Peter Mathews (Dublin South, Fine Gael)
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Question 98: To ask the Minister for Finance if, further to the communique issued after the recently agreed Fiscal Compact stating that a qualified majority voting of 85% will be required to approve funding from the European Stability Mechanism, ESM, to a member state, his attention has been drawn to the fact that this means that any country with 15% of the votes can veto Ireland accessing funding from the ESM; if his further attention has been drawn to the fact that this provides France and Germany with a veto vote over any future Irish access to the ESM; his views that France may veto future Irish access to funding from the ESM if the Irish Government refuses to raise corporation tax; and if he will make a statement on the matter. [1041/12]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy will be aware, on 11 July 2011, the 17 Euro Area Finance Ministers signed the Treaty establishing the European Stability Mechanism (ESM), subject to the completion of the necessary national parliamentary procedure and subsequent ratification. The text of the ESM Treaty agreed on 11 July 2011 provides that the ESM shall have a Board of Governors, that each ESM Member shall appoint a Governor and that, in terms of voting rules, certain decisions must be made by mutual agreement of the Board of Governors that is, requiring the unanimity of members participating in the vote. Decisions requiring the mutual agreement of the Board of Governors include the granting of financial assistance to an ESM member. The Board of Governors may take other decisions, which are set out in Article 5 of the Treaty, by qualified majority. In such cases, the voting rights of each ESM Member is equal to the number of shares allocated to it in the authorised capital stock of the ESM as set out in Annex II of the Treaty. In Ireland's case, this amounts to just under 1.6% of the total votes.

On 21 July 2011, the Heads of State or Government (HoSG) decided to increase the flexibility and scope of the European Financial Stability Facility and also grant the ESM the same powers i.e. to: intervene in the primary market and secondary markets act on the basis of a precautionary programme and finance recapitalisations of financial institutions through loans to governments including in non-programme countries.

Discussions have been on going since July 2011 to incorporate these new powers into the ESM Treaty which has yet to be ratified and come into force.

As the Deputy will be aware, on 9 December 2011, the HoSG agreed on the acceleration of the entry into force of the ESM Treaty - aiming for the ESM to come into force in July 2012. The HoSG also agreed on adjustments to the ESM Treaty to make it more effective including an amendment to the voting rules to provide for an emergency procedure. This emergency procedure involves replacing the mutual agreement rule by a qualified majority of 85% in cases where the European Commission and the ECB conclude that an urgent decision related to financial assistance is needed when the financial and economic sustainability of the euro area is threatened. At the meeting on 9 December, the Finnish Prime Minister indicated that his agreement to the emergency voting procedure was subject to confirmation by the Finnish Parliament.

The proposed 85% voting rule is restricted to the emergency procedure and if such procedure is invoked then ESM members with 15% of the voting rights would have the ability to veto any decision on granting emergency financial assistance to an ESM member. All other decisions on granting financial assistance however will still require the mutual agreement of the ESM's Board of Governors. In such cases, each and every ESM member could potentially veto a decision to grant financial assistance. Different parliamentary procedures across the Euro Area can result in it taking considerable time to reach mutual agreement on decisions to grant assistance despite the financial and economic sustainability of the euro area being threatened. The emergency procedure will enable faster assistance to be provided where deemed necessary.

Ireland's Corporation Tax rate of 12.5% is critical to our economy. Tax issues are decided by unanimity. The issue of potential threat to our corporate tax rate in the context of discussions on the ESM Treaty does not arise.