European Council: Statements

The Taoiseach

I am pleased to have the opportunity to brief the House on what was a very significant meeting for Europe and for Ireland. On 7 June, I wrote to all other Heads of State and Government to set out Ireland's position on the crisis in the eurozone and to outline my two key objectives for the summit in question: first, reaching agreement on a growth pact for Europe and, second, reaching agreement on a European response to the banking crisis that broke the link between banking and sovereign debt. I am pleased to report to the House that significant progress was made on both fronts. The European Council agreed a compact on growth and jobs and the Euro Summit agreed a number of important steps aimed at addressing the immediate crisis in the euro area, including the imperative need to break the vicious circle between banks and sovereigns.

President Van Rompuy presented his report, Towards a Genuine Economic and Monetary Union, laying the groundwork for a strong and credible currency into the future. It was a significant meeting, with significant results of particular consequence for our country.

Having had extensive discussions involving all 27 Heads of State and Government on the crisis facing Europe and the steps necessary to return Europe to growth and job creation, those leaders representing the 17 euro area member states continued their discussions on the immediate steps to restore stability to the currency. The backdrop to our meeting was a difficult and complex one, and the issues facing us were sensitive and potentially divisive. Our discussion was long and frank. As I have said, my goal was to ensure that the link between banking and sovereign debt was broken decisively. I also made it very clear, at the meeting and beforehand, that any outcome that did not respect the equality of member states in the solutions being developed would not be acceptable to Ireland. In the end, we made a clear statement that breaking the vicious circle between banks and sovereign was "imperative". This is a significant shift in position, the importance of which should not be underestimated.

I particularly welcome the fact the principle that the ESM should be enabled to recapitalise banks directly has been agreed. This is a major shift in policy, one which I publicly called for at a conference on the eurozone crisis in Dublin Castle on 20 April and on numerous occasions since. The interaction between banking and sovereign debt has been right at the heart of the crisis and has presented a significant obstacle to confidence in the markets. I have long believed it would not be possible for Europe to move beyond this crisis and towards recovery for as long as banking debt and sovereign debt remained intertwined. We have now agreed and decided to separate them. For Ireland, this vital step represents an important breakthrough that can help us to recover and to return to the markets.

In deciding to sever the link, we also identified how and when it should be done. The Commission will shortly present proposals for a single supervisory mechanism and the Council has been asked to consider these urgently by the end of 2012. When a single supervisory mechanism, involving the ECB, is in place, the ESM will be enabled to recapitalise banks directly. In each case, this would involve appropriate conditionality, formalised in a memorandum of understanding.

It has been abundantly clear that the markets will not accept as credible any arrangements for capitalising banks that place further strain on the position of sovereigns already under pressure. The recent agreement for Spain, for example, has simply not succeeded in bringing the relief that was sought. We now have the real prospect of a different approach with the capacity to deliver very different results.

In our discussions, I made it clear to colleagues that I could not accept a situation where Ireland would be penalised by having taken the steps necessary to secure its banks, both in the interests of our economy but also in the wider European interest. Where new possibilities were being offered to others, Ireland had to stand to benefit also. Equality is and always has been a key principle at European level. This was reflected in the text which was adopted and which contains a specific undertaking to "examine the situation of the Irish financial sector with the view of further improving the sustainability" of our programme. In working this through, it is made clear that "similar cases will be treated equally".

This outcome reflects the intensive efforts the Government has made since taking office to explain the situation regarding Ireland's legacy bank debt to partners and to seek their support in engineering an outcome that can reduce the excessive burden on Irish taxpayers, families and people. That support has now been made explicitly clear and the work to make it real will now begin, starting at the meeting of the eurogroup next Monday, where Finance Ministers will consider how to implement what was agreed last week.

The Government will obviously be working intensively to ensure the best possible outcome for Ireland is delivered as quickly as possible. We have stated our intention to exit our programme and to return to the markets as quickly as possible. Our European partners now have an opportunity to assist us in achieving that goal in a concrete and meaningful way. Europe needs a success. With their support, we can deliver it.

On Spain, the Euro Summit urged that the memorandum of understanding establishing financial support for its banks should be concluded rapidly. Addressing another market concern in a practical way, it was further agreed that while initial funding will be from the EFSF, when the ESM comes on stream, this will be transferred across without gaining seniority. We also restated our commitment to using the instruments available to the EFSF, European financial stability facility, and the ESM, European Stability Mechanism, in a flexible and efficient way to stabilise markets for member states that were respecting their commitments to reform but remained under pressure in the markets. This was seen as of particular importance for Italy. It was an issue I discussed with the Italian Prime Minister by telephone before and during the course of the meeting. This arrangement will be made through the agreement of a memorandum of understanding with the country in question. The European Central Bank has agreed to act as agent for the EFSF and the ESM in making bond purchases under this arrangement. Of course, there is much detail to be filled in and no time to be lost. The eurogroup of finance Ministers has been asked to implement what was agreed by 9 July. While it will not be implemented by then, this will be an important meeting, including for Ireland, at which the start of this process will be discussed and laid out.

The Government has long argued the need for a growth agenda for the European Union. The compact adopted by the European Council last week contains an ambitious programme of work to be taken forward at European and national level. This became centre stage during the recent French presidential election. Mr. Hollande made it clear that he would like to see a change of direction and emphasis from a European perspective in respect of growth and a growth agenda. The agreed programme will deliver an immediate stimulus with a €120 billion investment package, or 1 % of Europe's income, mobilised for fast acting growth measures.

It was agreed that we should increase the European Investment Bank's paid-in capital by €10 billion with the aim of strengthening its capital base, as well as increasing its overall lending capacity by €60 billion which would unlock up to €180 billion of additional investment. It was also agreed that the project bond pilot should be launched immediately, bringing investment of up to €4.5 billion for pilot projects, and following evaluation, the volume of such financial instruments could be developed further in the future. In both instances - the EIB and the project bonds - I insisted that eligibility be extended to cover all member states, particularly those such as Ireland, which bore the brunt of the economic crisis. The text of the Council resolutions was amended to reflect this.

We will now work intensively with the institutions concerned to identify suitable projects in Ireland. I look forward to discussing this issue with the president of the EIB, Werner Hoyer, when he visits Dublin this Friday. It was also agreed that those member states with unspent Structural Funds available could use them to share EIB loan risk and provide loan guarantees for growth-related projects. Ireland has allocated all of its funding for this round.

It was agreed that a deeper Single Market, in which remaining barriers were removed, would be a key factor in promoting growth and job creation, particularly in digital and network industries. The Commission will bring forward its further growth enhancing proposals under the Single Market Act in the autumn. These will not only be an important input but will also help to shape the agenda for the Irish term of the EU Presidency from 1 January 2013 to the end of June 2013. We called for early agreement on important measures on public procurement, e-signature and the recognition of professional qualifications. We also welcomed the Commission's proposals to improve Single Market governance to ensure better implementation and enforcement, a proposal for which I have called before. Our performance in turning high level commitments into action on the ground has to be stepped up. The Commission will now make an annual report on this issue as part of the European semester process.

Particular stress was placed on the potential of the digital Single Market, with priority to be given to measures aimed at promoting cross-border online trade, including a transition to e-invoicing, e-identification and other e-services. It was also agreed that the roll-out of high speed Internet and the modernisation of Europe's copyright regime were crucial. There was a shared view on the importance of external trade as a driver of growth. Free trade agreements with Singapore and Canada are to be finalised by the end of the year, while momentum is to be injected into negotiations with India. We also agreed that work should continue towards deepening our trading relationship with Japan.

The EU-US high level working group on jobs and growth will bring forward its recommendations later this year. It made a commitment to working towards launching negotiations on a comprehensive transatlantic trade and investment agreement in 2013. I will make this an issue during the Irish EU Presidency as the opportunities arising from such an agreement on trade, exports and job creation in the next decade will be phenomenal.

Tackling unemployment and addressing the social consequences of the crisis was a key focus of the meeting. We agreed to step up, in particular, efforts to increase youth employment, with the objective that within a few months of leaving school young people should receive a good quality offer of employment, continued education, an apprenticeship or a traineeship, which can be supported by the European Social Fund. Ensuring member states have more ambitious and precise national job plans such as those adopted by the Government will be an important element of next year's European semester process. Again, Ireland will drive this forward during its EU Presidency term.

The European Council President, Mr. Van Rompuy, presented his report entitled, Towards a Genuine Economic and Monetary Union, to the Council. As I outlined to the House last week, the report identifies four building blocks: an integrated financial framework, or banking union as it has been called; an integrated budgetary framework with commensurate steps towards common debt issuance; an integrated economic policy framework; and strengthened democratic legitimacy and accountability. The Council President was invited to develop these ideas in close co-operation with the Presidents of the Commission, the ECB and the eurogroup and come forward with a specific and time-bound roadmap for the achievement of a genuine economic and monetary union. In this, he will examine what can be done within the existing treaties and what proposed measures would require treaty change. He will bring forward an interim report in October and a final submission before the end of the year. It is clear that this work involves consideration of many difficult and sensitive issues. Ireland has a strong national interest in a strong and stable currency, as well as in a strong and coherent European Union. That is what the discussion was about and I look forward to playing a full and active part in it.

The European Council also addressed several other important issues. On the Union's future budget, the multi-annual financial framework, we welcomed the progress made under the Danish EU Presidency which provides a basis for the final stage of the negotiations during the current Cypriot Presidency term. I thank the Danish Presidency for this work and wish the Cypriot Presidency the best in its efforts on these matters. We reiterated our aim to bring the matter to a conclusion by the end of the year. We endorsed the welcome decision to open accession negotiations with Macedonia. We welcomed progress on several important JHA, Justice and Home Affairs Council, files. We called on member states to implement the recommendations of the European Nuclear Safety Regulators Group in a timely way. The brutal violence and massacre of civilians in Syria were strongly condemned.

This was an important meeting for Ireland and the Europe Union at which decisions of particular importance were taken. The task of implementing them in good faith lies ahead. The Government will leave no stone unturned in seeking advantage and the best possible deal for Ireland. Adoption of the compact for growth and jobs was also welcome, but we now need to give it effect. This will be an important priority for the Irish EU Presidency, now 24 weeks away. We have shown many times in the past that Ireland can make a difference and make its mark at European level in a way that reflects well on the country and its people. That will continue to be our goal in the important work ahead.

Deputy Micheál Martin

Last week the European Council and the euro group issued conclusions which gave us all some cause for hope. A new and more credible approach to addressing bank recapitalisation has been agreed in principle. A joint regulatory framework for the financial system will emerge at some point, although the scope of this is unknown. These are substantial moves forward. They mark a welcome departure from months of aimless activity which helped to renew the crisis in the sovereign debt market and bring the euro to the edge of collapse. The reductions in bond yields this week show that the summit has had some positive impact. However, let us not be fooled into thinking that it has finally dealt with the crisis or that the actions required to stop an escalation of the recession have been taken. This summit was only decisive if one sets it in comparison to what went before.

In light of the declarations of decisive action having been taken and of Europe having turned a corner, people should stop for a moment and consider the statements issued after last July's emergency summit or, for that matter, after any one of over a dozen crisis meetings held in the past four years. If one examines the record of this House for the past 18 months, one will find the Taoiseach repeatedly informing us about how decisive action has been agreed. After the December and March meetings he talked at length about how leaders had agreed moves which were already restoring confidence and which would deliver jobs and growth. There is not even the merest hint of understanding of the scale and escalation of the crisis. What one will also find is a systematic pattern of exaggeration about the Taoiseach's influence and that of the Government. At one point, he informed the House about having held negotiations with the former French President, Mr. Nicolas Sarkozy, but subsequently had to admit that this was little more than an informal greeting at the side of the Council Chamber. Last June he actually claimed to have put the Greek debt crisis on the summit's agenda. Of course his biggest exaggeration before Thursday's summit was when he claimed to have negotiated last July's reduced interest rate on loans to Ireland. Speaking notes were circulated to all Government backbenchers in which the claim was made that the Taoiseach had heroically delivered enormous savings for Ireland because of the deep diplomatic negotiations in which he was involved. The truth, acknowledged everywhere with the exception of Merrion Street, is that Ireland benefited from a deal which was negotiated for Greece and which was automatically extended to all countries. That deal was worth four times what the Government admitted it had sought.

This addiction to self-praise and exaggeration has become much worse. In that context, the Government seems to have forgotten what it said as late as last Wednesday. It should consider the record. On the day in question, the Taoiseach repeatedly stated that he would not be raising the issue of Irish banking debt at the summit. He was true to his word. On Thursday evening he and the Tánaiste sided with the majority that wanted to quietly agree the summit conclusions and move on. In fact, the Tánaiste got on a plane and headed home. In contrast, the Italian and Spanish Prime Ministers said there would be no deal on anything until urgent issues were addressed. The situations in their respective countries were giving grave cause for concern last week, particularly that of Mr. Mario Monti in Italy. Everyone in Europe welcomed the latter's arrival on the scene but he was being undermined by the lack of action in respect of the sovereign debt crisis and the intransigence that was displayed prior to the summit. The situation in Italy was becoming extremely perilous. The deal won by Spain and Italy in the early hours of last Friday morning is very important. This is because at every stage during the past four years the Council and the euro group have adopted a consistent approach of extending the principle of agreements to all countries.

The performance of the Government since last Friday has been so brazen it would make John Terry blush. Both the Taoiseach and Tánaiste have been praising themselves for having tirelessly executed a cunning plan. Brief handshakes when entering the meeting room have been elevated to the level of in-depth consultations. Apparently the Taoiseach showed a masterful command of tactics by agreeing to move on to other business and not co-ordinating with the Spanish and Italian delegations. Spain got a definite deal in respect of bank recapitalisation, while Italy obtained a deal on sovereign bonds. Ireland was granted an examination of its banking debt. That examination is welcome but I wish to ask the Taoiseach a number of questions in respect of the advanced discussions relating to our banking debt about which the House has been informed during the past 12 months. We were informed this time last year that a joint working paper on this issue was being drafted. One would have obtained the impression that a great deal of detailed work was to be done in respect of the technical paper, etc., in the interim. Two weeks ago, the Taoiseach indicated that he had not read the technical paper. Will that paper be published in order that we might glean some information in respect of what Ireland is actually seeking?

The difficulty for us is that we do not want merely what has been done for Spain. In the case of the latter, bank recapitalisation has yet to happen. As a result, the ESM money will go directly towards the purchase of new equity in Spanish banks. If the same core principles hold for Ireland, then the ESM may purchase from us our shares in Bank of Ireland and AIB. It appears the key factor is that the ESM must have an asset in return for its investment. It would be highly unlikely - and of little help - if all that happened was that those shares were purchased from us at current values. Until Friday last it was the Taoiseach's position that the Government's sole priority was the cost of the promissory notes. Earlier this year the Government declared victory on the basis of a deal which actually increased the cost of the first tranche of money relating to those notes and converted it into normal sovereign debt. The promissory notes should remain our absolute priority in the context of the bank debt. As the Taoiseach has finally been willing to admit, these notes were agreed because Ireland was being responsible towards a Europe which was scared of contagion and which lacked any alternative. This debt should under no circumstance simply be converted to standard sovereign debt on the ESM terms available to all. The promissory notes are a unique instrument, developed at an exceptional time, and have no implications for wider policy. An entirely separate approach is required in respect of them. A much longer-term and nominal interest rate is what should be considered in that context.

The reference to the ECB's support for Ireland in the statement issued in the aftermath of last week's summit is no surprise. The bank's core negotiating objective has been to transfer the promissory notes into standard sovereign debt and walk away. Its hard-line opposition to genuine relief on the promissory notes has not been changed by this deal; rather, it has been confirmed. In light of the policy of systematic exaggeration that has characterised everything the Government has done during the past 18 months, if it wants people to believe that a major breakthrough has been made then it is time to start producing some details. The Taoiseach should do what his Spanish and Portuguese counterparts did, namely, publish his detailed demands and then meet people to discuss them.

With the exception of the bank-debt element of the deal, nothing was agreed at the summit that fundamentally changes the dynamic of the crisis or addresses the core design faults of the euro. The introduction of joint banking supervision is absolutely essential. The linking of such supervision to the disbursal of ESM money to Spain suggests that it will be watered down to meet the demands of Germany's regional banks. It is highly unlikely that agreement will be reached in time for the October deadline.

A central dynamic of the crisis has been the fear among investors with regard to the lack of a lender of last resort. The ESM was supposed to ease this fear by showing how the resources were in place to rescue anyone. With €100 million to go to Spain's banks and the other commitments, the ESM simply is not large enough to give the required confidence to investors. If it becomes involved in buying Italian bonds on the secondary market, the ESM may bring forward the date of the next crisis. When it spent a much larger amount on similar purchases, it provided short-term relief, increased its own risks and failed to save Greece, Ireland or Portugal. Why should the dynamic change now because it is the ESM and not the ECB buying the bonds? The monetary ideologues insist on the purity of their vision for the ECB. They also insist that ESM funding cannot be leveraged to deliver firepower which can outlast a further run on the bond market. The failure to challenge this means that the single biggest driver of the sovereign debt crisis remains in place and will probably come to the fore again. I refer the Taoiseach to a newspaper article by Colm McCarthy in which he makes the intelligent point that the devil is actually in the principle and focuses on this specific issue of concern.

Europe also requires investment if it is to get out of the recession. This summit again failed to deliver anything which could honestly be called a growth agenda, and in today's edition of The Irish Times, Martin Wolf describes what is proposed as “a mere bagatelle”. Giving money to the European Investment Bank and reallocating structural funds are good ideas but they fall down in two major ways. First, there is no detailed agreement to use the money being allocated exclusively for regions most in need. Second - this is a most important point - the co-financing rules have not been changed. As a result, the money, if it materialises, is actually likely to further strengthen stronger regions at the expense of weaker ones that cannot afford co-financing. If the entire allocation actually happened, it would provide a stimulus of less than 1% of the income of the European Union over more than two years.

We must be honest about this matter. People have engaged in a great deal of spin in order to cover the French situation, talk up the supposed growth pact and so on. However, what is proposed is not a growth pact. Something that amounts to only 1% of the overall European Union budget is not a growth pact. This is particularly evident when one considers that unemployment across the Union now stands at 11.1%, the highest it has been since the introduction of the euro in 1999. Too little attention has been given to the effectiveness and capacity of the growth pact. It is not in any shape or form a real growth pact. A real growth pact is urgent and needs a direct transfer from regions in surplus to regions in deficit. Nothing agreed last week delivers that. The full summit talks at length about moving to what is termed a genuine economic and monetary union. What has been agreed is to look for areas to agree on rather than starting with a clear view of what is required. The text gives very little reason to believe the leaders understand this.

The agenda is about control, not creating a genuine Union. It is full of measures which originated in the pre-crisis period and involve neither ambition or reflection. I heard the Taoiseach's speech and he said he will play a full and active part, whatever that means.

The Taoiseach

Starting on Monday, with the Minister for Finance.

Deputy Micheál Martin

No, I am not talking about the debt, I am talking about the economic and monetary union. The Taoiseach says that talks are coming up and that we will full play a full part. What is the Government's position on that?

The Taoiseach

We will see the report in October.

Deputy Micheál Martin

We should not wait for President Van Rompuy.

The Taoiseach

Does Deputy Martin want to pre-empt the report?

Deputy Micheál Martin

We should state how Ireland sees Europe evolving and what is in the best interest of Ireland. We must engage citizens. What is clear from the Taoiseach's speech, which he did not say last weekend, is that we will need treaty change in Ireland. There will be further referendums on this point and we should tell people that and explain to them why it is necessary and in the best interests of Ireland and Europe. We should tell people our position and how far we are prepared to go on fiscal union, political union and monetary union. These are fundamental questions and people should not be surprised by them when they arrive on their doorsteps again via a referendum. As they did in the previous referendum, people always complain about a lack of information, a lack of preparation and a lack of understanding of the issues. The reason is that people keep ducking and diving. Before the previous referendum, the Government would not say for 12 months it wanted treaty change. Then, the Attorney General said we needed a referendum and the Government had to get its ducks lined up in a row in a hurry. There was major dissatisfaction among the public in respect of its understanding of the issues. That is a genuine issue for the country. A fundamental re-evaluation of the shape of the European Union is coming down the tracks. This refers to fiscal, economic and political aspects and there is not a genuine articulation of it from the Government side. In a speech in March, I expressed how Fianna Fáil sees a genuine fiscal union emerging. This is not one about balancing books but one that involves a genuine transfer union. We must share these issues with the people. I do not get any sense from the Taoiseach's speech of this being done.

The House should be aware that the summit explicitly noted that progress is supposedly being made on common tax policies but the Government has failed to provide any update whatsoever on what it has been discussing. I did not get any sense of that from the Taoiseach's speech. What is meant by the comments that good progress is being made in common tax policies? We need to know the lie of the land.

The Taoiseach

Deputy Martin is aware of our view on the financial transaction tax.

Deputy Micheál Martin

I am, but I am wondering if it is tied into the fiscal, monetary and political union issue. The political and economic issues on the agenda for the next six months are profound. For Ireland, the time has long since come when our Government should start articulating exactly where it stands on these reforms. They are even more important than debt issues in determining when the recovery will take place. They are not secondary to other priorities. If we do not set out what we believe is required to end the crisis and restore long-term growth, we will continue to be bystanders and, in the words of Pat Cox, policy takers.

Sometimes the outcome will be good and the Government can rush out to try to claim credit, but equally there are many areas where we cannot adopt a position of just accepting what emerges from the work under way. We will have issues with some of the proposals and recommendations and it is far better to stake out our position in order that there is public understanding of it.

Given the scale of the crisis and the length of time it has been under way, this summit delivered the bare minimum of what was required to stop a crisis becoming an immediate catastrophe, which is where we were heading prior to last weekend. We need our Government to spend less time on ridiculous self-congratulation and more time actually trying to shape Europe's actions and reform programme.

Deputy Pádraig Mac Lochlainn

The headline coming out of last week's summit was that the link between banking and sovereign debt has been broken, but the problem with headlines is that they are short on detail, they can miss the bigger picture and they can distract from more substantive issues. I am afraid last week's headlines did all three.

We cannot even talk about the detail of what was achieved because we have no idea. We know there is some sort of commitment to look at splitting banking and sovereign debt by allowing banks to be recapitalised by the ESM. That, if it comes to pass, will be a good thing, would represent an achievement for the Spanish and Italian Governments and should act as an example to this Government of what is possible when we argue for it. This could most definitely bring big benefits to Ireland, and Sinn Féin warmly welcomes that.

It is also what should have happened in the first place but we were told it was not possible and to stop asking for it. However, the devil will be in the detail and, as ever, we are promised conditionality will be the deciding factor. Conditionality, as we have learned, means doing as we are told. We will learn over time what the President of the Council means when he says "under certain circumstances and under certain conditions, the ESM could recapitalise banks directly". We know that it will come with a memorandum of understanding and the conditions will be, to quote the euro area statement, "institution-specific, sector-specific or economy-wide". That clears that up. There will be no charity and no solidarity flowing from this decision. Of that we can be sure.

If it helps to ease the proportion of debt directly lumped onto our people, then it is welcome. The use of the ESM to which we could have a total liability of €11 billion represents, once again, a huge amount of money being pumped into failed banks instead of the real economy. Sinn Féin has always argued that depositors must be protected but private banks must be allowed to wind up and bondholders must feel losses. Banks should only be recapitalised when toxic losses are removed from their balance sheets and when it is of benefit to the State. We argue the ECB, not taxpayers, should be directly involved in the recapitalisation. That is the bigger picture the headline misses and one that is linked to much more substantive issues that the summit skirted around or simply ignored.

The substantive issue of this summit should have been getting energy back into Europe's economy through stimulating growth and making the investment and the policies necessary to achieve that. The real headline should be the latest failure in a summit, after countless other times, of the EU to change tack and move towards a policy that would create jobs and wealth throughout the EU. I am sure the apologists for the austerity hawks will point to what was agreed in the so-called compact for growth and jobs and Council conclusions as proof a pro-growth agenda. That argument is very quickly dispelled by even a cursory glance at the content of what was agreed.

First, a stimulus package must be about putting money into the real economy. Here, the deal falls at the first hurdle. The amount of extra moneys is pitifully small. Only one point of the compact deals with figures, and they are noticeable only for their tininess. We are told the ElB's paid-in capital will be increased by €10 billion and that, magically, this will unlock €180 billion of additional investment. How €10 billion becomes €180 billion is not explained. There is mention of project bonds of €4.5 billion for pilot projects, none of which include Ireland. There is the often repeated story of reallocating Structural Funds. We know by now that this has almost zero impact in Ireland. We have spent or committed all our Structural Funds for this period.

The Commission, and now the Council, has clearly stated that member states "also have the possibility to consider reallocations within their national envelopes, under existing rules and in cooperation with the Commission". There will be no impact in Ireland due to any tinkering with Structural Funds and little anywhere else.

To put this in context, SIPTU and others have argued for a €10 billion stimulus package for this part of Ireland with a population of 5 million. What the EU effectively is putting on the table is €10 billion for 500 million people. It is pathetically small and is not a serious stimulus package or even close to one. Everyone knows it. There is, thankfully, more to the compact than figures; there are some worthwhile ideas, it must be admitted. Adapting the ESF to provide a youth guarantee is worth examining, as is the need to focus on the EU's research and development capabilities and strengthening our SMEs.

Unfortunately, however, in total the compact and the ideas in it make for depressing reading for anybody looking for a change in direction or genuinely new socially and economically responsible thinking. We are told the austerity-driven two-pack should be applied fully and effectively and recourse to peer pressure should be enhanced. The language is telling and it is depressing. "Fiscal consolidation" that is "growth-friendly" yet "differentiated" yet "respecting the Stability and Growth Pact" yet "taking into account country-specific circumstances" is to be used to get us of this mess. This language, like austerity, makes no sense.

We have an ideological return to what has failed and what is failing. Great emphasis will be put on the implementation of the services directive, one of the most neoliberal, anti-worker directives ever to come from Brussels - from the leadership of Charlie McCreevy, to be precise. The compact for growth and jobs is not a stimulus. There is barely any money and it is not a new push for jobs and growth. It contains old failed policies given a new lease of life and a new name. It will not work and it is not designed to work; it is designed to give political cover as austerity grinds on.

The growth sideshow is of course also cover for the other real purpose of this summit: to centralise, centralise and centralise at all costs. President Van Rompuy was quite explicit in his post-Council statement: "This summit was about combining short-term action to stimulate growth and to stabilise the markets, together with a longer-term vision on the way forward to strengthen our economic and monetary union." The first part of that statement is the cover, while the second part is the truth of what this summit was really about: the deepening of fiscal ties to the point of fiscal union.

Who is to be charged with carrying out this task that our Government will not talk about? The President of the European Council, in close co-operation with the Presidents of the Commission, the euro group and the European Central Bank - four presidents without a single citizen's vote behind them as a mandate. President Van Rompuy stated that "Member states will be closely involved" and "There will also be consultations with the European Parliament", but the power is with the cabal. Our Government and our MEPs are reduced to waiting with bated breath for the wise words of bureaucrats with a simple and explicit agenda - fiscal and political union above all else. These four unelected middle-aged men are to go off and come back with a plan to realise full economic and monetary union in the interests of the citizens of Ireland and other nations. What has our Government got to say? As usual, absolutely nothing. That is what we are used to - going along with the flow, never raising objections or standing up for Irish sovereignty. It has got us nowhere and it will never work as a strategy, although to call it a strategy might be giving the Government too much credit. It was another summit demonstrating another failure of the EU and particularly of this Government to deliver an agenda of growth and to stand up against the forces of centralisation and permanent austerity.

A number of Syrian citizens appeared before the Oireachtas Joint Committee on Foreign Affairs and Trade recently. Their testimony, which had to be given in camera to protect their families, was harrowing. It is important that our Government works in partnership with others to deal with this issue. The concern of the Syrian citizens based in Ireland who testified is that every time well-intentioned international diplomats such as former UN Secretary General Kofi Annan come up with a plan in good faith, the Assad regime, which is a mere cover for the military, uses the opportunity to carry out more horrendous massacres. We must be clear in the international community and Ireland must not hesitate. A time must come when the agreed programmes become mandatory and their abuse must end. We have seen what happened in Rwanda and the Balkans, where standing back resulted in massacres. Hopefully the international community can resolve this and I welcome any Irish involvement in achieving that, particularly having heard the testimony given to the committee.

Deputy Richard Boyd Barrett

There was considerable fanfare last week and much talk of a breakthrough following the deal at the European Council meeting. There was a lot of self-congratulation about what had been achieved by the Government and the EU leaders. We heard similar talk from the troika, whom we met this morning, about this great breakthrough. People in this country have heard these expressions on many occasions, usually shortly after almost every summit in the last few years, and no sooner are the politicians slapping each other on the back and declaring they have made great progress than the whole thing unravels and nothing changes for ordinary people being crushed by cuts and the impact of austerity. I would like to think this one was different and that all the talk of the great breakthrough was meaningful this time so ordinary people could look forward to some relief and hope instead of the terrible situation faced by so many. However, this is highly unlikely.

The Government and European leaders, and the troika in our meeting this morning, when asked specifically what the deal would do for ordinary working people and the unemployed and for our economic prospects, gave us no detail at all. The troika in fact said the details were vague and we would have to see what the details actually were. I find it hard to understand how people can talk about a breakthrough when we are told the details have not been worked out. Is it not the reality that any change of policy last week did not arise from the great talent or ability of our Government or any of the politicians?

Deputy Catherine Murphy

We have referred to this. We are talking to ourselves here.

Deputy Richard Boyd Barrett

Just so those in the Visitors' Gallery are aware, every time a Deputy from the Technical Group gets up to speak, the Minister of State, Deputy Creighton, plays with her phone and talks to the Leas-Cheann Comhairle. It is indicative of the contempt the Government has for the Opposition. The Visitors' Gallery, which is full right now, should understand that this is generally the approach of the Government. None the less, these problems will be resolved by ordinary people such as those in the gallery and in society. They will not be resolved by politicians in the club of the political establishment who failed us so miserably for the last four years.

I challenge the Government to tell us specifically how this deal will improve the lot of ordinary people. Is it just more PR spin, smoke and mirrors and an elaborate accountancy trick? One would not have much reason for hope when the first meaningful statement from a Government spokesman in the aftermath of all the declarations of the great breakthrough came from the Minister for Finance, who said it would make no difference whatsoever to the cuts and austerity that the Government plans to impose in the budget in December, a fact confirmed by the troika. While the troika members could not tell us what specific improvements in terms of employment, cuts and austerity the Irish people would see as a result of the deal, they were able to state that the cuts in incomes must continue, the privatisation agenda would continue and property taxes must be imposed. One wonders what all the hoo-ha is about.

In so far as there is any substance whatsoever to all the declarations of a breakthrough last week, it seems to revolve around the fact that perhaps the debts of the banks and the bailouts necessary to fill the hole in the banks will not be routed through the sovereign and that the ESM will directly bail out the banks. People should take note that the first and major priority of the European leaders remains unchanged, namely, to bail out the banks but to do so in a slightly different way.

The question is whether this new method of bailing out the banks will bring about an improvement for ordinary people. It may result in a reduction of our debt-to-GDP ratio, although that remains to be seen. However, we are going to pick up the tab at the other end through the ESM because it will now be the mechanism to bail out the banks and we, the citizens of this country and Europe, pay for the ESM. In our case it is now more likely that the Irish people will be on the hook for the full €11 billion or more to finance the ESM by virtue of the ESM treaty and that we will be called upon to bail out the European banks given that it is considered that there is in the region of a €2 trillion hole in Spanish and Italian banks alone and the ESM has only €500 billion of so-called firepower. That makes it almost certain that Irish citizens will just pay the bill in a different way.

The truth is that we will only have reason to celebrate when the Minister of State can tell us where the jobs are and how the 300,000 or 400,000 jobs we need to get our people back to work and to get the economy moving again will be created. When will the Government stop the imposition of brutal and unjust cuts on working people and vulnerable sectors of society? The Minister of State has made it absolutely clear that will continue. The policy is to prop up the banks, privatise everything and crush ordinary people with austerity. That is not a breakthrough and it is certainly nothing to celebrate.

Deputy Catherine Murphy

I woke up last Friday morning and for a change there was good news on the radio. There was talk of a seismic shift. Essentially, I have been waiting for the detail of that. I acknowledge that it is welcome that there has been a change but we must have the detail because one person's seismic shift is another person's relatively modest change. We cannot judge that for ourselves unless we have the detail, but we have not been given any sense of what is involved. In fact, the announcement and the European statement has given rise to new questions being posed, for example, on the extent of the ESM and the loan fund. It is a loan fund and it is expected that it will be paid back. What does that mean given that we own some of the banks that have been recapitalised? I am unsure about what the practical application of the change means given that we own the pillar banks.

I was on a radio programme on Thursday night when I heard that an expected European press conference did not occur because both the Italian and Spanish delegations refused to buy into the stimulus package until banking debt was addressed. It has become obvious to many of us that one's problems are only problems for Europe when one makes them problems for Europe. It is at that point that it decides to deal with them. That has been a concern of many of us in terms of our negotiation strategy. For example, we benefited from the reduction in interest rates because of Greece and we have benefited from the current change because of Italy and Spain. Essentially, we hope that we will be lucky. We must take much more control. I would like to hear a response from the Minister of State on the control we are taking and what is our negotiating strategy, because it is not obvious to many of us.

I would also like a response on the following issue. Finland has a significant problem with what has been proposed. Is it the only country with a problem? Was that raised at the summit and in what context? The ESM must be ratified by the Bundestag. Are there potential issues we should anticipate in terms of how the situation will play out? Is it likely, for example, that a new treaty will be required on foot of changes that will be made? It is clear there is potential for a shift in sovereignty from individual states to the European Union, and in that context, it is not unreasonable to anticipate that there could be a new treaty. It would be useful to get an insight into what we might face. On the same day, on the "News at One", Seán O'Rourke pressed the Minister for Finance on what the decision meant and whether it would make a difference to this year's budget. The response was that it would not make a difference. I accept it will take some months to work out the detail of the change, but to come to a conclusion about what it means, people must know how it will impact on them on an individual or collective basis.

A stimulus package was one of the issues that was part of the deliberations. As Deputy Boyd Barrett indicated, we met the troika this morning. I commissioned a report from TASC, an independent think tank, on job-rich investment. We could have a growth rate that is not necessarily job rich. If we have funding to put into a stimulus package, it is important we get the best return on it. I was a bit upset by the ESRI's response to how we might use funding available to us to reduce our debts rather than investing it in jobs and people. One cannot just throw money at the problem. One must be targeted in one's approach. I will make the TASC report I commissioned available to anyone who wishes to read it because any contribution we can make to the issue will be important. Ultimately, if we can get people back to work, we will reduce the social protection budget and increase the level of taxation, which will increase our ability to pay debts. The sovereign debt is the one which comes to mind. We should never have been on the hook for the banking debt.

Will the Minister of State indicate how she thinks a stimulus package for this country would play out and if we are reading it correctly in terms of what appears to be its limited nature? Could more funding be leveraged and how could it be applied? Two issues arise. Clearly, if there is to be a shift in sovereignty, a new European model will develop and we need to have a vision of what it will be. Ireland will hold the Presidency next year and it will be important to have a broad view of what we are buying into rather than bits and pieces of the details.

Last week's meeting was the 20th to deal with the crisis which must be addressed at some point. The meeting provided welcome relief, albeit not to the extent desired. I hope the figure will amount to €67 billion.

The meeting was also meant to deal with the issue of democratic oversight. Was this issue addressed, as it has not been discussed much? Technocrats will work up a plan, but there must be democratic oversight if the institution is to take on responsibilities. For too long we have been sidelining the European Union's democratic institutions, for example, the European Parliament. When the Merkozy agreement was hatched, it sidelined other states. Democratic oversight must be centre stage.

I would welcome a response to the points I have made.

Acting Chairman (Deputy Catherine Byrne)

We will now have the question and answer session.

Deputy Micheál Martin

I raised the question of the European Stability Mechanism becoming involved in buying Italian bonds on the secondary market. A central dynamic of the crisis has been investor fear about the lack of a lender of last resort. In essence, the ESM will replace the European Central Bank in terms of buying bonds on the secondary market. The ECB did this for some time, but it did not work. I refer the Minister of State to Professor Colm McCarthy's article "The Devil is in the Principles", in which he makes the important point that there is no longer a buyer of last resort for weaker sovereign bonds and that the unwillingness of the ECB to play that role means Spain and Italy might be forced out of the markets. The fundamental driver of the crisis has not been addressed in the summit's conclusions. Professor McCarthy views the transfer from the ECB to the ESM as a retrograde step. What is the Government's position in this regard, given the dangers inherent in the ESM buying bonds on the secondary market? The ESM does not have the necessary firepower and is not a lender of last resort.

Minister of State at the Department of Foreign Affairs and Trade (Deputy Lucinda Creighton)

It is a step in the right direction, in that we have always envisaged a greater role for the ESM. In this regard, the Irish position extends further than what was agreed at the summit. The Taoiseach, the Minister for Finance and I have advocated a banking licence for the ESM, which would dramatically enhance the fund's capacity to purchase bonds and apply leverage. However, this is slightly more ambitious than what is envisaged by the Heads of State and Government.

Deputy Micheál Martin

Does the Minister of State accept that the summit did not deal with the issue?

Dáil Éireann debate - Wednesday, 4 Jul 2012

European Council: Statements

Dáil Éireann debate -
Wednesday, 4 Jul 2012