Michael McGrath (Cork South Central, Fianna Fail)
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1. To ask the Minister for Finance if he supports the view that the negotiation of a precautionary credit line for Ireland, subject to acceptable conditionality, would underpin a smooth exit from the troika programme and enhance our prospects of a sustainable return to the international bond markets; and if he will make a statement on the matter. [49472/13]

Michael McGrath (Cork South Central, Fianna Fail)
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This question relates to the Government decision not to adopt a precautionary credit line regarding our exit from the programme. I look forward to our discussion on this at Question Time and later when we have statement on the programme exit. I would like the Minister to outline to the House why he has opted not to apply for a precautionary line of credit.

Seán Barrett (Dún Laoghaire, Ceann Comhairle)
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There is new procedure whereby the person asking the question can avail of 30 seconds to explain the question.

Michael Noonan (Limerick City, Fine Gael)
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Very interesting.

As the Deputy will be aware, the Government decided on 14 November that Ireland is now in the best position to exit the EU-IMF programme of financial assistance on 15 December without the need to prearrange a new precautionary credit line from our EU and IMF partners. Following a careful and thorough assessment of all of the available options, and various consultations with the European Commission, the ECB, the IMF, the President and members of the Eurogroup, the Governor of the Central Bank of Ireland and the National Treasury Management Agency, the decision was taken to exit the programme without a prearranged precautionary facility or backstop.

All along I have indicated that the decision was finely balanced, and since the announcement of the decision many commentators have also acknowledged that to be the case. That said, taking all factors into account, exiting our EU-IMF programme of financial assistance without a prearranged precautionary facility or backstop is the right decision for Ireland. This view is widely held both in Ireland and abroad, based on the generally positive reaction to our decision.

Market confidence in Ireland is high, the public finances are under control, we are reducing our deficit and debt levels, and economic conditions and sentiment are improving. We have already returned successfully to the financial markets. We have a domestic backstop in place, with cash reserves expected to be approximately €20 billion by the end of the year. This option represents greater normalisation, with Ireland now subject to EU economic co-ordination, fiscal surveillance and governance rules that apply to other EU and euro area member states that are not in a programme of assistance.

This decision is the latest in a series of steps to return Ireland to normal economic, budgetary and funding conditions. Like most other sovereign eurozone countries, from 2014 we will be in a position to fund ourselves normally on the markets. Confidence in Ireland has improved considerably in recent months and interest rates on Irish Government bonds are at highly affordable levels. This is the right decision for Ireland. We will be exiting the bailout in a strong position.

Michael McGrath (Cork South Central, Fianna Fail)
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Conditions are benign now, and if those conditions persist the Minister's decision will have been right and we will not need a precautionary credit line. The Minister has acknowledged that the decision was finely balanced, with arguments on both sides. Two issues that arise as a result of our not applying for a precautionary credit line are important. One is that we will be excluded from the ECB's outright monetary transactions, OMT, policy, the ultimate backstop in the event that we need it. The other is to do with the failure to reach an overall agreement on the single resolution mechanism at last week's ECOFIN meeting. This means that if next year's stress test shows a capital shortfall, particularly in the case of AIB and Permanent TSB, the national authority - the State - would come in ahead of the ESM to plug that hole. Neither the Minister nor I know whether that capital shortfall could happen. Did the Minister get a feel for the conditions that would have applied in the event that we had sought a precautionary credit line, to which we will not now be subject by virtue of our decision not to seek such a credit line?

Michael Noonan (Limerick City, Fine Gael)
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We never applied for a precautionary credit line; nor did I ask for one in my discussions. However, I gathered an amount of useful information as I talked to different people. There is a misunderstanding in Ireland, even at the highest levels of economic thinking, about OMT. I had a long conversation with Mario Draghi and his two deputy presidents in Frankfurt. OMT is not a policy for intervening in individual countries that are in difficulty. If Ireland had a problem, OMT would not be the solution. If there is a systemic difficulty with the euro affecting several countries across the eurozone, OMT is an option. While being part of a programme is one of the conditions necessary to avail of OMT, it does not automatically make a country eligible for OMT.

OMT has never been applied. According to Mr. Draghi, OMT is for a systemic crisis in the euro and will apply across the eurozone. If we got into that position it would apply to Ireland as to any other country. For any country that would avail of it there would be conditions, so there would be some form of programme. We have not ruled ourselves out or in, or changed our position at all. There is a serious misunderstanding in Ireland about how OMT operates.

Michael McGrath (Cork South Central, Fianna Fail)
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On that very important policy point, has the Minister received reassurance from the President of the ECB that not having a precautionary credit line does not make a country ineligible for OMT in the circumstances he has outlined in which there is a systemic risk to the euro? If that systemic risk exists, all countries could potentially benefit from OMT, even those that are not in a precautionary credit line. Has the Minister received that reassurance from Mr. Draghi? That is a very important point to clarify.

Michael Noonan (Limerick City, Fine Gael)
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I am not quoting him.

Michael McGrath (Cork South Central, Fianna Fail)
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Just generally.

Michael Noonan (Limerick City, Fine Gael)
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I am recounting the narrative. According to Mr. Draghi and the other ECB officials, it is a policy device to deal with a systemic crisis across the eurozone. By definition, if that happens, several countries will need and get that assistance under certain conditions. Because there is conditionality, they would be in some kind of programme, so they would fulfil the precondition of being in a programme. It is all theory. It has never happened and OMT has never been used. It was a great announcement which calmed down the eurozone without anyone spending any money. I have assurances along those lines.