Colm Keaveney (Galway East, Fianna Fail)
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238. To ask the Minister for Finance his views on whether the recent measures announced by the European Central Bank will be of benefit to Ireland in terms of measurable indicators; his views on what would constitute the criteria of success for these measures with respect to the Irish economy; his views on whether quantitative easing poses a risk of inflating asset bubbles in stocks, bonds, commodities and-or property; if so, the way he will address that risk; and if he will make a statement on the matter. [4462/15]

Colm Keaveney (Galway East, Fianna Fail)
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239. To ask the Minister for Finance with reference to the recent measures announced by the European Central Bank, the ceiling the ECB will place on the total holdings of Irish Government Bonds held by the Central Bank of Ireland; the current total holdings of Irish Government Bonds held by the Central Bank of Ireland; and if he will make a statement on the matter. [4463/15]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 238 and 239 together.

Price stability in the euro area has been defined as annual inflation of close to but not exceeding 2 per cent (inflation being measured by the Harmonised Index of Consumer Prices). Inflation in the euro area has been below levels consistent with price stability for some time and, in fact, has been in negative territory for two months in a row now.

With policy rates effectively at zero per cent, the ECB announced an expanded asset purchase programme on January 22nd to include bonds issued by euro area central governments, agencies and European institutions. This programme will be carried out from March until at least the end-September 2016, or until the path for inflation is consistent with price stability.

The Irish economy should benefit through a number of channels. For example, the economy should benefit directly through improved financing conditions for households and firms. In addition, the euro area is Ireland's single largest export destination; therefore, by supporting real economic activity and raising inflation in the euro area this will underpin export growth in Ireland. Monetary policy also works through the exchange rate channel the depreciation of the euro will provide a boost to Irish exports. Raising the rate of inflation in the euro area will also help Ireland achieve our twin goals of improving competitiveness and increasing tax revenue. So, over time, the success of quantitative easing will be seen in terms of stronger growth rates in Ireland and across the euro area, and inflation rates consistent with price stability.

Of course, the accommodative stance of monetary policy in the euro area raises the possibility of asset price bubbles. This must, however, be seen in the context of weak credit growth both in Ireland and in the euro area as a whole. Moreover, the macroprudential tools that the Central Bank is to impose are designed to reduce the probability of property market bubbles.

At a European level, there has been a strengthening of institutional arrangements governing the risk architecture since the global financial crisis with, for example, the establishment of the European Systemic Risk Board.

Many details in terms of the implementation of the ECB's expanded asset purchase programme are not, as yet, publicly available and these are, of course, an internal matter for the ECB and National Central Banks. The ECB has, however, indicated that its asset purchase programme in relation to sovereign bonds will be restricted to bonds with a remaining maturity of greater than 2 years but less than 30 years. It has also indicated limits on the Eurosystem's holdings of any one issuer's bonds, taking into account existing holdings. These limits refer to the same 2-year to 30-year maturity window. To be precise, holdings within the 2-year to 30-year remaining maturity window will not exceed 33 per cent of an issuer's tradeable bonds within the same window. In summary therefore, the limits imposed on the holding of bonds are limits on the Eurosystem as a whole, rather than on the Central Bank of Ireland, and relate to bonds within the purchasable window, that is, those with between 2 and 30 years remaining maturity.

The majority of the bonds acquired by the CBI in exchange for the Promissory Notes have more than 30 years remaining. Currently, this is the case for €19 billion out of the original €25 billion nominal issuance. Therefore, the holding of these bonds by the Central Bank of Ireland will, in practice, have no impact on the amounts that can be purchased by the CBI. While other bonds within the 2-year to 30-year maturity window that are already held by the CBI and other National Central Banks will be taken into account for the purposes of calculating the amounts that can be purchased, I understand that this still leaves ample room for participation by the CBI in the asset purchase programme. In addition, I understand that the Bank s disposal strategy for its Special Portfolio - those bonds acquired following the liquidation of IBRC and the exchange of the Promissory Notes remains as previously announced, that is, it will continue to dispose of the bonds as soon as possible, provided conditions of financial stability permit. Disposals may or may not impact on the purchasable amounts under the asset purchase programme depending on whether the bonds sold are within the 2-year to 30-year maturity window.

I also wish that note be taken of the fact that, as the Central Bank of Ireland and other Eurosystem National Central Banks do not generally make regular detailed statements of their investment holdings available, I do not have information on these holdings to hand. The Central Bank will report on the holdings in its Special Portfolio - those bonds acquired following the liquidation of IBRC and the exchange of the Promissory Notes in its regular Annual Report which is scheduled to appear in April. In addition, the Eurosystem makes available information on bonds purchased in its previous Securities Market Programme on its website but this information does not cover the investment holdings to which I have already referred.