Bernard Durkan (Kildare North, Fine Gael)
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81. To ask the Minister for Finance the extent to which he expects to convince his EU colleagues of the necessity to make provision for legacy debt in this country; and if he will make a statement on the matter. [2117/14]

Michael Noonan (Limerick City, Fine Gael)
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The Euro-area Heads of State or Government (HoSG) agreed in June 2012 that “it is imperative 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 could recapitalize banks directly.

The Eurogroup meeting of 20th June 2013 agreed on the main features of the European Stability Mechanism’s Direct Recapitalisation Instrument or DRI. There is a specific provision included in those main features, which 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 European Stability Mechanism for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it.

The DRI will come into effect when the Single Supervisory Mechanism is in place and operational. This is not expected to take place until late 2014.

The Eurogroup has agreed that there will be strict eligibility criteria as well as a clear pecking order for the ESM DRI, so any possible application for a DRI will be determined on its own merits within the rules established for the DRI.

The overall framework agreed in summer 2013 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.

Finally, I can assure the Deputy that the Irish case is made at all levels as appropriate and in this context I often engage on these matters with my European Ministerial colleagues.

I remain confident that the commitment made by the EU HoSG in June 2012 to break the vicious circle between banks and sovereigns will be respected.