I attended the European Council in Brussels on 22 and 23 March 2005. The Minister for Finance, Deputy Cowen, the Minister for Foreign Affairs, Deputy Dermot Ahern, and by the Minister of State with responsibility for European affairs, Deputy Treacy accompanied me. The Presidency's conclusions at the European Council have been laid before the Houses of the Oireachtas.
The spring European Council adopted conclusions on the reform of the Stability and Growth Pact and on the mid-term review of the Lisbon Agenda. It marked a further stage in Europe's programme of economic and social reform building on the work of the past five years. In particular, it recommitted all member states to achieving the European Union's ambitious goals as set out in the Lisbon Agenda.
The European Council endorsed the report from the ECOFIN Council on improving the Stability and Growth Pact. Ireland is a strong supporter of the Stability and Growth Pact as it underpins the stability and credibility of the euro. The Government very much welcomes, therefore, the new measures that underline the continued European commitment to fiscal discipline and strengthen the economic basis of the pact.
As with any pact or agreement, it is essential that it be reviewed from time to time to ensure that it is meeting the real objectives set for it. The recent review of the pact has placed it on a more viable footing which reflects the current state of the European economy while reflecting the continued commitment to fiscal discipline. The requirement to avoid deficits in access of 3% of GDP is retained and member states have stepped up their commitment to reduce debt levels and to strengthen long-term budgetary sustainability.
Member states have also agreed that medium terms budgetary targets should reflect economic circumstances. This means that countries with low debt and high potential growth, such as Ireland, can have more flexibility to run modest deficits rather than having a medium-term objective of near to balanced budgets, particularly where this is needed to fund extra investment in infrastructure, for example. On the other hand, highly indebted countries will be required to meet more demanding medium-term objectives.
The treaty already allows the Commission and Council to take into account other relevant factors in deciding if an excessive deficit exists. The Council has now elaborated further on these special factors. The special factors apply generally and not just to specific member states.
The agreed reform of the Stability and Growth Pact provides that such special factors include: developments in the medium term economic situation, in particular, potential growth, prevailing cyclical conditions, implementation of the Lisbon Agenda and policies to foster research and development — developments in the medium-term budgetary position, in particular, in good times were used to reduce debt; debt sustainability, public investment and the overall quality of public spending; and special budgetary efforts toward fostering international solidarity and achieving European policy goals, notably the unification of Europe.
It is important to emphasise that these special factors are subject to the over-arching principle that the budgetary excess above the 3% limit is temporary and the deficit remains close to the 3% reference value. The 3% deficit and 60% debt criteria remain unchanged as the anchors on the treaty of the Stability and Growth Pact.
Of course, we are party to the Maastricht treaty. Sound fiscal policies are essential for confidence, investment and growth across Europe. Ireland's economic success is a case in point. I am pleased that European leaders have reaffirmed their commitment to fiscal discipline with a package of measures that will help the Stability and Growth Pact to operate more effectively.
The European Council's endorsement of ECOFIN's report on the reform of the Stability and Growth Pact is a considerable achievement for the Luxembourg EU Presidency and the negotiating skills of my colleague, Prime Minister Junker.
The mid-term review of the Lisbon Agenda was the main item on the agenda of the Spring European Council. As political leaders, we were conscious that the issues covered by the Lisbon Agenda, such as jobs, growth and the quality of life, matter to all our citizens.
In March 2000, the European Council, which met in Lisbon, agreed on a new goal for the European Union, namely to transform Europe into the most competitive, dynamic and knowledge based economy characterised by a greater degree of social inclusion. At Gothenburg the following year, an environmental dimension was added to this goal to ensure that sustainable growth would be achieved. Five years on, the outcome is mixed, and there is general consensus that Europe needs to redouble its efforts to meet the challenges ahead.
In considering the mid-term review, the European Council was assisted by two key reports — that of the independent high-level group headed by Wim Kok set up during the Irish Presidency, and the Commission's communication to the spring European Council. Both of these reports acknowledge the scale of the challenge facing Europe, in particular the widening growth gap with other major world economies. Failure to address this gap will see Europe experience economic decline, with inevitable pressure on its social and environmental policies.
Our review of the Lisbon Agenda has resulted in a positive outcome. The European Council committed itself to re-launching the Lisbon Agenda as a "Partnership for Growth and Employment". While we have decided to focus on two urgent priorities, growth and employment, we have also endorsed action in two complementary areas — promoting social cohesion and sustainable development. The re-focused strategy, therefore, goes hand in hand with the promotion of social and environmental objectives which are crucial to Europe's success. The new focus on growth and employment expressly acknowledges the over-arching role of sustainable development.
The Lisbon Agenda and sustainable development strategy reviews are, therefore, closely linked, and their aims are mutually supportive. The European Council will adopt a declaration on guiding principles for sustainable development at its June meeting.
The European Council welcomed the Commission's communication on the social agenda which addresses vital issues on tackling poverty and disadvantage. The social agenda will help to achieve the Lisbon objectives of full employment and greater social cohesion. In our discussions on growth, the emphasis was on a number of key items such as promoting the knowledge society, completing the Internal Market and achieving better regulation.
We must complete the Internal Market, in particular, the Internal Market for services. The draft services directive is aimed at removing barriers to the free movement of services. When 70% of employment is in the services sector, it is clear that this draft directive is crucially important, both for the creation of new jobs and to stimulate growth and competitiveness. I support the overall thrust of this directive, with proper regard for the necessary standards. The European Council accepted that the directive as drafted requires some amendment in order to secure a broad consensus on achieving its overall objectives.
Competitiveness is also vitally important for Europe. Europe must become more competitive in its actions as well as its words. We must accept that the global picture is important, given that the EU competes directly with other regions of the world for mobile investment in knowledge and research. Our state aids regime must take account of this so that EU countries are not disadvantaged in competing for investment. In a word, the review of state aid rules which is being undertaken must be Lisbon-sensitive if Europe is to remain an attractive location for future global investment. Wording which stresses this point was included in the European Council conclusions at Ireland's suggestion.
A core objective for the European Union must be the delivery of more and better jobs. The report of the employment task force, chaired by Wim Kok and integrated into the joint employment report, provided the European Council with a good basis to take firm action on employment.
The issues are clear. We need to concentrate on attracting more people into the labour market, improving adaptability and investing more in human capital. At every level, we must increase the ability of workers and enterprises to respond to change. We must make work more attractive to particular groups, including women and older workers and we must continue to invest effectively in the whole area of education and life-long learning, to equip people for employment in the knowledge society of the future.
To realise the Lisbon goal, it is clear that implementation must be improved both at EU and member state levels. The European Council has agreed arrangements for a more streamlined and simplified approach to delivery. I supported this approach, which will be based on new national action programmes and single annual reports. This new format will be flexible enough to enable each member state to focus on and deliver its own key priorities in accordance with national administrative arrangements.
The Partnership for Growth and Employment can only be delivered in co-operation with all the stakeholders. Across Europe, we need to engage national Parliaments, social partners and civil society as a whole to achieve the necessary pace of reform. The partnership concept mirrors our own well developed social partnership process and we will continue to use this process to achieve the reform programme.
Last year, the European Council agreed to establish national reform partnerships to ensure the necessary level of engagement of all the players in the reform programme. In Ireland, the social partners have helped build the necessary partnership. We have been engaging in dialogue with our newly-formed National Reform Partnership throughout the past year. For example, we have consulted it in regard to our proposed approach to the mid-term review of the Lisbon Agenda and on our submission to the Commission on the subject. This level of engagement has helped us to come to broad agreement on the measures necessary to achieve positive outcomes in terms of the Irish economy and Irish society.
I am convinced that with genuine commitment from all stakeholders, member states will be similarly enabled to deliver the Lisbon goal of strong economic growth and a better society. Because of the strong focus on economic issues at the Spring European Council, there was relatively little discussion of external relations matters. The European Council's conclusions include statements on Lebanon and on Africa. There is also a statement welcoming the presentation by the UN Secretary General of his report on UN reform.
In this context, I welcome the appointment by the Secretary General of the Minister for Foreign Affairs, Deputy Dermot Ahern, as one of his four special envoys in the run-up to the September UN Summit. This is a great honour for Ireland and for the Minister, Deputy Dermot Ahern, personally. It reflects our long-standing commitment to the central role of the United Nations and our determination to ensure that the Secretary General's vision of a reformed and more effective UN becomes a reality.
The European Council was a key staging post in the economic and social development of the European Union. The improved Stability and Growth Pact will ensure that the euro and the euro-area economies remain fundamentally sound. The new streamlined approach to the Lisbon Agenda will give it a new momentum during the next five years and, along with complementary reforms within the member states, will help lay the ground work for strong economic and employment growth. In doing so, the Lisbon Agenda can ensure that Europe works in every sense, just as this European Council demonstrated that the European Union continues to work effectively and efficiently for its people.