Éamon Ó Cuív (Galway West, Fianna Fail)
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To ask the Minister for Finance his views on the impact on Ireland's prospect for attaining ESM investment in the pillar banks of the proposals under consideration by eurozone finance ministers to limit the the amount of money the ESM can use for direct recapitalisations of banks. [10619/13]

Gerry Adams (Louth, Sinn Fein)
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To ask the Minister for Finance if it his intention to sell his stake in AIB and Bank of Ireland to the private market or to recapitalise retrospectively through the ESM. [10563/13]

Brian Stanley (Laois-Offaly, Sinn Fein)
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To ask the Minister for Finance the progress that has been made at EU level in allowing the ESM be used to recapitalise banks retrospectively. [10581/13]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 6, 9 and 14 together.

As the Deputies will be aware, the European Council in October 2012 reaffirmed that the “the Eurogroup will draw up the exact operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism, ESM, in full respect of the 29 June 2012 euro area Summit statement. It is imperative to break the vicious circle between banks and sovereigns.”

The Taoiseach and Chancellor Merkel spoke together following the October 2012 European Council and discussed the unique circumstances behind Ireland’s banking and sovereign debt crisis and Ireland’s plans for a full return to the markets. They reaffirmed the commitment from 29 June to task the Eurogroup to examine the situation of the Irish financial sector with a view to improving further the sustainability of the well-performing adjustment programme. They recognised, in this context, that Ireland is a special case and that the Eurogroup will take that into account.

While the State’s successful disposal of the Bank of Ireland contingent capital notes earlier this year is further evidence of investors’ confidence in Ireland and demonstrates that there is a market appetite for Irish assets, the Government is still heavily involved in drawing up the operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism in full respect of the 29 June 2012 euro area summit statement.

In this regard, the European Council stated on 14 December 2012 that “once an effective Single Supervisory Mechanism (SSM) is established, the ESM will be able to recapitalise banks directly. An agreement on the operational framework supporting this possibility, including the definition of legacy assets, should be agreed as soon as possible in the first semester of 2013”.

Ireland continues to be fully engaged in this process within the Eurogroup and among Heads of State and Government. Furthermore, officials from my Department also attend technical meetings with the ESM and other member states. Discussions remain ongoing in regard to this issue and no conclusion has been reached. Notwithstanding these discussions, the Government will also continue to explore any market opportunities for our remaining banking assets to get a return of any of the sums used to bail out the banks.

Michael McGrath (Cork South Central, Fianna Fail)
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In the round, this issue deals with approximately half of the money that went into the banks, approximately €30 billion between the two pillar banks and Permanent TSB. What is the Government's objective with regard to the negotiations that are under way? Obviously, the ESM does not have any track record in holding shares in banks. A key issue in this regard will be the basis for valuation. The National Pensions Reserve Fund puts a figure of approximately €9 billion on our holdings in the banks. What does the Minister seek to achieve in this regard? Does he seek to get back as much as possible of the €30 billion invested in those banks? Is he of a mind to dispose of our stakes in those banks at the right price to the ESM, if the opportunity arises?

Michael Noonan (Limerick City, Fine Gael)
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The Government's objective is to try to have some of the money invested in the pillar banks when they were recapitalised in March 2011 credited once more to the taxpayer. The debate on the mechanism to be used for that purpose is still open.

Pearse Doherty (Donegal South West, Sinn Fein)
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While I appreciate the Minister's difficulty, he is trying to ride two horses and keep both options open. He seems to be rowing back on last June's commitment, or at least the commitment given to the people by certain Ministers on the public airwaves at the time. I refer to the idea that we would get back the money pumped into the pillar banks and that it would be fully retrospective. It now seems less likely that we will get back that money on the scale suggested. A clear question arises in this context. When the banks appeared before the committee, they stated they were looking for investors. Are we going to sell to the investors at the market rate which the NTMA has calculated to be approximately €9 billion? There is also some contingent capital which could increase the €9 billion figure. The value of the shares could increase. Alternatively, are we going to hold out on the basis of having the 29 June commitment met in full? In other words, are we going to proceed on the basis that the ESM will recapitalise the banks as they require retrospectively? It is a question of what the Government intends to do. If a proposal comes from the private sector and is identified by the Department and the Central Bank as genuinely meeting the current market value of AIB and Bank of Ireland, will the Government decide to sell or will it decide to hold out to see whether progress can be made with the ESM on getting a value for the recapitalisation based on historic or possibly future value?

Michael Noonan (Limerick City, Fine Gael)
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The Deputy is falling into the same political trap he fell into during the various debates on the promissory note arrangement. His hope that the Government will fail in order that he can continue to build a political movement on a failed economy is clouding his judgment. He is making wild prophecies. He is being dictated to by his hope that the Government will fail. He has fallen before into the trap of hoping the economy will fail. He should be more positive about these things.

Pearse Doherty (Donegal South West, Sinn Fein)
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It was just a question.

Michael Noonan (Limerick City, Fine Gael)
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The discussions that are ongoing have been well recorded in the media. We will continue to negotiate to achieve the best deal possible for Ireland. I am not going to put my negotiating position on the table when everybody could snipe at it internationally. We succeeded in one serious renegotiation and I believe we will succeed in this also, but it will take time. We need to remember the conditionality. There will be no recapitalisation through the ESM until the single supervisory mechanism is in place and functioning. That will take us into 2014. There is a long lead-in time. Every time I come here, I do not want the Deputies opposite to act like the kids in the back of the car who repeatedly ask, "are we there yet?" I do not want to get into that space.

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister has a job to do.

Michael Noonan (Limerick City, Fine Gael)
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It upsets the negotiating process.

Pearse Doherty (Donegal South West, Sinn Fein)
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To tell the Minister the God's honest truth, he would want to drop some of the bull he is coming out with in response to every question I ask.

Michael McGrath (Cork South Central, Fianna Fail)
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He is very tetchy today.

Pearse Doherty (Donegal South West, Sinn Fein)
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I asked a genuine question. I could have started to recite X, Y or Z, but I did not do so. I do not expect the Minister to reveal his negotiating strategy. If he is telling us it is a question of a negotiating strategy, he must intend to go down the road of ESM recapitalisation. If it is not a question of a negotiating strategy, he must be open to the idea of private investors buying shares in the banks at a fair value. That would involve giving up on the ESM idea. If the ESM approach works out, it will not happen before 2014. If private investors make an offer today on the basis of the fair market value of the banks, will the Minister be minded to dispose of the State's assets in these banks, or will he be minded to wait until the ESM proposals unfold in 2014? That is a fair and honest question. It does not suggest I am wishing disaster on the economy or failure on the Minister. I am not impressed by this nonsense.

Michael Noonan (Limerick City, Fine Gael)
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It is a fair question, to which I will give a fair answer. In the first week of January we sold the contingent capital notes - the CoCos - in Bank of Ireland. We achieved fair value because we got back the €1 billion the taxpayer had put in and we got a little bit with it - €40 million or €50 million. That was good. If similar circumstances allowed me to sell either the other CoCos in AIB and PTSB or the preference shares, the sale of which is more problematic for other reasons, while getting back what the taxpayer had put in, I would sell them. I have made this publicly known in the markets and investors know it. They are available at a price but not below par value. I am not disposed to putting the equity in AIB and PTSB and the 15% stake in Bank of Ireland on the market now because I do not think we would achieve full value. As I said in reply to a separate question, I want to build up values in the banks. We are taking away the guarantee away and building up their values and cutting their cost bases. What the State holds is becoming more valuable. The primary purpose of the approach we are pursuing is to have normal and well performing banks that will provide credit lines for the economy. It is not essentially driven by a desire to enhance value. The enhancement of value is a consequence of the actions I am taking.

What is going on in Europe is the biggest project that has been undertaken since the currency was established. A single supervisory mechanism is being put in place. The resolution legislation will govern how Europe deals with banks that become insolvent. It will set out the interventions, bail-ins and bailouts which are appropriate and deal with whether shareholders and others should be burned. We have to consider how to protect depositors and provide for a pan-European insurance system. Three pieces of work have to be done initially. The ESM will be empowered to recapitalise banks directly, while at the same time fulfilling its primary function - to react as the only fund for intervention, like the funds used to bail out Ireland and Portugal. There is a huge piece of work to be done. We are moving it forward through the Irish Presidency as quickly as we can. I do not think we will have a fully functioning supervisory mechanism until 2014, after which this debate will harden. I do not want to get to a position so far away that I cannot predict the moves. I want to make sure I am positioned correctly to get the best possible deal for the taxpayer.

Michael McGrath (Cork South Central, Fianna Fail)
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I seek clarification on one point. When the Minister spoke about the amount of money he would like to get back, he referred to the recapitalisation that took palce in March 2011 that followed the prudential capital assessment review. I assume all of the money put in, even before March 2011, is in the pot and on the table for negotiation through the ESM. Perhaps the Minister might clarify this. I would also like to ask a question about the basis for valuation. If we take it that the banks are worth €8 billion or €9 billion now - the IMF has spoken about potentially getting €20 billion back - is the Minister's hope and the Government's objective essentially that the ESM will pay more than they are worth at market rates? If not, it might not be in our best interests to sell to the ESM.

Michael Noonan (Limerick City, Fine Gael)
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If I lower the bar in any way by nominating a figure that is smaller than the amount we put in, regardless of my expectations, that will become the benchmark for negotiation. I have to work on the basis that we are in the game to negotiate as much as we can get out of it.

Michael McGrath (Cork South Central, Fianna Fail)
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Yes.

Michael Noonan (Limerick City, Fine Gael)
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While some of the actions taken served to prevent contagion from spreading from Ireland to the European banks which was in the interests of the wider European banking industry, it is obvious that the contagion was in Ireland. There is an Irish issue and there is an Irish responsibility also. I do not think the European authorities are going to exonerate us from all responsibility. The pretence that all of this was imposed on us from the outside is nonsense. People in Anglo Irish Bank and Irish Nationwide Building Society borrowed money at a very low cost on the interbank market and gave it out to builders and developers who took extraordinary risks because they were motivated by greed for their own enrichment. Unfortunately, as they are our fellow citizens, we end up with all taxpayers of the country sharing because of what they did. There is culpability attaching to certain people in Ireland. That is the pushback I will be seeking in the negotiations.