Dáil backs €7bn Irish EU rescue ‘bill’

By Paul O’Brien Political Correspondent - Friday, June 25, 2010

THE Dáil has passed legislation that could see Ireland contribute over €7 billion to a European rescue fund if another member state gets into financial trouble.

Ireland is already providing roughly €1.5bn to the €110bn joint EU-IMF bailout of Greece.

The EU recognised after Greece that instead of developing individual bailout packages each time a member state got into trouble, it needed a more comprehensive plan.

As a result, it agreed to establish a financial stability mechanism under which a fund of up to €750bn will be available if member states need assistance. The EU will provide circa €440bn with the rest coming from the IMF. The legislation passed yesterday provides for Ireland to provide just over €7bn if the fund is called upon.

Finance Minister Brian Lenihan said the stability mechanism would be able to "provide loans to euro area member states that are unable to access capital markets due to exceptional circumstances beyond their control".

"Ireland’s key obligation under the facility will be to provide guarantees up to a ceiling of just over €7bn, if needed, for any funds raised by the facility to provide loans to such euro area member states," he added.

The mechanism was a "logical consequence" of the steps that the EU and IMF took to assist Greece, the minister said.

He said it was recognised at the time that developing and implementing "bespoke instruments" each time a member state faced difficulties was "not a sustainable or prudent" approach.

"In light of this, it was decided that the EU needed to develop and adopt a comprehensive package of measures that would be of sufficient magnitude to address future potential needs."

Meanwhile, Mr Lenihan also confirmed that this year’s budget would take place in December and there would be no additional or "emergency" budget.

He downplayed suggestions by his brother, junior minister Conor Lenihan, that he had an axe which he sometimes wielded "indiscriminately" to cut Government spending. Brian Lenihan said his brother had already made clear that he was speaking in a humorous sense.

On NAMA, Mr Lenihan said the state agency’s first quarterly report was due to be submitted to him next week. An updated business plan from the board of NAMA is due to be submitted to the minister by June 30. Mr Lenihan committed to publishing both documents.

NAMA is acquiring billions of euro worth of property loans from the banks in a bid to restore them to health.



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