Ireland is in crisis. In American politics there is a saying, "Never waste a good crisis". This means that a crisis is a good opportunity to push through policy which would normally be unpalatable to the people. President Sarkozy of France and Chancellor Merkel of Germany angered many European leaders earlier this year when they drew up a six-point competitive pact without consulting their peers. This precursor to the pact for the euro raised suspicions that Europe's two most important leaders were using the current crisis as cover for driving through long-held and previously unrealisable goals.
The reality is that Europe is in crisis. This is a European problem. In January the six covered Irish banks owed €93 billion to the ECB. This arose because it had allowed insolvent or, in some cases, potentially insolvent banks and institutions to pay off private international bondholders. As a result, the position in Ireland became unsustainable and we were obliged to accept a bailout from the European Union and the IMF. The issuing of payments to bondholders was a prerequisite under the terms and conditions of the EU-IMF bailout. The European goal that governments should continue to back all senior bank liabilities is neither fair to taxpayers nor credible to the markets.
Sinn Féin has always maintained that the bailout fund is not about restoring growth or competitiveness to the economy. On the day on which the rescue package for Greece was agreed, the value of French banks rose by 24%. One can see, therefore, what the bailouts are really about, namely, rescuing the banks of the core European countries.
The European Financial Stability Fund, EFSF, can provide liquidity for Irish banks, but it cannot make them solvent. In order to maintain solvency, Ireland requires a return to solid growth. However, as a result of extreme fiscal tightening and imposed austerity, there are very few avenues through which such growth might be pursued. For Greece, the result of last week's meeting of EU leaders was a fire sale of €50 billion worth of its national assets within four years. Last year the Greek Prime Minister, Mr. George Papandreou, signed up to a sale of €5 billion worth of his country's national assets. This means that there has been a tenfold increase in the number of Greece's national assets which must be sold.
What was agreed last week will come in return for a reduction of 100 basis points in the interest rate being charged to Greece. This will not restore it to a position of solvency because its debt spiral has already advanced too far for that to happen. Its debt to GDP ratio will approach 150% this year. In addition, its debt service costs are 14.4% of tax revenues. Meanwhile, austerity measurs are biting harder. The level of unemployment jumped by a full 1% to 14.8% in January, while the level of youth unemployment hit 39%. Given that the pact for the euro states progress on fostering employment will be assessed on the basis of long-term unemployment, youth unemployment and labour participation rates, it is obvious that the pact has failed before it has been put in place.
The eurozone refers to competitiveness but seeks to deny Ireland and other struggling countries their competitive advantage. The financial crisis in this country has many causes. However, our rate of corporation tax is not one of them. Attracting foreign investment offers Ireland the best opportunity to grow out of the position of debt in which it finds itself. This fact was recognised by the eurozone when it granted the bailout. At the forthcoming summit Ireland cannot allow further fiscal instruments in the gift of the Government to be surrendered to Brussels. Ireland is in a different economic cycle to the remainder of Europe, particularly the core EU countries. The economy is experiencing contraction, while those of the core EU states are experiencing growth. As a result, different fiscal instruments are required here than those which are needed in the countries to which I refer. The implementation of the same fiscal instruments across the entire eurozone may control inflation in certain countries but may exacerbate economic contraction in Ireland. One size clearly does not fit all.
We have seen the proof of this in the centralisation of monetary policy in the ECB. The recent property bubble was significantly powered by the misapplication of ECB interest rates in Ireland. It is important to remember that owing to the country's size, the European Union will never implement fiscal or monetary policy for Ireland's benefit. Ireland only represents 1% of the EU economy and, as a result, does not even feature on the policy radar. Instruments are often implemented at levels which are bad for Ireland. As a result, the trading off of any other fiscal instruments by the Minister for Finance would be bad for this country in the long term and must be resisted. In its application, the common consolidated corporate tax base, CCCTB, is one such instrument.
During the debates on the Lisbon treaty, Sinn Féin publicly warned that the European Union was seeking greater competencies from member states and that, in turn, this would mean it exercising greater power over taxation matters. We were informed that we were wrong and that our arguments were ludicrous. However, we realised that the moves toward qualified majority voting would undermine our ability to retain full competence in taxation matters. The CCCTB is proof of this because it obliquely undermines Ireland's low corporate tax regime of 12.5%.
Amendment No. 2 to the motion recognises that the programme for Government clearly states the Government will "Keep the corporate tax rate at 12.5%". This statement is incongruous in the context of the pact for the euro. The reason for this is that companies which operate out of Ireland and which sell into the European Union pay their corporation tax in this country. However, the CCCTB proposal seeks to allocate profits by reference to where sales are made rather than to where assets are located and staff based. It is clear that the sales criteria would have an impact in the context of tax revenues currently paid by multinationals in Ireland being reallocated to various other countries in Europe. The rate of tax charged would become absolutely irrelevant under the CCCTB, particularly in view of the fact that use of sales by destination under the sharing formula would mean that export-generated profits would be taxed elsewhere. How can this proposal be revenue neutral for a small export-oriented economy?
There would be two extremely dangerous fallouts with regard to the CCCTB. Not only would a critical element of Ireland's attraction to foreign direct investment be removed, what is envisaged would also result in a serious loss of revenue at a time when we are suffering under the austerity measures imposed by the European Union and the IMF. The imposition of a CCCTB would mean that this will be doubly detrimental to the people of Ireland.
What is the position on Ireland's veto to changes such as that proposed? We have a veto when it comes to a direct challenge to the actual rate of corporation tax charged in this country. However, we may not be in a position to stop other EU member states from pressing ahead and changing their tax systems to a single system founded on the CCCTB. An EU-wide CCCTB is actually an unlikely eventuality, but a smaller group of countries may still proceed to establish some form of CCCTB under the system of enhanced co-operation. If this were to occur, it would reduce the flow of taxable income streams into Ireland. The enhanced co-operation model would shift the tax burden from large corporations operating in Ireland to ordinary people. Irish citizens are already shouldering the cost of bailing out bondholders in France and Germany, the universal social charge and cuts to public services. Are those opposite really of the view that their constituents could shoulder further burdens relating to this matter?
A report commissioned by the Department of Finance on the proposed implementation of the proposed CCCTB states Ireland would face a larger social welfare bill, that the funds available to pay this bill would be greatly reduced, that further cuts to public spending would be necessary and that this would all occur when the EU-IMF deal was in train. Yesterday, the Taoiseach listed a number of new European Council measures which would ensure fiscal discipline and avoid macroeconomic imbalances and stated they would involve reform of the Stability and Growth Pact to enhance surveillance of fiscal policies and apply enforcement measures earlier and more consistently. Even the most europhile members of the Taoiseach's party must see how this crisis is being used in an effort to radically dilute our ability to determine our economic future.
I call on all Members not to allow the financial crisis which has engulfed the country to lead to a debt for sovereignty swap. Further loss of critical economic instruments to Brussels will lead to a loss of competitive advantage to Ireland and an impoverished State in the future. We support this motion and oppose the Fine Gael amendment.
