The extraordinary meeting of the European Council on Thursday and Friday will be an important one, with significant implications for the Union over the coming years. There will be only one main item for discussion, namely, the Union's budget for the period 2014 to 2020, which is called the multi-annual financial framework.
It is my view that as Heads of State and Government, we have an obligation to work to show the European people that we can come to agreement in a decisive way on such important matters. For my part I will participate to negotiate an outcome that is in Ireland's interests and in the interests of the Union as a whole. Agreement by the 27 member states on matters as fundamental as equipping the Union with the resources necessary to face into the next seven years is no small task. However, it also is a matter which will affect the Union's credibility. I am committed to being constructive and ambitious in the negotiations and discussions that will take place.
As of now, it remains unclear whether it will be possible to reach agreement this week. There can be little doubt that the positions adopted by member states remain a considerable distance apart. Further delays would not be in our best interests, either nationally or as incoming Presidency, and, speaking frankly, I do not see how further delay will either change the substance of what is involved or improve the political context in which agreement must be reached. The time for action is now.
In recent years Europe has battled an unprecedented economic crisis and we are not out of the woods yet, with a great deal of work to do if we are to build recovery and return to growth. This must remain our absolute priority. Protracted negotiations about the Union's budget risk seriously distracting us from this vital task and risk also the goodwill and spirit of co-operation needed for the Union to operate as it should. Ahead of this week's meeting, therefore, I call on all member states and the representatives of the key EU institutions concerned to show the flexibility and compromise necessary if agreement is to be found. With political goodwill, a deal can and should be found, allowing us to return our full attention to the stability, jobs and growth agenda that will be the priority for us as Presidency in the first half of next year.
As the House will recall, negotiations on the multi-annual financial framework, MFF, have been under way since the European Commission put forward proposals in June of last year, and they are highly complex. The MFF sets out to agree the resources we provide in common across the entire range of the Union's actions for a seven-year period. By assigning our resources, we are effectively prioritising our common actions, making hard choices and difficult decisions on the EU's actions right up to 2020. The amounts of money involved are significant. The original Commission proposal had expenditure exceeding €1,000 billion over the seven years but the negotiations also concern how we raise this money, how the EU assembles the money that it needs, how we can improve the quality of our spending and how rebates may be handled for individual member states. This must all be agreed by unanimity.
We are a Union of 27 - soon to be 28 - member states, and each state has its own appreciation of the Union's wider interest, as well as of the national interest. I need hardly say that these negotiations are taking place in an extremely difficult economic environment for the Union, the eurozone and for most member states. Governments across the EU are keenly aware of the need for EU investment to promote growth and jobs, and this need was given clear expression in the form of the Compact for Growth and Jobs adopted by the European Council in June this year. We see spending on agriculture and agribusiness as very much a part of this picture, and the Common Agricultural Policy, CAP, delivers 85% of what comes into this country from the European Union.
Governments are also equally aware of the need to ensure that scarce public resources provided by our hard-pressed taxpayers are wisely used. This is the political context in which we are operating across Europe. Since the Commission made its proposal in June 2011, the Polish, Danish and Cypriot Presidencies have taken the work forward, aiming to reduce the areas of disagreement between member states. Successive Presidencies have worked to develop the so-called negotiating box, the detailed draft conclusions which would outline the parameters of the EU's spending.
The European Council President, Mr. Van Rompuy, has taken ownership of the process and will attempt to broker a deal at this week's meeting. It will not be an easy task and, as I have said, there are deep divisions between the member states. Mr. Van Rompuy will have my full support over the coming days in his efforts to broker a fair solution which will equip the Union with an MFF that is capable of supporting the Union and its member states in facing the real challenges for the years ahead.
The House will recall that, as I have set out before, the Government wants a properly funded and properly functioning European Union. The EU's budget must have the right mix of priorities, a fair allocation of resources and, most importantly in our present circumstances, a focus on jobs and growth. The EU must, in short, have a budget that is fit for purpose. We broadly supported the Commission's original proposal and although there was room for improvement in detail, we thought it had the right overall balance. In particular, we thought it had the right starting point for negotiations on the size of the CAP. It will be no surprise to anyone in this House to hear that in the negotiation of the MFF, our overriding financial priority has been to protect the allocation for the CAP and to maximise Irish access to it. The CAP accounts for about 85% of our total EU receipts and it is a key element in our overall relationship with the EU.
The Union's budget needs a CAP allocation that will support a vigorous, consumer-focused agricultural production base in Europe. Some member states have called for a greater emphasis to be given to the non-agricultural elements of the MFF, arguing that these promote growth and implicitly suggesting that the CAP does not. We have argued that the CAP is a vital tool for economic growth, through its support for agriculture, agrifood and related industries and the rural economy. Europe must take advantage of growing global food demand that will only increase over the coming decades. That is obvious, given the growth in the global population and the capacity of Europe and Ireland, in particular, to produce more food from the resources we have. The original Commission proposal for CAP funding in the MFF was a good starting point, although this heading showed the most restraint. However, the direction of successive proposals has been to reduce its allocation still further, and we reject this approach. At the European Council, I will vigorously defend the CAP.
The importance to Ireland of a robust MFF is not limited to the CAP. We have argued strongly for an MFF with adequate resources for other key growth-enhancing measures. Our economies are changing and the kind of support and stimulus we need from the EU is also evolving. Critical areas of our economies such as research, education, improved connectivity and the important small and medium-sized enterprise sector must be supported by the next MFF. I will continue to argue this strongly, and I have presented a report to a Council meeting in this respect. The Commission responded with a range of initiatives regarding the development and protection of the small and medium enterprise sector. I know the Minister for Finance feels very strongly about this as he prepares his budget.
We want the budget to support the Europe 2020 strategy for jobs and growth, and it must have adequate funding for investment in economic growth and the creation of employment. All member states, including those with more developed regions, must be able to access EU programmes and funds. The scourge of youth unemployment is not limited to underdeveloped regions, as we know too well. The Union's cohesion policy must address the challenges that face us today, and the most serious of these is unemployment. I have made this point to my fellow Heads of State and Government both at the European level and in my bilateral contacts. This is a challenge that we cannot fail to address in the MFF.
It might be of interest to Deputies to know that I spoke to the Austrian Chancellor last week when I was returning from Budapest. I took the opportunity to visit with him a youth employment centre. In Austria, if young people decide to leave the main education stream, they are given a guarantee from the state for training and apprenticeship. The country has practically a zero rate of unemployment among young people, which is quite extraordinary. Some of the schemes parallel what we do with training in catering, for example. I know the Minister for Social Protection has spoken to her Austrian counterpart about that and I have seen some evidence of real opportunities in that respect.
CAP and Cohesion Funding make up the bulk of the MFF. Of course, the remaining elements are also valuable and necessary, and the Union must have sufficient funds to act outside its borders, most importantly in the area of development and humanitarian aid. We see such efforts every day.
Administration costs are necessary and underpin the important actions of the European Union. By international standards, the EU budget in this regard is not exceptional. However, I agree with those who argue that the Union's funding must reflect the consolidation efforts under way in member states and I have no doubt there is room for much greater efficiencies, including financial efficiency, in the funding of the administration heading. We have argued that the Union's administrative expenditure can be cut, just as member states have consolidated their budgets.
As I indicated, there are, without question, divisions among member states on the multi-annual financial framework. Some countries, mostly net contributors, have called for significant cuts to the Union's budget, while newer member states naturally want a greater emphasis to be placed on cohesion funding and a well funded EU budget. Prime Minister Gonzi of Malta, who visited Ireland last week, argues that the proposal regarding Cohesion Funds is too severe in respect of his small country which needs to protect the limited areas of land available. The Prime Minister of Hungary, Mr. Viktor Orbán, makes the point that his country has spent its Cohesion Funds on infrastructure and development and does not want reductions in the current allocation.
For the Commission and European Parliament, as well as some member states, a key issue is reforming the way in which we collect the revenue which provides the EU budget. Various reforms, such as relying on a financial transaction tax or a new VAT arrangement, have been put. For the most part, the Government is unconvinced by these arguments and continues to believe the current assessment based on a gross national income, GNI, key is the fairest, simplest and most transparent way to fund the European Union. The system of rebates is another highly contentious and sensitive issue for some member states.
The European Council President, Mr. Van Rompuy, recently put forward draft European Council conclusions containing a new negotiating box. These contain his compromise proposals which, I regret, go in a direction we cannot support. Mr. Van Rompuy has proposed further cuts to the overall budget that are deeper than those suggested by the Cypriot Presidency. He has proposed a 7% cut in the overall multi-annual financial framework amount compared to the original Commission proposals, including a cut of 6.5% to the Common Agricultural Policy.
It will not be easy for the European Council President, Mr. Van Rompuy, to reconcile member states' very different positions. Britain has taken a firm view on restraint in the EU budget, to the extent that there are fears that it will not be possible to secure a deal at this week's European Council meeting. If a deal is reached, it will then be necessary to obtain the assent of the European Parliament. The President of the Parliament, Mr. Martin Schulz, spoke about this issue on the floor of the Dáil some weeks ago. Ireland has repeatedly stressed the importance of any European Council deal on the multi-annual financial framework being acceptable to the European Parliament in which there are also different views. As Deputies will recall from the recent visit of the European Parliament President, Mr. Schulz, the European Parliament is fully engaged with the process and very clear on the outcomes it expects.
We must be realistic; there is a real possibility that this week's summit will not reach a deal. If so, it will have a great impact on Ireland's Presidency agenda for the first half of 2013. The Irish Presidency will in any case have responsibility for chairing discussions on a range of sectoral regulations underpinning the multi-annual financial, including Horizon 2020 and reform of the Common Agricultural Policy, and negotiating their passage through the European Parliament. This would be greatly complicated if a multi-annual financial framework were not agreed. We do not want a failed summit as it would have severe implications for the reputation of the European Union and the citizens of its member states. At the same time, we do not want a deal which isolates any member state as this too would have serious consequences for the future of the Union.
An active and delicate process of negotiation is now under way. Ahead of the meeting proper, European Council President, Mr. Van Rompuy, will have a brief meeting with each Head of State or Government to ensure he has a full appreciation of the position of each member state. I will meet the president tomorrow morning when I expect to give him a clear indication of our priorities. Negotiations will get under way later in the day with plenary meetings, bilateral sessions and various break-out arrangements through Thursday evening and Friday. There is no scheduled finish time and I expect Heads of State or Government to continue until we have reached a compromise or it becomes clear that none is possible on this occasion. The latter outcome is a distinct possibility.
While this week's meeting of leaders will be firmly focused on the conclusion of the multi-annual financial framework, one other matter has also been flagged for consideration. This is the filling of a vacancy on the executive board of the European Central Bank, ECB. There has been a vacancy on the executive board since the beginning of June. In line with the procedure set down in the EU treaties, the Council made a recommendation for the filling of this vacancy in which it proposed Mr. Yves Mersch of Luxembourg. The European Parliament was consulted on this proposal, as provided for in the treaties, and offered a negative opinion on the grounds that a better gender balance was required on the board. During the European Parliament hearings, there was full recognition that Mr. Mersch is a person of recognised standing and professional experience, these being the requirements for the position, as set out clearly in the treaties. It had been proposed that the European Council would consider the matter of the filling of this vacancy on the ECB's executive board through a written procedure earlier this month. However, as there was no consensus among member states to use this procedure, the decision now comes on to the agenda of this week's meeting of the European Council. I expect this matter, which will be decided upon by qualified majority, to be finalised this week.
As I noted, this is an important meeting for the European Union which I hope will have a positive outcome. I look forward to playing, on behalf of the country, a full, active and constructive part in the discussions and I hope they will be brought to a conclusion this week.
