Published on 

Statement by the Taoiseach on the Meeting of Heads of State or Government of the Eurozone, Brussels, 21 July

As the House is aware, I will travel to Brussels tomorrow for a meeting of the Heads of State or Government of the euro area. The meeting has been convened by the President of the European Council, Herman Van Rompuy to discuss the future financing of the Greek Programme and the stability of the euro area as a whole.

These are vitally important topics and the meeting will be an important one.

But, and I think it is important to note this at the start; it will not be the be-all-and-end-all. The crisis in the euro area will not be resolved overnight. There is no one magic solution or silver bullet. At our meeting tomorrow we will consider important proposals, but there will be further meetings and further steps to be take before we are out of the woods.

Since the crisis began, we have seen something of a vicious cycle emerge. Pressure builds. A meeting is convened. Expectations are raised, unreasonably so. Decisions are taken, but they are never sufficient to the build-up. Rather than gaining confidence, the markets are disappointed. Pressure begins to build again. The cycle continues.

This is corrosive and damaging, and the consequences are real for the countries that find themselves at the centre of attention.

I hope, therefore, that we can have a measured debate today, one that does not raise expectations beyond what can reasonably be achieved.

That is not to say that we should abandon all ambition for a strong and clear outcome – one that is credible, workable and durable. The markets are watching and the pressure on Member States has spread and intensified in recent weeks.

In our work tomorrow, we will focus on taking forward what was agreed at last week’s meeting of Finance Ministers, which has been the subject of serious work by officials since.

At their meeting, Ministers reaffirmed their absolute commitment to safeguarding financial stability in the euro area.

They stated that they stood ready to adopt further measures to improve the euro area’s systemic capacity to resist contagion, including through: increasing and enhancing the flexibility and scope of the EFSF; lengthening the maturities of the loans; and lowering the interest rates, including through a collateral arrangement where appropriate.

Ministers also discussed the main parameters of a new multi-annual adjustment programme for Greece.

As the House is aware, the Greek Government has demonstrated political determination and courage in securing parliamentary support for the serious reform programme which will be necessary if Greece is to recover. They are deserving of great credit for this. Delivery on that programme will be tough, but essential.

At their meeting, Ministers called on the Greek Government to sustain their efforts and to meet commitments in full and on time.

Ministers noted that responsibility for resolving the crisis in Greece lies primarily with Greece, but recognised also the need for a broader and more forward-looking policy response to assist the Greek Government in its efforts to achieve debt sustainability.

It was also accepted that there is a need to act to safeguard financial stability in the euro area as a whole.

In that context, Ministers asked officials to propose measures to reinforce the current policy response to the crisis in Greece, including through exploring how a new multi-annual programme for Greece would be financed, steps to reduce the cost of debt-servicing and means to improve the sustainability of Greek public debt.

The results of this on-going work – which will be taken forward by a meeting of key senior officials in Brussels later today - will form the basis of discussions tomorrow. It is, therefore, not yet possible to say what precisely will emerge from our meeting and, as we know from hard-won experience, it is unwise to speculate in these matters.

As I told the House yesterday, however, we do need an outcome that offers certainty and security for the future.

My main priority will be to ensure an agreement with positive implications for Ireland. There are three dimensions to this.

Firstly, while the focus will be on Greece and the parameters for a new Programme for that country, what is proposed for one Member State cannot be seen or read in isolation. Those countries, like Ireland, that are already in a Programme, and those under pressure in the markets, are alive to the real danger of contagion and negative read-across.

So I will be watching carefully and working to ensure that what is agreed for Greece does not in any way make our progress and eventual return to the markets more difficult.

Secondly, I will be working to ensure that any element of the new arrangements for Greece that might be of benefit to us is given wider application.

The Government has long argued for greater flexibility for the EFSF. I am pleased to see that this is now very much back on the agenda.

The point we have made all along is that the purpose of a programme is to contribute to recovery and growth. This is a shared goal of the recipients of loans and of those guaranteeing them. It is, of course, necessary that conditions be imposed. But these should not be such as to undermine this fundamental and central objective, or else we are all wasting our time.

The type of elements now being considered – lower interest rates, longer term loans, a greater flexibility of instruments – have the potential to make a positive contribution.

On interest rates, we know the specific issues that have arisen for Ireland – we will continue to press for the reduction in interest rates agreed in March to be applied to us.

But the question is also a wider one. It is worth recalling that the method of calculating interest rates under the EFSF, which is a complex one, was agreed when no country had sought assistance from the facility and the question was, to an extent, an academic one.

There were some who argued at the time that there was a need for the margin imposed to be such as to deter any Member State from entering into a programme lightly. This was presented as an argument against moral hazard.

In light of experience since, more realism has entered the debate. There is wider appreciation that the strictures of a Programme itself - the pain of adjustment it brings with it and the accelerated pace of reform – are more than sufficient deterrent.

No country would seek assistance other than in a situation of last resort.

There are a number of other possible adjustments to the operation of the EFSF under consideration. Until these are thrashed out more fully, and until they are actually tabled as proposals, there is little to be gained from speculating on what they might mean both for Ireland and for others.

However, as I have said, the Government has supported the principle of increased flexibility and I am hopeful that a positive outcome on this can be secured when we meet tomorrow.

Thirdly, I will be looking for an outcome that is good for Europe and for the eurozone, that settles nerves in the markets, and that sends a clear and positive signal that we are about our work in a committed and productive way.

Ceann Comhairle,

We have all of us lost count of the number of times we have come to this House to discuss crunch meetings for Europe. The crisis has been a long and sustained one.

Criticism of the decisiveness and leadership of key figures has become widespread and commonplace. However, and in the interest of balance, it is important to remember that we are engaged in a process of learning, in which new territory is being charted day by day.

As I said at the start, this week’s meeting will be an important one. The danger facing the euro area and the very currency itself is real and present.

This week’s meeting will not resolve all matters. But I hope that it will demonstrate the capacity to act in a way that begins to restore confidence and momentum, and that arms us well for what lies ahead.