# EUR-Lex - 52012PC0291 - EN

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# 52012PC0291

**Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2011/77/EU on granting Union financial assistance to Ireland /* COM/2012/0291 final - 2012/0153 (NLE) */**

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EXPLANATORY MEMORANDUM

Upon a request by Ireland, the Council
granted financial assistance to Ireland on 7 December 2010 (Implementing Decision 2011/77/EU) in support
of a strong economic and financial reform programme aiming at restoring confidence, enabling the return of the economy to
sustainable growth, and safeguarding financial stability in Ireland, the euro
area and the EU.

In line with Article 3(9) of Decision
2011/77/EU, the Commission, together with the IMF and in liaison with the ECB,
has conducted the sixth review of the Irish authorities' progress on the
implementation of the agreed measures as well as of the effectiveness and
economic and social impact of the agreed measures.

Taking into account the revised economic
outlook, as well as intervened information, the Commission proposes to modify
the economic policy conditions underpinning the assistance as explained below.
The Commission views the proposed changes to the economic policy conditions as
necessary to ensure the smooth implementation of the programme and secure the
programme's objectives.

2012/0153 (NLE)

Proposal for a

COUNCIL IMPLEMENTING DECISION

amending Implementing Decision 2011/77/EU
on granting Union financial assistance to Ireland

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union,

Having regard to Council Regulation (EU) No
407/2010 of 11 May 2010 establishing a European financial stabilisation
mechanism[1], and in particular Article 3(2) thereof,

Having regard to the proposal from the
European Commission,

Whereas:

(1)       Upon
a request by Ireland, the Council granted financial assistance to it (Implementing Decision 2011/77/EU[2])
in support of a strong economic and financial reform
programme aiming at restoring confidence, enabling the
return of the economy to sustainable growth, and safeguarding financial
stability in Ireland, the euro area and the Union.

(2)       In line with Article 3(9)
of Implementing Decision 2011/77/EU, the Commission, together with the IMF and
in liaison with the European Central Bank (ECB), has conducted the sixth review
of the Irish authorities' progress on the implementation of the agreed measures
as well as of the effectiveness and economic and social impact of the agreed
measures.

(3)       The Irish authorities had
presented to Parliament legislation to enhance the long-term sustainability of
the public finances in September 2011, as envisaged under the programme. Some
elements of the envisaged reform were not adopted by Parliament by the end of
the above-mentioned sixth quarterly review (in particular, as regards pension
entitlements for new entrants to the public service, including a review of
accelerated retirement for certain categories of public servants and an
indexation of pensions to consumer prices, the linking of pension benefits to
career average earnings and of retirement age to state pension retirement age).
The authorities have committed to secure the approval of these provisions by
end 2012.

(4)       In light of the
postponement of the EU-wide stress test exercise carried out under the auspices
of the European Banking Authority to 2013, it is considered appropriate that
the next stress test of the domestically-owned Irish banks is postponed to
2013. In the meantime, the authorities have identified key preparatory
work-streams, which will be completed during 2012.

(5)       The Irish authorities have
identified additional measures that they will undertake during 2012 to reduce
unemployment and underpin the attainment of the programme objectives. In
particular, they will take steps to increase the effectiveness of their labor
market activation and training policies and reduce any potential for social
payments to provide disincentives for able people to take up work while
protecting the most vulnarable.

(6)       In light of these
developments and considerations, Implementing Decision 2011/77/EU should be
amended.

HAS ADOPTED THIS DECISION:

Article 1

Article 3 of Implementing
Decision 2011/77/EU is amended as follows:

(1) in paragraph 7, point (d) is replaced
by the following:

"(d) the adoption of legislation to
increase the state pension age to 66 years in 2014, 67 in 2021, and 68 in 2028,
with a view to enhancing the long-term sustainability of the public finances.

(2) in paragraph 8, the following points are
added:

"(f) the completion
of the following work-streams in the domestically-owned Irish banks, on whose
results the Irish authorities will report to the European Commission, the ECB and
the IMF: (i) an independent asset quality review to assess the quality of aggregate
and individual loan portfolios and the processes employed for establishing and
monitoring asset quality; (ii) a distressed credit operations review to assess
the operational capability and effectiveness of distressed loan portfolio
management in the banks including arrears management and workout practices in
curing NPLs and reducing loan losses; (iii) a data integrity validation
exercise to assess the reliability of banks’ data; and (iv) an income
recognition and re-ageing project to review existing practices against IFRS
and relevant regulatory guidance;

(g) the assessment of banks' progress with the
work-out of their non-performing portfolios;

(h) the provision to the European Commission, the
ECB and the IMF of an evaluation of the actions taken in respect of jobseekers
payments recipients who do not attend employment activation interviews;

(i) the completion of a cross-departmental report
to explore the scope for attenuating any adverse employment incentives arising
from the structure of social payments;

(j) the adoption of legislation reforming pension entitlements for new entrants to the public service. This
shall include a review of accelerated retirement for certain categories of
public servants and an indexation of pensions to consumer prices. Pensions
shall be based on career average earnings. New entrants’ retirement age shall
be linked to the state pension retirement age.”

The following paragraph is added:

"9. Ireland shall, during 2013 and in line
with specifications in the Memorandum of Understanding, complete stress tests
of the banks that were included in the PCAR 2011. The stress test will be
aligned to the EBA exercise, and build on the outcomes from PCAR 2011 and the
Financial Measures Programme 2012. The stress test will be rigorous and
continue to be based on robust loan-loss forecasts and a high level of
transparency. The publication of the results will be aligned with the timing of
the next EBA exercise."

Article 2

This Decision
is addressed to Ireland.

Article 3

This Decision
shall be published in the Official Journal of the European Union.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 118, 12.5.2010, p. 1.

[2]               OJ L 30, 4.2.2011, p. 34.