Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2011/77/EU on granting Union financial assistance to Ireland
Date: 2012-06-07
Institutions: European Commission
Subjects: EU aid, Ireland, banking system, economic reform, economic stabilisation, financial aid, job creation, reflation, retirement conditions

EUROPEAN COMMISSION 

Brussels, 7.6.2012  
COM(2012) 291 final 

2012/0153 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

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

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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. 

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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 mechanism1, and in particular Article 3(2) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

Upon a request by Ireland, the Council granted financial assistance to it (Implementing 
Decision  2011/77/EU2)  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. 

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. 

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 

1 
2 

OJ L 118, 12.5.2010, p. 1. 
OJ L 30, 4.2.2011, p. 34. 

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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. 

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. 

light  of 

In 
2011/77/EU should be amended. 

these  developments  and  considerations,  Implementing  Decision 

(5) 

(6) 

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 

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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." 

This Decision is addressed to Ireland.  

Article 2 

Article 3 

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

Done at Brussels,  

For the Council 
The President 

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