Wednesday, 24 October 2012
European Council Meeting: Statements
I am pleased to brief the House on the outcome of last week's European Council meeting in Brussels on 18 and 19 October. I am happy to report that the outcome of the meeting was very positive from both an Irish and a European perspective. At the insistence of a number of member states, including Ireland, we explicitly reaffirmed the commitment we had made in June to break the link between banking and sovereign debt and to provide for the recapitalisation of banks by the ESM. This will be done in full respect of the decisions taken in June. We agreed that legislation on the establishment of a single supervisory mechanism for banks was a priority and that the legislative framework should be in place by 1 January 2013, with work on the operational implementation to take place during 2013. As a result, a firm timeline is now in place. The supervisor will be up and running next year and we are further down the path towards a functioning and effective banking union. The objective is clear, but it must be based on quality and competence.
I said last week when I briefed the House ahead of the meeting that progress on banking union - especially the single supervisor - was of pressing urgency, not just for Ireland but also for the euro area, and that it was a priority issue for me. Last week's decisions are, therefore, particularly welcome and significant. It will, of course, be important to maintain the pressure for implementation and delivery. There can be no slippage or drift, particularly in view of the fact that over 6,000 banks across the eurozone will be involved. Maintaining momentum is important to the European Union's credibility and this will be a key focus for me in the period ahead.
The main focus of discussions at our meeting last week was on strengthening economic union, with a particular focus on advancing towards banking union as an essential element of this work. At the beginning of the meeting we heard the report of the President of the European Parliament, Mr. Martin Schulz. President Van Rompuy presented his interim report, which is based on the four essential building blocks he identified in June, namely, an integrated financial framework, or so-called "banking union", an integrated budgetary framework, an integrated economic policy framework and democratic legitimacy and accountability. His report was well received and we agreed that he should continue with informal consultations with member states and the European Union's institutions before making his final report in December. This will include a specific and time-bound roadmap for the way ahead. It will also include specific proposals. As part of his work he will explore, in particular, the possibility of having fiscal capacity for the euro area which, in practice, is another term for a possible eurozone budget and potential contracts between member states and the EU institutions, perhaps covering the country-specific recommendations. While these are interesting ideas, we need considerably more detail before we can assess whether they might have a contribution to make. We will continue to engage in these consultations constructively and with an open mind.
On banking union, the European Council agreed that we need to move towards a more integrated framework but one that will be open, to the greatest possible extent, to all member states that wish to participate. A considerable amount of our discussion focused on how to ensure that outcome, which is a particular concern of those member states that are not, as yet, part of the euro. As I have said, we agreed to move forward on the single supervisory mechanism as a matter of priority, with the objective of agreeing on the legislative framework by 1 January. Work on implementation will then take place in the course of 2013. In this regard, we agreed that protecting the integrity of the Single Market was crucial.
On bank recapitalisation, we agreed that the eurogroup will draw up the exact operational criteria "in full respect" of the June euro area summit statement.
We restated the imperative need to break the vicious circle within banks and sovereigns and we reiterated that when an effective single supervisor is established, the ESM could have the possibility of recapitalising banks directly. As I have said, Ireland was part of a group of member states that insisted that reference be made to what was agreed in June to underscore that the commitments entered into at that time stand and that they will be fully respected in the work that lies ahead. At the meeting I raised the specific circumstances of this country and the need to fulfil the commitment to examine the sustainability of our programme as agreed in June. Our focus was on working through how the commitments on banking union in particular were to be advanced. However, as the House knows, I had a good conversation with Chancellor Merkel on Sunday evening in the wake of her comments about banks in Spain at her post-European Council press conference. I regret that some Members of the House and others chose to jump to the conclusion that these comments referred to Ireland, or that the June commitment with regard to Ireland was no longer valid. These comments were opportunistic and misguided and I hope that those who made them will use the opportunity of this debate to withdraw them. In my conversation with Chancellor Merkel, she registered a genuine appreciation of the steps the Irish people are taking to turn our economic situation around and her full support for our efforts to get back to the markets. Like us, she believes that a positive outcome for Ireland would be good news also for the euro area and the wider European Union. Her support is well expressed in the joint statement we issued after our conversation. It makes it clear that the commitments made to Ireland at the end of June stand, and that this vital work will be taken forward by the Minister for Finance, Deputy Noonan, and his colleagues in the eurogroup. The Chancellor was pleased to put on the record her recognition that Ireland is a special case and to state that this would be taken into account in the discussions ahead, within the mandate given to the Eurogroup.
I also had an excellent meeting with President Hollande in Paris on Monday. He, too, made his support for our case clear both in the meeting and in the subsequent press conference. He expressed in clear and welcome terms his appreciation for the special situation that Ireland faces - that we had moved early to put large amounts of money into our banks in the interests of wider stability in Europe's banks and our common currency - and the need for the Eurogroup of finance Ministers to take this into account as it works out the modalities of how to implement the commitments agreed by all leaders in June. This is the mandate given to the Eurogroup. These statements are a welcome reassurance that, in keeping with the June agreement, Ireland's particular situation will be addressed. As my colleagues in Government and I have said on many occasions, our goal is to secure the best possible deal for the people of Ireland, one that makes our debt more sustainable and our return to the markets more certain. We have agreement from our partners to work with us on this. The approach we are taking has yielded results and I am confident it will lead to a positive outcome. We appreciate that it will take careful and patient work, often behind the scenes and away from the glare of publicity. The negotiations are complex and sensitive and the stakes for our country are high. I will not say to the House that we will have a deal on our banking debt by a particular date, nor will I say how such a deal will be structured. The Government has always said that getting the right deal is better than getting a rushed deal. However, the very public acknowledgements by both Chancellor Merkel and President Hollande over recent days of our particular circumstances and the necessity for those circumstances to be fully taken into account as work is taken forward are, I believe, positive developments for Ireland and lend weight to the case we will continue to press.
The House will recall that in June we agreed the compact for growth and jobs. The compact provides a very useful framework for actions at national and EU levels, which are directed at returning the Union to sustainable and job-creating growth. I argued strongly for an emphasis on the growth and jobs agenda to match the necessary focus on structural reform and consolidation. We have always spoken up for a balanced approach and I indicated that this would be a priority issue for our forthcoming Presidency. In that context, I warmly welcomed the return of the leaders at last week's meeting to review implementation.
With the compact, as in other areas, it is imperative that what is agreed at the level of Heads of State and Government is actually implemented, and without undue delay. As I have said in this House previously, this is a matter of credibility for the European Union. What we agree must be implemented. I made this point clearly to my colleagues in Brussels last week, as did a number of other leaders.
I am glad to report to the House that considerable progress has been made in taking forward the various elements of the compact, but it was also made clear - including through presentations by President Van Rompuy, the Cypriot Presidency and President Barroso - that more needs to be done if it is to realise its full potential in boosting growth and achieving an environment for the creation of sustainable employment across the European Union.
In advance of this summit meeting, we sought to strengthen the language on the need to take further steps to see the Single Market - especially in the digital area - deliver the growth potential that I am certain it holds. We must complete work on the first set of measures under the Single Market Act - due to be agreed by the end of the year - while taking forward work on the second set of measures recently published by the Commission. This work will be an important component in our Presidency workload during the first half of 2013. Research and innovation, through the new programme, Horizon 2020, as well as through the new programme for competitiveness of enterprises and SMEs, will contribute significantly to converting research and innovation into competitive advantages from which European business can benefit, thus supporting European employment.
An area that I was keen to see properly recognised in our conclusions on the compact for growth and jobs was the potential of trade as a real engine of growth. As a trading nation, we know well the critical importance of trade to our economic well-being. Indeed, our recovery thus far has been export-led and I intend to do everything possible to see the Union's trade opportunities pursued vigorously. I am satisfied that the European Council called for progress over the coming months in progressing free trade agreements with Japan, Canada and Singapore. I am delighted that European leaders have committed the European Union to working towards the goal of launching negotiations on a comprehensive transatlantic trade and investment agreement during 2013. It will not be concluded in 2013 but it will tally very closely with the priority we will be giving to developing EU-US trade during the term of our Presidency next year. These efforts will include the hosting of an informal ministerial meeting here in Dublin on this theme during the spring. In truth, each aspect of the compact supports Ireland's vital national interest. We understand and appreciate that recovery in Ireland depends significantly on recovery in Europe. We now need to make a reality of the compact; yet again, we need to implement it and be seen to do so.
On Friday morning last, leaders had a good exchange on the EU's relations with its strategic partners, most notably China. This kind of discussion - especially one in which we are not trying to reach agreement on conclusions or on an outcome document - is especially valuable, as colleagues avail of the opportunity to share experiences with a genuine view to strengthening the Union's hand in our external engagements. There was a general sense that we need to do more to ensure our approach at bilateral level is consistent with that being pursued at EU level. This makes good sense. Our approach in engaging with China across the broad range of issues needs to be an open and constructive one. For my part, I shared with my colleagues our recent experience in our engagement with China, including the high-level visits in both directions. We look forward to developing our bilateral relations with China as well as advancing EU-China relations during our Presidency.
Before concluding our meeting on Friday, we also adopted a comprehensive set of conclusions on a range of foreign policy issues which are currently pressing. The European Council took stock of the deteriorating situation in Syria and endorsed the conclusions reached by EU Foreign Ministers, including the Tánaiste on behalf of Ireland, at the meeting of the Foreign Affairs Council in Luxembourg on 15 October. The High Representative of the Union for Foreign Affairs and Security Policy, Catherine Ashton, gave a detailed briefing to the meeting about persecution of religious minorities and other issues pertaining to Syria. With regard to Iran, we expressed our serious and deepening concerns about that country's nuclear programme. We reaffirmed our commitment to a dual-track approach of restrictive measures as well as efforts by the High Representative to engage Iran in meaningful and constructive discussions. The situation in Mali and the Sahel region was addressed, with the European Council expressing its serious concern at the continuing political, security and humanitarian crisis in that area. This matter was raised by President Hollande in his contribution.
Before concluding, I note that last week's European Council also adopted conclusions recognising the award to the European Union of the Nobel Peace Prize. I warmly welcome the award.
It is a reminder to us at a time of real challenge that earlier generations of Europeans came together to build, out of the rubble of the devastation caused by the Second World War, a new kind of community and union which would bind the states of Europe together for our common good and an area of peace and prosperity that our Continent has never before seen. This is a perspective we need to keep in mind as we deal with our difficulties today. Europe together and united has, in the past, overcome existential challenges. Similarly, we will see our way through this current crisis, working with our partners in a true spirit of co-operation and solidarity.
Europe is in the middle of the largest economic, social and political crisis since the Second World War. Last week, its leaders met and again failed to show the ambition or urgency that are so badly needed. No significant step forward was taken on a single matter. The final communiqué is a long repetition of statements that have been made previously, with a number of small exceptions representing areas where backward steps have been taken. The summit has been followed by near panic as the ongoing strategy of over-spinning everything and failing to undertake serious negotiations threatens to undo completely Ireland's interests. The rearguard action of recent days has done nothing to challenge the basic fact that the supposed campaign for debt relief for Ireland has been nothing of the sort.
Thankfully, the Taoiseach has finally put aside his partisan obsessions and shown a willingness to state publicly what he rejected previously, namely, that Ireland incurred significant debts solely as a result of the lack of European Union policies and because it showed solidarity with the rest of Europe. On Monday, he stated: "Ireland was the first and only county which had a European position imposed upon it, in the sense that there wasn't an opportunity if the Government wished to do it their way by burning bondholders." He is correct on this matter and it is a great pity it has taken him more than a year and a half to say this. Who knows how much he previously set back our case through his unwillingness to make this admission? Despite the Taoiseach's spin, the truth has become obvious. A policy of sitting on the sidelines and hoping something will turn up and failing to speak to people before summits or even state his specific negotiating objective does not amount to a campaign.
The Taoiseach stated the summit agreed to implement fully the deal agreed in June. In fact, it stepped back from the June deal. He did not outline in any specific way what the deal means because he does not know what it is and there is no agreement among member states as to what exactly it means. While it was important and is full of general commitments to actions which are badly needed, nearly every element of the specifics remains to be agreed. This is the reason there have been months of confusion.
It is rich for the Taoiseach to blame the Opposition for the events of last Thursday, Friday and the weekend. It was Chancellor Merkel's comments after the summit that created considerable doubt.
The Taoiseach raised this issue when he asked members of the Opposition to withdraw comments they made. I was reasonable on Thursday and Friday last when I sought clarification on Chancellor Merkel's comments. However, it was the Chancellor's officials who confirmed that her comments applied to Ireland and nothing she has said since in any way contradicts that view. She has not said her comments in the aftermath of the summit did not apply to Ireland.
Germany, the Netherlands and Finland have a fundamental problem with the European Stability Mechanism retroactively or retrospectively financing debt.
Before discussing the detail of what Ireland should be seeking, we should note that it is factually untrue for the Taoiseach to state the June deal has been reaffirmed in full. The summit conclusions involve two significant dilutions of the deal. It was agreed in June that the new supervisory regime for banks would be in place by 1 January 2013. Last week, however, it was agreed only that a legislative framework would be agreed by 1 January next and implementation would take place during 2013. It was also reiterated that ESM money will not be made available for bank debts until the new system is fully up and running. This will delay significantly even the possibility that the European Stability Mechanism will fund Spanish and Irish bank debt. This development could have a major impact on the costs faced by Ireland when we return fully to the sovereign debt market.
The Taoiseach should not pretend that everything is on track when that is not the case. Implementation of the June deal has been delayed by up to a year. The summit also stepped back on the issue of a common bank resolution regime and deposit insurance. These measures will be essential if banks in all parts of the European Union are to see a restoration of confidence and bank lending is to be rebuilt. It was understood in June that a common regime was to be proposed. Last week, the common regime was reduced to merely a harmonisation of national policies, a major step back from one of the most important parts of a banking union.
Chancellor Merkel states at a press conference that historical bank debt would not be covered by the European Stability Mechanism. She is fully entitled to state this is her understanding of the position given that the deal is so vague. Nothing in Sunday's rushed statement has seen her or Germany back off this basic statement. We know Germany likes and admires Ireland and recognises that we are in a unique position. We also know the German Finance Minister, Wolfgang Schäuble, will come to Ireland on Monday and make nice, pleasant comments about us. However, we do not know what Germany and other countries will agree in terms of the contents of the banking union or European Stability Mechanism.
In June it was agreed that something should be done. Since then, the deadline for doing something has been moved back and we are no wiser as to what exactly is this "something". Too much damage has been done in recent years by leaders systematically exaggerating agreements. This practice needs to stop. A good start would be if the Taoiseach were to put aside the empty formulas and casual exaggerated claims which fill his statements on Europe and started to be open. Since it became obvious last July that he is reluctant to engage in the type of diplomatic activity undertaken by other prime ministers or his predecessors, I have tackled him on the issue. Day after day he informed the House that everything was fine and was being left to others. Last week, we saw the outcome of this approach when the Germans briefed that they would not be accountable for his Government's spin.
There is also clear evidence that a solid core is not engaging with Ireland's case. The Tánaiste told us he was certain the game had been changed in June, even though he left the meeting early and was not involved in the deal. In a final show of the Government's effort to shore up its flanks, the Minister for Communications, Energy and Natural Resources, Deputy Rabbitte, was sent out to do what he does best, namely, attack everyone else.
The briefings after Sunday's telephone call and Monday's 45 minute meeting in Paris were typically euphoric, with advisers doing the rounds and speaking of a great victory, incredible personal chemistry and games being changed once again. Given the history of massive over-claim about every small diplomatic encounter, there is no reason to believe any of this until the Taoiseach is honest enough to state what he has sought. The basic point is that Ireland is seeking the assistance of the European Union to make its debts more sustainable. What does the Government believe this means? What is its definition of "debt sustainability"? Surely this should be at the centre of every financial plan and budget measure.
In the past 18 months, the Taoiseach has delivered many speeches praising himself for turning everything around and delivering us on the fast track to sorting everything out. Unless he has been telling the House untruths during Question Time and statements, this has been his message at every summit and meeting with a foreign leader. European leaders hearing this would surely be forgiven for believing the Government considers our debt to be sustainable as currently structured. Let us remember that what is being discussed is sustainability rather than simply making things easier.
The Government has made a series of contradictory statements over the past 18 months as to what are its core objectives. The Minister for Finance, Deputy Noonan, originally stated the main concern was the interest rate on the promissory note. When it was pointed out that this was returned to the Government through the Central Bank, he moved on and announced in Washington that he would burn many more bondholders. We were then told it was not the bondholders that mattered but the interest rate on EU loans. When we secured a reduction of four times what we were seeking as a result of Greece's requirements, the Government announced victory and returned to discussing the promissory notes.
Does the Taoiseach remember the much heralded technical paper? That never appeared, and briefings stopped on our supposed promissory notes campaign. In June, Spain and Italy refused to let a summit finish without a deal on their funding needs. Ireland had done such little preparation and expected so little, the Tánaiste went home early. The statement that our debt sustainability would be examined and that we would be treated equally was and remains welcome. What was and remains a major error was the failure to do the advance work to get an understanding of what that meant.
In the case of Spain, it is clear what it wants. It wants the ESM to recapitalise its banks to an amount of over €50 billion and to take the associated risk. That is known to everybody. It is also clear what Italy wants. It wants the ESM to be open to purchasing its sovereign bonds to reduce interest rates. That is known to everyone.
What is Ireland looking for?
Our situation is different from that of Spain, and not just because, as the Taoiseach finally admitted on Monday and it is worth repeating because of its significance, "Ireland was the first and only country which had a European position imposed upon it in the sense that there was not the opportunity, if the Government so wished, to do it their way by burning bondholders."
That was the first time he had put that on the record.
Are we looking for the ESM to buy our stakes in AIB and Bank of Ireland? Are we looking for the ESM to finance our repayment of the promissory notes? Are we examining all parts of bank-related debt or just the bank shares? What is the Government's definition of "sustainability"? Unlike Spain, we are not looking for extra capital to be put into our banks. They have enough capital; they have been recapitalised. It is arguable that they are perhaps among the best capitalised in the international system because of the State's investment. The book value of the State's capital in the banks is just over €29 billion. The ESM purchasing that from us would be done only at current market prices. Given that the investment is booked as an asset in our net debt figures, selling it would either have no impact on our net debt or it would make it worse by forcing us to book a loss at close to the bottom of the market. Money saved in interest payments might be significant, but there is no indication whatsoever how much is involved or the technicalities of that.
Unlike the Spanish Government our Government has failed to provide even the most basic information on what is being discussed or its implications. Regarding the promissory notes, it is my understanding that at a minimum those countries involved in the Helsinki statement believe that this is a matter purely between Ireland and the European Central Bank. They do not believe it is a legitimate use of the ESM and they do not believe that there is any legitimate expectation on this front contained in June's deal.
On a number of occasions recently, the Taoiseach has deliberately misquoted me in exchanges here. He did so again yesterday with his claim that I said it would be easy to get the European Central Bank, ECB, to restructure the promissory note.
No. You have an awful habit, Taoiseach, of deliberately misleading on what other people say. I said they could be restructured easily if the ECB agreed, which is a factually accurate statement. The fact that Mario Draghi and others are opposed to the restructuring is clear. What is not clear is the Government strategy for dealing with it.
When the 2012 promissory payment was converted into a sovereign bond financed by Bank of Ireland, the Government claimed it was a huge step forward. It was nothing of the sort. It converted a note whose interest was returned to the State into a long-term bond requiring interest payments.
Ireland does not want the ESM involved in re-financing the promissory notes. At the very least it wants the terms of the notes extended significantly. In light of what even the Taoiseach now admits were the unique circumstances faced by Ireland, which obliged the creation of the promissory notes, significant relief from these payments is the minimum we should be demanding.
The summit's other conclusions contain a long list of items which add up to very little progress. Regarding the future of the Economic and Monetary Union, EMU, a negotiating framework will be agreed in December by which time it is hoped the Taoiseach will finally have outlined Ireland's position for the future of the EMU.
In discussing measures to encourage growth, the summit produced a lot of high talk but little substance. None of the measures involved allow a stimulus which is in any way in proportion to the crisis being faced in many parts of the Union today.
Regarding the European Investment Bank, the expansion of its capital base is welcome. The fact that much of the potential new lending will go directly onto country's debt figures means it is of limited potential benefit. However, it would be welcome if the Taoiseach and the Minister for Finance outlined what Ireland is proposing to do to benefit from a share of the potential €60 billion in extra investment over the next three years.
This was a summit which mainly reiterated a general deal made in June but stepped back on a number of important areas. Uncertainty as to what exactly has been agreed remains, no matter what the Taoiseach and his press operation says and spins. When the new system comes into operation what will be the benefit to Ireland is unknown. Amazingly, what is also unknown is exactly what Ireland is asking for.
I suggest it is time to put aside the generalities and the constant over-claiming of every development. Now that we have a consistent story from the Government on the unique circumstances which mean Ireland should be helped, it must state clearly what it is looking for. What is the sustainable level of debt and what European assistance are we looking for?
Yes. Yet another summit has come and gone and our debt remains intact and the economic distress and social disadvantage of many of our citizens increases on a daily basis. I know the negotiations are ongoing, they have yet to conclude, and there will be ups and downs during that process. Sinn Féin's position is to support the Government's efforts, but that includes being critical in a constructive way when that is appropriate.
The fatal flaw in the Government's approach to these negotiations is that it has never had a clear strategy regarding the bank debt. It has never acknowledged that this debt cannot be paid. Last January, when I challenged the Taoiseach about the payment of Anglo bondholders, he berated me by saying that we will not have "defaulter" written on our foreheads, we will pay our way, we have never looked for a debt write-down. He moved at that time to reassure the markets and our friends in the European Union that Irish citizens, irrespective of the human price and the social consequences, would pay the banking debt.
The Minister of State, Deputy Hayes, has a different position. He accepted last week that the current debt position is untenable. Yesterday, the Taoiseach pointedly refused to endorse the Minister of State's view and that of the Minister, Deputy Quinn. Why? Those colleagues have simply stated what everyone knows to be the reality. Why does the Taoiseach not acknowledge this reality? How does he expect to secure the maximum write-down on bank debt or achieve a deal on the legacy debt if he keeps saying that the State can pay its way?
In June, the Taoiseach sat back and hoped that the leaders of Spain and Italy would negotiate a deal from which this State would benefit. That is fair enough, but when an agreement was reached the Government over-sold it and claimed that a deal had been done on Irish legacy bank debt. The Taoiseach said it was a seismic shift. The Tánaiste said it was a game changer. The Tánaiste went even further and claimed that a deal on legacy debt would be concluded by October, as did the Minister for Finance. Irish legacy debt was not even mentioned in the June statement.
It is important that the Taoiseach takes the opportunity today to acknowledge the blindingly obvious, namely, that no deal was done and this debt is not payable. I gave him that opportunity yesterday. He stayed silent. I invite him again to clarify that today. He now says that he supports the separation of bank debt from sovereign debt. That contradicts what he has said previously but it is good that he has changed his position, and I welcome that, but he must deliver on it. There is no point in just saying it; he must follow through on it.
Throughout this process the Government has promised much but delivered little. Three months after the June summit we still do not have a commitment that the burden of legacy banking debt will be lifted from Irish citizens. The debate has been reduced to dictionary definitions of "special" and "unique" amid conflicting spins from Government sources in three states.
In addition, there is still no progress on the promissory note payments. Two payments totalling €6.2 billion will fall due next March because of the smoke and mirrors manoeuvre cooked up by the Minister for Finance last March. That is €6.2 billion of taxpayers' money, and twice what he will take from December's budget, going into a toxic criminal bank.
At our recent engagements with the troika, it said there was no indication of any imminent deal on the promissory note. What is the real timeline for this process? Of the €67 billion borrowed from the troika, €64 billion has been given to the banks. The Government, despite its pre-election commitment that not another red cent would go to the banks, has already paid them €20 billion.
The Taoiseach’s primary objective must be to remove this debt from the shoulders of Irish citizens, not to make it more sustainable. I am aware of a case of an 80 year old partially sighted woman living outside Drogheda who recently had a hip replacement operation and, subsequently, has limited mobility. The Health Service Executive allocated her a home-help package of 30 minutes a week. The director of Older and Bolder has warned that the Government’s cuts will devastate the prospect of safe and healthy aging at home and actually contradict Government policy of supporting people to age safely at home.
These measures are not the only ones hurting citizens. We have had a succession of punitive measures that reduce wages, child benefit payments, disability payments and social welfare. There have been attacks on social provisions for carers, older citizens and even the blind. An additional range of stealth taxes, including the household charge, the universal social charge, VAT increases, septic tank charges and more, have eaten dramatically into the incomes of families. Yet, at the beginning of this month, the Government paid €1 billion to unsecured bondholders in AIB.
It is little wonder that the banks fail to live up to their social responsibilities. Why should they when the Government keeps rewarding bad behaviour? We need the Taoiseach to be strong on these issues, to go beyond rhetoric and negotiate in a robust way. Sinn Féin wants the Government to succeed as we believe this is beyond party politics and the advice we offer is given in good faith. We firmly believe in our suggestions; they are not point scoring. This has to be about removing a bank debt which will allow the State to grow its way out of the economic crisis. Our inability to pay this private banking debt gives the Taoiseach considerable leverage by the simple fact that this debt is not payable. We cannot afford it and we ask the Taoiseach to make this clear. He must position his negotiating strategy and tactics on that reality.
I must also record my concern at the EU’s failure thus far to respond adequately to the humanitarian crisis in Mali and the Sahel region. More needs to be done. The EU, with its considerable resources, has a clear duty to assist citizens in that region.
Last week, before the European Council meeting, I asked the Taoiseach, on behalf of the Irish people, to try his hardest to ensure he got a deal which would solve our unsustainable debt crisis. A week later, the summit has come and gone but no deal has been made to solve the crisis facing people across Europe. At last week’s summit, behind all the spin, doublespeak, mixed messages, confusion and German mood changes, the fact remains the Taoiseach and his negotiators failed to deliver a deal for Ireland on debt as well as the overriding political necessity of separating sovereign and private debt. Many commentators have suggested the Taoiseach did not even succeed in getting it on the agenda for negotiation.
An information gap now exists following that meeting. Uncertainty will undermine confidence and lead directly to an increase in the cost of borrowing. Will the Taoiseach accept there is more uncertainty following the summit than prior to it? Time is not on our side. We have a debt timebomb ticking away. More than €6 billion is due to be paid on a promissory note next March - €3.1 billion to Anglo and €3.1 billion to Bank of Ireland for the one-year bond used to cover a 2012 promissory note payment. Would the Taoiseach describe the summit’s outcome, including the mixed messages, as adding to any certainty or confidence in the markets which we are proposing to go back to in 2014?
All we seem to have learned since the actual summit is that the German and French Governments have agreed that Ireland is a special case. What does that mean?
Are we supposed to say “Yippee”? Will it be a great relief to anyone struggling with a mortgage, trying to get a job, pay bills or just trying to get through the week? Well-meaning statements from Europe and its leaders without actions mean nothing. There is some suggestion Ireland may be treated differently with the European Stability Mechanism. I do not believe that can happen. Could a special deal be done on the promissory note? What everyone wants to know is will there be deal on legacy debt, when will that deal be struck and what will be the scale of recapitalisation into the pillar banks.
Much was made of the deal done at the European Council summit in June. People spoke about a seismic shift and game-changer in EU policy. We were told a deal was done and dusted and would be signed off by October, almost certainly before the budget. We are no closer to confirming a deal on our legacy debt than last June. In fact, the situation is less certain than the Government claimed in June. The whispered words of support are the pat on the back outside meetings. What seems to be happening is there is growing opposition to a deal on legacy debt. Merkel has her elections in autumn and we have our €6 billion plus mountain to climb or fall of in March. Yet, the Taoiseach still claims the June deal stands. If that is the case, why will other EU leaders not clearly state this?
It is not clear what they have stated. Olli Rehn predicted a deal on Ireland’s banking debt would be concluded before the end of October. He got it wrong. Backsliding by other EU countries since June means that not a single element in the agreement has moved closer to implementation. We know ordinary people are struggling across Europe. Governments and their leaders are failing these people through their inability to deliver a deal on this mountain of debt. Just this week, the Irish League of Credit Unions pointed out that 1.3 million adults have only €50 left to spend after paying essential bills each month yet €20 billion has been given to the banks under the Government’s watch. Does Merkel appreciate the sacrifices Irish people have made to save German bondholders?
The Government’s procrastination over securing a deal on our debt is hurting ordinary families and households. It is not just an Irish problem now as it affects the whole of Europe. The most important job for the Government is to ensure private banking debt does not continue to impoverish more and more Irish taxpayers.
We need a deal on debt soon, rather than rhetoric or unclear statements from European Union leaders. We need a real deal that will make a difference to struggling families throughout the State. I am keen to see the best deal delivered for the people. As I said last week, many Irish people believe that we do not have the best negotiators on our side. People have said to me that this is among their concerns. The "softly, softly" strategy we have adopted is not delivering for Ireland. The Irish national debt combined with the level of personal debt is unsustainable. A constituency colleague of mine, the Minister of State at the Department of Finance, Deputy Hayes, reiterated this point on "Prime Time". We need a deal on debt and we need certainty on whatever will be in the deal. We cannot afford to wait until March for clarity on any deal. That is my message and my view although perhaps others will disagree with it.
I wish to share time with Deputies Donnelly, Healy and Collins in equal parts. There are some encouraging aspects to what has occurred in recent days in Europe, especially from Ireland's point of view. We learned belatedly that the Taoiseach has access to Angela Merkel and to the Élysée Palace and, therefore, that he has the ear of the most influential people in Europe. That was welcome but it appears he has access to Angela Merkel only in dire situations. She is the most powerful person in Europe.
It concerns me that whatever was achieved in that telephone conversation - we have no idea what this was and we will not be told - it is perfectly apparent that Ireland has now become a victim of internal German politics. If a hard line is being taken by the German nation as a result of the elections coming up there next year - this is what everyone on this side of the House appears to believe - then we must dance to the German agenda for almost another year but that is unacceptable. The Taoiseach ought to rethink his policy if that is the case. There is no guarantee that an election in Germany will let us off and whoever wins there is no guarantee that they will take a softer line afterwards. The Taoiseach and other Members are aware that there are some hardline political forces, especially in Bavaria, and that Angela Merkel is dancing to the Bavarian tune. By proxy, we will be dancing to the Bavarian tune as well.
Whatever the Taoiseach has achieved in the great diplomatic initiative he has taken in the past week we do not know, but at least he should address a dual policy. We are entitled to know more about what happened in that conversation and I will explain why. The communiqué issued was full of words that would make Alice from Alice's Adventures in Wonderland blush. I am unsure of the meaning of "unique" in this context. One could use that word and subsequently say one has said nothing. I am unsure of the meaning of the word "special" in this context as well. Similarly, one could use that word and then claim that one did not say this, that or the other. It is a neutral word. Spain was a special case as were Portugal and Greece and undoubtedly Ireland is a special case, but is Ireland an exception? Will Ireland be picked out and informed that we will be helped in a different way from the others? That is what we need.
As other speakers have noted the Government is coming around to the conclusion that this debt cannot be paid back. If the Minister of State, Deputy Brian Hayes, and the Minister for Education and Skills, Deputy Ruairí Quinn said as much, presumably the Taoiseach has not admonished them for it.
If the debts cannot be paid back then we will have to ask in another such telephone call whether they will give us a reprieve on legacy debt. That is a yes or no question. Otherwise we must take the course of action often so eloquently proposed from here, that is, simply to say we will park the debt associated with the promissory notes and we will not pay on 31 March. That would give them five months, time enough to consider and focus their minds on the fact that we are not doing it nor will we be honouring what are supposedly our obligations to the bondholders. It could be a two-tier project. We could go one way or the Taoiseach could pursue his thus far fruitless diplomatic efforts, which may bear fruit, while at the same time pursuing a policy of not repaying the bondholders or Anglo Irish Bank's promissory notes.
There are three things to which I would like to draw the attention of the Taoiseach, the Tánaiste and the House. First, the amount of money at stake; second, the amount of that sum that this nation needs back to set us up for recovery; and third, a concern of mine, the danger of limited success. I will begin with the amount of money at stake. We have all referred to the €64 billion. We know it is made up of a little more than €30 billion for the promissory notes and €33.5 billion for the remainder in terms of capitalisation. A third amount is €17 billion on interest on the promissory notes. The logic we have heard is that we need not count this sum because we are paying it into the Irish Bank Resolution Corporation, IBRC, which we own. Anyway, I have tried to get reassurance and certainty from the Minister that this money will be left in the account when the IBRC's liabilities are discharged. The message I have heard back is that this figure cannot be calculated. It is possible that an additional €18 billion in interest could be added to the €64 billion sum on which we are agreed. It is possible that when IBRC's liabilities are fully discharged that money will not be there. This would bring the total cost of the bank recapitalisation to more than €80 billion. I wish to draw the attention of the House to that. It may end up being a good deal more than the €64 billion.
How much do we need back? Obviously, we would all like the full €64 billion or €80 billion back and I appreciate the Taoiseach is doing what he can to get as much of that back for the country as possible. The figures suggest that we need it all back. Our debt to GDP ratio next year will be 120%. More concerning, our debt to GNP ratio, a more suitable ratio for Ireland, for reasons relating to arrangements for multinational corporations, will be 150%. The literature suggests that an unsustainable rate kicks in somewhere between 80% and 120%. This depends on a range of factors. We are a modern sophisticated economy suggesting our tolerance for debt is higher than that of a transition economy. However, according to some reports when one factors in our household and corporate debt we are the most indebted nation on earth. Our tolerance for higher national debt arguably is a good deal lower by that measure.
Let us be as optimistic as possible. Our target could be a debt to GNP ratio of 80%. That would require a reduction in the debt of €95 billion. Obviously, we will not get that and I would never expect the Taoiseach to be able to secure that, but it sizes the amount we must reduce our national debt by to get back to sustainability. Let us consider the debt to GDP ratio. An 80% debt to GDP ratio is just about doable. This would require a return of approximately €64 billion.
This brings me to the danger of limited success. I passionately wish the Taoiseach the best of luck and support. I do not always agree with his approach but I hope the approach he is taking is the most successful one for the country. However, I remain concerned about limited success. Let us suppose the Taoiseach managed to get back €20 billion through the promissory notes or the ESM or another mechanism. There is a danger that we will get just enough to just about continue to service the debt, but at the cost of stagnation.
I use the analogy of a family renegotiating a mortgage with the bank. We know what the banks are doing at the moment. They claim they are restructuring and they are moving people onto interest-only mortgages.
They may be looking at smaller capital repayments. What the banks are really doing is extracting every last penny they can get from the borrowers. They are not trying to put them on a sustainable path. I merely suggest to the Taoiseach, although it may sound slightly counter-intuitive, that we may be better off getting nothing and being forced into a unilateral action where we must impose a writedown to a sustainable level rather than getting just enough that it keeps us ticking along on the interest but, ultimately, we are stagnant.
I wish the Taoiseach and the Tánaiste luck. I welcome the comments of the Minister of State at the Department of Finance, Deputy Brian Hayes, and the Minister for Education and Skills, Deputy Quinn, and I hope it is the beginning of a robust approach from the Government.
The past week has read like a "Lanigan's Ball" farce between Chancellor Merkel and the Taoiseach. The Government has failed in its request for relief from the burden of public debt arising from recapitalisation of the banks and the honouring of promissory notes to Anglo Irish Bank. Chancellor Merkel, after the EU summit, ruled out legacy recapitalisation by the European Stability Mechanism, and German officials insist, while vowing to look at improving Ireland's EU-ECB sustainability programme, that it carries no obligation or deadline for action and no link to EU banking regulation or bank recapitalisation.
The first clarification, issued by the Chancellor on Saturday last, is meaningless, that Germany will support Ireland in achieving debt sustainability. Of course, Germany would already claim to be doing so. There is no commitment to retrospective recapitalisation of surviving Irish banks or to reducing the promissory note payments in the clarification.
The second clarification contained in the joint communiqué, issued by the Taoiseach and the Chancellor on Sunday evening, contained no retraction of the original Merkel position whatsoever. The two leaders reaffirmed the commitment of 29 June to task the euro group to "examine the situation of the Irish financial sector with a view to further improving the sustainability of the well-performing adjustment programme." They recognised that "Ireland is a special case", but no firm commitment to do anything except to examine the Irish financial sector was included. Unbelievably, yesterday another German official, Mr. Steffen Seibert stated that Ireland does not have "special status"; it has something called "special circumstances".
As I stated, if the situation were not so serious these exchanges would be in the nature of a "Lanigan's Ball" type farce. It is quite clear that Merkel's clarifications are all plámas chun dalamullóg a chuir ar muintir na hÉireann. It is time to stop the repayments and to play hardball.
Mr. Martin Wolf, a respected economic commentator with the Financial Times, in June last, wrote:
Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events.We could not have a better description of the crisis that we are facing in the eurozone, now in its fifth year. At the heart of the crisis is a simple fact, that we do not know whether the eurozone's most powerful economy, Germany, is really prepared to do whatever is necessary to save the euro. We do not know whether it is prepared to take the risk of pushing Greece out. We do not know whether it regards Ireland as a special case because we do not know what "special" means. What we know is that a recession flowing from a financial crash can easily turn into a depression.
The euphoria, the frenzy of lending and borrowing, and the mad speculative risk-taking that takes place on the way up in this bubble are now replaced by their opposite after the crash. There is fear, massive de-leveraging, a refusal to lend, collapse in demand, collapse in investment, hoarding of capital and capital flows to safe havens throughout the world. Some $32 trillion are heading into the Cayman Islands and Switzerland, with a potential $280 billion worth of tax-take into revenue.
The only way to contain such depression is to increase State spending to offset private sector de-leveraging. What the eurozone needs is less austerity, expansionary monetary policies, stronger German demand, some inflation and collective backing of the financial system and some sort of euro bonds. What I speak about are measures which we know, from the 1930s and, indeed, from this crisis, are necessary to contain a depression in capitalism. I am not even talking about a solution to the fundamental contradictions contained within the system. Even if the measures required to limit the damage of the crisis are beyond the European elite, the eurozone is on a journey of a break-up that Germany shows little will to alter unless there is a change in policy direction, in tack and in targeting what needs to be done, that is, the creation of jobs.
The Taoiseach made a point about his conversation with Chancellor Merkel, that she registered a genuine appreciation of the steps the Irish people are taking to turn our economic situation around. The IMF says austerity is not working. In that regard, therefore, we are talking about crashing our economy. We have her full support for our efforts to get back to markets, but at what cost? It is at the cost to our citizens. I have made this point already in the Dáil. We have been cut to the bone. The Government is now chasing after the marrow, which is probably not there. We cannot take anymore. We must go the European Union and state we cannot pay this debt.
I thank the Taoiseach.
My fundamental question is as follows: What, in essence, is the Taoiseach's definition of debt sustainability for Ireland and could he explain to the House exactly what he is looking for in the negotiations in the context of the euro group and the euro summits? According to the Taoiseach, Ireland is unique. I accept that because it had the European position imposed upon it which resulted in the sovereign having to take on the debts of all the banks. Those specific circumstances, we are now told, are what the eurozone Finance Ministers will taken into account when considering Ireland's case while negotiating the role of the ESM in supporting banks. In simple terms, given that our banks are recapitalised, is the State looking to sell its stake in the banks to the ESM, is the Taoiseach insisting, if we are to go down that route, that this will be done at the price at which they were taken onto the books of the State, that is, a book value of approximately €29.4 billion, and has he examined the wider implications of what it would mean for the Irish economy to have the banks in the hands of the ESM?
On the promissory note, the funding cost is quite low as the Central Bank effectively borrows the money it lends to IRBC from the European Central Bank at a very low interest rate. Obviously, the cost is the capital payment that we make because we must borrow that money on the open market at the prevailing rate. The Holy Grail would be to kick it out over an extended period at a very low interest rate. Is the Government demanding, in the absence of a specific write-down - the Taoiseach might clarify that he is not looking for a write-down - an extended period of time to pay the debt at a low interest rate? My party would argue that it could be in the form of a zero coupon bullet bond over 40 years. Is that what the Taoiseach is looking for? Would he answer those two questions succinctly?
The Minister and the officials from the Department of Finance are involved in detailed discussions with the ECB about the promissory note. There are a range of issues on which they have been working and they are progressing those discussions with the ECB.
The question of debt sustainability is always difficult. We have made the case clearly to the European Council.
It has been accepted that Ireland is in a different position from other countries in that our banks have been recapitalised. I do not want to go back over the decisions taken by the previous Administration.
I believe Deputy Martin's party could have taken a different route in dealing with the issues. However, that is history and there is now a €64 billion imposition on the Irish people. The decision of the Council in June was to break the link between sovereign and bank debt. Everybody is clear on that. The decision of last Thursday and Friday was to put flesh on that by saying that we must have a date for the putting in place of the legal framework because we cannot do anything until we have that in place.
The mandate given to the Finance Ministers and the Eurogroup is to go through the process by which that will happen and then to set down the conditions that will apply. The ECB, as a central supervisory authority here, will have to do a mountain of work in terms of systems, personnel and all of the questions that need to be asked and answered about the process and how it will actually work. The decision in June was that once the banking union and the supervisory mechanisms are in place, bank recapitalisation can follow. All of those areas and all of the legitimate questions that Deputies asked here are part of the discussions and negotiations that will take place at finance minister level from now until this becomes a reality.
What do we want for Ireland? Deputy Donnelly gave a range of figures which are already in the public domain. We want to get the very best deal for the country and for our people. It is not possible to put a figure on that. Clearly, this will emerge during the course of detailed discussions and negotiations. We want the very best deal we can get and I am sure that everyone, no matter what his or her political affiliations, wants the same. We must try to get the maximum we can. However, as Deputies are well aware, when one is sitting around the table with 26 others, a wide range of views and very strong opinions are expressed. It is important that when the banking union and supervisory authority are set up, they work effectively and to a high standard. This is a major undertaking and we must get it right.
Do I consider that this debt is sustainable? I consider that it is very unfair on our people, who have been meeting the demands upon them for some time. In terms of the sovereign and bank debt, what we are trying to do is ensure that the mandate given to the Eurogroup works itself through to the putting in place of the legal framework and then that the conditions, modalities, organisation and mechanics of how this new banking regime will work are agreed. All of those questions are on the table for discussion and negotiation.
That is part of a whole range of areas that are under discussion. The promissory note issue is being pursued very diligently with the ECB and the possibilities that exist there are all being discussed.
As others have said, I do not know what happened in the Taoiseach's conversation with Angela Merkel and I certainly do not know exactly what "special" means. Special could mean better treatment or it could mean basket-case, as is the case with Greece and the impact of troika policies on that country. It would be helpful if the Taoiseach could tell us what he thinks "special" means in terms of treatment and what he is asking for. What, precisely, are we asking for? If we are not asking for debt write down, then it is difficult to see how any special treatment is going to alleviate the burden on ordinary people or do anything other than produce long-term stagnation, if not depression. We do not know what Angela Merkel means by "special" so I ask the Taoiseach to tell us what he means by that term.
If we cannot get clarity on whether we are going to get debt relief, I ask the Taoiseach to consider an alternative strategy. As of September 2013, we will have a primary budget surplus. As of that point next year, the deficit will be entirely composed of interest on debt. That gives us leverage because at that point we can be self-sustaining. Let us tell Angela Merkel that if she does not give us a deal by the middle of next year that makes our debt sustainable, we will not pay back the money because the debt interest will cripple us. We will be in a position to do that because at that point we will not be spending more than we are taking in in tax revenue and we will be able to manage. Let us use that leverage and tell Angela Merkel that she has a deadline, after which we cannot be nice anymore because it is killing us.
The reason Ireland is a special case and is recognised as such is that our banks have been recapitalised. Therefore, the assistance to be given is of a different nature from that for other countries which have not yet sought assistance. The fact is that the communiqué issued by myself and the German Chancellor recognises our unique circumstances and against that background, the special case that Ireland is recognised as having will be taken into account in the negotiations and discussions by the Eurogroup. No other country finds itself in these particular circumstances and that is what is special about the Irish case. It is not a special status, but a special case because of the background and the unique circumstances. The outcome of the meeting last Thursday and Friday clarified again, in the communiqué and in the press conference by President Hollande, that Ireland's special case will be taken into account when the Eurogroup goes through its negotiations and discussions. Out of that, what we want to get is the very best, maximum benefit that we can.
I wish to make a few remarks about this word "special". The joint communiqué with Angela Merkel was a very necessary piece of damage limitation, required because of what she had said and the interpretation thereof. Let us not over-egg that though, because it was full of the language of diplomacy, of constructive ambiguity, of fudge. I may be able to help Teachta Boyd Barrett with his question. I was, a number of times in my life, treated in a very special way. I had special status. Now, the problem for me was that I was in a prison ship in Belfast Lough, without charge or trial, held below deck with other internees for a very long time. In another period of my life, I was in the H-Blocks and cages of Long Kesh and in Belfast Prison and again, I had what was defined as special category status, but I was incarcerated without proper charge or trial. I just offer that up as a little light relief in these straitened times.
I hope that does not phase the Tánaiste in the time ahead. I am sorry that the Taoiseach had to leave. That is not a complaint - I simply wanted to make a point to him. When he was asked if he thought our debt was sustainable, he said that it was unfair. I have been arguing, as has my party, that the Government has a very strong hand to play here. In our weakness, we have strength. The strongest hand we have to play is that we cannot afford this. We cannot afford to pay because the social consequences, as the leader of the Labour Party should know, that citizens have to bear are simply too much. Why on earth should we put our people back decades in their social advancement and increase their economic distress just to pay off the greed caused by private banks, corrupt politicians and golden circles?
Why should we do that? We are able to argue from a strong and truthful position. In the absence of the Taoiseach, and mindful of what the Minister for Education and Skills said, I ask the Tánaiste if he thinks this debt is affordable. Is it preferable to go through these interrogations and proceedings until a more senior Minister says it is not tenable?
I acknowledge the negotiations are ongoing and that there will be ups and downs and twists and turns but how can it be claimed that the legacy debt will be sorted out by October when the word "legacy" was not even mentioned in the June statement? I invite the Tánaiste to take this opportunity to acknowledge that private banking debt is not affordable and that the legacy debt is unlikely to be sorted out by the end of October.
I will take less than two minutes and will be quicker than everyone else. I commend the Government on strengthening our relationship with France.
Various proposals have been made on eurozone bonds, banking unions, EU wide infrastructure spending and common programmes but all have been greeted with deep suspicion in Berlin. The Germans suspect that the bottom line on these ideas is a desire to get German taxpayers to subsidise other Europeans. However, Germany's counter proposal that the budgets of EU nations should be subject to control by the European Commission is dismissed as an infringement on national sovereignty. In the post-war years we have seen a more European Germany develop but a more German Europe now appears to be emerging. The price of Germany's financial assistance will increasingly be our acceptance of rules and laws designed in Berlin. Does the Tánaiste believe we are looking at further loss of sovereignty over the coming years?
I will be quicker than the rest of them. The real seismic shift this week was the admission that our debt is unsustainable. It is good news for the relatives when an alcoholic admits his or her problem because they can finally do something about it. However, if the alcoholic hangs around with others who refuse to admit they have a problem he or she will go back on the booze. Deputy Donnelly eloquently explained what sustainability requires. It is difficult to disagree with him unless one wants to spin a story.
The Taoiseach has not answered a question since I was elected to this House. That is why I am happy I did not get an opportunity to put my questions to him this morning. Perhaps the Tánaiste will answer my question by explaining what he believes is sustainable when it comes to our debt. If our debt is not written down to a sustainable level, what is the next plan?
Deputy Adams invited me down memory lane. I recall that when the Deputy was involved in complex and long lasting negotiations he described those who claimed the negotiations would not be successful as naysayers. That is a phrase which could describe his attitude to the current negotiations. We should consider what has already been achieved. In June a decision was taken to separate bank and sovereign debt. Twelve months earlier people said that could not be achieved.
I argued that we needed to renegotiate the terms of the deal and that is what we are doing. The separation of bank and sovereign debt was a landmark decision. In advance of the October summit people predicted that we would not implement the decisions to use the ESM for recapitalising banks and establish the single supervisory mechanism but we decided at the summit to proceed with these measures according to a timetable based on completing the legislative framework for the supervisory mechanism by the end of the year. The word "sustainability" has been used by several speakers. Let us remember that the objectives of the June agreement, which was restated in October and again in the joint communiqué between the Taoiseach and the German Chancellor, include improving the sustainability of Ireland's debt situation. There is only one way to interpret that objective. It means securing the best possible outcome from the point of view of the Irish taxpayer. That has to be worked out. The promissory note is the subject of negotiations with the ECB. The wider bank debt will then be addressed in the context of the ESM.
I am entitled to make a contribution. I want to address the issue of loss of sovereignty, which was raised by Deputy Wallace. The whole point of this exercise is to recover our sovereignty. In many respects we lost our economic sovereignty when the deal was struck with the troika at the end of 2010. We are trying to regain our economic sovereignty.
What is the Tánaiste's understanding of the June decision and the current position of the German Chancellor and others regarding legacy debt? Is it his understanding that the June summit committed European Heads of State and finance ministers to apply the decision to legacy debts in respect of the pillar banks? Nothing we have heard from any European leader or finance minister in Finland, the Netherlands or Germany suggests they are agreeable to applying the principle of the June decision to legacy debt.
It is my understanding for two reasons. First, the June decision explicitly states that the eurogroup will be tasked to work on proposals for improving Ireland's debt sustainability. That was a clear, separate and special mention of Ireland. We were the only state to be individually mentioned in that statement. Second, a clear statement was made that similar cases would be treated equally. That anticipated the possibility that the ESM might be used in new situations.
It does say that. One must look at what it states.
There was a reason the Irish situation was mentioned separately and the reference was made to Ireland as a "special case" in the communiqué. That reason is straightforward. First, it was because the Irish taxpayer was required to take on the burden of the bank debt, wrongly in my opinion, but that is an argument of history we can probably debate at another time. Second, it was required to do that in advance of the new mechanisms which are now in place, like the ESM, being in place at the time. Third, it is a special case because of the huge sacrifice of the Irish people in paying for the taking on of that burden. That special nature of our case, particularly the burden the people have taken on, is acknowledged.
We have to work this through now. We must work through the detailed negotiations with the ECB, the Commission and the troika and for that we must have political support across capitals in Europe. That is something that has been a consistent part of what we have been doing since the Government was established. There are two elements to what we have been doing. One element has been to advance our individual national case on improving the debt sustainability of Ireland. The other thing we have been doing, and we should not lose sight of this, is we have been helping to change the way in which Europe has been addressing the situation. Some of the instruments now in place were not in place at the time. They had to be worked for, for example, the establishment of the ESM and the advancement of banking union on which we had to secure political agreement. There is a much broader political agreement now at European Council level and across European capitals than was the case at the beginning of this whole exercise.
Two processes have been running in parallel and we must continue with that. One is that we have been using our position to influence the shape of European policy and where it is going. Then, by doing that we are creating the space for a deal to be struck which will improve Ireland's debt sustainability and secure the best possible deal for the Irish taxpayer.