Dáil Éireann debate -
Tuesday, 22 May 2012

Vol. 766 No. 1

Pre-European Council Meeting: Statements

The Taoiseach

I am pleased to have this opportunity to brief the House ahead of the informal meeting of the European Council which will take place tomorrow in Brussels. President Van Rompuy has convened this meeting at this sensitive time to provide an opportunity for an open and informal debate on how we can move ahead with urgency to boost growth and jobs across the European Union.

There is no issue more pressing for our country than that we bolster the successful efforts under way here to create jobs and develop a sustainable pathway back to growth. All of our painful efforts to adjust are in the interests of securing that renewed growth, investor confidence and, as a consequence, jobs. We need these jobs and that growth and require a stable eurozone to deliver this. We want to see some fresh thinking and courageous action at EU level to sustain those goals. I believe tomorrow's meeting opens an important new chapter. We want to see the EU harness our combined strengths to achieve stability and recovery for the eurozone, Europe and, of course, for Ireland. The discussions tomorrow night will focus on that. The intention is that we will not at this stage take decisions or draw conclusions, rather we will have a comprehensive discussion designed to pave the way politically for decisions at our meeting at the end of June. I intend to be an active contributor to that debate.

I welcome this opportunity for what I hope will be a frank and comprehensive discussion. We are confronting a most serious situation in the eurozone and more widely. If we are to rise to the challenge, our approach must be a balanced one. As the Government has argued time and again, a growth-oriented focus is the essential complement to the efforts at consolidation and reform under way. The stability treaty is a vital component but it is not the full picture. Tomorrow's discussion will be important in setting out the further steps that must now be taken. If we emerge with a clear set of common understandings among all EU leaders about what needs to be done we will have made important headway. We do not come to the table with a blank slate. We will be building on work already done, including at our meetings in January and March. However, there is now new momentum behind the drive for growth and we need to seize the opportunity to make real and substantial progress. It is my sincere hope that tomorrow's discussion will begin the process of looking ahead to the type of economic and monetary union, EMU, which may best serve the euro area and the European Union in the years and decades ahead.

In his letter ahead of the meeting, President Van Rompuy has called for focus on four elements, including building blocks of a growth strategy, consistent with the Commission's statement of 9 May on "seizing the moment to boost growth". The first building block is the pursuit of sound national economic policies within the framework of the European semester. This now includes the six pack cornerstone for maintaining a growth-friendly fiscal consolidation strategy and for avoiding macro-economic slippages. President Van Rompuy will invite the President of the Commission to provide a preliminary assessment of national reform programmes, NRPs, under the Europe 2020 strategy which were submitted in April and to look ahead to the package of proposals which the Commission will adopt on 30 May, notably its country specific recommendations.

As a party to an EU-IMF programme of financial support, Ireland was not required to submit a separate NRP for 2012. We already undergo rigorous reporting under the programme and the Commission was of the view that this meets the reporting requirements for the NRPs. However, the Government decided to go beyond its obligations and to provide comprehensive feedback to the Commission. Our NRP update was submitted in April along with our stability programme update. It provides a review of progress made under the five headline targets, namely, employment, research and development, climate change, education and poverty. It also takes into account our national response to President Barroso's initiative on youth unemployment and SMEs.

The second building block highlighted by President Van Rompuy in his letter of 26 April is EU policies bringing added value. Ireland looks forward to the Commission's proposals in the second half of the year for a new round of measures under the Single Market Act. This will be an important focus for our Presidency next year. I particularly welcome President Van Rompuy's emphasis on the role of external trade as a driver of growth and jobs. The EU is in the process of negotiating major agreements with important partners and we look forward to further progress in this area.

The third building block highlighted by President Van Rompuy is measures improving the financing of the economy. There are now a number of concrete initiatives receiving active consideration, including those highlighted by President Hollande. I expect this list to grow in the period ahead. Many of the ideas are promising but each will need to be closely assessed for its potential impact upon this country. President Van Rompuy mentions in particular that the role of the European Investment Bank could be better mobilised to support SMEs and key infrastructure through an increase in its capital and a strengthening of existing joint instruments. This would be helpful. For our part, we will be working to ensure that resulting funds are available to those who need them most and that SME access to finance remains a priority.

In so far as project bonds are concerned, we want to ensure that the arrangements are suitable for member states like Ireland and that the scale of projects is not an obstacle to good investments that can actually deliver real growth and jobs. Negotiations are ongoing on the EU's Multiannual Financial Framework 2014-20. There is already agreement that this should be aligned with the Europe 2020 strategy but we will aim to give it a greater focus on growth and jobs. I will be making the point to my colleagues that we see the agri-food industry as a key and highly dynamic engine for innovation, growth and quality jobs. European investment in this sector remains evidence of money well spent. As we reach the end of the current EU budget, there are funds that member states have not been able to use. We need to examine how these can be redirected towards growth. We want the focus to be on those who need them most and on those who can make best use of them, including in tackling unemployment in countries like Ireland which face the greatest challenges. President Van Rompuy also mentions the difficult issue of a possible financial transaction tax, FTT, which some have suggested as a possible source of funds for stimulus. Our position on this is well known. We remain opposed to anything that would place us at a competitive disadvantage, as are a significant number of like-minded countries.

The fourth building block highlighted by President Van Rompuy is measures to strengthen job creation, embracing national and EU policies. Aside from national efforts here in Ireland, including the Action Plan on Jobs and the Pathways to Work initiative, President Barroso will inform the meeting of the work the Commission is carrying out with the eight member states, including Ireland, with particularly high youth unemployment.

A team from the Commission visited in February and met with officials from relevant Departments to explore ways to combat youth unemployment and increase supports for small and medium-sized enterprises. As we have no unallocated Structural Funds, the emphasis in Ireland is on any potential to refocus employment programmes to better effect, consistent with the direction set by our pathways to work initiative. This, of course, includes learning from what is working well in other member states.

As well as elaborating upon the broad range of growth-related issues, President Van Rompuy has also encouraged European Council members to engage in innovative thinking. Given what we have been through as a currency union over the last number of years, we need to give serious consideration to ideas which, even up to very recently, would have seemed insurmountably difficult to some. These ideas might include, but are not limited to, eurobonds and the possibility of revisiting the mandate of the European Central Bank. We need to reflect calmly and soberly on what sort of European monetary union will best serve us in the medium to long term. Engaging in such thinking should provide a positive signal to both the financial markets and our people that we remain determined to do all that is necessary to correct weaknesses in the EMU brought into focus by the current crisis.

Although we will focus on the growth and jobs agenda tomorrow, we should not lose sight of the importance of the stability treaty on which the Irish people will vote in just over a week's time. The responsible budgetary rules set out in the stability treaty, to which 25 countries have signed up, are a critical foundation stone on which we can build sustainable jobs and growth. Fiscal responsibility, which transparently holds each euro area member state to account for the commitments which they entered into, is fundamentally in Ireland's interest and in the interests of our shared common currency.

Any serious efforts to boost growth, in particular job-creating growth, whether they be national or European ideas, will be fatally holed below the waterline if we do not get our budgetary house in order at the same time. That is exactly what this Government has been doing since coming to office last year. Growth and stability are two sides of the one coin: on the one side, bringing our deficit under control, and, on the other, giving our economy a growth stimulus which will boost our growth rates and job creation. This growth will lighten our debt load which, in turn, will encourage further growth. We need to create a positively reinforcing virtuous cycle of growth, jobs and falling relative debt levels. We have done this before as an economy and as a society and it is something we will do again. Approving the stability treaty is an important step on the way to getting on to such a positive cycle. I believe the Irish people appreciate that and will reflect it in their votes on Thursday week.

As would be expected, tomorrow's informal meeting will also touch upon recent developments in the eurozone. The current situation in a number of member states raises real concerns for every euro area member state. Within a currency union we are intrinsically linked to one another and the negative shift in our bond yields in the secondary markets are a most concrete and unwelcome reaffirmation of this. The situation in Greece remains the most pressing. It is, of course, a sovereign matter for the Greek people to decide the composition of their next government when they come to vote again next month. Let me state, very clearly, that I want Greece to remain in the euro area. I want Greece to implement the terms of the programmes it has agreed. Both of these are important for the stability of the euro.

I also wish to express my support for the efforts being made by the Spanish authorities to identify and address issues in their banking sector. As we have seen in this country, getting to grips, no matter how painful, with the banking sector, including insuring that banks are properly capitalised, is a prerequisite for emerging from this crisis and returning even to the most modest levels of growth. Tomorrow's informal meeting of the European Council will allow EU leaders to reflect freely and openly upon how best we can work together to restore growth and job creation to our Union. There is no more vital task.

I hope we will reach the broadest possible understanding among Heads of State or Government of what needs to be done so that appropriate decisions can be taken when we meet again next month. I will continue to take a strong and proactive stance in support of any and every initiative which will deliver sustainable jobs and growth to this country and across the EU. I will be happy to return to the House next week, or whenever is appropriate, and report to Members on the meeting.

Deputy Micheál Martin

The meeting which starts tonight is the direct result of the consistent failure of Europe's leaders to address this crisis with the urgency it requires. In summit after summit, the action taken has always been the minimum required to get through the next few weeks or months. The dominant theme has been an effort to make pre-crisis policies work rather than to adopt the radical departures that are clearly needed. Each significant move has been as the result of an emergency and so the Union has consistently failed to keep pace with the crisis.

If many of the policies in place today had been agreed two years ago, it is likely the Irish and Portuguese bailouts could have been avoided. The eurozone would not be facing a threat to its very existence. However, they were resisted and the crisis was allowed to spiral. The December set of agreements have, as predicted, proven to be inadequate. They have failed and we are now in a situation where more radical action is required. The situation is much graver than it has been at any time in the past three years because the room for manoeuvre and delay is over. The crisis is reaching its final stage, which will see either dramatic action to save the euro and restore growth or the setting off of a chain of events which may be impossible to contain. The situation today is that preparations are already under way to manage the possible departure of a state from the euro. There is a steady run on eurozone banks, with vulture funds lining up to try to exploit the situation. Sovereign borrowing is reaching possibly unsustainable levels for many countries. Most important, and unfortunately, there is no faith whatsoever that Europe's leaders understand what must be done.

Although others in this House have either ignored the crisis or focused on getting short-term political benefit from it, I and my party have been consistent in calling for and proposing a set of actions to contain the sovereign debt crisis, reform the eurozone and restore growth.

The design of the euro is deeply flawed and lies at the heart of everything which has happened during the past three years. This is recognised by the architect of the euro, Jacques Delors, and by nearly every independent expert. The OECD's commentary of today is the latest to set out the simple truth: change core policies of the eurozone or allow a much deeper and destructive crisis to develop.

The eurozone has the resources within its borders to get through this crisis. It is one of the world's wealthiest regions. Its aggregate fiscal, trade and financial situation is very strong. It can overcome any of the challenges which face it today. The only issue is whether it is willing to adopt the policies required. It is also important to reiterate that the euro is worth saving. It has enabled growth and rising standards of living which, in most places, have not been completely undone by the crisis. In Ireland, it still supports hundreds of thousands of jobs. At this meeting, and over the coming weeks, what Europe needs is for its leaders to agree more radical action to restore confidence and growth to Europe. Only when they show they understand the scale of what is required will progress be possible.

The deal that is desperately needed is one which achieves three basic outcomes. First, it must tackle the sovereign debt crisis by establishing a more secure and bigger facility for buying government bonds. Second, it must tackle the financial crisis by ensuring that banks are capitalised to a level where their long-term survival is unquestioned, including dealing with Irish bank and mortgage debts. Third, it must tackle the jobs crisis by using the eurozone's enormous resources to deliver immediate job-creating investment. What will not do is the minimalist collection of half-measures and over-hyped statements of intent which have followed most summits for the past year. Unfortunately, the early indications about the agenda are not encouraging.

Before I speak about the action that is needed to save the eurozone, it is important for me to put next week's referendum in context. Every day, it is becoming clearer that an Irish "Yes" vote is essential if Europe is to return to stability and growth. The stability treaty is not the only solution to the crisis. Fiscal policies did not cause the crisis. Those like the Taoiseach and his Government colleagues who pretended they did wasted a great deal of critical time. However, a determination to run sustainable fiscal policies is a vital part of the solution to the crisis. If states are to be able to borrow to fund their public services, we must restore confidence in budget policies. The consequence of any failure in this challenge would be austerity on a scale far beyond anything we have experienced to date. Europe is on a precipice. We must do nothing to push it over the edge.

The controls in this treaty are already in European law. We are accepting no new budget targets and no new austerity. We are giving the existing targets more credibility. We are saying we accept that states cannot spend and borrow without limit. Under every conceivable scenario, a "Yes" vote will give us the most secure and cheapest access to the funding we need to keep paying public services and pensions. By contrast, the "No" side is offering nothing but cynical arguments that are designed to exploit problems rather than solve them. When they are asked how Ireland will find the €18 billion it will need in two years' time to fund services and refinance debt, all they can come up with is "sure someone will have to lend to us and we hope they will give us a good rate". The "No" alliance, which extends from the extreme left to British and English nationalists, has nothing to offer other than empty slogans. A win for the "No" side would represent an immediate worsening of the crisis and much deeper austerity than anything which is planned or likely. People are seeing through the claim that they are being frightened into voting "Yes". It takes some brass neck for those who have put up tens of thousands of posters claiming the treaty means ruin and desolation for Ireland to accuse their opponents of being negative.

Deputy Lucinda Creighton

Hear, hear.

Deputy Micheál Martin

I have met thousands of people all over the country over the last month while I have been canvassing in advance of the referendum on this treaty. They are approaching this vote with a deep seriousness. I have found they understand the core positive case for a "Yes" vote. If Ireland is to recover, we need to restore confidence in Europe. We need to save the euro and stay within it. Most importantly, we need secure and affordable funding. If we vote "Yes" next week, we will have shown that Ireland is playing its part and that a basic step to restore confidence has public legitimacy. We need equally decisive action from Europe's leaders.

The European Stability Mechanism is not a long-term solution in relation to sovereign debt. It is an important and essential step, but it needs to be bigger. It does not address the fact that the eurozone needs a fund which can purchase Government bonds when they are issued. The European Central Bank's purchases on the secondary market provided some breathing space at first, but then accelerated the crisis by enabling investors to leave the market. The provision of funds to banks in the hope that they would buy sovereign debt also gave short-term relief which has created a longer-term problem. The exposure of the financial system has been increased without a sustainable reduction in yields. There are only two actions which can allow countries like Ireland to borrow at affordable rates. First, the mandate of the European Central Bank could be changed to allow it to purchase bonds directly. Second, jointly guaranteed eurobonds could be introduced. Germany and some other countries have resisted these measures consistently. Most leaders, including the Taoiseach, have refused to push the issue. The time for being timid is long over. It needs to be put to Germany in particular that it had a chance to provide an alternative route and failed to do so. Its way alone does not and cannot work.

It is clear that the eurozone is experiencing a low-key but relentless run on its banks. Investor financing has dried up. The system is being held together by the European Central Bank. This is choking businesses and families that cannot access credit. There is a need in most of Europe for permanent recapitalisation, which can only come from a co-ordinated fund operating at European level. Leaders need to take immediate measures to make this happen. The situation is even more serious in Ireland. This has implications for investment, for the debts of the State and for hundreds of thousands of families. The financial crisis here emerged before there were any European policies to help. The primary goal of the measures adopted in Ireland was to help the eurozone as a whole. It is not acceptable that Ireland is obliged to maintain these debts in full. Any new European action on banks must include a write-down of these debts or place them on new terms which remove most of their impact.

As we heard yesterday from the Central Bank, the actions of the Government and the banks on mortgage arrears are too little and are allowing thousands more people to get deeper in trouble. Quite apart from the huge social impact, the economy is getting squeezed in two directions. The banks are scared about potential default and are hoarding reserves. Hundreds of thousands of people are withdrawing from the economy, in effect, as they focus on their mortgage debt. This situation cannot go on. We need European help to remove debt from the balance sheets of the banks and fund a major programme to restructure mortgage debt. Nothing else will work. A return to growth and job creation also requires increased investment. The election of President Hollande is to be welcomed. It has concentrated minds and led to a new willingness to discuss investment for growth.

Unfortunately, the specific measures being discussed tonight will do nothing other than confirm that the leaders do not appreciate the scale of the challenge. People expect to be led out of this crisis. They want leadership. The use of the European Investment Bank to fund major projects is obviously needed. It will have no impact if it is on the scale or terms being discussed. It is reported that a pilot project bonds scheme is being discussed. This will involve €230 million over the next year and a half. Given that the eurozone economy is €9.2 trillion, the idea that these project bonds will stimulate anything is risible. It would be worse than a token gesture. I hope that speculation is not well founded and that something far more substantive emerges from the meeting.

Just as significant is the point that what is needed is not just more loans, but the transfer of funding. The states that are most in need of investment cannot take on more debt. They need direct assistance. If the scheme goes ahead as planned, stronger regions will be the only ones which will be able to secure the funding. At a minimum, existing EU funding should be redirected to areas which have seen the biggest increase in unemployment, with a loosening of co-financing regulations. Over the last year, the leaders of Europe have repeatedly failed to show the ambition and resolve required to tackle a unique crisis. They have consistently tried to work with pre-crisis instruments, only to adopt new ones when every other option has run out. The situation could not be more grave. It is clear that the euro will not remain fully intact. New bailouts are becoming likely. The final agreement that was reached in December has failed and a new agreement is required. There must be an end to the timid and reserved approach of Europe's leaders. The Taoiseach and others must stop being passive bystanders and speak up for radical action.

Deputy Pádraig Mac Lochlainn

I would like to share time with Deputy McDonald.

Acting Chairman (Deputy Tom Hayes)

Is that agreed? Agreed.

Deputy Pádraig Mac Lochlainn

Everybody is for growth now. It is wonderful that everybody has been converted to the jobs and growth agenda. The Nobel Prize-winning economist, Professor Paul Krugman, did not need to write all those articles and get so upset after all. We were slowly realising that Professor Krugman and all the other economists who were looking at the situation, including Professor Stiglitz and Dr. Roubini, actually had a point.

When it was announced that a referendum campaign would be necessary, the choice to be made by the leader of Fianna Fáil, Deputy Martin, was an obvious one. He could not campaign against this treaty or against failed right-wing austerity policies being enshrined in our Constitution. When he was a Cabinet Minister, his Government was the architect of these policies in Ireland, which led to our failure to deal with the banking crisis. If Deputy Martin had campaigned against austerity during a television debate with the Tánaiste or the Minister of State, Deputy Creighton, he would have been laughed out of the studio. Everybody at home would have been laughing as well. He made a pragmatic choice, in the interests of his own party, to align himself with the Government during this campaign. He should not accuse anybody of putting party before the State, or "the country" as he referred to it. It is all a bit of a nonsense, is it not?

In terms of the issue of growth, we in Sinn Féin have clearly said that these policies of austerity are failing in Ireland and across Europe. We just cannot cut our way out of a recession. When the Taoiseach returns home to Mayo, no doubt he talks to small businesses on the ground and no doubt they are telling him that if money is sucked from low to middle income workers and resources are taken from the people who sustain the domestic economy, then small businesses and the domestic economy will be strangled.

It was an insane policy to pursue but, unfortunately, it was pursued. Not only was it pursued but we sought to put in place a treaty and give constitutional protection to these policies so we would tie the hands of future Governments. Thankfully, somebody has said that the emperor has no clothes, and that somebody now, most important, is the President of France, Mr. Francois Hollande. During his campaign he stated that, if elected, he would not ratify this treaty as it is and he would seek to develop a growth strategy. When we raised this point, we were shouted down by the Government. Now, thankfully and helpfully, the French Minister, Mr. Pierre Moscovici, has repeated that point and made it clear that they will not ratify this treaty as it is and that there has to be a renegotiation.

I have to ask the question why our Government is so enthusiastically supporting yesterday's European Union. Why have we supported this treaty? Why have we not called for a renegotiation of this treaty? I certainly have not heard that yet. Why have we not called for changes to the text to promote growth? Why is that the Irish people have to rely on a French President to do the work for us and to act in our interests? Why is it that our Government, in which our people put so much hope, has not done that?

Now that there is a serious renegotiation of the treaty between France and Germany, we need to know the following. Is the Government involved in those negotiations? Are we now, as we speak, defending Ireland's interests or are we leaving it to the larger states once again to speak for us? Is the Government promoting eurobonds, a financial transaction tax and a bank lending licence for the European financial stability facility? If so, what are the details of the proposals being supported by the Government? Is the Government promoting or supporting an increase in the investment capacity of the European Investment Bank and, if so, to what level? Is the Government supporting changing the investment rules of the European Investment Bank and, in particular, the 50:50 ratio, which Sinn Féin had said it would like to see at 75:25? Can the House imagine what we could do with our National Pensions Reserve Fund allied to those funds in terms of driving forward our economy?

It is very important the Government outlines what is its strategy. An article by Mr. Fintan O'Toole in The Irish Times refers to a lawyer going to a citizen and saying: “Here is a contract, here are all the penalties, here is what can happen to you in the contract and here is what is going to happen to you if you do not sign this contract.” When the citizen says: “Hold on a minute. Can you just tell me the full details of the contract?”, the lawyer replies: “Away with you, that is none of your business. Sign this contract or this is what will happen to you.” Can anyone imagine what the citizen would do? That is what is happening to our people.

To me, "Yes" is a positive and is something we should embrace. Yet, I have heard no positivity coming from Government in regard to this because Government members know that what would remain if they left out the threats and had to debate the merits of yesterday's European Union - of a treaty that represents a political ideology that is now being taken out across Europe. If we look at France, President Hollande has won, and in Germany, the Social Democrats, who have said they will not work with this, had a very significant success in the most recent regional elections, particularly in Rhine-Westphalia. If we look at local elections in Italy and Britain, it is clear that parties which oppose this approach of "austerity only" have been successful. The tide has turned, the game has changed, yet the Taoiseach is still presenting the old game. If he is not, could he outline to us at some opportunity, hopefully in debate with Deputy Gerry Adams on some television show in the not too distant future, what is his strategy for growth and what is the other part? The Taoiseach keeps saying this treaty is only part of the picture. What is the other part of the picture? Before he asks our people to enshrine in our Constitution - our precious and robust Constitution - protection for these policies, could we see the full picture? We would like to know where the Taoiseach is at with this.

Before I pass over to my deputy leader, I wish to address the issue of sovereignty. Would it not be nice to have a bit of truth? The Taoiseach famously said he wanted to be the Taoiseach who returns economic sovereignty to the Irish people - that was one of his big calls.

The Taoiseach

It still is.

Deputy Pádraig Mac Lochlainn

If that is the case, why is he now proposing to give more away? Why would he tie the hands of future Governments? Why would he prevent the Irish people from having their democratic right to elect future Governments on the merits or demerits of their arguments? Why would he put us in a position where, if we vote "Yes" and put this into our Constitution, and a future Government seeks to undo that, it will be in breach of Article 3.2 and we would have a situation where the European Court of Justice would come after us for breaking a solemn agreement with all of the other member states? Why would he give away our sovereign powers in such a way that we cannot undo it? Could he be truthful about that in this campaign, which would be very important?

Deputy Mary Lou McDonald

The Taoiseach is pretty upfront in his remarks and he states categorically that the intention of this meeting is not to take decisions or draw conclusions - that is in the fifth paragraph of the script he delivered to us. If anything characterises the manner in which the European institutions have failed to deal with the crisis in which we find ourselves, that pretty much sums it up. The Taoiseach is here briefing us before heading off to a meeting at which he believes decisions will not be taken nor conclusions drawn. That is extremely telling.

The Taoiseach

I said a fortnight ago that we would discuss an agenda for growth, with decisions taken in June.

Deputy Mary Lou McDonald

What it says is that far from a new urgency, at least in the mind of the Taoiseach and the mind of the system here, it is still this laissez-faire, business as usual approach. The Taoiseach and his Government are half asleep on these matters. When the Minister of State, Deputy Creighton, who is seated beside the Taoiseach, conceded or indicated today that we are looking a second bailout directly in the eye, it was the most comprehensive and explicit recognition of the abject failure of the Taoiseach’s policies. Those on that side of the House know as well as we on this side that the policies of austerity have failed.

There is a reason that Mr. Francois Hollande and, more to the point, the French people are holding back in respect of this austerity treaty. The reason for that is not a fit of pique, I believe, but a recognition that the current policy options are failing. When policies fail, smart, responsible, responsive government has the capacity to change. However, in everything the Taoiseach has said in this House - I cannot comment beyond that because, as was said, the Taoiseach is a reluctant debater on these matters outside of the Oireachtas-----

The Taoiseach

Where is Deputy McDonald's leader today?

Deputy Mary Lou McDonald

Everything the Taoiseach has said inside the Oireachtas indicates that Nero fiddles, or Enda fiddles, while Rome burns.

The Taoiseach

Where is the bearded one today? Gerry is absent.

Deputy Mary Lou McDonald

The debate moves on, the politics shifts and the categoric evidence of the failure of austerity is there for all to see but the Irish system and the Taoiseach simply do not want to see it.

The Taoiseach quoted the OECD earlier during Questions to the Taoiseach and tried to put a positive gloss on its position, so let us see what it makes of matters.

The OECD states the eurozone crisis remains the single biggest downside facing global outlook. No surprise there. We would all agree with that. It also states that the risk is increasing of a vicious cycle involving high and rising sovereign indebtedness, the debt overhang; weak banking systems; excessive fiscal consolidation, read austerity and cutbacks for that - all things for which the Government is a cheerleader; and lower growth. That is its description of the vicious cycle it sees us in, and I agree.

The Taoiseach

Read its projections for Ireland.

Deputy Mary Lou McDonald

In his speech, the Taoiseach painted a picture of what he calls a "virtuous cycle". The virtuous cycle brings the deficit under control and provides a growth stimulus to the economy which would boost growth rates and job creation. This growth in turn would lighten our debt burden, which in turn would encourage further growth. This is very sensible but the difficulty is that the policies the Taoiseach recommends, which are reiterated in the austerity treaty, are not the stuff of the virtuous cycle but the stuff identified as a vicious cycle of a downward spiral described by the OECD. The Taoiseach may pretend forever and a day that it is not so but the reality contradicts that. As long as we have 14% of our workforce on the live register, 30% youth unemployment, forced emigration on a scale not seen since the 1980s - with nine people an hour fleeing this State - and families under pressure in mortgage distress, these give the lie to the Government's propaganda that austerity is working. It is not.

Let me be clear. There is little point in the Taoiseach saying he is going to this meeting to do the divil and all and to be an active participant in a discussion around growth and jobs when he persists with an austerity policy that is killing any prospect of growth, keeping people out of work and sending yet another generation to make their lives and contributions in Brisbane, Toronto, Sydney and London. I am relieved to hear the Taoiseach say that he will be an active contributor to this meeting because for a long time I wondered if he was saying anything at all at these meetings. He says he has long been a champion of growth. However, as a keen observer of these matters, it strikes me it has been the French electorate and Mr. Hollande who have forced this matter. That demand for growth is reiterated across Greece, Italy and in Britain, where people have given their verdict on policies of austerity through the ballot box.

The call for citizens to reject the austerity treaty is a call to move this State and Government on to the right side of the conversation and debate at European level. Austerity has failed. There is nothing to suggest that come 1 June, things will miraculously change and austerity will start to work. That will not happen. Sensible people, politicians and commentators recognise that. It is time for the Taoiseach to get a bit of sense, to get with the programme and to go to this meeting and, if he is going to be a constructive contributor, ditch his mantra of austerity and embrace a philosophy of growth. However, that means ditching the austerity treaty too.

Deputy Seán Barrett

I wish to share my time with Deputies Clare Daly and Mick Wallace.

Acting Chairman (Deputy Tom Hayes)

Is that agreed? Agreed.

Deputy Richard Boyd Barrett

The Government has peddled the line over the past number of weeks that it cares about the ordinary citizens of this country and of Europe and that a "Yes" vote on the treaty is vital to secure the interest of ordinary citizens and to secure access to the European Stability Mechanism, which has been presented by the Government as some sort of salvation for this country. It has also pointed to Greece as a warning of the danger if the people of Ireland have the temerity to say that they have had enough of austerity, with the implication that disaster would be inflicted on them if they say "No".

The past week has exposed the Government's bogus claims and possibly has exposed the fact that the Government has been involved in a dishonest deception of the people with regard to its real stance on these matters. First we had the outrageous comments of the Taoiseach to a man who had worked for 30 years and was unemployed. He made the disgraceful comment that the man looked like a person who could do with a day's work. Then we had the outrageous comments from the Minister for Finance, Deputy Michael Noonan, making jokes about the suffering of the Greek people and referring to Feta cheese. One might consider these small aberrations, until one discovers in a report in Der Spiegel that the same Minister berated the Greek Government at the ECOFIN meeting for not imposing further austerity with sufficient vigour on the Greek people.

One begins to wonder, therefore, whether the real position of the Government is complete disregard and contempt for the people who have been the victims of the recession, lost their jobs and been the victims of austerity, whether in this country or in Greece. One wonders whether the reason it is trying to ram this fiscal treaty through is because it, like Chancellor Angela Merkel, is ideologically committed to the failed and discredited policy of austerity. One must wonder, when all the political forces in Europe, Greece, France and even the United States now insist that there be a change of course and that Europe begin to prioritise jobs and growth instead of the failed policy of austerity, why only Chancellor Angela Merkel and the Irish Government cling to the failed policy of austerity and continue to want to ram through this austerity treaty. Is it because Fine Gael is in the same European party as Angela Merkel, the European People's Party, that this is its real commitment? Its real commitment is an ideological allegiance to Angela Merkel and her disastrous policy of austerity, regardless of the consequences for the people of this country or of Greece. It is increasingly apparent this is the case.

This week has also exposed the bogus threat that Ireland would be cut loose from funding if we voted "No". When push came to shove and the Greek people finally found a political voice for their resistance that was willing to say "No, enough is enough" and that they would not wear any more austerity, the ECB and other voices in Europe suddenly started to say that they could not afford to let Greece go and wanted it to stay in the eurozone, because they know their involvement in Greece had nothing to do with protecting the interests of the Greek people and had everything to do with protecting the eurozone, the European financial system and their own self interests. This proves that if Greece has leverage and Europe is not willing to turf Greece out because of the danger of contagion, Ireland also has leverage. Ireland has the leverage to say "No", that it has had enough of austerity and that it is not working. It has the leverage to say it wants a fairer deal for the country. There is no question of us being thrown out of the Union or the eurozone or of having funding cut off. If Europe will not do it to Greece, how on earth will it do it to Ireland without contagion spreading throughout Europe and bringing down the whole European project?

It is about time the Government got a bit of backbone and stood with the forces in Europe who are resisting austerity and demanding that jobs, fairness and growth come first, instead of simply protecting the interests of bankers, bondholders and speculators.

Deputy Clare Daly

We all now know that despite all the talk of the past period about growth, there will be no agreement on a growth package from tomorrow's summit. This tallies with the hypocrisy of the Government in claiming that it has been leading the charge to deliver growth in Europe. That would be a laughable claim if the consequences were not so serious. The reality is that we have heard platitudes but no details from any of the main economic powers on how growth can be delivered. Yesterday, The Irish Times published claims that productivity and growth could be achieved through structural reform and investment in education and modern infrastructure, support for small businesses and public-private partnerships. It was the same old waffle about job creation and growth.

The structural reforms proposed for Europe are purely based on liberalisation of the EU's Internal Market and deregulation of labour markets. If we had any doubts about that, we need only read the comments by Mario Draghi in The Wall Street Journal. When Mr. Draghi was asked about the most important structural reforms that could help us grow out of the crisis, he drew attention to what he called labour market reforms and the unfairness of the labour market. One might believe he was making a positive contribution until one reads that he decried the security offered to workers who are long established in their jobs and wanted to extend the flexibility many young people in Europe experience by extending three month and six month contracts onto the shoulders of older workers.

What we are seeing throughout Europe is a race to the bottom but job creation does not go hand in hand with measures aimed at driving down demand. Job creation measures will have a marginal impact in the context of the overall reduction in demand required to fulfil the balanced budget strategy on which this treaty is built. The argument that we will require billions of euro in additional cuts to meet those targets has not been answered. The situation will only be made worse by the conditionality on debt reduction. The facts prove that austerity is not working, even in terms of cutting the deficit. The deficit increased from €12.7 billion in 2008 to €18.7 billion this year because of these policies. Stiglitz, Krugman and other economists argue that an economy can never grow on the basis of austerity.

When the first bailout was delivered we were told austerity policies would lead to a growth rate of 3.2% this year. The dogs on the street know we are in a recession and this is the sixth successive year in which domestic demand has fallen. How can implementing and extending those policies of austerity improve the situation? The Government can say all it likes about growth but as long as it is implementing austerity the two cannot go hand in hand.

I ask the Government to put the issue of bank debt on the table at the European Council meeting. It should announce that we are not prepared to accept the impoverishment of our people or the destruction of public services to pay bank debts. Why not follow Syriza's call and refuse to pay interest on the loan? That money can instead be invested in job creation. The ECB has no problem with loaning more than €1 trillion to banks at interest of 1%. Why not demand that the money be loaned instead to Governments in order to fuel job creation? That is the only way we can revive real growth and deliver jobs and a recovery of the economy.

Deputy Mick Wallace

There is little doubt that the majority of people will go to the polls on 31 May without really know what they are voting on due to the disingenuous nature the debate thus far. The Government tells us it is important to vote "Yes" in order to get the money. We have already received confirmation from Europe that any country in a programme will get money if it needs it. If Europe did not give us money to help us stand on our own feet, it would be like cutting of one's nose to spite one's face. The question would also arise of how we could repay the bank debt if it did not continue to give us loans.

We are told the treaty is about housekeeping. That is an abuse of the word "housekeeping". Where is the evidence the treaty will bring confidence, stability or a recovery? For the last three years we were told austerity would restore confidence because people would start spending and the private sector would create jobs. We cut public spending and wished on a star that the private sector would start spending. The confidence fairy does not exist, however. No economist worth his or her salt believes it is possible to get growth from austerity. It is the same as taking blood from a patient and expecting a full recovery.

It amazes me there is nothing positive in this treaty. It makes the threat that we will be unable to access money. That is not positive. It proposes to introduce draconian rules on the citizens of this country. We would tie our hands by making it more difficult for any Government to prepare budgets. Furthermore, we face the prospect of fines if we do not keep to the rules. The Government cannot claim that we will retain our financial independence when it is as obvious as black and white that we would be agreeing to having restrictive rules imposed on us by the EU. Future Governments will also be hampered by an agreement we will have added to the Constitution and the Irish people will have less say in how their affairs are managed.

The most disappointing aspect of the fiscal treaty is its emphasis on controlling public debt. Some people have argued that we would not be in our current mess if the treaty was in place several years ago but our problems did not arise because of public debt. This crisis is the result of private debt which became public because of a poor decision. The notion that the fiscal treaty would have averted the crisis is a complete lie.

The removal of power from governments is consistent with much of what has happened over the past 30 years since the advent of neoliberalism. At the heart of neoliberalism is the belief that the State should keep its hands away from the affairs of business and the boats will rise for everybody if the markets and big business are allowed to take care of things. We know at this stage this neoliberalism has not worked out as planned. These theories have been seriously discredited since the crash began yet we being asked to include neoliberal ideas in our Constitution. It is not remotely in our interest to do so. The people have to understand that a "No" vote will force Europe to revisit this question. It is time that Europe started to treat us with fairness once again. It is completely unfair that the people are made to carry the burden for the problems created by the financial sector. It is even more unfair that plans are afoot to make matters worse for ordinary people.

A "Yes" vote is a vote in the dark for uncertainty. We do not have a clue where the Government will raise the money to meet its targets. It is madness.

Minister of State at the Department of the Taoiseach (Deputy Lucinda Creighton)

I will try to stick to the topic at hand. I welcome Deputies' contributions and, while I do not agree with the sentiment of many speakers, I appreciate their point of view. Growth and stability are key foundations for our recovery, at home and in Europe. The new treaty will help to build the stability Europe needs for the future. The discussion tomorrow evening will help to inject real momentum into the drive for growth. This is something the Government has been seeking for a long time and it is welcome. Europe now has a real opportunity to move things forward, an opportunity that must be seized with both hands.

The impact of the crisis in Europe is acting as a drag on the global economy. We have seen the concerns of our international partners, including at the weekend's meeting of the G8. We must be ready to take the decisions needed to turn things around and have the courage to move decisively and swiftly. Tomorrow, we must send a strong signal that Europe is determined to turn things around. We need to show that we have the capacity to match our commitments with action and to think boldly and innovatively about what needs to be done. President Van Rompuy has rightly said that there should be no taboos. I hope the informal format of the meeting will help to achieve that level of free-flowing engagement. Leaders will not be endeavouring to agree conclusions or take firm decisions, which creates the much-needed space for an actual exchange of ideas and views. For this, I warmly commend the approach of European Council President, Mr. Van Rompuy.

President Van Rompuy has identified a number of key elements, or building blocks, for discussion. As the Taoiseach has highlighted, these include sound national economic policies, EU policies bringing added value, measures to improve the financing of the economy, and measures to strengthen job creation. The first will allow us to take stock of implementation of the structural reforms agreed in the framework of the Europe 2020 strategy and the European semester process. President Barroso will brief the meeting with a preliminary assessment of the national reform programmes and will give a preview of the package of proposals to be adopted by the Commission on 30 May, particularly the set of country-specific recommendations.

On action at EU level, the Single Market agenda will be a priority. President Van Rompuy has identified a number of initiatives where high-level political commitments have not been followed through and he has pointed to delay on issues including patents and energy efficiency. Both are of vital national importance to Ireland and have the potential to contribute to significant growth here if we can get agreement on implementation at European level. President Van Rompuy has our full support in his efforts to remove any blockages and obstacles. The time has come for people to think of the big picture and to live up to the commitments they have made. We would go a long way to achieving the growth we desire if we could have the implementation at European level of commitments already agreed to.

The discussion on how to improve financing of economic growth will be of vital importance. There are ideas with potential - such as increasing the capital of the European Investment Bank in order to support SMEs and the development of key infrastructure – but we must be sure that any new arrangements will be capable of delivering where they are most needed and where they can have greatest impact. Similarly, the Government strongly supports the project bond initiative as having the capacity to leverage private funding for important infrastructural projects, but scale cannot become an obstacle to delivering investment and money to where it is most needed.

We need to look at what remains within the framework of the Union's existing budget and consider how it can be deployed to best effect. We need also to look to the budget currently being negotiated for 2014 onwards. This must be directed, to the greatest extent possible, to growth and jobs. This is a budget of over €1 trillion so it is not insignificant. It is of vital importance to the agrifood sector in this country. Some 85% of our funding under the new EU budget comes through the Common Agricultural Policy to the agrifood sector. It is not to be sniffed at.

President Van Rompuy has left the agenda for tomorrow's meeting open to innovative or even controversial ideas, as he puts it. I hope people will take this in the spirit in which it is intended and will be prepared to engage in new thinking and to move beyond established positions. It is a discussion that must happen if we are to build recovery and a sustainable economic future. We need to tackle all the difficult issues, whether it is eurobonds or looking critically at the mandate of the ECB. I am personally supportive of those two elements.

Not everything is for the immediate period ahead but Europe has to demonstrate the capacity to think strategically into the medium and long-term future, particularly if we are to restore credibility with international partners and with the markets. Tomorrow's meeting of EU leaders will provide an excellent opportunity to reach the widest possible agreement on the decisions necessary to boost sustainable job creation and growth in Ireland and across the entire Union over the months and years ahead. A fully fleshed-out and intelligent action plan for growth will complement the work we have done and are doing to end crisis and to restore stability, including through the new treaty. Stability and growth are two sides of one coin. It is a fallacy to believe we can have one without the other.