Terence Flanagan (Dublin North East, Independent)
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328. To ask the Minister for Finance his views on a matter (details supplied) regarding Irish debt; and if he will make a statement on the matter. [34774/14]

Michael Noonan (Limerick City, Fine Gael)
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I take it that the Deputy's question refers to the issues of the retrospective direct recapitalisation of Irish banks and the early repayment by Ireland of a portion of our IMF loans which are covered in the Irish Times opinion piece by Mr Donal Donovan, dated 10 September 2014, as set out in the details provided with this question and in particular the issues of direct recpatialisation and the early repayment of a portion of our IMF loan.

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, the ESM, could recapitalise banks directly.

On 10 June 2014 the euro area Member States reached a preliminary agreement on the operational framework for the ESM's Direct Recapitalisation Instrument (DRI). This includes a specific provision in relation to the retroactive application of the instrument. 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.

What is now required  is a decision by mutual agreement of the ESM Board of Governors to create a new ESM instrument in accordance with Article 19 of the ESM treaty and the aim is to have this process completed by November this year, subject to completion of national approval procedures.   This would allow the ESM DRI to come into effect once the Single Supervisory Mechanism is in place and operational which is expected to be in November of this year.

In relation to retrospective recapitalisation, the preliminary agreement states that the potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement. Obviously, it will not be possible to make a formal application to the ESM for retrospective recapitalisation before the Instrument is in place and it would therefore be premature to make any submission in advance of that.

In relation to the planned early repayment of our IMF loan, the proposal is to repay up to €18 billion of this loan and to replace it with less expensive market funding.

For this to succeed we require a waiver of mandatory early repayment clauses which are included in each of our loan agreements with the EFSF and the EFSM, and with our bilateral lenders, the U.K., Denmark and Sweden.

Our request for such a waiver was discussed at meetings of the Eurogoup and ECOFIN Ministers last weekend. There was unanimous political support among the Ministers for the proposal. However, a number of countries will have to go through national approval procedures before they can approve the waiver sought. This includes Sweden, where parliamentary elections have just taken place.

The ECB supported this initiative, but raised concerns regarding the IBRC related bonds held by the Central Bank of Ireland. However, as the ECB also acknowledged, this is a separate issue, which is not related to the early repayment proposal.