Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context

Question 94: To ask the Minister for Finance the agreement reached at EU level to tackle the financial crisis; and if he will make a statement on the matter. [5274/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

Last October the European Council agreed a common framework for national rescue schemes to address the intensification of difficulties in financial markets. The objective of the rescue schemes was to deal with the immediate threat to financial stability that had emerged, to promote a return to normal functioning in the wholesale credit markets; and to underpin lending to the private non-financial sectors of the economy. The introduction of the national schemes was successful in averting the immediate threat to financial stability. However, concerns over the tightening of credit constraints on businesses and households remain. The Ecofin meeting last December highlighted this issue, noting that "it is a matter of priority to safeguard that the measures in the common framework function properly, particularly the guarantee schemes which could help bring down the cost of financing for the financial institutions to the benefit of households and companies".

In December the Commission published a paper on recapitalisation which stressed that aid should be limited to the minimum necessary and that safeguards should be taken against undue distortion of competition. This paper noted that the objectives of recapitalisation include restoring financial stability and confidence for interbank lending, ensuring lending to the real economy and/or dealing with the systemic risk of insolvency.

The role and mandates of national regulators have also been the subject of in-depth consideration at Ecofin. Common reporting standards are being introduced to achieve greater EU-wide consistency in supervision. Colleges of supervisors are being introduced for cross-border financial groups. Further proposals in this area will be introduced this year following the report of the de Larosière Group, on prudential soundness, the orderly functioning of markets and stronger European co-operation on financial stability oversight, early warning mechanisms and crisis management.

In December the European Council endorsed Commission proposals for a European Economic Recovery Plan (EERP) involving a fiscal stimulus equivalent to approximately 1.5% of EU GDP, as part of the Community response to the economic and financial crisis. At last week's Ecofin meeting it was agreed that the priority is to fully restore the functioning of credit channels and that to this extent the strategy agreed in October remains fully valid. Member States continue to remain committed to taking all necessary steps, including on capital, liquidity and lending, working together wherever possible. The Council will continue to monitor the implementation of the rescue packages over the coming months and has invited the Commission to make recommendations on how to enhance their effectiveness.