Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Office of the Ceann Comhairle for selecting this important item for discussion today. My motivation for raising it is to seek an update from the Minister on the Government's efforts to renegotiate the arrangement associated with the IBRC promissory notes, which, as we know, account for approximately €30.6 billion, and, in light of the recent developments in the eurozone, particularly Spain, to negotiate an overall reduction in the burden of bank related debt this State is carrying.

During the recent referendum campaign, the Taoiseach and Ministers were at pains at every opportunity to emphasise there was no connection between passing the treaty and obtaining a deal on Ireland's bank debt. However, no sooner were the votes counted than the Taoiseach, Tánaiste and Ministers were lining up to say the passage of the referendum would strengthen our case for obtaining a deal on the bank debt. In the immediate aftermath of the vote, the Taoiseach said the carrying of the referendum sent a message to EU leaders seeking a just deal on Ireland's bank debt. We have been informed that the Taoiseach raised this issue directly with Chancellor Merkel by telephone last Friday. However, the overtures by the Government have been flatly rejected publicly today by Mr. Mario Draghi, governor of the European Central Bank, and in recent days by a spokesperson for the German Finance Minister, Mr. Wolfgang Schäuble.

It is important to return to the issue of the promissory note. As we know, in March of this year, payment of the €3.06 billion that was due was kicked to touch for 12 months using a convoluted arrangement that involved NAMA and Bank of Ireland, subject to the approval of that bank's shareholders later this month. However, the Irish Central Bank was repaid the €3.06 billion it was due in emergency liquidity assistance. However, there is still €28 billion at play in respect of promissory notes, including the €3 billion that was deferred from this year and the remaining €25 billion.

As far back as September 2011, the Minister for Finance, Deputy Michael Noonan, advised us that the Government was in talks with the European authorities about negotiating the promissory note. In November, reference was made to the preparation of a technical paper. It is now June 2012 but we have seen no such paper, and we have no timeline for the completion of any such paper. What is the position on Ireland's efforts to renegotiate the promissory note structure?

In the Dáil, on 1 February, the Minister, Deputy Noonan, in response to a question I put to him, confirmed that the core Government objective was essentially to come up with a new financial arrangement at a lower coupon and over a longer period of time. Is that the Government's objective? Is the Government objective to repay this over a longer period of time and at a reduced interest rate or is it to reduce the principal - the face value of the amount of money that is owing?

The second question is, are the Government's ambitions to renegotiate the banking debt merely limited to the promissory note or is the Government determined to address the remaining €30 billion or so which was invested in Bank of Ireland, AIB and Permanent TSB through the National Pensions Reserve Fund and the cash reserves of the State which were to hand?

John Perry (Sligo-North Leitrim, Fine Gael)
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I thank Deputy Michael McGrath for raising this important issue. I am taking this on behalf of the Minister for Finance, Deputy Noonan, who is on important Government business as we speak.

The Government is committed to reviewing the arrangements that were put in place to capitalise the Irish Bank Resolution Corporation, IBRC, by the previous Government. The purpose of this review is to determine whether there is a way to reduce the overall cost to the State. Part of the capitalisation of IBRC was provided using promissory notes as consideration. The troika has agreed to engage in this process to produce a common paper which will consider all options for restructuring the notes in terms of the source of funding, the duration of the notes, the interest rate, etc.

While the development in relation to the end-March promissory note payment, whereby the payment due was settled with a Government bond maturing in 2031, is a positive development, we must keep our eye on the greater benefits which would derive from the re-engineering of the promissory note and also the potential improvements for the banking sector which could also stem from the ongoing technical discussions. It should be borne in mind also that recent concerns in the eurozone underpin the fact our problems are part of a wider European dilemma and the need for solutions to address the Irish situation as part of an overall eurozone-global solution.

It is for these reasons we must look at the recent developments in relation to the promissory note repayment as an initial step to facilitate a project where, if we are successful, it will be in the medium term rather than immediately. These discussions will continue and the Government is focused on developing an alternative solution to the promissory note arrangement in IBRC. The ongoing discussions may also explore options to re-finance the long-term Government bond issued in settlement of the 31 March payment. We all want to arrive at a successful conclusion that is in the interests of Ireland and the EU.

We support proposals to allow European funds to directly recapitalise banks and will ensure any proposals advanced at EU level will be in the best interest of the Irish taxpayer. It is too early to make an assessment as to what mechanism will be arrived at ultimately in the potential recapitalisation of the Spanish banking sector or to speculate as to how such mechanisms could, if implemented, be utilised retrospectively to the benefit of the Irish position. It should be borne in mind that the recent concerns in the eurozone underpin the fact the solutions to address the Spanish situation, as with the Irish situation, should be seen as part of an overall eurozone-global solution. We will continue to review the proposals that emerge in relation to Spanish bank recapitalisation to ascertain whether any of the proposed measures would have favourable applicability if implemented in Ireland, including whether they could potentially alleviate a proportion of the €62.8 billion cost to the State of the recapitalisation of the Irish banks.

While our debt levels are sustainable and we are committed to repaying our debts, the development of an alternative funding arrangement, which would, for example, extend the term of the loan or reduce the costs, would aid our return to the markets in 2013. This Government has constantly sought to advance proposals that are in Ireland's interest, and our successes can be seen in the interest rate reduction that has saved the State almost €10 billion over the lifetime of the EU loans and the settlement of the 2012 promissory note payment by way of a long-term Government bond.

The positive result in last week's referendum has been recognised across Europe as good news for the European project, strengthening the eurozone's course to a more stable future. The referendum result also improves the Government's position in any negotiations that might occur in the further restructuring of the Irish banks, costs incurred to date in the recapitalisation of the institutions or the funding of the assets held by the banks.

The Government will continue to press Ireland's case for a better long-term solution to our debt problems. We will continue to monitor developments in the eurozone closely and to participate actively in discussions leading to a sustainable solution to problems facing individual countries and the eurozone. We recognise clearly that the eventual solution must have regard for Ireland's best interests and the interests of the eurozone. The House will appreciate it is too early in the process to predict what the eventual outcome might be and, as indicated, it is not envisaged the eventual solution will be arrived at in the short term. Given the decision-making process in the European Union, it is much more likely a sustainable solution will emerge in the medium term.

Michael McGrath (Cork South Central, Fianna Fail)
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The issue is that something will need to be done in the short term with Spain, which has a matter of weeks at most before certainty must be brought to the recapitalisation of its banks. The problem for Ireland is the absence of clarity as to the negotiating strategy of the Irish Government. We simply do not know what the Government is seeking. Is the Government simply looking at tinkering around the edges of the promissory note or is it looking at securing a write-down or writing off of some of the bank related debt? Those of us in this House and the Irish people deserve to have clarity on the core Government objective in terms of the Irish bank debt. Certainly, if Spain is successful in securing approval for the ESM to directly recapitalise its banks, something in which I wish it well and which I hope it achieves, there is a compelling case for that to be applied to Ireland in order that equity would be applied across the European Union whereby what is given to one eurozone member is also given to another.

Perhaps the Minister of State could give Members a sense of the Government's objective because, during the referendum campaign, we were told it had nothing to do with bank debt and, immediately following the passing of the referendum, we were told the great result strengthened Ireland's case to get a better deal on the bank debt. What are we looking for? Are we looking for longer terms and cheaper interest rates or are we looking for a write-down in the amount owing?

John Perry (Sligo-North Leitrim, Fine Gael)
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The Taoiseach gave a comprehensive reply this morning. As he stated, it is a eurozone problem.

I do not doubt the capabilities of the Minister, Deputy Noonan. What he has achieved to date has been quite considerable. Deputy Michael McGrath must remember this is a legacy of the previous Government and which the current Administration inherited. The Deputy can be assured the interests of the people will be well served by the Taoiseach and the Minister, Deputy Noonan, who will be negotiating the best deal possible for the taxpayer.