Matt Shanahan on ESM changes and SRF backstop

As a member of the regional group, I would like our group to be associated with the comments, and previously from Mr Devlin, in respect of Mr Currie. The purpose of this bill is to ratify amendments of the European Stability Mechanism and the introduction of the common backstop to the Single Resolution Fund. The policy paper suggests that this agreement represents a significant political breakthrough and is a crucial stepping stone on the path to strengthen Europe's economic and monetary union. And certainly based on the amount of borrowing that all European countries are doing at the moment, there is no doubt that we are in a very cohesive monetary alliance. It is proposed that approving these changes will strengthen resilience of the euro area and help with future crisis management. And I think that is to be commended. It has been agreed to give the ESM an enhanced mandate with improvements to its financial assistance instruments toolkit and a stronger role in future economic adjustment programs. And I suppose the question we have to see is how will that actually play out in terms of future fiscal rules and frameworks. And many people in Ireland, although they may not have interest or regard to the technical nature of this bill, they will certainly understand and probably have intimate history with many aspects. And namely our request to European support funding back in 2010 as part of our applications to the IMF and the subsequent visits of the Troika here to re-chart our national economic management post-2020. Where we saw institutional imposed austerity, which has scarred so many of us in the society and continues to do. This agreement is pledged to address a crucial gap in the banking union by empowering the ESM to act as the common backstop to the single resolution fund. And therefore it assumes that the common backstop can provide a financial safety net for bank resolutions within the banking union. And based on our history, that is something we could certainly have done with in the past and hopefully we will not have need of in the future. The size of the credit line will be aligned with the SRF funds with a target level of 1% of covered EU deposits in the banking union with a cap of €68 billion, so significant firepower there without a doubt. There are elements within the treaty reform elements that are technical in nature. The common backstop to the single resolution fund reform of the precautionary condition credit line. And the single fund, as I have said, which will ensure is made up of contributions from credit institutions and investment firms in the 19 participatory member states within the banking union. And therefore sees that this financial industry as a whole ensures the financial stabilization of the system. And I suppose that brings up the question that if we were back in 2010, would we have had to cover bank debts? And ultimately, would every citizen in Ireland have paid a price for covering the bondholders? So I'm not sure where that lies. And I presume when this legislation goes to before committee, some of these issues will be addressed, Minister. But there's no doubt that we are in a very important monetary cohesion system now. And we're very grateful for it in terms of the borrowing that we are doing to facilitate spending of COVID in particular. But I would say at what costs, and we know that government, the national government is certainly borrowing cheaply from the European framework borrowing. But that is not cheap when we come to the likes of mortgages here. And we are still supplementing mortgages with interest rates, potentially to restore our own bank's balance sheets, which are wiped out throughout the banking crisis. And the question has to be asked how long more will borrowers in Ireland continue to pay rates that are significantly, sometimes 50% above what our European peers are borrowing for. And this is a competitive threat and an ongoing competitive disadvantage to the businesses in this country. We can also question, Minister, the oversight that is presently being implemented in terms of our national bank borrowing arrangements. Given that the state is borrowing at a very low rate, it makes it very easy, firstly, to borrow. And secondly, it often derives very poor value from money. And the best time to make a borrowing application is when, firstly, when you don't have the money and you badly need it, and when you have onerous terms in terms of the lending, it will make you look long and hard about the spending that you're going to do and the proposed oversight that you're going to implement. So this is an area, again, that I think Ireland Inc. has to be very careful about. But, as I say, there's no doubt we need European stability at the moment, particularly in light of where Brexit is at and where it's potentially heading to. And European borrowing frameworks are required, but I think Ireland has probably suffered quite a bit underneath them and, indeed, other deputies have outlined our inability to go beyond structural frameworks in terms of investment in transport infrastructure, for instance. So I suppose we will have to see the new direction of where these frameworks are going to take us. I think we don't have a choice per se, but it looks like to support and pass this proposed legislation. I think there are benefits, as has been outlined. There are probably some short gaps, and I hope that these will be identified in committee. But more importantly, as I say, I think the fact that we have access to cheap borrowing rates is not a reason for us to go out and essentially throw money everywhere without significant oversight. And I have brought it up in the House before, Minister, about the lack of clarity in terms of spending that deputies are asked to give votes to, not seeing where the money is going other than voted expenditure comes in here periodically and we are asked to vote in favour of it, not seeing where the money is spent. And I think we have a significant situation in this country all the time where we do not have sight of all of the spending, not the borrowing, but the spending that we are doing in this country. And I wish to see that rectified into the future. Thank you. Thank you.