Proposal for a COUNCIL DECISION on granting Union financial assistance to Ireland
Date: 2010-12-03
Institutions: European Commission
Subjects: EU aid, Ireland, economic stabilisation, financial aid, macroeconomics, reflation

EN 

EN 

   EN 

 
 
EUROPEAN COMMISSION 

Brussels, 3.12.2010 
COM(2010) 730 final 

2010/0351 (NLE) 

Proposal for a 

COUNCIL DECISION 

on granting Union financial assistance to Ireland 

SEC(2010) 1516 final 

EN 

   EN 

 
 
 
  
EXPLANATORY MEMORANDUM 

Ireland  has  recently  come  under  increasing  pressure  in  financial  markets,  reflecting  rising 
concerns  about  the  sustainability  of  the  Irish  public  finances.  The  current  crisis  has  had  a 
dramatic  impact  also  on  Ireland's  public  finances.  Support  measures  for  the  banking  sector 
including  significant  capital  injections  have  added  greatly  to  the  deterioration  in  the  public 
finance  position  caused  by  the  recession.  Current  market  concerns  primarily  reflect  the  fact 
that  the  solvency  of  the  Irish  sovereign  and  the  banking  system  have  become  inextricably 
linked in the crisis; they have led to a steep increase in Irish sovereign bond yields, while the 
domestic banking system is effectively cut off from international market funding and has been 
increasingly relying on the Eurosystem for funding. 

In  view  of  this  severe  economic  and  financial  disturbance,  Ireland  officially  requested 
financial  assistance  from  the  European  Union,  the  euro-area  Member  States  and  the 
International Monetary Fund (IMF) on 21 November 2010 with a view to supporting a policy 
programme to restore confidence and enable the return of the economy to sustainable growth, 
and safeguarding financial stability in Ireland, the euro area and the EU. The draft economic 
and  financial  adjustment  programme  submitted  to  the  Commission  and  the  Council  aims  at 
restoring financial market confidence in the Irish banking sector and the sovereign. It contains 
three  main  elements.  First,  a  financial  sector  strategy  which  comprises  fundamental 
downsizing,  deleveraging  and  reorganization  of  the  banking  sector,  complemented  by 
appropriate  recapitalisation.  Second,  an  ambitious  fiscal  consolidation  strategy  setting  out 
detailed fiscal consolidation measures aiming at putting gross public debt on a firm downward 
path in the medium term. Third, an ambitious structural reform agenda, notably for the labour 
market,  with  a  view  to  facilitating  adjustment  and  strengthening  the  economy's  growth 
potential.  

The programme covers the period 2010-2013. The financial package of the programme will 
cover financing needs of up to EUR 85 billion, including up to EUR 35 billion to support the 
banking system and up to EUR 50 billion covering possible fiscal financing needs. Half of the 
banking  support  measures  (EUR  17½  billion)  will  be  financed  by  an  Irish  contribution 
through  the  Treasury  cash  buffer  and  investments  of  the  National  Pensions  Reserve  Fund. 
Union assistance to Ireland of up to EUR 22.5 bn under the European financial stabilisation 
mechanism  (EFSM)  established  by  Council  Regulation  (EC)  No  407/2010  of  11  May  2010 
has  been  requested.  This  would  be  part  of  total  support  provided  by  Ireland's  European 
partners amounting to EUR 45 bn together with a loan from the IMF of SDR 19.5 bn (around 
EUR  22.5  bn)  under  an  Extended  Fund  Facility.  Against  this  background,  the  provision  of 
Union  assistance  to  Ireland  of  up  to  EUR  22.5  billion  under  the  European  financial 
stabilisation mechanism (EFSM) established by Council Regulation (EC) No 407/2010 of 11 
May 2010 would allow supporting the return of the economy to sustainable growth, ensure a 
properly functioning banking system and safeguard financial stability in the Union and in the 
euro area. The union assistance would be disbursed in up to 13 instalments and be linked to 
economic policy conditions. It needs to be supplied on terms and conditions similar to those 
of the IMF. 

EN 

2 

   EN 

 
2010/0351 (NLE) 

Proposal for a 

COUNCIL DECISION 

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,  and  in  particular 
Article 122(2) thereof,  

Having  regard  to  Council  Regulation  (EC)  No  407/2010  of  11  May  2010  establishing  a 
European financial stabilisation mechanism1, 

Whereas: 

(1) 

Ireland  has  recently  come  under  increasing  pressure  in  financial  markets,  reflecting 
rising  concerns  about  the  sustainability  of  the  Irish  public  finances  in  view  of 
comprehensive  public  support  measures  to  the  weakened  financial  sector.  Due  to  its 
excessive  exposure  to  real  estate  and  construction  projects,  the  domestic  banking 
system has experienced large losses in the aftermath of the collapse of these sectors. 
The  current  economic  and  banking  sector  crisis  has  had  a  dramatic  impact  also  on 
Ireland's  public  finances,  compounding  the  impact  of  the  recession.  Falling  tax 
revenue  as  well  as  an  increase  in  cyclical  expenditure,  notably  due  to  rising 
unemployment,  have  contributed  to  a  high  general  government  deficit  and  steep 
increase  in  debt,  compared  to  their  favourable  pre-crisis  positions  and  despite  the 
implementation  of  five  important  fiscal  consolidation  packages  since  mid-2008. 
Support  measures  for  the  banking  sector  including  significant  capital  injections  have 
added  greatly  to  the  deterioration  in  the  public  finance  position.  Current  market 
concerns  primarily  reflect  the  fact  that  the  solvency  of  the  Irish  sovereign  and  the 
banking system have become inextricably linked in the crisis; they have led to a steep 
increase  in  Irish  sovereign  bond  yields,  while  the  domestic  banking  system  is 
effectively cut off from international market funding and has been increasingly relying 
on the Eurosystem for funding.  

(2) 

In  view  of  this  severe  economic  and  financial  disturbance  caused  by  exceptional 
occurrences  beyond  the  control  of  the  government,  the  Irish  authorities  officially 
requested financial assistance from the European Union, the euro-area Member States 
and  the  International  Monetary  Fund  (IMF)  on  21  November  2010  with  a  view  to 
supporting  the  return  of  the  economy  to  sustainable  growth,  ensuring  a  properly 
functioning  banking  system  and  safeguarding  financial  stability  in  the  Union  and  in 
the euro area. Agreement at technical level was reached on 28 November 2010 on a 
comprehensive policy package for the period 2010-2013.  

1 

OJ L 118, 12.5.2010, p. 1. 

EN 

3 

   EN 

 
                                                 
(3) 

(4) 

(5) 

The draft economic and financial adjustment programme (hereafter ‘the programme’) 
submitted  to  the  Commission  and  the  Council  aims  at  restoring  financial  market 
confidence  in  the  Irish  banking  sector  and  the  sovereign,  enabling  the  economy  to 
return  to  sustainable  growth.  To  achieve  these  goals,  the  programme  contains  three 
main  elements.  First,  a  financial  sector  strategy  which  comprises  fundamental 
downsizing, deleveraging and reorganization of the banking sector, complemented by 
appropriate  recapitalisation  to  the  extent  needed.  Second,  an  ambitious  fiscal 
consolidation  strategy,  building  on  the  National  Recovery  Plan  2011-2014  published 
by  the  authorities  on  24  November  2010.  The  plan  sets  out  detailed  fiscal 
consolidation measures aiming at putting gross public debt on a firm downward path 
in the medium term. The authorities are committed to reducing the deficit to below 3% 
of GDP by 2015, the revised deadline set by the Council on [7] December 2010. Third, 
also  building  on  the  National  Recovery  Plan,  the  programme  sets  out  an  ambitious 
structural  reform  agenda,  notably  in  the  labour  market,  with  a  view  to  facilitating 
adjustment  and  strengthening  the  economy's  growth  potential.  The  authorities  are 
requesting financial assistance from the Union, the euro area Member States, bilateral 
loans from the United Kingdom, Sweden and Denmark and the IMF in support of this 
ambitious policy package.  

Under the Commission's current projections for nominal GDP growth (1.4% in 2011, 
2.7%  in  2012  and  3.8%  in  2013),  the  fiscal  adjustment  path  specified  in  the  [7] 
December  2010  Council  Recommendation  to  Ireland  under  Article  126(7)  of  the 
Treaty is consistent with a path for the debt-to-GDP ratio of 98.9 % in 2010, 113.5 % 
in 2011, 120.0 % in 2012 and 121.8 % in 2013. The debt to GDP ratio would therefore 
be  stabilised  in  2013  and  be  placed  on  a  declining  path  thereafter,  assuming  further 
progress in the reduction of the deficit. Debt dynamics are affected by several below-
the-line operations, which are projected to increase the debt-to-GDP ratio by 5.3 pps. 
of  GDP  in  2011  and  0.8  pps.  of  GDP  in  2012  and  reduce  it  by  1.3  pps.  of  GDP  in 
2013. These include projected capital injection into banks in 2011, reductions in cash 
reserves and differences between accrued and cash interest payments.  

The  assessment  by  the  Commission,  in  liaison  with  the  ECB,  is  that  Ireland  needs 
financing of a total amount of EUR 85 bn over the period from December 2010 to end 
2013.  Notwithstanding  the  significant  fiscal  adjustment,  the  financing  gap  for  the 
sovereign may sum up to EUR 50 bn over the programme period. This assumes roll-
over rates for maturing long-term debt of 0% until end-2011, 20% in 2012, and 80% in 
2013.  Conservative  roll-over  assumptions  are  also  made  regarding  short-term  debt. 
The financial sector strategy contained in the programme to restore confidence in the 
Irish banking system on a sustainable basis contains a banking support scheme of up to 
EUR  35  bn.  This  comprises  an  immediate  capital  injection  of  up  to  EUR 10 bn  into 
selected banks to bring their core tier 1 capital ratio to 12%, while also funding early 
measures  to  support  deleveraging  and  taking  account  of  haircuts  on  the  additional 
loans to be transferred to the National Asset Management Agency (NAMA). Further 
contingent  capital  provisions  of  EUR  25  bn  should  provide  assurance  that  banks  are 
able  to  meet  current  and  future  capital  requirements.  Actual  funding  needs  may, 
however,  be  substantially  lower,  in  particular  if  market  conditions  improve 
significantly  and  no  severe  unexpected  banking  losses  materialize  during  the 
programme period.  

(6) 

The  programme  would  be  financed  through  contributions  from  external  sources  and 
the use of Irish financial buffers. Union assistance to Ireland would reach up to EUR 

EN 

4 

   EN 

 
22.5 bn under the European financial stabilisation mechanism (EFSM) established by 
Council  Regulation  (EC)  No  407/2010  of  11  May  2010.  This  would  be  part  of  total 
support provided by Ireland's European partners amounting to EUR 45 bn. Further to 
the support from the EFSM, loans from Ireland's EU partner countries would include 
contributions  from  the  European  Financial  Stability  Facility  (EUR  17.7  bn),  and 
bilateral lending support from the United Kingdom, Sweden, and Denmark (EUR 4.8 
bn  in  total).  In  addition,  Ireland  has  requested  a  loan  from  the  IMF  of  SDR  19.5 bn 
(around EUR 22.5 bn) under an Extended Fund Facility. The Irish contribution would 
be EUR 17.5 bn, and would come from the use of the existing Treasury cash reserve 
and contributions from the National Pensions Reserve Fund (NPRF). The support from 
the EFSM needs to be supplied on terms and conditions similar to those of the IMF.  

(7) 

(8) 

(9) 

The Council should review on a regular basis the economic policies implemented by 
Ireland,  in  particular  in  the  context  of  the  annual  reviews  of  Ireland's  update  of  the 
stability programme and implementation of the National Reform Programme, as well 
as under the excessive deficit procedure. 

The  Union  financial  assistance  should  be  managed  by  the  Commission.  The  specific 
economic  policy  conditions  agreed  with  Ireland  should  be  laid  down  in  a 
Memorandum of Understanding. The detailed financial terms should be laid down in a 
Loan Facility Agreement. 

The Commission should verify at regular intervals that the economic policy conditions 
attached  to  the  assistance  are  fulfilled  through  missions  and  regular  reporting  by  the 
Irish authorities, on a quarterly basis.  

(10)  Throughout  the  implementation  of  the  programme,  the  Commission  should  provide 

additional policy advice and technical assistance in specific areas. 

(11)  The  operations  which  the  Union  financial  assistance  helps  to  finance  must  be 
compatible  with  Union  policies  and  comply  with  Union  legislation.  Interventions  in 
support of financial institutions must be carried out in accordance with Union rules on 
competition. 

(12)  The  assistance  should  be  provided  with  a  view  to  supporting  the  successful 

implementation of the programme. 

HAS ADOPTED THIS DECISION:  

Article 1 

1. 

2. 

3. 

The Union shall make available to Ireland a loan amounting to a maximum of EUR 
22.5 billion, with a maximum average maturity of 7.5 years.  

The financial assistance shall be made available during three years starting from the 
first day after the entry into force of this Decision. 

The Union financial assistance shall be made available by the Commission to Ireland 
in  maximum  13  instalments.  An  instalment  may  be  disbursed  in  one  or  several 
tranches. The maturities of the tranches under the first instalment may be longer than 
the  maximum  average  maturity  referred  to  in  paragraph  1.  In  such  cases,  the 

EN 

5 

   EN 

 
4. 

5. 

6. 

7. 

8. 

1. 

2. 

3. 

4. 

maturities  of  further  tranches  shall  be  set  so  that  the  maximum  average  maturity 
referred to in paragraph 1 be achieved once all instalments have been disbursed.  

The  first  instalment  shall  be  released  subject  to  the  entry  into  force  of  the  Loan 
Agreement and Memorandum of Understanding.  

Ireland  shall  pay  the  actual  cost  of  funding  of  the  Union  for  each  tranche  plus  a 
margin of 292.5 basis points, which results in conditions similar to those of the IMF 
support.  

In addition, costs referred to in Article 7 of Regulation No 407/2010 shall be charged 
to Ireland.  

If  required  in  order  to  finance  the  loan,  the  prudent  use  of  interest  rate  swaps  with 
counterparties of the highest credit quality shall be permitted. 

The  Commission  shall  decide  on  the  size  and  release  of  further  instalments.  The 
Commission shall decide on the size of the tranches.  

Article 2 

The  assistance  shall  be  managed  by  the  Commission  in  a  manner  consistent  with 
Ireland's  undertakings  and  recommendations  by  the  Council,  in  particular  the 
Recommendations  addressed  to  Ireland  in  the  context  of  the  implementation  of  its 
National  Reform  Programme  as  well  as  of  the  implementation  of  the  Stability  and 
Growth Pact.  

The  Commission  shall  agree  with  the  authorities  of  Ireland  the  specific  economic 
policy conditions attached to the financial assistance as laid down in Article 3. Those 
conditions  shall  be  laid  down  in  a  Memorandum  of  Understanding  consistent  with 
the  undertakings  and  recommendations  referred  to  in  paragraph  1.  The  detailed 
financial terms shall be laid down in a Loan Facility Agreement to be concluded with 
the Commission. 

The Commission shall verify at regular intervals that the economic policy conditions 
attached to the assistance are fulfilled. To this end, the Irish authorities shall place all 
the  necessary  information  at  the  disposal  of  the  Commission  and  cooperate  in  full 
with  the  latter.  The  EFC  shall  be  kept  informed  by  the  Commission  of  possible 
refinancing of the borrowings or restructuring of the financial conditions. 

Ireland  shall  adopt  and  implement  additional  consolidation  measures  to  ensure 
macro-financial  stability,  in  case  such  measures  will  be  necessary  during  the 
assistance programme. The Irish authorities shall consult the Commission in advance 
of the adoption of any such additional measures. 

1. 

The adjustment programme prepared by the Irish authorities is hereby approved.  

Article 3  

EN 

6 

   EN 

 
2. 

3. 

4. 

5. 

The  disbursement  of  each  further  instalment  shall  be  made  on  the  basis  of  a 
satisfactory implementation of the adjustment programme of the Irish Government to 
be  included  in  the  Stability  Programme  of  Ireland,  in  the  National  Reform 
Programme  and,  more  particularly,  the  specific  economic  policy  conditions  laid 
down  in  the  Memorandum  of  Understanding.  These  shall  include,  inter  alia,  the 
measures provided for under paragraphs 4 to 11 of this Article. 

The general government deficit shall not exceed 10.6 % of projected GDP in 2011, 
8.6 % of GDP in 2012 and 7.5 % of GDP in 2013, in order to place Ireland on track 
to reduce the deficit to below 3% of GDP by 2015. The projected annual deficit path 
does not incorporate the possible direct effect of potential bank support measures in 
the  context  of  the  government's  financial  sector  strategy  as  set  out  in  the 
Memorandum  of  Economic  and  Financial  Polices  (MEFP)  and  specified  in  the 
Memorandum  of  Understanding  to  be  signed  by  the  Commission  and  the  Irish 
authorities. Further, this path is consistent with the preliminary view of Eurostat on 
the  ESA95  accounting  treatment  of  time  of  recording  of  interest  payments  on 
promissory  notes  payable  to  Anglo  Irish  Bank2,  such  that  a  revision  of  that  view 
would result in a revision of the deficit path.  

The measures specified in paragraphs 7 to 9 below shall be adopted by Ireland before 
the  end  of  the  indicated  year,  with  exact  deadlines  for  the  years  2011-2013  being 
specified in the Memorandum of Understanding to be signed by the Commission and 
the  Irish  authorities.  Ireland  shall  stand  ready  to  take  additional  consolidation 
measures to reduce the deficit to below 3% of GDP by 2015 in case downside risks 
to the deficit targets specified in paragraph 3 materialise.  

With a view to restoring confidence in the financial sector, Ireland shall adequately 
recapitalise, rapidly deleverage and thoroughly restructure the banking system as set 
out in the Memorandum of Understanding. In particular, Ireland shall: 

(a)  take  action  to  ensure  that  Allied  Irish  Banks,  Bank  of  Ireland,  Educational 
Building Society and Irish Life and Permanent are recapitalised in the form of equity, 
if needed, so as to ensure that the minimum capital requirement of 10.5% core tier 1 
capital  will  be  maintained,  depending  on  the  results  of  the  Prudential  Capital 
Adequacy Review for 2011.  

(b)  implement  the  divestiture  of  participations  in  banks  acquired  during  the  crisis 
within  the  shortest  timeframe  possible,  in  a  manner  compatible  with  financial 
stability and public finance considerations.  

(c)  implement  a  specific  plan  for  the  resolution  of  Anglo  Irish  Bank  and  Irish 
Nationwide Building Society, which will seek to minimise capital losses arising from 
the working out of these non-viable credit institutions.  

6. 

Ireland shall adopt the following measures before the end of 2010: 

2 

See 
http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/methodology/advice_
member_states. 

EN 

7 

   EN 

 
                                                 
Adoption  of  a  budget  for  2011  including  fiscal  consolidation  measures  in  a  total 
amount of EUR 6 bn aiming at a reduction of the general government deficit within 
the timeframe referred to in Article 3(3). The budget shall include revenue measures 
to  raise  at  least  EUR1,400m  in  2011,  including  a  lowering  of  personal  income  tax 
bands and credits or equivalent measures to yield EUR945m in 2011; a reduction in 
pension  tax  relief  and  pension  related  deductions  to  yield  EUR  155m  in  2011;  a 
reduction  in  general  tax  expenditures  to  yield  EUR  220m  in  2011;  increases  in 
excises and miscellaneous tax measures to raise EUR 80m in 2011. In addition, the 
budget shall specify that the government will outline methods to raise at least EUR 
700m  in  one-off  and  other  measures  in  2011.  The  budget  shall  also  include  a 
reduction  of  current  expenditure  in  2011  of  at  least  EUR  2,090m,  including:  social 
protection  expenditure  reductions;  a  reduction  of  public  service  employment;  a 
reduction  of  existing  public  service  pensions  on  a  progressive  basis  averaging  over 
4%; other expenditure savings including cuts in goods and services spending and in 
other  transfer  payments;  a  reduction  of  at  least  EUR  1,800m  in  public  capital 
expenditure  against  existing  plans  for  2011.  In  exceptional  circumstances,  other 
measures  yielding  comparable  savings  than  those  mentioned  above  shall  be 
considered, in close consultation with the Commission. 

7. 

Ireland shall adopt the following measures by the end of 2011: 

(a)  A  10%  pay  reduction  for  public  service  new  entrants.  Government  shall  also 
consider an appropriate adjustment, including in relation to the public service wage 
to  compensate  for  potential  shortfalls  from  projected  savings  from 
bill, 
administrative efficiencies and public service numbers reductions.  

(b) Adoption of a budget for 2012 including fiscal consolidation measures amounting 
to  at  least  EUR  3.6bn  and  aiming  at  a  reduction  of  the  general  government  deficit 
within  the  timeframe  referred  to  in  Article  1(3).  The  draft  budget  shall  notably 
include  revenue  measures  to  yield  EUR  1.5bn  in  a  full  year  including,  inter  alia,  a 
lowering of personal income tax bands and credits; a reduction in private pension tax 
reliefs;  a  reduction  in  general  tax  expenditures;  a  new  property  tax;  a  reform  of 
capital  gains  tax  and  capital  acquisitions  tax;  an  increase  in  the  carbon  tax.  The 
budget shall provide for a reduction of expenditure in 2012 of EUR 2.1bn including 
social  expenditure  reductions;  cuts  in  public  sector  employment;  adjustments  in 
public sector pensions and in other programme expenditure; and reductions in capital 
expenditure.  

(c) Finalisation of an independent assessment of transfer of responsibility for water 
services  provision  from  local  authorities  to  a  water  utility,  and  preparation  of 
proposals for implementation with a view to starting charging in 2012/2013. 

(d) 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. Further, pension entitlements for new entrants to the public service 
shall be reformed with effect from 2011. 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. 

EN 

8 

   EN 

 
(e) Adoption of measures reinforcing a credible budgetary strategy and to strengthen 
the budgetary framework. Ireland shall adopt and implement the fiscal rule that any 
additional  unplanned  revenues  in  2011-2015  will  be  allocated  to  deficit  and  debt 
reduction.  In  accordance  with  the  proposal  set  out  in  the  National  Recovery  Plan 
2011-2014,  Ireland  shall  establish  a  budgetary  advisory  council  to  provide  an 
independent  assessment  of  the  Government's  budgetary  position  and  forecasts. 
Ireland  shall  adopt  a  Fiscal  Responsibility  Law  introducing  a  medium-term 
expenditure  framework  with  binding  multi-annual  ceilings  on  expenditure  in  each 
area.  This  shall  be  made  taking  into  account  any  revised  economic  governance 
reforms at EU level and build on reforms already in place.  

(f)  Ireland  shall  adopt  legislative  changes  to  remove  restrictions  to  trade  and 
competition in sheltered sectors including the legal profession, medical services and 
the pharmacy profession.  

(g)  Recapitalisation  of  Irish  domestic  banks  to  an  initial  level  of  12%  core  tier  1 
capital, taking account of haircuts on the additional loans to be transferred to NAMA, 
and funding of early deleveraging by making available EUR 10 billion in the system. 
The  recapitalisation  shall  take  the  form  of  equity  shares  (or  equivalent  instruments 
for Educational Building Society).  

(h) Introduction of legislation to reform the minimum wage in such a way to foster 
job  creation  and  act  to  prevent  distortions  caused  by  sectoral  minimum  wages,  and 
undertaking,  in  agreement  with  the  Commission,  an  independent  review  of  the 
framework  Registered  Employment  Agreements  and  Employment  Regulation 
Orders.  

(i) A reform of the unemployment benefit system to enhance incentives for an early 
exit  from  unemployment.  Activation  measures  shall  be  strengthened  by  identifying 
job seekers' needs better, enhancing engagement, and developing sanctions to ensure 
job  search  or  training  by  beneficiaries;  this  shall  be  underpinned  by  more  effective 
monitoring.  The  sanctions  mechanism  shall  be  set  to  cause  an  effective  loss  of 
income without being excessively penal.  

(j) Publication of an in-depth review of the personal debt regime, and start of work 
on  a  reform  of  legislation  which  will  balance  the  interests  of  both  creditors  and 
debtors. 

(k) Preparation of a report providing an independent assessment of the electricity and 
gas sectors to assist with the public financing need as well as to increase competition. 
The authorities shall consult with the Commission on the results of this assessment 
with a view to setting appropriate targets.  

(l) To enhance competition in open markets, legislation shall be reformed to generate 
more credible deterrence by providing for the possible imposition of fines and other 
sanctions  in  competition  cases.  In  addition,  the  competition  authorities  will  be 
required  to  identify  sectors  which  are  effectively  outside  the  scope  of  competition 
law and identify processes to address those exclusions.  

(m) To encourage growth in the retail sector, the government will conduct a study to 
examine  the  economic  impact  of  eliminating  the  current  cap  on  the  size  of  retail 

EN 

9 

   EN 

 
premises with a view to enhancing competition and lowering prices for consumers. 
Implementation of the policy of the study will be discussed with the Commission.  

8. 

Ireland shall adopt the following measures by the end of 2012: 

(a) Adoption of a budget for 2013 including fiscal consolidation measures amounting 
to at least EUR 3.1bn aiming at a reduction of the general government deficit within 
the  timeframe  referred  to  in  Article  1(3).  In  particular,  the  budget  shall  include 
revenue  measures  to  raise  at  least  EUR  1.1bn  (inclusive  of  carryover  from  2012), 
including: a lowering of personal income tax bands and credits; a reduction in private 
pension  tax  relief;  a  reduction  in  general  tax  expenditures  and  an  introduction  of 
property tax. The budget shall also provide for a reduction in expenditure in 2013 of 
at  least  EUR  2bn  including:  social  expenditure  reductions;  a  reduction  of  public 
service  employment;  public  service  pension  adjustments;  cuts  in  other  programme 
expenditure; and reductions in capital expenditure.  

(b) Submission of legislation to Parliament to reform the personal debt regime with a 
view to ensuring better balance of the interests of both creditors and debtors. 

9. 

In order to ensure the smooth implementation of the programme conditionality and to 
help  restoring  imbalances  in  a  sustainable  way,  the  Commission  shall  provide 
continued advice and guidance on fiscal, financial market and structural reforms and 
within the framework of the assistance program, together with the IMF and in liaison 
with  the  ECB,  shall  periodically  review  the  effectiveness  and  economic  and  social 
impact of the agreed measures and recommend necessary corrections with a view to 
enhancing  growth  and  job  creation,  securing  necessary  fiscal  consolidation  and 
minimising  harmful  social  impact,  particularly  regarding  the  most  vulnerable 
members of the Irish society.  

Ireland shall open a special account with the Central Bank of Ireland for the management of 
the Union financial assistance.  

Article 4 

This Decision is addressed to Ireland. 

Article 5 

Article 6 

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

Done at Brussels, 

EN 

For the Council 
The President 

10 

   EN 

 
 
 
BUDGETARY IMPACT STATEMENT 

(cf. Article 16 of the Internal Rules)  

POLICY AREA: TITLE 01 – ECONOMIC AND FINANCIAL AFFAIRS 
ACTIVITY: FINANCIAL OPERATIONS AND INSTRUMENTS 
TITLE  OF  ACTION:  EUROPEAN  FINANCIAL  STABILITY  MECHAMISM  -  FINANCIAL 
ASSISTANCE TO IRELAND 

1. 

NAME OF THE PROPOSAL: BUDGET HEADING CONCERNED AND TITLE 

01 04 01 03 European Union guarantee for Union loans raised for financial assistance under 
the European financial stabilisation mechanism 

2. 

LEGAL BASIS: 

Art. 122(2) of the Treaty; Council Regulation N° 407/210.  

3. 

OVERALL FIGURES FOR THE FINANCIAL YEAR (IN EUROS) 

This item constitutes the structure for the guarantee provided by the European Union. It will 
enable  the  Commission  to  service  the  debt  (principal,  interest  and  other  costs)  should  the 
debtor (Ireland) default.  

The budget entry ("p.m.") reflecting the budget guarantee will be activated only in the case of 
an effective call on the guarantee. It is expected that normally the budget guarantee will not be 
called.  

CA 

3a – Current year 

Not applicable 

Initial appropriation for the financial 
year (budget) 

Transfers 

Additional appropriation  

Total appropriation 

Appropriations  already  set  aside  by 
another work programme 

Balance available 

Amount for the action proposed 

EN 

11 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3b – Carry overs 

Not applicable 

Carry-overs 

Appropriations  already  set  aside  by 
another work programme  

Balance available 

Amount for the action proposed 

3c – Next financial year 

Not applicable 

Initial appropriation for the 
financial year (budget) 

Transfers 

Additional appropriation 

Total appropriation 

Appropriations  already  set 
aside  by  another  work 
programme 

Balance available 

Amount 
proposed 

for 

the  action 

CA 

CA 

p.m. 

p.m. 

4. 

DESCRIPTION OF THE ACTION 

The  proposed  medium-term  financial  assistance  to  Ireland  consists  of  a  Union  loan  (to  be 
financed by Union borrowings in the international capital markets) in the amount of EUR 22.5 
billion. It will be provided in the context of an international financing package. In particular, 
loans  from  Ireland's  EU  partner  countries  would  include  contributions  from  the  European 
Financial  Stability  Facility  (EUR  17.7  bn),  and  bilateral  lending  support  from  the  United 
Kingdom, Sweden, and Denmark (EUR 4.8 bn). In addition, Ireland has requested a loan from 
the  International  Monetary  Fund  of  SDR  19.5 billion  (around  EUR  22.5  billion)  under  an 
Extended Fund Facility. The Irish contribution would be EUR 17.5 bn, and would come from 
the  use  of  the  existing  Treasury  cash  reserve  and  contributions  from  the  National  Pensions 

EN 

12 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserve Fund (NPRF). The Union financial support to Ireland is intended to support the return 
of the economy to sustainable growth and ensuring a properly functioning banking system. At 
the  same  time,  this  assistance  makes  a  contribution  to  safeguarding  financial  stability  in  the 
EU and in the Euro Area, by restoring confidence.  

The  Union  borrowings  raised  on  the  capital  markets  or  from  financial  institutions  for  the 
purpose  of  extending  the  loan  to  Ireland  are  covered  by  the  Union  budget.  The  amount  in 
principal of loans which will be granted to Ireland amounts to EUR 22.5 billion. 

The  structure  for  the  guarantee  provided  by  the  European  Union  budget  will  enable  the 
Commission to service the debt should Ireland default. 

In order to honour its obligations, the Commission may draw on its cash resources to service 
the  debt  provisionally.  In  this  case,  Article  12  of  Council  Regulation  (EC,  Euratom)  No 
1150/2000 of 22 May 2000 implementing Decision 2007/436/EC, Euratom on the system of 
the European Communities’ own resources (OJ L 130, 31.5.2000, p. 1) will apply. 

5. 

METHOD OF CALCULATION ADOPTED 

Not applicable. 

6. 

PAYMENT SCHEDULE (IN EURO) 

Not applicable. 

Heading 

Appropriations 

Payments 

Year n 

Year n+1  Year n+2  Year n+3 

Subsequent 
financial 
years 

Year n 

Year n+1 

Year n 

Year n+1   

Total 

EN 

13 

   EN