Patrick Nulty (Dublin West, Labour)
Link to this: Individually | In context

Question 129: To ask the Minister for Finance if the agreement reached between EU leaders on the separation of banking debt from sovereign debt reached at the recent EU summit will result in a retrospective easing of Ireland's national debt burden, namely in relation to the €64 billion used to capitalise Irish banks but which now forms part of Ireland's national debt; and if he will make a statement on the matter. [33417/12]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

As I stated last week in the Dáil during Oral questions, the announcement following the euro area summit in Brussels at end-June represents a major shift in European policy in terms of breaking the link between recapitalising the banks and the sovereign, a policy change that I have repeatedly pressed for at EU meetings. This message has been echoed by the Taoiseach, the Tánaiste and other Ministers in meetings with their EU colleagues. The specific mention of Ireland in the statement issued following the summit is a welcome development and is the result of intensive discussions over the past year. It shows that there is widespread recognition for the measures this country has implemented and the significant sacrifices that Irish people have taken to bring our public finances under control.

This is an agreement in principle which provides an opportunity for the issue of bank debt to be addressed at an EU level. As the details have yet to be worked out, it is too early to say at this time what the precise implications of the announcement will be.

Preliminary discussions on how to separate Irish banking debt from sovereign debt are underway, with a view to concluding in October, but I do not want to prejudice them by commenting on the likely contents of any agreement at this time. Because of their complexity the discussions are likely to take some time. Our shared objective, agreed with our European colleagues is to break the link between banks and sovereigns and we are open to discussing any method of doing this.

This announcement is undoubtedly a positive development for Ireland. However, we cannot lose sight of the fact that notwithstanding the very considerable negative effect State support for the banking system has had on the public finances, including the debt level, there remains a large gap between day to day spending and revenues. This needs to be closed so as to enhance further the long-term sustainability of our public finances.