Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance in respect of the €509,504,000 contribution paid by the State to the European Stability Mechanism in October 2012, the interest rate and expected date of receipt that applies to interest receivable on this contribution. [49483/12]

Michael Noonan (Limerick City, Fine Gael)
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The ESM Treaty, which was signed by Euro Area Member States on 2 February 2012, entered into force on 27 September 2012. To obtain the highest possible credit rating, the capital structure of the ESM will have a total subscribed capital of €700 billion. Of this amount, €80 billion will be in the form of paid-in capital by the Euro Area Member States. The balance of €620 billion will be callable capital. The contribution key for each Member State is set out in Annex 1 to the Treaty and is based on the ECB capital contribution key. For Ireland the key is 1.5922% of the total paid and committed capital.

Ireland’s share of the €80bn in paid-in capital to the ESM will therefore be just above €1.27 billion, and will be paid in five equal instalments of €254.752 million. The first two instalments totalling €509.504 million were paid together on 13th October this year. It is expected that two more will be paid in 2013, with the final one paid in 2014.

Article 8 of the ESM Treaty provides that the authorised capital stock of the ESM shall be divided into seven million shares, each having a value of €100,000 divided according to the subscription key set out at Annex 1 of the Treaty.

Article 22 of the ESM Treaty governs the ESM’s investment policy. It provides that the ESM is to have a prudent investment policy, which will operate in accordance with guidelines to be adopted, and reviewed regularly, by its Board of Directors.

Article 23 of the ESM Treaty outlines the ESM’s dividend policy. This provides that where the amount of paid-in capital and the reserve fund exceed the level required to maintain its lending capacity, and where proceeds from the investment are not required to avoid a payment shortfall to creditors, a dividend shall, subject to guidelines adopted by and the approval of the Board of Directors, be distributed to the ESM members on a pro rata basis linked to contributions to the paid in capital.

As contributions to the ESM’s paid in capital represent a share subscription, interest is not therefore payable in respect of it. A dividend may be paid in accordance with Article 23 of the ESM Treaty.

Pearse Doherty (Donegal South West, Sinn Fein)
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To ask the Minister for Finance in respect of the €509,504,000 paid by the State to the European Stability Mechanism in October 2012, the treatment of this and other future payments to the ESM in calculating the deficit target as set out in the Memorandum of Understanding with the IMF/EU/ECB. [49484/12]

Finian McGrath (Dublin North Central, Independent)
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To ask the Minister for Finance the position regarding the moneys paid to the ESM following ratification of the ESM Treaty; and if he will make a statement on the matter. [49704/12]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 201 and 234 together.

The capital structure of the European Stability Mechanism (ESM) is set out in the ESM Treaty which was signed by Euro Area Member States on 2 February 2012, and entered into force on 27 September 2012.

To obtain the highest possible credit rating, the capital structure of the ESM will have a total subscribed capital of €700 billion. Of this amount, €80 billion will be in the form of paid-in capital by the Euro Area Member States. The balance of €620 billion will be callable capital. The contribution key for each Member State is set out in Annex 1 to the Treaty and is based on the ECB capital contribution key. For Ireland the key is 1.5922% of the total paid and committed capital.

Ireland’s share of the €80 billion in paid-in capital to the ESM will therefore be just above €1.27 billion, and will be paid in five equal instalments of €254.752 million. The first two instalments, totalling €509.504 million, were paid together on 13th October this year. It is expected that two more will be paid in 2013, with the final one paid in 2014.

The ESM has been established as an International Financial Institution and on that basis Ireland’s contribution will be treated as a financial transaction and considered as an equity investment for Ireland. This means that while payments towards its paid-in capital will impact on Ireland’s Exchequer Borrowing Requirement, they will not impact on its General Government Deficit.

As our fiscal targets under the EU-IMF programme are defined in terms of the General Government Deficit, the capital contribution to the ESM does not impact on these fiscal targets.

If and when the ESM engages in programme funding, it will borrow money on the international financial markets and lend it on to the beneficiary ESM member state. This is how the EFSF operates at present. The capital of the ESM will not be paid out directly to programme countries. The callable capital will only fall to be called upon in the event that Member States borrowing from the ESM default or that the ESM incurs losses in ESM operations.