Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank all of the Deputies for their interesting contributions to this debate. As most have said, it is a technical and detailed debate but, nonetheless, it is very important for the stability of State finances and the banking sector across Europe. To conclude today's discussions, I want to reiterate the purpose of this legislation and then respond briefly to some of the issues that were raised by Members. Obviously. there will be a more detailed, one-to-one discussion on Committee Stage.

The reforms outlined in the amending agreements of the ESM treaty and the Single Resolution Fund intergovernmental agreement are intended to enhance the mandate of the ESM in order to further strengthen the resilience and crisis resolution capabilities in the euro area. The main provisions of the Bill seek Oireachtas approval to ratify both amending agreements to the ESM treaty and the SRF IGA. The key purpose of the amending agreement is to strengthen the crisis management and resolution capabilities in the euro area. The financial and sovereign debt crisis of the previous decade highlighted a number of weaknesses in Europe's crisis management systems, which have resulted in significant developments to the architecture of the euro area since 2010.

In fairness, the EU is a relatively new concept and is only a couple of generations in existence. The euro is quite a new currency and I was here in the Dáil when it came in. While we launched the euro, all of the infrastructure that goes with it has taken time to follow. Obviously, we want to strengthen all of our management systems because we have a common currency now across many of the countries in the EU through the euro, that is, all those countries that participate in the Eurogroup. It is important, as time goes on, that we strengthen the infrastructure and architecture behind the currency because what happens in one country can impact on another country. In layperson's English, we have a joint bank account when it comes to our currency and if something happens in one area, it can have an impact in other areas as well.

The establishment of the two rescue funds as a temporary European financial stability facility in 2010 and a permanent ESM in 2012 closed an institutional gap in the European Monetary Union, namely, the absence of a lender of last resort for euro area sovereign states. In addition, during the period between 2014 and 2016, we saw the establishment of the banking union, which introduced EU-wide banking supervision, the Single Supervisory Mechanism, and the common resolution mechanism for failing banks, the Single Resolution Board, which is the central resolution authority within the banking union, backed by the Single Resolution Fund, which is composed of contributions from the EU backing sector. I stress again what I said in my opening remarks, namely, the contribution to these funds will be from the banking sector, not from the taxpayers in the individual countries. The Eurogroup agreements regarding the ESM treaty reform and early introduction of the common backstop to the SRF will build upon the architecture that has emerged over the past decade by adding firepower and credibility to the bank resolution regime in Europe via the common backstop, as well as improving the effectiveness of the ESM as an institution.

Various points were made in the debate. Much of the debate centred on what happened in the crisis of over a decade ago and the introduction of the IMF, with the European Central Bank and the European Commission, at the time known as the troika, and the various conditions. People were almost saying this is going to happen again under this new regime. It absolutely is not. Anybody who has witnessed the European response to the Covid-19 pandemic will see that people on this occasion, and governments right across the EU, looked after citizens right through Covid-19. There was great solidarity within each country and between the countries of the EU. There has definitely been a clear sea change in regard to those issues. Some compare the new situation and what happened ten or 15 years ago and say it proves the same ideology is ruling in Europe, but I think Covid has proved the opposite is the case. The EU has changed its rules.

For example, I do not know how many times over the years we talked in this Chamber about the cost of medicines from the pharmaceutical industry in Ireland and the billions we spend. I was asked why we do not work with other EU countries to buy collectively from the main pharmaceutical companies.

Look at what happened during Covid. That bridge was crossed in a quick way and in a way that will benefit us all. The idea of solidarity between states is strong as a result of Covid-19. While there is no good side to Covid, we have learned lessons as European citizens and we are working together on that.

The SRF was introduced in 2016 and it was the first kind of funding for banking in trouble. There is a suggestion that our rainy day fund can be used to invest in banks. That fund was utilised during Covid and it reduced the need to borrow. The €1.5 billion that was in the fund came out and the debate we had yesterday was on not putting €500 million back into the fund while we are still dealing with Covid and while there are many immediate priorities. I understand the comments about the rainy day fund. When it is safe and prudent to do so, we will continue to commit €500 million per year into that fund, as was originally intended. We had a resolution yesterday, requiring a vote, to allow the Minister not to deposit €500 million this year.

We have had much debate in the House about the PCCL, which is reformed under the ESM. There was also a discussion on the ECCL available to member states that do not meet the PCCL eligibility criteria. It is important to stress that these matters are relative to the state concerned. These funds are not about bank bailouts but about supporting individual states. It was mentioned that to meet the PCCL eligibility criteria a state must have an approximately 3% deficit or be in budget balance or have a framework to do that and the debt to GDP ratio must be 60% or the state has to have a clear path to reduce that ratio to 60%.

I was asked about the role of multinationals and I confirm that GDP ratio is based on GDP, not GNI*, which excludes the multinationals contribution to the Irish economy in making up those figures. There have been references to the fiscal rules and it has been said that most countries might not be able to meet those fiscal rules and that they might be forced to go into the ECCL, which can be more restrictive. The reason for that is that this will concern states that have a weaker financial situation than other member states. Those states will probably need a more hands-on approach and careful management and there would have to be a memorandum of understanding.

On the PCCL, I note the reference to EU fiscal rules by many Members. Deputies have rightly pointed that out and said that those rules have been suspended during Covid. A period of consultation has been launched to update the fiscal rules. If Members have views on this, they should contribute to this debate. If there are changes to the fiscal rules, they will be reflected in the new PCCL rules and regulations that will apply. Those rules will flow from the fiscal rules.

Deputy Shanahan said there is never a great debate on spending where somebody does not say we should be spending more and I concur with him on that. I have a simple figure I use when we talk about the national debt. There is a debt of €50,000 on the head of every man, woman and child in Ireland. Every time we have debates like this, Members say we should spend more on this, that and the other. We need additional expenditure where it is prudent and important but every time we require additional expenditure and borrow money, I ask Members what we should shove that debt of €50,000 up to. People do not think about that but if one thinks about it in one's household context, it is a clear situation and it is a high bill. We need to look at that and we have to be careful about loading debt onto other people. Those were the main points that were mentioned. The interest rates and the issue of State spending have also been mentioned. I commend the Bill to the House.

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