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European Council Meetings (Continued)

Tuesday, 25 March 2014

Dáil Éireann Debate
Vol. 835 No. 1

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(Speaker Continuing)

[The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny] Ireland supports the decision of the European Council in respect of the sanctions against Russian individuals and participated in the discussion about what areas might be included in a broader economic plain, be they economic or financial. There is a recognition, however, that no matter what sanctions one imposes, they work both ways in that they will impact on all countries involved. It would be far better to have a situation where Russian understands what it has done.

Another point made was that the winners should be the people of Ukraine in acting as a buffer between the East and the West. Over €11 billion in funds is on the table from the European Union and the Commission. The point made by several speakers at the Council meeting was that the conditions that applied to many of the IMF programmes for Ukraine could be very difficult. Obviously, one needs unity on this position to secure the overall unity of Ukraine. It is not true to claim Ireland did not take a position on this matter. We have been very clear about it - we support the sanctions.

Deputy Micheál Martin: Information on Micheál Martin Zoom on Micheál Martin Does the Government believe the sanctions should be stronger?

The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny If they move to the next level, we will participate. Decisions were made the last day on extra individuals to be restricted, visa liberalisation and a paper being prepared on broader options if there was going to be a further escalation. Ireland is only a small country, but it has a trade figure of €1 billion with Russia where 200 Irish companies provide goods and services. Obviously, there are other markets that we have to go after.

Deputy Micheál Martin referred to GCHQ. When one is dealing with terrorists or subversives, there is, clearly, an understanding one has to have information available on what is necessary to prevent atrocities from taking place. The level of co-operation between the Garda and the PSNI is exceptionally high. The Deputy will appreciate that on several occasions in the past 18 months bombs and other potential threats have been thwarted.

Deputy Micheál Martin: Information on Micheál Martin Zoom on Micheál Martin I was referring to the bugging of European governments.

The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny As far as I am aware, the United States stated it did not have any listening post in Dublin. I did not detect evidence of, as the Deputy called it, GCHQ bugging Government Buildings.

Deputy Micheál Martin: Information on Micheál Martin Zoom on Micheál Martin Did the Taoiseach ask the British Government if it had bugged us?

The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny I cannot recall if I asked that specific question. However, I did raise the issue of surveillance, bugging and the protection of private data.

  The Deputy also referred to breaking the link between sovereign and bank debt and what Ireland was looking for in that regard. He is aware that Ireland was first over the edge, with no tools or mechanisms to deal with it. We had to borrow €64 billion, half of it gone with the promissory note agreement, with the support of the European Central Bank. European banking union, with a single supervisory mechanism, SSM, and a single resolution mechanism, SRM, are all part of the process leading to the point where the Council decision of 29 June 2012 to break the link and the possibility of recapitalisation directly of banks can be followed through. Up to €80 billion has been left aside out of the ESM, European Stability Mechanism, to deal with the concept of direct recapitalisation. We cannot make any case on this until all of these facilities are in place, which should apply from November this year. The European Presidency and the Parliament came to an agreement on the single resolution mechanism, its regulation and the IGA, intergovernmental agreement, on 20 March. The text of the SRM was further refined in a trilogue on Friday, 21 March. The SRM regulation will be submitted to COREP, Common Reporting, on 26 March. It is expected that the IGA will be finalised through the intergovernmental conference as quickly as possible. Most people did not expect this to happen because they had doubts about how effective the Greek EU Presidency would be. Greece was commended for its diligence in getting it across the line.

  Mutualisation will occur over eight years, with contributions also taking place over eight years, with 40% in year one, 20% in year two and the remainder in equal instalments over the remaining years. It is understood contributions will follow a linear trajectory from year one, 12.5% each year, until the target is reached at the end of eight years. it was originally meant to be over ten years.

  The European Central Bank will be the supervisor within the SRM. The supervisory board should be able to assess whether a credit institution is failing or is likely to fail. Therefore, in its executive session it may determine whether resolution is required, but only after having previously informed the ECB about its intention and only if the ECB, in three calendar days after receiving such information, does not make such a decision.

  There is also the role between the Council and the Commission in what is determined by the Meroni doctrine. The Council maintains a role, but it is limited to the existence of a public interest and the use of the fund. The Council can only approve or object to a Commission proposal without actually amending it. The role of the plenary session in the board has been limited, depending on a certain threshold being reached. The plenary session may only adopt a resolution scheme if in the support of the fund in that specific resolution action is required above the threshold of €5 billion for which the weighting of liquidity support is 0.5%. It can also evaluate the application of the resolution tools. The legal basis for this is Article 114 of the Treaty on the Functioning of the European Union.

  Ireland is looking for the structure to be in place where we can make a case, based on the decision of 29 June, for recapitalisation of the banking system. This is still very much on the table. I was glad to see these other sections being put in place which will allow the complete structure for banking union to be followed through. It is expected that the Parliament will approve it in the next few weeks.

  Banks in the member states will contribute to the SRM fund. This reflects the fact that in the integrated financial markets any financial support to resolve a bank issue benefits financial stability and the health of other banks in all member states. These contributions will be calculated in a way that reflects different types of bank and their business models. Contributions will be raised annually and will be pro rata through the amount of liabilities, excluding own funds and covered deposits of all the institutions authorised in participating member states. Contributions will also be risked-based, reflecting different risks inherent in different types of banking activity. Progress was actually made and we do expect it to be finalised, with the structures being in place by mid-summer. We can then deal with the negotiations on the decision of 29 June.

Deputy Micheál Martin: Information on Micheál Martin Zoom on Micheál Martin I have a brief supplementary.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett It is actually our turn.

An Ceann Comhairle: Information on Seán Barrett Zoom on Seán Barrett Give Deputy Micheál Martin one minute. Deputy Richard Boyd Barrett will get in; do not panic.

Deputy Micheál Martin: Information on Micheál Martin Zoom on Micheál Martin The so-called banking union will only provide enough money to cover less than 1% of the capital base of the banks. Is that adequate?

The Taoiseach: Information on Enda Kenny Zoom on Enda Kenny Obviously, it was an agreed figure. We will be happy if the banks stand up to the stress tests which will take place later this year. We hope the fund in place will be adequate. However, these are matters that will need to be reflected upon as time passes. What is important is to get agreement on a structural fund and to make it work.

The European Central Bank will be responsible for the SSM and will begin to supervise all of the major banks in the eurozone and those member states which choose to join the mechanism.


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