Brendan Smith (Cavan-Monaghan, Fianna Fail)
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Question 66: To ask the Minister for Finance if he will provide details of the way Ireland will benefit from the enhanced role of the European Financial Stability Facility as set out in the 21 July and 26 October European Summit [i]communiqués[/i]; the plans he has in that regard; and if he will make a statement on the matter. [34421/11]

Michael Noonan (Limerick City, Fine Gael)
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The Euro Area Heads of State and Government at their meeting of 21 July last, announced a number of significant changes to the European Financial Stability Facility (EFSF). These changes included increasing the effective capacity of the EFSF to its headline €440 billion figure by increasing the level of over-guarantee from €440 billion (120%) to €780 billion (165%); reducing the interest rate on EFSF loans to Ireland, Greece and Portugal to lending rates equivalent to those of the Balance of Payments Facility, close to, without going below, the EFSF funding cost as well as lengthening the loan maturities; the ability to act on the basis of a precautionary programme; the ability to finance recapitalisation of financial institutions through loans to governments including in non programme countries; and the ability to intervene in primary and secondary markets on the basis of an ECB analysis recognising the existence of exceptional financial market circumstances and risks to financial stability and on the basis of a decision by mutual agreement of the EFSF/ESM Member States, to avoid contagion.

On 27 October, the Euro Area Heads of State and Government agreed a further change to enable leveraging of EFSF funds.

These changes have significantly reduced the cost of our borrowing from the EFSF, both by setting the margin to zero on the loans to Ireland (along with those for Portugal and Greece) and also through the elimination of the credit enhancement measures.

In terms of benefits, it is now estimated that the overall net reduction in Ireland's EFSF interest rate margin and other changes will be in the range of 2.7% to 2.8%. It should be noted that the EFSF's cost of funds depends on the interest rate it pays for its market issuance when raising funds for programme countries.

New Instruments

In relation to the new instruments, Ireland welcomes the introduction of the new flexibilities to the new EFSF. Technical discussions on the implementation of these new instruments are continuing with a view to finalising guidelines for each as soon as possible. Ireland is actively participating in this EU process.