Dáil Éireann debate -
Wednesday, 19 Dec 2012

Vol. 787 No. 4

European Council Brussels: Statements

The Taoiseach

I am pleased to brief the House on the outcome of last week's European Council meeting in Brussels on 13 and 14 December. This was the final Council meeting before Ireland's Presidency begins in less than two weeks. The meeting focused on economic policy but also covered common security and defence, enlargement and foreign affairs. I am happy to report that progress was made on all issues, in particular, on economic and monetary union and delivering the commitments agreed by the Council last June.

The meeting began on Thursday evening with the usual engagement with the President of the European Parliament, Martin Schulz, MEP. Mr. Schulz made a call on leaders to improve democratic accountability within EU decision making, making the reasonable point that many would struggle to explain the full range of measures deployed in response to the eurozone crisis to an ordinary person in the street. As we in Ireland know very well, this is a vitally important question. Issues debated at EU meetings, including the European Council, are complex but we need to factor in the legitimacy that can only come through public engagement and understanding.

Improving the perception of the European Union and eurozone will be an important aspect of Ireland's Presidency and 2013, including through the discussion that will take place at the informal meeting of Ministers for European Affairs which will be held in Dublin in January. As Deputies are aware, next year is also the European Union year of the citizen. We will engage closely with the European institutions in making this a meaningful exercise. None of us can take our electorates for granted.

As I stated last week when I briefed the House, progress on banking union, especially the single supervisor, was of pressing urgency not only for Ireland but for the euro area as a whole. The breakthrough agreement by EU Finance Ministers, including the Minister for Finance, Deputy Noonan, in the small hours of Thursday morning was, therefore, particularly welcome. They agreed and set out an ambitious timetable for the next elements of banking union and a framework for the single supervisory mechanism, SSM. The agreement provides for a differentiated approach to supervision depending on the size and significance of the banks concerned. It provides for equal treatment for euro area and non-euro area member states to allow banking union to be attractive to all 27 member states and protect the Single Market. While smaller institutions will not automatically come under the direct supervision of the European Central Bank, the ECB will remain responsible and will be able to step in to supervise these institutions.

The European Council built upon this by setting a deadline for the operational framework for the single supervisory mechanism, to be agreed as soon as possible in the first semester of 2013.

This process will include giving a definition to what is meant by "legacy assets". It was also made completely clear that this process would ultimately allow the European Stability Mechanism, ESM, to recapitalise banks directly. The specifics remain to be considered, but this is clearly an important development of our consistent position over the course of this year.

The deal on a single supervisor means we can now move on with the next elements of banking union, which include the harmonisation of national recovery and deposit guarantee schemes. For these measures the European Council confirmed an ambitious timetable, with the Council to agree in March and co-legislators to agree by the end of June. Ensuring these deadlines are met will be a key task for our Presidency.

It was agreed that, after a single supervisor mechanism, SSM, is in place, the next logical step is the creation of a single resolution mechanism, SRM. On this, the Commission has been asked to submit a proposal next year with the aim of it being adopted before the European Parliament elections in 2014. The mechanism is to be based on contributions by the financial sector and will feature effective back-stop arrangements. Taxpayers will not carry the cost. It will have the necessary powers to ensure a resolution for any bank in participating member states.

In keeping with our clear and consistent position, the European Council also agreed that the immediate priority was to complete and implement the measures that had been agreed, including the six pack, the stability treaty and the two pack, alongside adopting the SSM and other related banking legislation. In particular, it called for the Council and the Parliament to ensure the two pack was rapidly adopted.

Last week's European Council meeting also made important progress on mapping out the way ahead on economic and monetary union, EMU. I set out the background to the discussion of this issue in the pre-Council statement of last week, in particular highlighting President Van Rompuy's report, the blueprint by the European Commission and the draft European Council conclusions, which at that stage included a sequence of structured steps for the strengthening of EMU.

The outcome of last week's meeting mainly focuses on the short to medium term and ties in directly to Irish interests and concerns. In his report to the meeting, President Van Rompuy set out an ambitious programme for developing EMU that extended beyond the European Parliament elections in 2014. It fuelled an important and interesting discussion on what is one of the most pressing issues facing the Union. Deepening economic and monetary union is necessary if we are to underpin the euro as a stable and credible currency, which the Government strongly supports as a vital national and European interest.

However, as I said to the House last week, it was clear to me that there were elements in President Van Rompuy's report that required greater explanation and elaboration. These issues were at the heart of what was discussed last week, where my assessment was widely shared, and it was agreed that further work was required in the period ahead before we would be in position to take concrete decisions on the way forward. This was especially true of the possible creation of agreements of a contractual nature with member states and of solidarity mechanisms for the eurozone.

Following our discussion, therefore, President Van Rompuy will now consider and consult further, and will present a time-bound roadmap on the following four issues to the June 2013 European Council: co-ordination of major economic reforms in the member states; the social dimension of EMU; the feasibility and modalities of contracts for competitiveness and growth between governments and EU institutions; and solidarity mechanisms to enhance the efforts made by states that enter into these arrangements.

On the first of these, co-ordination of economic reforms, the Commission is to bring forward a proposal in the context of the European semester, building on Article 11 of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. Clearly, new steps towards strengthening economic governance need to be accompanied by stronger legitimacy and accountability. I will be pressing to ensure the involvement of European and national parliaments in this matter.

We also agreed that, to improve governance within the euro area and building on the provisions of the stability treaty, the Heads of State or Government of the euro area will adopt rules of procedure for euro summit meetings in March of next year.

To help shape the ongoing work in the immediate period ahead, the European Council welcomed the annual growth survey recently published by the Commission, which launches the 2013 European semester process. Ensuring this is handled efficiently and effectively will be a key priority for our Presidency. The growth survey will now be considered in the various relevant Council formations, with a view to the Council providing its views to the March 2013 meeting of the European Council, which will agree on the guidance to be given to member states on the preparation of their stability and convergence and national reform programmes. We also asked the Commission to include an assessment of labour and product market performance in its next annual growth survey with a view to promoting growth and jobs.

The European Council also gave close consideration to completion of the Single Market, which is a key priority for the Irish Presidency. Last week's conclusions called on the Council and Parliament to conclude the remaining Single Market Act I files as a matter of urgency, in particular those on professional qualifications, public procurement, posting of workers and e-signatures. These are complex issues. They also called on the Commission to present all key Single Market Act II proposals by spring 2013 and for the Council and Parliament to assign them the highest priority.

As President, Ireland will prioritise these Single Market and digital single market actions. The untapped potential of the EU's Single Market has an important contribution to make to delivering jobs and a growth agenda. We will work very hard to advance this agenda.

The European Council also called for consideration of the Commission's recent youth employment package, including early adoption of the recommendations on the youth guarantee schemes. This is also a priority objective for the Irish Presidency. It clearly matters to the young people of Europe, in particular young Irish, who are unemployed. We will aim to make significant progress with a view to adopting the recommendations at the Employment, Social Policy, Health and Consumer Affairs Council, EPSCO, on 28 February next. Youth unemployment will also be the main focus of the informal meeting of EPSCO Ministers taking place in Dublin earlier that month.

On enlargement, the European Council made good progress and welcomed and endorsed the conclusions agreed at the General Affairs Council last week. These will shape the enlargement agenda over the six months of Ireland's Presidency and it is likely we will have to consider such issues as granting candidate status to Albania and opening negotiations with Serbia and possibly Macedonia.

We welcome the reference in the conclusions to regaining the momentum in the accession negotiations with Turkey, where we would hope to progress over the next six months. We also intend to advance the accession negotiations with Iceland and Montenegro, and will oversee consideration of the final monitoring report on Croatia's preparations for accession. In this regard, we look forward to welcoming Croatia as the 28th member of the Union on 1 July.

The European Council adopted conclusions on the Common Security and Defence Policy, CSDP, which includes CSDP missions and capabilities, and preparations for a discussion on defence issues at the European Council in December 2013. The European Council tasked the High Representative and relevant EU bodies to develop further proposals and actions aimed at strengthening CSDP and improving the availability of civilian and military capabilities and to report on these initiatives by September 2013. The issues to be covered in the report will include increasing the effectiveness, visibility and impact of CSDP, enhancing the development of defence capabilities, and strengthening Europe's defence industry.

We also discussed the deteriorating situation in Syria and the ways in which the EU could try to end the current violence and hasten the emergence of a negotiated solution. The Council reiterated very strongly its view that only a political solution could end the current nightmare for the Syrian people. It also restated that Assad had no place in a new, democratic Syria where human rights and the rights of all minorities should be both promoted and protected.

The Council considered the outcome of the most recent meeting of the Friends of Syria, which took place in Marrakesh on 12 December and at which Ireland was represented by the Minister of State, Deputy Costello. The Marrakesh meetings allowed many participants to meet the leadership of the new Syrian opposition coalition, and the Minister of State extended an invitation to the chairperson of the coalition to meet the Tánaiste to develop our contacts with the new body further and to explore how Ireland and the EU could best be of support.

The issue of recognition of the Syrian opposition coalition was also addressed at the Council. Ireland remains firmly of the view, in line with the clear majority of EU partners, that it would be premature at this stage to go beyond the limited recognition afforded to the Syrian opposition council at the Foreign Affairs Council meeting of 10 December. Our view is that it has still some work to do in terms of building up structures and satisfying us that it is fully representative, inclusive and democratic. This view was ultimately reflected in the conclusions agreed by the European Council last Friday.

Last week's Council outcome was a good and positive one, both from an Irish and European perspective. It represents progress on a number of key issues that will guide our work as Presidency in the first half of next year. It was one of the few Council meetings I attended where there was a sense of optimism and, indeed, achievement that dates and timelines were met and fulfilled in putting together the agreement for the legal framework for the single supervisory mechanism. That was an indication of leaders' refocused views. It is important that when decisions are made they are followed through and seen to be followed through. I look forward to keeping the House updated on the vitally important work that lies ahead.

Deputy Micheál Martin

No matter how the Taoiseach talks up the outcome of last week's summit, it is a fact that no significant step forward was actually delivered. At the end of a fourth year of economic crisis, the leaders of Europe have decided once again to take the path of complacency. Following the decisive action of the ECB in the middle of the year the leaders have used it as an excuse to water down and delay every significant element of the programme which Europe needs for jobs and recovery.

This summit did not deliver a banking union. It merely agreed to joint supervision of less than 2% of eurozone banks and kicked other vital reforms down the road. It did not deliver measures to reform the deep flaws in the foundations of the euro, but took all ambitious reforms off the table and fudged what is left for at least two years. The summit did not deliver any actions to help the more than 20 million Europeans who are unemployed. It simply repeated empty phrases. It did not do anything to address the increasing disunion between member states. It ignored the issue. Yesterday, the British Prime Minister said, for the first time, that he could imagine his country leaving the European Union. It is a very significant statement and has huge implications for Europe and this country. Many commentators have concluded that this summit was the time when the leaders of Europe signalled that they will make no major move until, once again, an emergency develops.

With regard to Ireland’s contribution, yet again no attempt was made to speak up on behalf of vital reforms, and the policy remains one of hoping that something turn will up. This remains one of the only governments in Europe which has failed to detail its views on the specific actions required to secure recovery in Europe. From the first time this Dáil discussed European matters after the general election, I and my party have taken a very consistent and constructive line. We believe that a reformed Europe is a vital foundation for sustainable growth and job creation. We reject the empty rhetoric of those who attack Europe as a conspiracy or an all-powerful dictator. In fact, we have argued that Europe has been too timid. It has tried to tackle an unprecedented crisis with minor incremental changes, always seeking to do as little as possible rather than everything that is required.

I remain the only party leader in this House to set out in detail specific proposals capable of addressing the worst flaws in the euro and allowing the EU to take the lead in helping countries such as Ireland to tackle unemployment. Ours was the first party to demand that we protect the democratic legitimacy of Ireland’s relationship with the European Union by having a referendum on the fiscal treaty. At our Ard-Fheis and in the referendum Fianna Fáil refused to take the opportunistic route and campaigned on the basis of the treaty being just the first of many required steps. Nobody can question that we have been constructive and that we have put the long-term national interest ahead of short-term politics.

I am sorry that it is becoming increasingly clear that this Government has not developed, and is not interested in developing, a real strategy on Europe. Everything it does appears to be based on maximising the credit which can be claimed rather than pursuing a clear set of goals. In recent weeks, tensions within the Government and fear of the people have started to impact on European matters, particularly the core issue of bank-related debt. Since the budget there has been an almost frantic effort by the Government, especially Labour Party Ministers, to show that there is something happening buried deep beneath the broken promises, falling growth targets and rising disillusionment. Both the Minister for Communications, Energy and Natural Resources, Deputy Pat Rabbitte, and the Tánaiste have decided that pretending that the Labour Party is the saviour of the nation on the promissory note is the only route to redemption. This has even gone so far as to prompt the Minister for Finance, Deputy Michael Noonan, to lose his temper and tell a colleague to butt out of things which are not his concern. On Monday, the Tánaiste broke three decades of precedent when he told the Irish media that he would use the Presidency of the Council to secure one of Ireland’s main demands. He said this in spite of the facts that he has not attended a single negotiating meeting with the European Central Bank and that the ECB is not subject to decisions of the European Council.

A budget has been pushed through the Dáil which has rightly been condemned by most of the public and some Government backbenchers because of its entirely avoidable targeting of the most vulnerable in society. What has been less commented upon is the fact that the budget figures are highly unlikely to be achieved. The budget figures can only be achieved if major unspecified savings are imposed by a range of Ministers. As we saw this year, claims about an iron hand guiding spending were completely untrue and nothing has been changed to ensure that next year is better. Yesterday it was announced that GNP, which is the most important measure of national income in this country, is falling. This is due directly to the major damage done to domestic confidence by Government decisions. Other than trying to follow fiscal targets set out in October 2010, there is no strategy to tackle any problem which has grown in the last two years. Domestic confidence cannot recover as long as the Government puts all of its effort into talking about recovery rather than taking concrete steps to achieve it.

The mortgage and household debt crisis has been allowed to keep growing with no credible response. Investment plans have been published which actually cut investment, with all proposals for funding a job-creating stimulus rejected. It is highly unlikely that the figures announced in the budget will be achieved. No major initiative is under way to deliver the spending commitments, and the tax plans will not deliver the claimed revenue. This is especially true of the family home tax.

Deputy Dara Murphy

The Deputy said that last year as well and he was wrong.

Deputy Micheál Martin

I was not. There was a Supplementary Estimate of €1 billion-----

Deputy Dara Murphy

There was more growth in the economy and more jobs.

Deputy Micheál Martin

-----that was rushed through the Dáil without debate.

An Ceann Comhairle

Deputy Martin without interruption.

Deputy Micheál Martin

I am entirely correct.

All that is left is the hope that Europe will again turn up with something which will make up for the failures in budget planning.

As I have said previously, I believe there will be a deal in respect of the promissory note. The justice of the Irish case demands an outcome which would lengthen the term and reduce the rate to halve the impact of repayments on the Irish deficit across a few decades. The case for Ireland has been repeatedly hampered by the refusal of the Government to put aside domestic politics. However the Taoiseach summed up our case well in Paris last October. He has not repeated this line since then, so perhaps it was an accidental slip on his part. Certainly, it was an unusually non-partisan point for him to make. He said: “Ireland was the first and only country which had a European position imposed upon it in the sense that there wasn’t the opportunity, if the government so wished, to do it their way by burning bondholders”.

Any deal which replicates the handling of the repayment made in January this year would be deeply unfair and cause serious economic damage. While the Tánaiste and the Minister for Communications Energy and Natural Resources, Deputy Pat Rabbitte, appear to believe we did not pay the promissory note in March, we paid it and received a "thank you" note from the ECB. The national debt continued to reflect the full value of the promissory notes but the interest paid out of current funding increased very significantly as a result of that deal. Millions of euro extra were incurred as a result. This muddling through will have to end and it should end in the next three months, yet so far the Government has refused to publish even a single sheet of paper setting out what it is seeking.

No technical papers have been provided and no details supplied. All we can be sure of, no matter what happens, is that the claims of Ministers cannot be taken at face value.

Since the rotating Presidency of the Council was created 40 years ago, it has been an absolute principle that the holder does not promote its unique national concerns. This Presidency will be significantly less influential than in the past because the Taoiseach will not lead the Council. The principle, however, will remain the same. Ireland is fortunate to have an excellent group of diplomats working on European issues in Brussels, Dublin and throughout our network of embassies. They are ably assisted by public servants in the various Departments who carry a heavy load of EU-related work. I have no doubt they will ensure that the Presidency is carried out to their usual, incredibly high standards of professionalism and effectiveness.

What is unhelpful, however, is when members of the Government seek to grandstand at home in an attempt to impress people with sabre-rattling about using the Presidency to secure Ireland's goal. I agree with the Minister of State, Deputy Lucinda Creighton, that Ireland being asked to chair the Organisation for Security and Co-operation in Europe was a mark of the high esteem in which we are held by European colleagues. Of course, it is never acknowledged that this invitation issued a year before the Government took up office, yet another sign of the growing party politicisation of this area by Members opposite. In fact, I was Minister for Foreign Affairs when we were approached with a view to taking the chair of the OSCE, not only by fellow EU member states but by countries throughout the globe. The Taoiseach should instruct his Ministers to stop the empty grandstanding in the media. It has already caused us problems, with the German Government expressing displeasure at Dublin consistently over-spinning deals.

The summit deal in regard to the issue of banking union is a cause for major concern. Banking union has always encompassed three fundamental elements, namely, a single supervisory mechanism, a common system of guaranteeing deposits and a common system for closing down failed banks. All that has been agreed so far, however, is an incomplete supervisory mechanism, the operation of which is yet to be decided. Moreover, the new supervisory system will include only extremely large banks, meaning that fewer than 2% of the eurozone's banks will be covered. Certain leaders have pointed out that the new supervisor will be able to step in when banks get into trouble, an incredible observation given that the entire point of supervision is to prevent trouble in the first place. It also ignores the reality, as we know all too well from the experience at Anglo Irish Bank, that it is smaller, rapidly growing banks that nearly always cause the trouble. The €30 billion assets limit will become a target to be worked around by creative financial management. It amounts to a foolish capitulation of the principle that was supposed to have been agreed in June.

The resolution and deposit guarantee issues have been kicked down the road as a result of this summit and there is no sign whatsoever of a growing consensus. As one commentator pointed out on Sunday, the decision to exclude 98% of banks from direct supervision may have already scuppered the other elements of the banking union. This particular observer wrote, "If there are hardly any German banks in this new system, why should one expect Berlin to take part in a resolution system?” Europe's leaders left the summit patting themselves on the back for what they had agreed – we have had more of the same from the Taoiseach today – but, in reality, they may have fatally undermined a vital element in the effort to restore Europe's financial system.

If it were not for the President of the European Central Bank, Mr. Mario Draghi, there is no doubt that 2012 would have turned out to be the most destructive year in the Union's history. He deserves our gratitude for his intervention to prevent a potential economic meltdown. By stretching the ECB's remit to its very limit and facing down fundamentalist opponents, he did the citizens of Europe a great service. There is more he should have done, but his work in 2012 deserves our praise. By contrast, the political leaders of Europe have actually used his work to step back from taking urgent decisions. Even though an imminent collapse was avoided, so too were major forward steps avoided. This summit postponed every single major reform proposal for the future of economic and monetary union. Twelve months ago we were supposed to be committed to urgent, time-bound and radical action. As of last Friday, all radical actions have been removed from the agenda, there is no urgency and agreement is targeted for some indefinite time after the formation of the next Commission in late 2014.

This is not the leadership the people of Europe deserve. This is a clear betrayal - I recognise this is a strong description - of the spirit which built the EU and earned it the right to receive the Nobel peace prize. The leaders who attended to receive that award should be dissatisfied with their performance and should reflect on their behaviour in the past two years. They have presided over a collapse in public confidence in the European Union. They have engaged in selfish agendas and shown no ambition or ability to show consistent leadership. There must be no repetition of these failings in 2013. There should instead be a determined effort both to tackle fully the urgent economic issues and put in place a real framework for sustainable growth. A first step in this regard would be for all leaders to be open and honest in setting out their own proposals and ending the practice, which is now out of control in this Government, of caring only about the public relations strategy.

In regard to the foreign affairs agenda, I asked in advance of the summit last week that the Taoiseach raise the issue of the Israeli settlement policy as recently articulated, which has seen a major expansion of disputed settlements, and press for this activity to be condemned. I am disappointed that there was no reference to this in the Taoiseach's statement. These provocative actions could further delay the achievement of a peaceful two-state solution.

In conclusion, this was a complacent summit which may prove in time to have caused considerable long-term damage to the prospects of the Union.

Deputy Gerry Adams

I propose to share time with Deputy Seán Crowe.

Acting Chairman (Deputy Tom Hayes)

That is agreed.

Deputy Gerry Adams

Sinn Féin profoundly disagrees with the Government's attitude to the European Union and its failure to stand up for Irish interests. Sinn Féin wants to see a Union of equals, a social Union embedded in citizens' rights as opposed to a two-tier Union with the larger states in the ascendancy and the Irish Government acquiescing to their wishes. Having said that, I wish the Taoiseach well as the Government prepares to assume the Presidency in the new year. I am sure he sees it as an honour and I wish him well in his endeavours.

The latest European Council summit repeated the pattern of previous summits of broken promises and pledges, somewhat like the pre-election promises of Fine Gael and the Labour Party. The crisis in the EU is repeatedly kicked down the road as Governments fail to agree on the best way forward. Last week's meeting, which followed on the failure of member states to agree a new seven-year budget in November, was supposed to see substantive progress on reforming the euro regime and the banking system. However, the roadmap devised by the President of the Council, Mr. Herman Van Rompuy, ran into a roadblock and he was sent off with a "could do better" report card.

President Van Rompuy's roadmap was supposed to set out the way forward for the reduction of national fiscal and economic sovereignty in the interests of deeper economic and monetary union. Sinn Féin is opposed to fiscal union. Claims from certain quarters at last week's summit that the worst is behind us quickly came undone when the German Chancellor rubbished that view. Ms Merkel claimed that the EU faces at least another two difficult years involving high levels of unemployment and slow growth. It is clear that the German Government, which faces an election in September, has put German interests first. In these circumstances, should we be surprised that the Government is still no closer to the elusive deal on Ireland's bank debt which the Taoiseach claimed to have achieved in June? As this process continues to be strung out, our country's debt is heading for more than 120% of GDP, an entirely unsustainable level.  At the same time and despite all the conflicting bluster from Ministers, there is still no sign of a deal on the promissory note or the long awaited technical paper. I expect that a deal will indeed be cobbled together, but it will simply serve to push the problem up the road. The notion that we will not be asked to pay this debt is a figment of the Minister, Deputy Pat Rabbitte's, imagination.

Last week’s European Council summit agreed to the establishment of a single supervisory mechanism and a single resolution mechanism for European banks. Sinn Féin supports the strongest possible regulation of banks and banking at domestic and European level. The light touch regulation of the Fianna Fáil Government was clearly one of the major contributory factors of the banking crisis and the meltdown in the Irish economy. However, Sinn Féin has serious concerns about giving more power to an unelected and unaccountable body like the ECB. It contributed to the crisis through its low interest rate policy, which flooded Irish banks with cheap money and cheap credit. The ECB pushed Ireland into a bailout in 2010 and also appears to be one of the main obstacles to a deal on Ireland’s debt. Commentators have been rightly critical of the failure of the Irish banking regulators to regulate properly the banking sector. Can we have confidence the ECB is fit for purpose before these institutions are given increased powers? Just because regulation failed in this State does not necessarily mean the answer is to hand over regulation to the ECB. The ECB has not shown itself to have any special insight when it comes to running itself or contributing to the banking debate. The ECB wants all the rights but none of the responsibilities when it comes to the banks. It centralises control and supervision over banks, some of which have been nationalised, but refuses to provide a backstop for the euro or to capitalise the banks centrally. Sinn Féin has called for the ECB to be a lender of last resort for the euro; however, that is not on offer. Focusing solely on problems associated with monetary reform of the euro will not solve the crisis. Bank debt must be written down and a growth strategy for the EU must be pursued.

In this context, I want to comment on Ireland’s forthcoming Presidency of the Council of the EU. On Monday, the Tánaiste outlined the priorities for the Presidency, which he said would be stability, jobs and growth. These are fine words but none of this has been delivered by the Government after 20 months in office. The six-month Presidency offers an opportunity for the State to show leadership at European level. It is an opportunity to move away from austerity towards a more socially inclusive EU and an opportunity to heal the disastrous social consequences of the austerity policies pursued by this and other EU governments. Many important decisions will have to be made under Ireland’s watch, including the signing off on the EU’s seven year budget or the multi-annual financial framework. The Government should be arguing for a budget that will create jobs, retain jobs and invest in jobs. How can the EU be taken seriously when it talks about stimulus while at the same time looking at cutting, or at least not increasing, its budget? The Taoiseach needs to argue for an alternative approach, including a well-funded and fair CAP that prioritises working farmers. I urge the Government to ensure that, under its Presidency, a new PEACE programme is secured so the good work to date of the PEACE programmes is not squandered.

I welcome the Taoiseach's commitment to an all-Ireland element to the Presidency. I understand Government officials have liaised with officials from the Executive in the North, which is a good thing. Co-operation with the northern Executive is particularly important on issues like CAP and the PEACE programme.

Sinn Féin has consistently argued that the Government should take a sterner line in negotiations with our EU colleagues on debt. We should be frank with them, which means telling them our debt is not sustainable, that we cannot pay it and that we need action to alleviate the burden on our citizens to give our economy a fighting chance of recovery.

During pre-summit statements last week, I asked the Taoiseach to raise the case of Mr. Pat Finucane, either formally or informally, in light of the publication of the de Silva review. I am disappointed the Taoiseach made no mention of it in a statement. I also asked him to raise illegal actions by the Israeli Government following the welcome ceasefires between the Israeli Government and the Palestinians. I am also disappointed there is no mention of this in the statement.

The Taoiseach

I raised it with the Prime Minister, Mr. David Cameron.

Deputy Seán Crowe

It is good to hear the Irish Presidency will focus on youth unemployment. Like everyone, across all parties and none, we want to see this acted on and delivered during the six months of Ireland's Presidency. We know some countries in the European Union have introduced measures that have kept youth unemployment at a low level. Countries like Ireland, with an unacceptably high level of youth unemployment, need to look seriously at many of the credible and viable initiatives and adapt them to our local needs and conditions.

Earlier this month, the European Commission launched its action plan on youth jobs. Young people across Europe were waiting and hoping that something concrete would emerge or that new thinking would gain traction. The plan is welcome but it is weak and, crucially, it does not commit to any new funding to tackle youth unemployment as a problem that needs its own focus. Youth unemployment is running at 30% in this State and is as high as 49% in Donegal. In Dublin South-West, my constituency, it is 40% but some estates in Tallaght have rates far above that. If we could factor in the young people who have left because of the lack of work, the figure would increase dramatically. In the recent budget, one element created a push factor by reducing the time people are eligible for jobseeker's benefit. We hope progress can be made on youth unemployment during the next six months but people are not holding their breath with the Commission’s weak and vague plan.

My suggestion is that there is nothing stopping the launch of a young entrepreneurs fund during the Irish Presidency. Is there any difficulty in doing so? It could be funded by the European Investment Bank and, in view of the crisis in youth unemployment, if the fund is too low nothing stops member states increasing their subscription to the EIB for such a fund. That is a positive suggestion. We should do something concrete during the Presidency. The Taoiseach referred to the employment, social policy, health and consumer affairs, EPSCO, meeting taking place during February, with youth unemployment the main focus. We need to move beyond that and put something concrete in place. From listening to the Tánaiste, there is common agreement that this is the crisis facing us. I suggest putting something in place. There is a view that this is falling on the shoulders of the Irish Presidency but I would like to think we are genuine in moving it forward.

The adaption of the funding arrangement could also be looked at in view of the crisis with the 50:50 requirement being altered to a more realistic 75:25 for youth jobs in disadvantaged communities and regions. The bank recapitalisation could call on something like €700 billion from the European Stability Mechanism. Surely we can come up with some realistic proposal emerging during the Presidency for such a project considering there is so much common agreement across Europe.

The Taoiseach also mentioned the Common Security and Defence Policy. The conclusions of the European Council summit make large references to the European Common Security and Defence Policy. It states that in today’s changing world the EU "is called upon to assume increased responsibilities in the maintenance of international peace and security...and the promotion of its interests". Who is calling on the EU in this regard? Should it not read that the EU wants to assume greater international powers to promote its own interests? I refer to free trade agreements with countries that have abysmal human rights records.

Colombia, for example, is the most dangerous place in the world for trade unions.

The conclusions also outline how the further development of Europe's military capabilities will increase employment and growth. Future employment and growth will not come from the militarisation of the EU. Member states should be reducing the amount they spend on militarisation and wars and invest in disadvantaged communities alongside viable stimulus packages to create sustainable growth and employment. Where will the products of further militarisation go? Will they go to Israel, Syria or Libya? We should focus on growth and employment plans and not on an industry that profits from death and destruction, particularly in areas around the world that are underdeveloped and disadvantaged.

It is mentioned in paragraph 34 of the conclusions of the summit that the European Council agrees to increase, enhance and strengthen Europe's common security and defence policy. It speaks of conflict prevention and crisis but also of increasing Europe's military technology and research. Is it not reasonable to ask how increased militarisation of the EU ensures conflict prevention? Only six member states are not members of NATO, so how can the EU speak of its high regard for conflict prevention? The EU seems not to be aware that many countries, like Ireland, are neutral.

We need only look at the recent conflicts in Iraq, Afghanistan, and at what might happen as more EU NATO countries back the opposition in Syria, to see how committed to conflict prevention these states are. In fact, the whole European Council conclusions on the Common Security and Defence Policy are so full of double-speak that even George Orwell would be surprised.

There is also reference in the Council conclusions to the situation in Syria. It states that the European Council tasks the Foreign Affairs Council to work on all options to support and help the opposition in Syria. I am concerned about these matters and I will ask questions about them later in the debate.

Acting Chairman (Deputy Tom Hayes)

You will have an opportunity to do that, Deputy.

Deputy Stephen S. Donnelly

With the agreement of the House, I will share my time with Deputy Boyd Barrett. As I have only five minutes to speak, I will touch on a few issues. The first is the single supervisory mechanism which came out of the recent meeting. The logic of the mechanism goes as follows. It will lower the risk because if the ECB is in charge of the banks, we will not repeat the mistakes of the past. This is not necessarily true. It is a dangerous logic of which I hope the Taoiseach will be cognisant during our Presidency. The argument goes that if the ECB is in charge, the banks will be better regulated than they were in the past. For that to be true, the ECB must be technically proficient, but the ECB has been technically flawed in its response to the eurozone crisis, as we know. Two decisions, in particular, have hit Ireland. The first was that no European bank should be allowed fail. The second was that no senior bondholder would incur any cost to their investment. We all know the result of that for us in Ireland. Not only does the ECB act in an economically technically flawed manner. Its reactions, particularly in those two issues which have socialised private sector losses, are immoral, certainly as judged by the values of our society and of the European project.

Something potentially dangerous is happening here. An institution that has acted technically incompetently and, in an immoral way, contrary to the values of our society and of the European project is being put in charge because there is a general acceptance that it knows best. I ask the Taoiseach to be cognisant of this when he is at the helm. They do not, necessarily, know best. They have not acted well. Many of the people in the ECB were in the central banks of the eurozone that did not act correctly. If the ECB gets it wrong, and inevitably it will, it becomes a systemic problem. If an isolated error is made, in Ireland, Spain or wherever, the system can correct itself. If the ECB gets regulation wrong, and it is more than capable of getting it spectacularly wrong, the error will apply everywhere in the eurozone. I ask the Taoiseach to be very cognisant of that.

The second issue is President Schulz's concern about democratic accountability which he has raised several times. I am deeply concerned about this. I have looked in detail at the two pack, the six pack, the fiscal compact and all of these bits and pieces. They are incredibly complicated. In the Joint Committee on Finance, Public Expenditure and Reform, we struggle every week trying to get our heads around the implications. As the rules become more complex and numerous there is an inevitable ceding of democratic control by elected representatives, like the Members of this House, to technocrats. This is something about which we need to be very careful.

I was particularly concerned by some of President Von Rompuy's recommendations. The Taoiseach mentioned agreements of a contractual nature. My understanding of what President Von Rompuy is saying is that when the nation states submit their budgets to the European Council, invisible technocrats will look at them against a wide range of economic measures and the Council will then make suggestions to the nation states to correct their budgets. President Von Rompuy seems to be saying that he does not want these to be suggestions. I believe President Schulz's concerns about democratic accountability are very profound and serious.

The final issue is the promissory note, the perception of Ireland and an opportunity we may have. I believe the promissory note should not be paid. It should not be restructured, unless it is to repay a euro a year for 30 billion years, or something. It should not be restructured. We should not pay it. I am not in charge, however, so that is just my opinion. Some of the resistance is due to a clear perception in the eurozone establishment that we are doing fine and that we can deal with it.

I am impressed by how the international media are reporting the Taoiseach as we come up to our Presidency. The Taoiseach is being reported as clearly saying Ireland needs a substantial deal on the banking debt, and not letting go of that. That is to be commended. My concern is that, during the Presidency, senior European politicians and technocrats will fly in, stay in the Merrion Hotel, be wined and dined in Iveagh House or Dublin Castle and fly out. My concern is what they will not see. The Taoiseach and his team must be creative and think of ways for them to see the food queues at the Capuchin centre, for example, and the impact of 435,000 people unemployed.

As the Taoiseach goes into these negotiations, I repeat my warning about the danger of limited success. There is a danger that we will get a small deal and that the Taoiseach will feel he has to take it, bring it back and claim it as success. That would be analogous to a distressed mortgage being moved to interest only. We need a very big deal. A small deal may be worse, in the short term, than a big deal.

Deputy Richard Boyd Barrett

Before I make my main points, I must correct the record. In a telling comment, Deputy Martin claimed Fianna Fáil was the first party to call for a referendum on the fiscal treaty. This is interesting, first because it is not true-----

Deputy Micheál Martin

It is true.

Deputy Richard Boyd Barrett

It is not true. Second, it indicates that even Fianna Fáil, notwithstanding its support for all the referendums, knows there are serious problems at the heart of the European project that are affecting people, and they are, amazingly, calling for a wealth tax, for which some of us have long been calling. This reveals a growing awareness among large numbers of people in this country and across Europe that these summits are not gatherings of political leaders to secure the interests of ordinary citizens or to deal with their concerns. At these gatherings, the representatives of the political elites of Europe meet to plot how they can protect the European financial system, corporate interests and the super-wealthy of Europe and shove the costs of the economic crisis down the throats of workers, the unemployed and the least well-off.

While the European elite throws out a few token mentions of youth unemployment and growth, the key watchwords that were repeated again at the most recent summit, the real priorities that are emerging from these summits, are budgetary discipline, economic co-ordination and increased competitiveness, which translates into more austerity for ordinary people that is dictated centrally by Europe, along with further attacks on the pay and conditions of ordinary workers and the welfare systems to increase competitiveness, while putting more power into the hands of the European Central Bank, the policies of which, as Deputy Donnelly outlined, have worsened the situation of the European financial crash.

To add to Deputy Donnelly's point, we bemoan the failure of the banks we bailed out to deal with the mortgage crisis, to lend to the SME sector or to behave in any way, as if they give a damn about what is happening to ordinary citizens in the economy, and the Taoiseach bemoans it, but he is moving towards giving more power to the institution that is dictating that policy to our banks. As soon as the crash hit at the end of 2008, the European Central Bank issued guidelines to the banks and to states demanding that even if banks were to be rescued with public funds, they must maintain profit maximisation as the key priority and should not be diverted into other social or macroeconomic goals. It was simple and clear. When Richie Boucher behaves like a belligerent thug at meetings of the Joint Committee on Finance, Public Expenditure and Reform, refusing to pay any attention to the interests of public representatives, it is because he is following ECB policy, which states profit maximisation is the only thing banks should care about. It is clearly the only thing they care about.

Acting Chairman (Deputy Tom Hayes)

I ask the Deputy to refrain from naming people in the House.

Deputy Richard Boyd Barrett

The resulting costs are very clear in Irish society. Despite all the European of the year awards, the backslapping and hugs between leaders at these summits, the Taoiseach is delivering nothing in terms of debt relief and it is becoming increasingly clear that he is not even asking for debt write-downs.

We are getting nothing to deal with the unemployment crisis. The Government's own medium-term fiscal framework tells us that even if the budget projections work out for the next two years, unemployment will only go from the current level of 14.8% to 13% by the end of 2015. That is what the unemployed can look forward to, a 2% reduction in unemployment by the end of 2015. In other words, there will be no end to the economic crisis and in the domestic economy growth will continue to fall. That is nothing to cheer about.

Deputy Mick Wallace

If the Taoiseach ignores the irreparable social damage austerity has caused and the destruction of our domestic economy, the test of whether austerity and structural reforms are working, according to those who manage to live out their existence in the financial bubble, is the ability of countries that have received bailouts to return to the capital markets. If this means anything, it must be that a country can borrow long-term funding from private investors at a sustainable interest rate that roughly resembles what it paid in the past. In 2005, Ireland could borrow for ten years at under 3%. Right now, it's notional ten year borrowing costs are 4.3% and may be higher in practice. If we find ourselves borrowing at rates close to double those for the stronger countries, we will continue to play catch up, falling further behind all the time. If the European Union is to take best care of all its members, there will have to be some form of debt mutualisation. The alternative will leave us permanently on the periphery.

It was interesting to read the views of leading Financial Times correspondent, Wolfgang Münchau on Monday, when he said at the European summit that the German Chancellor said she rejected a mutualisation of debt and hidden transfer payments. In other words, she will reject a bank resolution mechanism that does what such a policy is supposed to do, take taxpayers' money and rescue a bank. Without a real resolution mechanism, there can be no banking union either, so what happened last week was that the political process stalled in a very big way. What was agreed last week is virtually cost-free, a single supervisory mechanism for about 2% of the banks in the Eurozone and based at the ECB. The common supervisory structure will affect between 100 and 150 banks out of a total of 6,000, those with assets of more than €30 billion. The €30 billion will become a target to circumvent. The practical outcome of this agreement will be a two-tier banking system, one for large banks and one for small banks. The ECB will deal with failing banks just as the Eurogroup has been dealing with failing states. It will replace existing debt with new debt and impose conditions. Just as the eurozone will try never to allow a member to default, the ECB will never close a bank, no matter what its problems. Bank resolution becomes a euphemism for exactly the opposite. This is about the pretence of resolution, not real resolution.

That Financial Times commentator is well respected and he is not very impressed by what happened at the Council meeting last week. If we are to look at the status quo for the foreseeable future, continuing to drive down earnings and undermining the social welfare system, allowing women and children to suffer most from austerity, the brainchild of today's version of neoliberal thinking - austerity - will lead to the price being paid as a result of our adherence to the European powers being too high.

Acting Chairman (Deputy Tom Hayes)

We will now move on to questions. I will take three questions at a time to allow everyone in.

Deputy Micheál Martin

On the single supervisory mechanism, would the Tánaiste accept it is a major disappointment that 98% of banks were, in essence, excluded? Does he accept the other key elements of the banking union have been undermined by this decision? A deposit guarantee scheme and a failed bank resolution mechanism have both been undermined by this decision. There is huge resistance within Europe, particularly from the German perspective, to any real banking union that has teeth and the scale to cover the 6,000 banks.

Could the Tánaiste confirm that he has not attended any meetings with the ECB on the renegotiation of the promissory note? Does he accept the basic principle that a host country does not use the Presidency to pursue its own agenda and does he accept the European Council does not have jurisdiction over the European Central Bank? Could he explain then how Ireland, as co-chair of the Council, can influence the ECB, given the Council has no jurisdiction over the ECB in terms of the resolution of the promissory note issue? How will we use the EU Presidency to advance negotiations with the ECB?

Deputy Seán Crowe

The IMF made a statement during the week on meeting its deadlines. The subtext was that austerity is not working throughout Europe. Was there any sense of this growing reality among the European leaders at the Council meeting and were there discussions on the social cost of austerity?

The Taoiseach mentioned a meeting on Syria that took place in Marrakesh, attended by the Minister of State, Deputy Joe Costello, who suggested extending an invitation to the Syrian opposition coalition. Is there any indication the coalition will accept that invitation? Prior to the meeting there was discussion of the situation in Palestine, in particular in regard to the proposed 3,000 new settlements. Was there any discussion or agreement on that matter?

The British Prime Minister, David Cameron, has suggested Britain is considering leaving the European Union and a statement is due in January in this regard. Did this matter come up at any of the side meetings? There would be a negative impact on Ireland, especially in the Border region, given the difficulties involved.

Deputy Adams asked the Taoiseach to raise the de Silva report on the killing of Pat Finucane. Did that issue arise as part of the discussions? Was it raised with the British Prime Minister?

Minister for Foreign Affairs and Trade (Deputy Eamon Gilmore)

I refer first to Deputy Martin's question. It is not the case that 98% of banks are excluded from the single supervisory mechanism. The mechanism will cover the vast majority of European banks, some 90% all told, according to some estimates. The misunderstanding concerns the direct supervision by the ECB-----

Deputy Micheál Martin

That is the point.

Deputy Eamon Gilmore

There are a number of categories. Some banks have assets of more than €30 billion. There is also the agreement that the three largest banks in each member state will be covered. Some banks have assets greater than 20% of their country's GDP, while there are others in trouble. The last-named have been identified as those that will come directly under supervision.

Deputy Micheál Martin

That is only when they get into trouble. That is the point.

Deputy Eamon Gilmore

Yes, that is right.

Deputy Micheál Martin

They are only covered if they get into trouble.

Deputy Eamon Gilmore

The Deputy is missing the point. I refer to direct supervision. The supervisory mechanism will embrace the entire supervisory system of the European banks. We need to stand back from this. Initially there was a great deal of scepticism about it. First, there were those who said there would never be agreement to separate bank debt and sovereign debt or to allow for the ESM to recapitalise banks. Despite the scepticism agreement was reached in June that this would be done. Then there were those who argued there would be a pull-back from that position in October; there was not. Instead there was a commitment that the legislative framework would be put in place by the end of the year, and this has now been agreed. The second two elements of banking union, namely, the bank resolution issues and the deposit guarantee scheme issues, are to be proceeded with in the early part of 2013. Far from undermining progress on banking union, progress is taking place. That is something we must welcome, first, from the point of view of the European banking system and, second, because of our own interest in the issue.

I refer to the discussions on the ECB. We must return again to the formula agreed in June, which was that the Eurogroup would take it forward, the situation in the Irish financial institutions would be addressed on its merits and, as has been clarified by a number of European leaders in the intervening period, this is being addressed on the basis that Ireland is a special case. The discussions with the ECB are being conducted, in the main, by the Irish Central Bank, and are being backed up by political level discussions which are taking place with the Eurogroup and ECOFIN, conducted by the Minister for Finance. At a political level they are being conducted by the Taoiseach and me. That process has been under way for some time and progress is being made. As we stated from the beginning, our objective is to get the right deal for Ireland rather than set ourselves some artificial deadlines.

Deputy Micheál Martin

Does the Tánaiste accept the Council has no jurisdiction over the ECB?

Deputy Eamon Gilmore

The ECB is separate. There is an established structure-----

Deputy Micheál Martin

Does the Tánaiste accept the point?

Deputy Eamon Gilmore

There is a structure established for the ECB.

Deputy Micheál Martin

Does the Tánaiste accept that the Council has no jurisdiction over the ECB?

Deputy Eamon Gilmore

I am not sure what is the purpose of the Deputy's question.

Deputy Micheál Martin

I just want an answer.

Deputy Eamon Gilmore

The Council agreed the way in which the Irish bank debt issue would be dealt with-----

Deputy Micheál Martin

It did not deal with it. The Tánaiste is playing politics.

Deputy Eamon Gilmore

-----which was that it would be progressed by the Eurogroup.

Deputy Micheál Martin

I asked a simple question. Does the Council have jurisdiction over the ECB? Can the Tánaiste answer "Yes" or "No"?

Deputy Eamon Gilmore

It is not about playing politics. The only person playing politics with this is the Deputy.

Deputy Micheál Martin

I only want a "Yes" or "No" answer.

Deputy Eamon Gilmore

The issue is to secure the best possible outcome for this country in terms of our banking difficulties. I do not want to go back into this again. If the Deputy invites me to play politics-----

Deputy Micheál Martin

I only want a "Yes" or "No" answer. The Tánaiste is filibustering.

Deputy Eamon Gilmore

-----I am quite happy to do so.

Acting Chairman (Deputy Tom Hayes)

Please. In fairness, there are other questions to be answered.

Deputy Micheál Martin

I asked a question but the Tánaiste did not answer it.

Deputy Eamon Gilmore

The Deputy maintains an interrupting pattern.

Acting Chairman (Deputy Tom Hayes)

Please, allow the Tánaiste to speak.

Deputy Micheál Martin

Will you answer the question - "Yes" or "No"?

Deputy Eamon Gilmore

I am answering the questions you asked. You asked about the discussions

Acting Chairman (Deputy Tom Hayes)

Through the Chair, please.

Deputy Eamon Gilmore

Deputy Martin asked about the discussions with the ECB and I am providing him with the answer.

Deputy Micheál Martin

If only the Tánaiste would answer what I asked, namely, whether the European Council has any jurisdiction-----

Deputy Eamon Gilmore

That was not the question. I wrote down the question you asked.

Deputy Peter Mathews

Excuse me, Chair.

Acting Chairman (Deputy Tom Hayes)

No.

Deputy Peter Mathews

The Tánaiste and the various leaders have had an opportunity to take up a majority of this debate. Some of us wish to ask questions.

Acting Chairman (Deputy Tom Hayes)

I ask the Tánaiste to respond.

Deputy Eamon Gilmore

I answered Deputy Martin's question. I refer now to what Deputy Crowe asked about the social cost to the European economy. This cost was addressed in the conclusions of the European Council last week which state clearly that both the economic and the social dimensions are being addressed. The resolution of Europe's economic difficulties and the debate around that has moved on, very much in the direction of what is needed to generate economic growth in Europe and ensure that jobs are created there. That is why the priorities for the Irish Presidency in the first half of next year emphasise growth and jobs. We set out in our programme the way in which those issues are to be addressed, namely, by completion of the Single Market, addressing the digital single market and issues of mobility in the labour market, dealing with the banking union issue and the promotion of trade agreements. All these measures are aimed at developing an environment where jobs will be created in Europe. In addition, it is also our intention to advance the proposals for addressing youth unemployment, levels of which are far too high in Europe. That is the reason we have given a high priority to getting agreement on the youth guarantee during the course of the Irish Presidency.

I refer to Syria. As Deputy Crowe indicated, the Minister of State, Deputy Costello, suggested we should invite the new Syrian opposition coalition for discussions, and we will do that.

I met Mr. Khatib at the Foreign Affairs Council at the beginning of last week and I hope to have the opportunity to meet him here in Ireland if that can be arranged.

A very clear conclusion was reached and a very strong statement was issued on the building of settlements on the West Bank. It is our view, as stated repeatedly, that the building of the settlements on the West Bank will make a two-state solution impossible.

The Taoiseach has discussed the da Silva report with British Prime Minister, and I have discussed it with the Secretary of State for Northern Ireland and with the Deputy Prime Minister. It is a matter we expect to discuss again with them.

Deputy Richard Boyd Barrett

I have two questions.

Acting Chairman (Deputy Tom Hayes)

Time is moving on. I ask the Deputy to be brief.

Deputy Richard Boyd Barrett

The Acting Chairman should not worry. I will not take as long as Deputy Martin did.

The development of the banking union and supervision of the banks by the ECB is being presented as a sort of panacea to which we should look forward. Why is that being presented as some sort of positive development when the ECB, by any reasonable assessment of what has gone on, has an enormous responsibility for the failure of the banking system and the financial system in Europe? Many of its decisions have worsened that situation and its priorities seem to be entirely at odds with the concerns of ordinary citizens. Ordinary citizens and their public representatives, at least at a public level, are saying that we need jobs, economic growth and a path out of recession. The ECB's priorities are none of those things. They are about book-balancing, profit-maximisation for the banks, and insisting that public authorities should not interfere with banks when we need more interference judging by what has happened and is happening. Why is this being presented as some sort of positive development and what assurances can the Tánaiste give us that the ECB having this level of power over the banking system will improve the situation in any way?

Approximately two weeks prior to the latest Council meeting, the biggest general strike in European history, if not in world history, took place. Much as the Government likes to blame me and certain people on the left for protest, it cannot blame this one on us. This was an unprecedented, co-ordinated, European-wide mobilisation of working people, of the less well-off of their civil society and trade union organisations saying this was not working for them. It is not dealing with unemployment or producing economic growth, but is impoverishing people and they want an end to these policies.

Acting Chairman (Deputy Tom Hayes)

Deputy-----

Deputy Richard Boyd Barrett

Our unions are planning on doing something early in the new year. What can the Tánaiste say to them? Is there anything coming out of this summit that offers them anything when the Government's medium-term fiscal outlook indicates that unemployment will go from 14.8% to 13% by the end of 2015? The promise is that we will get a reduction of less than two percentage points in unemployment.

Acting Chairman (Deputy Tom Hayes)

A question, please.

Deputy Richard Boyd Barrett

What does that offer us?

Acting Chairman (Deputy Tom Hayes)

That is the question.

Deputy Peter Mathews

We are running short on time. I would like the Taoiseach and the Tánaiste to take particular note of the four aspects of the contribution made by Deputy Donnelly about 20 minutes ago. He mentioned the ECB and its incompetence at various stages to date. He raised the question of the adequacy of the banking union and what its purpose is. Deputy Wallace further developed the point by reference to Wolfgang Münchau article that what has been envisaged in the banking union could fall very far short of what is needed. We need more than the political plastering over of the situation that has happened in recent times. There have been large deluges of financial rain and the system has surcharged and then abated. It has not gone away and the fundamental engineering of the banking system with 6,000 banks in the eurozone, is still very weak and has not been addressed.

I believe I gave the Tánaiste or the Taoiseach an article on Deutsche Bank approximately two weeks ago. As admitted by very senior people within Deutsche Bank, there had been an accounting fraud at a level of up to €12 billion at the height of the financial crisis. These banking institutions are quite fragile. They have been plastering over their own fundamental engineering weaknesses. During our Presidency of the European Union in the next six months, we can and should bring these to the top of the agenda. We should be mindful of Deputy Donnelly's final point. We will be careful that all the visitors see the natural comforts of hospitality when they are here and will not be aware of the one in four households whose mortgages are in distress. They need to get tutorials about this when they are here because we will not be in a position to add weight to the argument and justify the case that we need the right dose of financial antibiotics - not a small dose that will fail and will allow the body relapse into economic underperformance. We need a big cortisone injection, which is a big write-down, as nothing less will suffice.

Acting Chairman (Deputy Tom Hayes)

I ask the Tánaiste to answer the questions and perhaps give his final statement.

Deputy Eamon Gilmore

Deputy Boyd Barrett's questions get to the heart of the matter. He asked why we say that banking union is a positive and how that relates to the imperative to create jobs and get economic growth in the European economy. Deputy Martin will remember the banking crisis although of course he does not want to be reminded of it.

Deputy Micheál Martin

I certainly do.

Deputy Eamon Gilmore

At the start of the banking crisis this State took responsibility. The State gave the guarantee, took on the debts of the banks and placed those debts on the shoulders of the taxpayer. The ECB position throughout that period was that this was the way to go, that Ireland's banks' problems were problems for the Irish State and the Spanish banks' problems were problems for the Spanish state and so on. Its position was that if something went wrong with a country's banking system, that was that country's problem and it was on its own.

Deputy Peter Mathews

On the understanding that it was a liquidity crisis, which it was not.

Deputy Eamon Gilmore

That fundamental view of the banking crisis has now changed. There is a change in European policy on banking. That change is expressed in the conclusions of the June summit which clearly stated that bank debt and sovereign debt were to be separated and that Europe would proceed with the establishment of a banking union, which, once the single supervisory mechanism was put in place, would provide for recapitalisation of banks to be done through the ESM. In other words, the problems of the banks in individual countries used to be the taxpayers' problems, whereas now the problems of banks within the eurozone system are essentially a European problem. That is why banking union is being established and why it is a positive.

How does that relate to the imperative to create jobs and growth? We need to have a functioning banking system within Europe in order to underpin economic activity and to ensure that credit is made available to businesses which create jobs and generate economic growth.

The two are very much intertwined.

In respect of the points raised by Deputy Mathews, any of the contributions made here by any Deputy are listened to and taken on board. If I can follow the analogy, we have gone beyond antibiotics. The problem in the European economy and banking system is not one that can be dealt with by prescribing antibiotics.

Deputy Peter Mathews

I said cortisone.

Deputy Eamon Gilmore

Or even cortisone. This problem requires surgery and it is that surgery that is underway because that is what must be addressed the way we are doing it.

Deputy Peter Mathews

It needs a €3 trillion utilisation.

Acting Chairman (Deputy Tom Hayes)

The Tánaiste, without interruption. We have gone over time.

Deputy Eamon Gilmore

It is fortunate that Ireland will assume the Presidency of the EU at the very time when the issue of banking union is coming to fruition. It gives us an opportunity to use the position we have in the Council to drive forward the process and implementation of what has already been agreed. It also gives us the opportunity to put the issues we face in respect of bank debt centre stage.

Deputy Micheál Martin

The Presidency does not do that.

Deputy Eamon Gilmore

Deputy Martin is just talking it down.

Deputy Micheál Martin

The Tánaiste is over-stating it and grandstanding for political reasons.

Acting Chairman (Deputy Tom Hayes)

I ask the Deputy to allow the Tánaiste to finish as he only has one minute left.

Deputy Eamon Gilmore

Deputy Martin seems to wish that the Government would fail in this.

Deputy Micheál Martin

No, that is unfair. He is making a very unfair charge. I am not making that point.

Deputy Eamon Gilmore

This is the seventh Irish Presidency of the EU and it must be the first time the Leader of the Opposition effectively wishes that the country would not be able to deliver or that we would not be able to develop our Presidency. I am not being dishonest but Deputy Martin is constantly hectoring.

Deputy Micheál Martin

Is the Tánaiste being serious? That is an outrageous statement. I never said that. The Tánaiste should not be dishonest in the House.

Acting Chairman (Deputy Tom Hayes)

The Tánaiste has the floor.

Deputy Micheál Martin

Why is the Tánaiste being so dishonest in the House? I did not say that. He did not hear my speech.

Deputy Eamon Gilmore

No.

Deputy Micheál Martin

He is being dishonest. I did not say that. He is doing his usual Labour's way, Frankfurt's way, overstating everything. I am asking him not to overstate things and grandstand. People have had enough.

Deputy Eamon Gilmore

I am not grandstanding.

Deputy Micheál Martin

It is a bit like child benefit. People have had enough. The Government says it will not do this and will do that but people do not believe it.

Deputy Eamon Gilmore

Deputy Martin came in here and said he wanted to put an end to Punch and Judy politics. If he carried on like that on the Punch and Judy stage, the children would get tired of it and go home.