EURO AREA LOAN FACILITY BILL 2010
Posted on May 25, 2010 at 11:37 AM
The purpose of the Bill is to give Dáil approval to the Loan Facility Agreement between the Euro Area Member States of the EU and Greece in order to prevent Greece from defaulting on its loans and to secure the stability of the Eurozone as a whole.
The Bill provides for the loans to be managed by the EU Commission on behalf of the Member States and for conditions to be applied in relation to fiscal measures and structured reforms which will be reviewed quarterly by the Commission, the International Monetary Fund and the European Central Bank.
The funding totalling €110 billion - €80 billion from the EU Member States and €30 billion from the International Monetary Fund will be payable over three years.
Ireland’s share of the fund will not exceed 1.5 billion euro.
Section 4 of the Bill requires the Minister for Finance to report annually to Dáil Éireann outlining payments made to the fund and received from it.
I would prefer if there were six monthly reports made so that the House could debate the issues more regularly and assess progress.
Today is the deadline for the first tranche of Greek repayments on its national debt, repayments which require certain Member States to make an immediate contribution to the fund.
This highlights the urgency of the bailout for Greece and indicates why the bond markets were circling like vultures or “packs of wolves” according to the Swedish Finance Minister hoping that Greece would be separated and isolated and therefore vulnerable to the market predators.
The EU collective decision was necessary in the circumstances. It was an act of economic and social solidarity. It would be an appalling vista if Greece defaulted, had to leave the Eurozone and threatened the entire economic and monetary union.
The bailout shouldn’t have had to happen but the very fact that it did happen is an important benchmark for the European Project and what the EU is all about – solidarity amongst the nation states of Europe in the pursuit of peace and prosperity.
However, the Greek crisis is only the tip of the iceberg. Many EU countries are in a bad economic place.
In the space of two years the average national debt/GDP ratio has gone up from 60% to 84% and the deficit from 3% of GDP as required under the Growth and Stability Pact to 7% at present.
The new European Stabilisation Mechanism which proposes a second fund of €500 billion for further crises down the road and will reassure the markets, at least temporarily.
However, I am concerned that the medicine being meted out is extraordinarily harsh. The fiscal adjustment requires a package of €30 billion cuts or 13% of GDP in 4 years to 2014.
Also the narrow base of cuts will be a severe burden on the ordinary Greek citizen and will take an inordinate amount of money out of the economy – The public sector pay, pensions, excise duty and VAT will all be subjected to severe cuts.
The Taoiseach has been shuttling over and back to Brussels for the last couple of months dealing with the Greek crisis.
Yet even though the most important economic issue of the day is being debated everywhere else the Taoiseach has not found time to come into this House and share his views and the Government’s thinking on the issue.
The Oireachtas has the responsibility of holding the Government to account. This is not possible while the Government Whip refuses to allow the issue to be addressed in plenary session on the floor of the Dáil.
The Oireachtas must assert its authority and demand that significant decisions that commit the Irish taxpayer to contributing a large amount of scarce money to a European or other project should be brought before the Oireachtas and debated and voted on prior to a decision being taken.
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