Brendan Griffin (Kerry South, Fine Gael)
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224. To ask the Minister for Finance in view of Ireland’s challenging debt levels and further to the June 2012 agreement, if he will renew and intensify Ireland’s efforts for a deal on retrospective banking debt; and if he will make a statement on the matter. [48187/14]

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 (ESM) could recapitalize banks directly.

Last week, on the 8th December, the ESM Board of Governors approved the creation of a new Direct Recapitalisation Instrument (DRI) in accordance with Article 19 of the ESM. The operational framework for the DRI, approved on the same date, includes a specific provision in relation to the retroactive application of the instrument. The guideline states that the potential application of the instrument for this purpose should be decided on a case-by-case basis and by mutual agreement.

However, I would remind the Deputy that unlike back in 2012, the ESM is no longer the only option open to us to recover the money provided to recapitalise our banks. Investors are now willing to support Irish banks again and the market value of our investments has improved accordingly.

With respect to the State's shareholdings or ownership in the banks, Government policy remains unchanged that we do not wish to hold these investments in the banks over the long term. Subject to market conditions therefore we are willing to exit in a manner that maximises value for the taxpayer.

In the last 18 months the State has exited successfully from some debt investments with the sale of our "Cocos" and Preference Shares in Bank of Ireland in addition to the sale of Irish Life. Given the significant cash resources we hold, we are not under any immediate pressure to exit our remaining investments. However given where our national debt is, neither do we have the luxury of holding on indefinitely.

In relation to AIB, which is our largest remaining investment, we have important work and decisions to make around the bank's capital structure and how we should best reconfigure our various holdings in a way that benefits both the bank and the taxpayer. Hence we are not making any decisions around reducing our ownership of the bank now. If we can deliver on this work programme next year and everything else develops as we would like, then we may be at the point where we can consider selling some of our shares.

In relation to retrospective recapitalisation via the ESM, I would reiterate what I've said previously, that in Europe a strategic approach tends to deliver the best results and that it serves our interest to keep this on the table.

However I see no benefit in making an application to the ESM now. I believe the work we are doing in relation to our AIB investments will help us better understand what they are really worth, and ultimately which route - ESM or the markets - will be our best option.