Michael Noonan (Limerick City, Fine Gael)

Before I outline the purpose and content of the Bill, I thank the Senators for agreeing to discuss and consider all Stages of the Euro Area Loan Facility (Amendment) Bill 2012 today at short notice. Although it is a fairly technical Bill, it is critical to the public finances and our economy. Enactment of the Bill is required to allow Ireland to ratify the changes to the Greek loan facility. The changes agreed, reviewed by the Government and the other euro area member states, are essential to ensuring financial stability within the euro area.

The crisis in Greece has been ongoing since 2009. Senators will be aware that Greece entered its first programme of financial support in May 2010 following an intergovernmental agreement to provide bilateral loans totalling €80 billion to Greece from the euro area member states, together with the IMF assistance of €30 billion, over a three-year period to mid-2013. In late 2010, Ireland entered its own programme of assistance and consequently stepped out of the Greek loan facility. However, as one of the original signatories to the Greek loan facility, Ireland is required to give its consent in order to implement any amendment to that facility.

In June 2011, the Heads of State and our Government agreed to revise the Greek loan facility. The changes agreed were to extend the grace period between draw-down and commencement of repayment from three to four and a half years, to increase the maturity period for loans from five to ten years, and to reduce the margin applying to loans to Greece under the Greek loan facility by 100 basis points.

This amendment to the loan facility agreement with Greece was signed by the Commission on behalf of the euro area member states on 14 June 2011, subject to ratification by all euro area member states. Ireland ratified the first amendment through the European Financial Stability and Euro Area Loan Facility (Amendment) Act 2011. On 23 September 2011, we notified the relevant authorities of our formal confirmation of our commitment to this amendment. However, these amendments have proved insufficient; hence, there is now a need for further amendments. On 20 February 2012, the euro group Finance Ministers approved the new programme of assistance for Greece which includes approval of the second amendment to the Greek loan facility. This amendment includes three elements: a further increase of the grace period, of up to ten years, for paying back the loan principal; a further lengthening of the loan maturity to a minimum of 15 years; and a further reduction in the margin to 150 basis points to apply from the three-month interest period that ended on 15 June 2011. The Bill provides for the ratification of these amendments.

The completion of the amendment, by way of signature by the EU Commission on behalf of member states and by Greece, was not in place until 27 February 2012. This Bill is thus being presented at the earliest possible date following this completion.

All signatories to the Greek loan facility agreement have been asked to provide their acceptance to the second amendment to the chairman of the euro working group no later than 13 March 2012. This is to ensure that the next phase of the Greek loan facility can proceed as planned for that date. It has therefore been necessary to bring forward this Bill as a matter of urgency to ensure Ireland can confirm acceptance by that date. I have also brought forward an earlier signature motion for the President to sign the Bill.

The aforementioned changes to the Greek loan facility are proposed at a time when there have been many other changes to the Greek programme, most notably the €130 billion in additional funding that has been provided in conjunction with changed private sector involvement, PSI. As I have mentioned already, the Bill provides for amendments to the Euro Area Loan Facility Act 2010, as amended by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. The amendment Bill has four sections with the amendment of March 2012 to the loan facility agreement set out in the Schedule. The first section of the Bill provides the definitions to the legislation. Section 2 provides for the second amendment of February 2012 to be included in the references to the Euro Area Loan Facility Act 2010, as amended by the European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. Section 3 provides for the second amendment to the loan facility agreement to be inserted as Schedule 3 to European Financial Stability Facility and Euro Area Loan Facility (Amendment) Act 2011. Section 4 sets out the Short Title to the Act. Annexe 1 contains the form of legal opinion. Annexe 2 contains the amended scheduled principal repayments. Annexe 3 contains the list of contacts. The Schedulecontains the amendment of February 2012 to the loan facility agreement. This amendment includes the three elements I have already outlined, namely, a longer grace period a lengthening of the loan maturity, and a further reduction in the margin. Ireland provided €345.7 million to Greece under the Greek loan facility before entering our EU-IMF programme, when we stepped out of the facility. Quarterly interest payments are being made by Greece on this. The reduction in the interest rate chargeable on the loan under the second amendmentwill reduce the interest we receive each year by €5.2 million, or roughly one third at current rates of interest. We expect that this will be offset by the provision for the distribution of profits from the ECB's secondary market programme for Greek bonds. A further result of this amendment is that the grace period before Greece begins to repay the principal of this loan will be extended from four and a half years to ten years. The maturity of the loan will be extended from seven and a half years to 15 years.

I believe it is important to show solidarity with Greece. However, we should also recognise the reality that there is a significant contrast between our condition and that of Greece. The underlying strength of our economy and thus our capacity to recover, is well recognised. This of course depends on the right mix of policies at home and internationally. Latest estimates show that economic growth resumed last year and the growth outlook for this year remains positive. Our export sector is robust, with the well known companies of the multinational element performing well together with a less heralded strengthening in the indigenous sector. Foreign direct investment is recovering, pointing to the continued presence of many of the established strengths of our economy, including a well-educated workforce, favourable demographics, an open and flexible economy and a pro-enterprise environment. Moreover, the labour market is showing welcome signs of stabilisation. It is particularly encouraging that CSO figures show an increase of 10,000 in the number in employment in fourth quarter of last year on a seasonally adjusted basis, the first such increase in four years. In addition, our record on programme implementation to date has been second to none - something the troika team frequently acknowledges. We are meeting all of our targets. This performance is bringing benefits in terms of a falling bond yield and the recent successful re-engagement with the markets by the NTMA.

As our programme is working it is only right that we should show solidarity and unity with Greece and the broader euro area. I therefore look forward to a constructive discussion of this Bill. The Bill aims to facilitate the stability of the European Union and to safeguard the euro area as a whole. Ireland must play its part and stand in solidarity with its fellow euro area member states. This will be in both our own interest and that of the euro area and the EU as a whole. Therefore, I would urge Senators to support the changes to the Greek loan facility.

I commend this Bill to the House.