Gerry Adams (Louth, Sinn Fein)
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185. To ask the Minister for Finance if he is concerned at the German Government rebuff to a letter from the Taoiseach to EU leaders asking that the ESM be used retrospectively on Irish banking debt; and if he will make a statement on the matter. [47688/13]

Gerry Adams (Louth, Sinn Fein)
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186. To ask the Minister for Finance the EU leaders that have indicated support for the demand of the Taoiseach that the ESM be used to retrospectively recapitalise Irish banks; and if he will make a statement on the matter. [47689/13]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 185 and 186 together.

The letter to which the Deputy refers was sent by the Taoiseach to the President of the European Council, Herman van Rompuy, and the Heads of State or Government in the 28 EU Member states, for information, prior to the October 2013 European Council. The Taoiseach wrote his letter against the background of our planned exit from the EU/IMF Programme and stressed the need to deliver on long-standing commitments to break the vicious circle between banks and sovereigns.

The European Council conclusions, the agreed output of the summit, reflect the issues the Taoiseach highlighted in his letter to colleagues.

There has been no rebuff from Germany as intimated by the Deputy. Coalition negotiations in Germany are continuing, and it is expected that it will take until mid-December for them to conclude and for any new government's official policy programme to emerge.

The Deputy will be aware that the Euro-Area Heads of State or Government agreed on 29th June 2012 to break the vicious circle between banks and sovereigns, and that when a Single Supervisory Mechanism (SSM) involving the ECB, is in place and operational, the European Stability Mechanism (ESM) could recapitalize banks directly.

The Eurogroup meeting of 20th June 2013 agreed on the main features of the ESM’s Direct Bank Recapitalisation instrument (DBR). The DBR instrument will come into effect when the SSM is operational. There is a specific provision included in those main features. This provision states that “The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement.” Therefore, the agreement that we were active in negotiating keeps open the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks should we wish to avail of it. The SSM is expected to be place and operational in the second half of 2014.

Gerry Adams (Louth, Sinn Fein)
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187. To ask the Minister for Finance the position regarding the decision by the EU Council to reduce the role of the ESM in any future recapitalisation of banks; the way the proposed new rules will affect any retrospective recapitalisation of Irish banks; and if he will make a statement on the matter. [47690/13]

Michael Noonan (Limerick City, Fine Gael)
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I assume the question refers to the European Council conclusions following the meeting of EU Heads of State or Government in October of this year.

The Council conclusions outline the hierarchy of decision making for bank recapitalisation. It continues to provide for ESM Direct Bank Recapitalisation (DBR) as part of this process.

The ECOFIN Council agreed in June 2012 to break the vicious circle between banks and sovereigns, and that when a Single Supervisory Mechanism, involving the ECB, is in place and operational, the European Stability Mechanism (ESM) could recapitalize banks directly.

The Eurogroup meeting of 20th June 2013 agreed on the main features of the ESM’s Direct Bank Recapitalisation instrument. There is a specific provision included in those main features. This provision states that “The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement.” Therefore, the agreement that we were active in negotiating keeps open the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it.

The DBR instrument will come into effect when the Single Supervisory Mechanism is in place and operational. This is not expected to take place until the second half of 2014.

The Eurogroup has agreed that there will be strict eligibility criteria as well as a clear pecking order for the ESM DBR instrument, so any possible application for DBR will be determined on its own merits within the rules laid down by the ESM’s DBR instrument.

The overall framework agreed this summer builds upon the earlier Euro area Heads of State or Government agreement secured on the 29th of June 2012 and is an important step in the Eurozone’s efforts in this regard.