Mairead Farrell (Galway West, Sinn Fein) | Oireachtas source

This is a highly technical Bill but it provides two main reforms, which I will deal with in moment. First, it is worth providing some background context on what the ESM is, what its forerunner was and what Ireland's previous experience with it was. While most ordinary people are probably not familiar with the ESM, they will surely be aware of what transpired and led us to requesting financial assistance from its forerunner, the European Financial Stability Facility. That was in 2010, a year when multiple Fianna Fáil Ministers told us there was to be no bailout. I recall the then Minister, Mary Hanafin, saying we were fortunate here to have such a good banking sector. It was a time when our former financial regulator told us our banks were well capitalised, only for the Government, before the close of the year, to turn around and go cap in hand to the IMF and EU seeking money for a bailout of the banks.

The money we received was to be the first package organised by the European Financial Stability Facility. We received a package of almost €5 billion, financed by a combination of the EU and the IMF. The first tranche of these funds was to be disbursed on 1 February 2011 when we would receive €3.6 billion. In order to receive this money, this State had to enter into a memorandum of understanding with the troika, which would lead to harsh, long-lasting and far-reaching austerity measures being imposed on some of the most vulnerable people in this State. It led to a mass exodus of many of our young people, some of whom never returned home. It also led to the sale of valuable State assets at knockdown prices, representing poor value for money, and has set back the process of economic recovery, as the European Commission now recognises.

The European Stability Mechanism, in its current incarnation, is similar to the European fiscal rules in that it is regressive. It is neoliberal in orientation and reflects the kind of erroneous, neoclassical economic thinking which has often pervaded in the EU institutions. However, in saying that, I recognise some of the reforms the Bill is trying to enact and they are an improvement on what is currently in place. The Bill's primary purpose is to ratify amending agreements to both the European Stability Mechanism treaty and the Single Resolution Fund intergovernmental agreement.

The Single Resolution Fund was established on 1 January 2016 as an emergency fund for resolving failing banks in the context of the banking union. It is financed by commercial banks in member states which participate in the banking union and thus offers some protections against taxpayer bailouts. The amendment before us seeks to create a line of credit between the ESM and SRF, a so-called common backstop, and this would be used under a scenario in which other options had been exhausted. It is welcome on the basis it goes some way to breaking the sovereign bank link or what is often referred to as the "doom loop".

Another welcome reform relates to the credit lines the ESM can access. I am, of course, referring to the precautionary conditioned credit line. Member states will not be required to submit a memorandum of understanding. Rather, they will submit a letter of intent outlining their policy intentions, which will then be assessed. Provided this new process is in good faith and member states will not be sent away until they come up with the reforms the EU wishes, this will be an improvement on the status quo.

One criticism which needs to be made, and which echoes the current problems with the fiscal rules, relates to the debt-to-GDP ratio criteria. The 60% debt-to-GDP ratio is unworkable. If a eurozone member found itself in difficulty tomorrow and tried to access this line of credit, the current debt-to-GDP ratio would preclude Germany, Austria, Greece, Italy, Portugal, Cyprus, Spain, Belgium, France and, of course, this country. Compounding this ridiculousness is the fact that where the fiscal rules are concerned, it seems likely there will be a significant upward revision of this ratio. The ESM criteria need to also recognise this.

I will mention the other line of credit member states can access through the ESM, namely, the line of credit for those countries which do not meet the criteria of the PCCL. This is known as the enhanced conditions credit line. A memorandum of understanding will still be required for this. For the connected financial assistance, the sale of public assets can be attached as a conditionality. This should be removed because, as we know, during such fire sales of state assets, good value for money is rarely had.

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