This week's meeting of the European Council presents an important opportunity to demonstrate that the European Union is taking further concrete steps to address the falling growth rates and high unemployment which characterise the current economic situation throughout Europe. It will focus, in particular, on setting out the strategic orientation of a plan to boost investment levels in Europe. It will also consider issues relating to the 2015 European semester. In addition, I expect the European Council to underline the European Union's firm commitment to tackle aggressive tax planning and unfair tax avoidance as part of broader global efforts in this regard.
On the external relations front, the European Council will return to consider the situation in Ukraine which remains disturbingly fragile. The European Commission President, Mr. Juncker, and the High Representative, Ms Mogherini, will provide an update on actions taken by the European Union in response to the Ebola crisis. The European Council may again consider how the European Union can most effectively stem the flow of fighters from different countries to conflict zones.
This week's European Council will be the first since Presidents Tusk and Juncker and their respective teams took up their new positions. I look forward to working closely with them in the period ahead.
Irish economic recovery remains firmly on course. We expect GDP growth of 4.7% this year. According to the Commission's forecasts, Ireland will be Europe's fastest growing economy. The tough decisions already taken by the Government will bring the deficit below 3% of GDP next year, allowing us to exit the excessive deficit procedure. Significantly, our unemployment rate is falling and down to 10.7% from a high of 15.1% in 2012. This positive outlook is tempered by the fact that recovery in the wider European Union is feeble at best. GDP growth this year is expected to be approximately 1.3% for the European Union as a whole and as low as 0.8% in the euro area. The situation is compounded by decidedly low inflation. In its autumn forecasts the Commission acknowledges that risks are tilted towards the downside. A prolonged period of economic stagnation in Europe would undoubtedly present serious challenges for Ireland's future economic growth. Sitting back and waiting for recovery to take hold spontaneously is simply not an option. It is welcome, therefore, that in his first remarks as President of the European Council Donald Tusk made explicit reference to the need for ruthless determination to end the economic crisis.
The focus this week will be on how to improve Europe's investment framework and simultaneously boost investment levels. Productive investment in the European Union is lagging 15% behind pre-crisis levels, making it clear that concerted and creative action is required to get the necessary levels of investment flowing again. Our discussions will centre on the investment plan for Europe which was recently proposed by President Juncker. The plan aims to mobilise €315 billion in net additional investments in the economy in the next three years. The proposals are designed to attract private investors by reducing complexity, sharing risk and delivering priority projects with economic and social benefits that would not otherwise be realised.
The investment plan has three key strands including the creation of a new European fund for strategic investments, which would deploy an initial guarantee of €16 billion from the EU budget and €5 billion from the EIB to leverage a total investment package of €315 billion, the bulk coming from private investors. Member states will also be encouraged to contribute to the seed capital of the fund. A credible investment project pipeline will be established in tandem with an assistance programme to channel investments where they are most needed and there will be an ambitious roadmap intended to make Europe a more attractive location for investment, including through removing regulatory barriers.
There are many aspects of the proposed new fund that will require work over the period ahead – for example, governance arrangements, modalities for project selection and how to ensure that private investment is leveraged to the maximum. The European Council will not be discussing the finer detail but is instead expected to endorse the broad strategic orientations of the plan. A legislative proposal to be brought forward by the Commission early next year will provide further operational detail.
At the European Council I intend to convey Ireland’s strong support for the establishment of the fund and for wider efforts to improve the investment climate in Europe. This includes making real and rapid progress on aspects of the Single Market which have yet to be delivered in full, in particular the digital agenda, energy union and services. It is also important that negotiations on trade agreements, especially those with the United States, be advanced urgently.
The Commission proposal to set up the fund has received its share of criticism, with questioning from some quarters as to whether the leverage ratio of 1:15 is realistic. Of course, the fund is not and cannot be some magic bullet. However, when implemented in tandem with structural reforms and growth-friendly fiscal consolidation and with the full use of monetary policy instruments by the ECB, it has the potential to make a tangible difference. It will complement already programmed expenditure under the Structural Funds and the ongoing lending of the European Investment Bank.
Early and decisive implementation of the fund and associated projects will be essential for the credibility of the initiative. That is why we are looking at the ambitious target of mid-2015 for mobilisation of the first new investments. Commission Vice President Katainen has already kicked off a 28-country road show to showcase the initiative, starting last Monday in Romania. The decisive backing of the European Council this week for the initiative will lend important impetus.
As the detail of the fund is worked out, we will also be considering carefully how it might be of benefit to investment in Ireland. While project criteria remain to be clarified, the factors likely to influence decisions are the added value for the EU, over and above what is possible through existing instruments; economic viability and value; whether a project can commence in the coming three years; co-operation across frontiers; and, above all, the potential of the project to attract private investment. Another important issue will be how the Commission will follow up on recent indications that it will look positively at capital contributions from member states when assessing how they are delivering on their Stability and Growth Pact commitments.
A taskforce led by the EIB and the Commission recently compiled a list of projects from across Europe that could be considered ripe for investment, whether from the new fund or elsewhere. Ireland, along with other member states, submitted a broad list of projects across a range of economic sectors which could commence within the next three years. Given the timing constraints, this was very much intended as a preliminary and indicative list. It will, of course, be further examined and revised and I expect it will be narrowed down significantly over the coming months. Relevant Departments, co-ordinated by my Department, will closely engage with the negotiation of the legislation setting up the fund. They will also work to see if there are possible opportunities for Ireland, over and above those projects for which other funding sources are available. Of course, if the fund helps significantly to boost investment and growth in the Union generally, that will also have knock-on positive effects for Ireland. Boosting investment is one of three pillars that will underpin the European Semester in 2015 – the other two being structural reform and fiscal responsibility. These are set out clearly in the Commission’s recently-published annual growth survey, and the European Council this week is expected to reaffirm its commitment to all three pillars.
As Deputies will be aware, the Commission’s opinions on member states’ draft budgetary plans were also published recently. Ireland was one of five member states found to be fully compliant with the provisions of the Stability and Growth Pact, along with Germany, Luxembourg, the Netherlands and Slovakia. This is a real vote of confidence in our management of our public finances. The Government is committed to continuing its policy of prudent fiscal management as Ireland exits next year from the excessive deficit procedure.
The European Council is also expected to welcome proposals made by the Commission to streamline the European semester process. These are intended to facilitate more meaningful dialogue between member states and the Commission before specific country-specific recommendations are proposed. Ireland's aim is to use the new arrangements to support a richer national-level dialogue including with relevant Oireachtas committees and with economic and social interests, on how the European semester can best feed into and reinforce our national recovery effort.
The European Council is also expected to note that there will be a substantive discussion of economic co-ordination within the Economic and Monetary Union at its meeting next February, on the basis of initial work by the President of the Euro summit with the heads of the Commission, the Eurogroup and the ECB. Ireland is ready to play a full and active part in discussions, and I will update the House accordingly in due course.
It is now expected that the European Council will briefly consider tax avoidance and aggressive tax planning – issues which are currently very much in the international media and political spotlight. Ireland is committed to working with our partners in the EU as part of a wider global effort to tackle these issues. In this regard, the European Council is expected to look forward to the proposal recently promised by the Commission on the automatic exchange of information on tax rulings in the EU. We are contributing very actively to the work in the OECD on base erosion and profit shifting, which is essentially about modernising international tax administration and fitting it for the globalised world economy which is now a reality. What we have consistently stated is that from a tax policy perspective Ireland will play fair but will also play to win. This belief led the Government to make a number of amendments and enhancements to our tax regime to best position that regime for the future. These changes, announced on budget day, were accompanied by a new roadmap for Ireland’s tax competitiveness. This roadmap updates last year’s international tax strategy and contains a comprehensive package of competitive tax measures which will help ensure that Ireland maintains and expands its position as a thriving hub for foreign direct investment well into the future. Our actions and commitments have been broadly welcomed, including by EU Commissioner Vestager and by the OECD. At the European Council and in other EU fora, Ireland will contribute constructively to taxation-related discussions, as we always do, while simultaneously holding a firm line that matters of direct taxation remain a member state competence. Let me underline once again that our single and transparent corporation tax rate of 12.5% is not under discussion. Our partners can have no doubts as to our unswerving determination on this. I understand there will be an investigation of the taxation measures in all countries.
The European Council will consider the current situation in Ukraine. I understand that President Tusk rightly sees this issue and the general question of the EU’s relationship with Russia as the single most important geopolitical issue facing the Union. He believes it is timely to have a broad debate among leaders, although no proposals to change the EU’s current policy or sanctions arrangements are on the table. Ireland remains deeply concerned by the ongoing crisis and in particular by the levels of violence and troop movement on the ground in eastern Ukraine. While there has been some reduction in the level of violence in the past week or so, the situation clearly remains fragile. It is vital that all sides, including Russia, renew their commitments to the Minsk agreements and work to ensure that they are fully respected. A lasting ceasefire remains key to the success of current efforts to reach a sustainable and peaceful end to this crisis. Such a resolution must be based on respect for Ukraine’s independence, sovereignty and territorial integrity and with clear guarantees on border security, disarmament of all illegal groups and the withdrawal of foreign forces. The formation of a new government in Ukraine following the successful parliamentary elections in October is welcome. It must seize the mandate for reform given by the people of Ukraine and move quickly to begin implementing much needed political, economic and constitutional reforms. A genuine and effective reform process must be an integral part of the strategy to help de-escalate and resolve the crisis. We are hopeful that the EU’s measures in relation to Russia, coupled with continued political and diplomatic engagement with the various sides involved in the conflict, will ultimately lead to a breakthrough and a negotiated solution to the conflict. The EU remains open to taking further steps as required, in light of developments on the ground. The EU stands ready to support Ukraine at this time of transition and through the challenges that lie ahead.
The Minister of State, Deputy Dara Murphy, will update the House on the remaining elements of the European Council agenda. I will return to the House next month to report on the outcome of this week’s meeting.
Along with others, I intend to raise at the European Council meeting the question of the outrageous wanton murder of children in Pakistan which was so devastating.
I will be in Brussels tomorrow and I am not sure if the Dáil will sit next week. If the House sits, that is fine but in the event that it does not sit, I take this opportunity to wish everyone in the Oireachtas a happy and peaceful Christmas, in particular the staff who serve us so well, members of the media and Press Gallery and all those who support Members in their work. I hope that despite the occasional words we have in the Chamber, everyone will enjoy Christmas with their families. I appreciate all the support provided during the session.