the observations on the amendment.

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