Mary Upton (Dublin South Central, Labour)
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Question 99: To ask the Minister for Finance his views on the fact that, following the State's guarantee of six financial institutions in September 2008, Ireland's rate for loans on the international market has risen sharply; if there is an escalator clause in this agreement with the banks to ensure that the fee charged to these banks covers the increased cost in lending which the State has to bear; and if he will make a statement on the matter. [6789/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I acknowledge that Irish bond spreads have widened against the benchmark German bund over recent months. This is not specific to Ireland only. With particular attention to Ireland, while I am aware that the government guarantee is a factor to be considered by market participants, there are a variety of factors at play, most notably the international economic environment and the general government deficit. To this end, I have outlined at length the necessity to reign in public spending in order to bring more balance to the public finances.

Each covered institution will pay a quarterly charge to the Exchequer for its guarantee. The objective of the guarantee charging model is to put in place a mechanism to remunerate the State appropriately for the financial cost and risk of granting of the guarantee provided to covered institutions. The main principle of the guarantee charging model is that as Minister, I estimate an aggregate cost that the State will bear as a consequence of the guarantee and each covered institution will pay its share in accordance with its risk profile. In case the actual cost for the State is determined to be higher, the charge model will be adapted accordingly.