JOINT COMMITTEE ON EUROPEAN AFFAIRS debate -
Friday, 5 Nov 2010

Single Market Act: Discussion with Commissioner for Internal Market and Services

Chairman

I extend a special welcome to the Commissioner for the Internal Market and Services, Michel Barnier, a renowned and experienced senior Commissioner who has been on the European scene for some time. I also welcome his colleagues. The Commissioner is dedicated to European economic recovery in a meaningful and positive way. He and his colleagues have given several demonstrations to that effect in recent times. The Commissioner addressed the Friends of Europe conference in Brussels a few weeks ago and he showed he was particularly positive and resolute in the way in which he and his colleagues in the Commission view the economic situation as it now unfolds. He and others were particularly significant in showing the positive attitude they had and their willingness to tackle any issue, no matter how big, and to deal with the issues as presented with resolution and confidence. That is something that is important at this time. The Commissioner is very welcome.

I take this opportunity to also welcome Ms Barbara Nolan, the new director of the Commission's representation in Dublin. She is very welcome. We had a good relationship with Mr. Martin Terret. We had somewhat fractious discussions from time to time but, generally speaking, we got on very well. We wish him well. He did a great job and we have no doubt that Ms Nolan will do an equally good job.

The Single Market Act was published by the Commission on 27 October and contains 50 proposals on the completion of the Single Market. This Act is the Commission's response to the Monti report, published in May 2010, on a strategy for the relaunching of the Single Market. The general impression was and is that the Single Market was not as effective as it could be or should be but now more than ever it is generally recognised that the Single Market must be put in effect and made to work in a way it was never made to work before. That is particularly important for countries like Ireland.

The Act is accompanied by the EU Citizenship Report, which contains 25 measures aimed at making life better and easier for EU citizens as they work and live within the Single Market. This is the first discussion we have had on this issue but it will be one of the many and it is one on which we in this committee have gone to great lengths to ensure there is adequate dialogue between the Members of this Parliament and the European institutions at all levels. We have also tried to encourage dialogue between Members of the Oireachtas and the European Parliament and Members of other national Parliaments. To understand each other's problems at any given time, it is important that we can put ourselves in the position of those who surround us, particularly within the European Union.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give to the committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a person or persons or an entity by name or in such a way as to make him, her or it identifiable.

I invite the Commissioner to make a short presentation, after which there will be an opportunity to have a question and answer session. I hope there will be time for a photo-call immediately afterwards.

Commissioner Michel Barnier

I thank the Chairman for his warm welcome and the joint committee for allocating time for this hearing. I also thank it for welcoming me to Ireland which I have visited many times, including when I was Commissioner with responsibility for regional policy and the PEACE programme and when I was French Minister for Agriculture, also a key issue for Ireland. I was also French Foreign Minister a few years ago. I am pleased to meet Members of the Dáil and the Seanad, as well as Ms Nessa Childers, MEP, and Proinsias De Rossa, MEP, who are very active Members of the European Parliament.

The reason I am here today is to show my personal respect for the national Parliament of every member state. I was a Member of the National Assembly of France and the French Senate for 20 years. My personal conviction is that the key to reconciliation between the European Union and its citizens is the national Parliaments. There is no need to convince me of the importance of strong dialogue with them, not only because they have new powers under the Lisbon treaty but also for the reason I outlined.

Ireland and its citizens are suffering more than most in the current crisis. My first message is, therefore, one of determination. It is clear to all that mistakes were made across all of Europe and that we must have the courage to learn from them. I am not here to give lessons but to learn the lessons of the crisis with members and to listen. I know the Government and the Parliament are taking courageous measures and I am confident there is light at the end of the tunnel. The second message I wish to convey is that I believe Ireland's future lies at the centre of Europe and that the European Union can help it. Make no mistake, the answer to the current difficulties in Ireland and elsewhere in Europe must not be a retreat from common aims, policies and solidarity. It should be the opposite. If there is one lesson to be learned from the past years, it is that we are all in this crisis together.

During the course of the day I will meet the Government, the Central Bank and the financial regulation authorities, as well as representatives of civil society and business. I come to them with an extended hand and two simple messages on the priority of my portfolio as Commissioner for the Internal Market and Services: first, we must put our financial house in order and, second, we must kick-start growth with a renewed and revitalised internal market. To be frank, my goal is to put the financial markets, which we need, at the service of the real economy, not the contrary. The second strategy is to put the real economy at the service of the people for growth and human progress, not the contrary, as we saw perhaps too much in the past 15 years. I will speak further about these two priorities. We must put our financial house in order. More than two years after the collapse of Lehman Brothers, we are not yet out of the woods. We need a new, safer financial system in the interests of the real economy, ordinary people and companies, both big and small. Progress has been made, but we are not yet there. We are continuing to move as fast as possible.

On the basis of the G20 commitments, we are in the process of implementing an ambitious agenda for reform. There are five main principles and some key proposals, the first of which is effective supervision and enforcement of the rules. As of 1 January 2011, there will be real Europe-wide supervision of the financial sector, thanks to the Belgian Presidency and the work of the European Parliament. There is the creation of three new authorities for banks, insurance and the securities markets. Above these three authorities is the new European Systemic Risk Board.

The second principle is full transparency. Complexity has for too long been an excuse for opacity. I can offer two examples. In the derivatives markets 80% of the current trade worth $600,000 billion takes place over the counter, with full opacity. This raises serious potential systemic risk. Second, last spring all eyes were focused on the Greek debt crisis. I am not saying markets lie, but what we saw was that a country's capacity to finance itself on international markets was severely affected by movements on credit default swaps, CDS, markets and short selling. We had no detailed information on what was going on or what trade was taking place. These issues are at the heart of the proposals the Commission presented in September to regulate over the counter, OTC, derivatives and short selling. They are about greater transparency across the board.

The third principle is greater stability in the financial sector. With Basel III, common equity requirements will rise from 2% to 7% of assets. Total capital requirements will, for the first time, pass the bar of 10% of assets; it is more capital and of better quality. There is the same thing for the insurance sector with Solvency II.

The fourth principle is more responsibility. Let us be clear that at the root of the current crisis are unacceptable corporate governance practices.

That is why we must bolster corporate governance rules. This includes better supervision of senior management by the boards of financial institutions and increasing the involvement of shareholders.

Policies on pay must give staff and management the right long-term incentives for sound management and discourage excessive risk taking. That is why new rules were introduced in binding EU legislation earlier this year. We also need to look at further into certain issues of conflict of interest, notably in credit rating agencies and audit firms.

Last but not least, better foresight and sound rules are required for crisis prevention and management. This is the first part of my job and it is directly in line with the G20 roadmap. I am also involved in ensuring that what we are doing in Europe is in parallel with what the United States is doing. I returned yesterday morning from a six-day working trip to the United States where I met the US Treasury Secretary, Mr. Timothy Geithner, as well as all the regulators and supervisors in the banking sector. It is an important goal for me to ensure that we will implement the G20 roadmap, not with the same tools and laws, but at the same time.

We need to relaunch growth, and a better-functioning Internal Market can help us to do that. I spoke of determination in my introduction, so let me now say a few words about the Single Market. I believe the people of Ireland know the answer to the question of what the Single Market has delivered for this country since 1992. The Single Market was a key reason for the Irish economic boom of 1996 to 2008 because it provided a level playing field and a much bigger playing field than Ireland ever had access to before. This allowed the country to attract investment. It developed quickly, even catching up and overtaking the rest of Europe. Ultimately, what will help to turn the Irish economy around again are exports and access to the larger European market.

I believe in the Irish character, your competitive economy, your openness to the world and readiness to adapt. Ireland has what it takes to win in the long term. Now, however, we are beginning to get the growth where it is to be found. With the Single Market working in a better way, we can get 2% or 3% more growth. That is why, a few weeks ago, the Commission made 50 proposals. I want to open up a real, European public debate on these proposals, which is why I will be sending Ireland the same document as the other 26 member states. The Single Market Act is an open document. I have worked with 12 of my fellow commissioners - including Ms Geoghegan-Quinn, who has responsibility for research and innovation - to devise this action plan. We will now open the debate on these 50 proposals. At the end of this debate in February 2011, we will have a meeting of the European Council. The European Commission will act on the definitive proposals and will engage in delivering upon them over the next two years. The year 2012 will mark the 20th anniversary of the Single Market. We do not want this anniversary to be either nostalgic or melancholic. We cannot do politics with nostalgia; we want this anniversary to be proactive and dynamic. That is why we attach so much importance to the Single Market Act. We will be pleased if the Irish national Parliament can, like the European Parliament, play its part in this public debate.

I thank the members of the joint committee for their attention. I am ready to answer questions and if the committee members do not mind, it would be easier for me to answer in French in order to be more precise.

Chairman

I thank the Commissioner for his address. We have a number of speakers, including Deputy Howlin, Senators Leyden, Donohoe and Boyle, as well as Nessa Childers, MEP, and Proinsias De Rossa, MEP. I will call Deputy Howlin first.

Deputy Brendan Howlin

Since there is such a long list of speakers, I will try to be brief. It is good to see Commissioner Barnier. We worked together many moons ago on the European Council. I welcome his comment that, in the face of economic difficulty, there will be no retreat from common aims and purpose. We need leadership and drive for commonality.

I wish to comment on the crisis that we are facing in Ireland. Commissioner Barnier rightly said that, as an objective, we need to put our financial house in order. As a second objective, he stated the need to sustain and develop growth. The problem for us is that they are mutually exclusive objectives. The more we address the fiscal deficit, which we have agreed on a cross-party basis that we must do, the more we suppress the potential for growth. I would be interested to hear the Commissioner's view on the balance that must be struck in that regard.

The general issue is the attitude of the markets to our financial position. Yesterday, the Irish bond spread reached a staggering 7.8% and it is slightly less today. The very capacity of our State to borrow is affected not by our actions but by the attitude of the so-called rating agencies. Many of us regard those agencies as being highly culpable in having given a AAA rating to what were potentially junk bonds in the past. They are the people who are determining our destiny right now, as we struggle to get the balance right here. As regards the survival and development of the Single Market, does Commissioner Barnier have a view on the development of a common rating agency for Europe that would be independent of banks?

As the Commissioner rightly said, the Single Market has been extraordinarily important for Ireland. We support it because we have one of the most open economies both in the Union and in the world generally. One of our bedrock issues has been the maintenance of a low corporation tax rate. The current rate of 12.5% was introduced by a Government of which I had the privilege of being a member, along with my colleague, Mr. Proinsias De Rossa, MEP. Although the Commission stresses that the proposals will not have the objective of harmonising corporate tax rates, we do have concerns because any perceived assault on our corporate tax rate is a disincentive to our current drive to get investment in our State.

Chairman

I will now call the next speaker, Senator Terry Leyden. I ask members of the committee to pause between sentences to make it easier for the translation process. We will take as many questions as possible at the beginning, so the Commissioner should bank the questions and then answer them collectively.

Senator Terry Leyden

I thank the Chairman for arranging this meeting with the Commissioner whom I sincerely welcome to Ireland. I thank him for attending this meeting so that we can discuss these important issues, which is very much in keeping with the Lisbon treaty. We voted for it on the second round on the basis that we would have a better dialogue with Europe generally and with the commissioners in particular. The Commissioner is fulfilling that part of the Lisbon treaty as far as I am concerned.

I am delighted the Commissioner served as a councillor, a Senator, a Deputy and a Minister. He has an excellent curriculum vitae as far as parliaments are concerned and he appreciates their concerns. I also commend him on his eight publications. He is a very experienced politician.

As Minister of State with responsibility for trade in 1992, I represented Ireland at the negotiations on the Single European Act. I agree fully with the Commissioner that it brought considerable success to Ireland. Access to 500 million people and the freeing up of trade led to the Celtic tiger, to a great boost in our exports and to the creation of jobs.

That said, I welcome the new developments decided on 27 October in regard to the opening of discussions on the Single Market and on the 50 proposals. There is a very tight timeframe of February 2011 in which to make submissions. I look forward to that. This committee will have a role in discussing those issues and in putting forward positive proposals in that regard.

I refer to a point made by Deputy Howlin. It is vital we retain the 12.5% corporation tax. The Commissioner must bear in mind that we are at the edge of Europe and need that incentive to attractive international trade, investment and multinational companies. We have that disadvantage of being at the edge of Europe, although quite close to the United States of America. Ireland is the gateway to Europe. Any change to that tax would be detrimental. It is the policy of this Government, and it will be that of future governments, to fight to the end in regard to that tax.

In regard to the services directive which will come into force in January, much concern is being expressed by the postal services and postal unions about the freeing up of the postal services. It is essential there is a level playing pitch and that despite whatever regulations are brought in, there is a universal postal system and there will not be a creaming off of the more lucrative city postal deliveries. There must be the same delivery on the Aran Islands as in Dublin 4. When the legislation is brought in, it is essential there is a level playing pitch and a universal system throughout the country, irrespective of the agreement reached in regard to opening up the postal services to all of Europe, otherwise individuals and companies will try to cream off the lucrative postal deliveries.

The Commissioner has a particularly important role as far as the future and trade are concerned. I am very confident he will fulfil that mandate given his experience. I am delighted he is in Ireland because Charles de Gaulle was very impressed by our former leader Éamon de Valera. We remember his visits to Ireland. He loved this country. There is a great relationship between France and Ireland, although I know the Commissioner represents all 27 member states.

Chairman

I remind members to be as brief as possible as I would like to give everyone an opportunity to speak. The Commissioner, who is on a tight schedule, will have an opportunity to reply.

Senator Paschal Donohoe

I welcome the Commissioner. I had an opportunity to read his report, Towards a Single Market Act, and the proposals contained in it. The opening paragraph contains the following sentence which is worth putting on the record: "Sharing a common economic and social space while respecting diversity, the wish to be nourished together and consolidated by the wisdom of standing together: that was, and still is, the aim of the big European market". If the intent of that sentence was delivered in the coming years, it would play a huge part in resolving the difficulties Ireland and Europe face currently.

I have a number of questions for the Commissioner in the context of his report. The first concerns the proposal for a project bond scheme. Will the Commissioner explain how such a scheme will work? Would such a scheme help countries like Ireland which is struggling to fund infrastructural projects due to the pressure of our budget?

I refer to the proposals for an integrated mortgage market which formed part of this report. We have seen how a poorly regulated mortgage market can cause considerable difficulty to an entire economy. If such a proposal is implemented, how can we develop the ability to regulate such a vast and complicated market given that national regulators have, at times, failed to do so?

In regard to the Lisbon treaty, a major concern among many workers was that increased liberalisation in Ireland and throughout Europe would come at a great social cost, in particular to those on the lower income scale. Of all the proposals at which the Commissioner is looking, what does he believe would be the most effective to ensure that balance is rectified?

Ms Nessa Childers, MEP

I thank the Commissioner for coming. This is a very difficult time for Ireland and the people need reassurance and confidence. His presence, and that of other Commissioners who will visit, will go some way to providing that.

The Commissioner mentioned in his report the systemic risk posed by the derivatives market. Is he considering seriously the imposition of a financial transactions tax which would raise many billions of euro in funds for the European Union and which would limit the systemic risk?

I refer to the transparency, or lack of, in terms of the lobbying that goes on in the European Union, in this instance by financial services groups which are hostile to some of these proposals. Would the Commissioner and the Commission be prepared to publish a mandatory register of lobbyists in order that the people of the European Union would know all the interests whose voices, as well as their own, must be heard?

Senator Dan Boyle

I welcome the Commissioner. I wish to emphasise some of the points made by other contributors. Deputy Howlin spoke about the role of the credit agencies. The fact the Commissioner has finished the public consultation and the report will be published in a number of months is something many of us would wish to see progress. Given that the credit agencies got things so spectacularly wrong in rating institutions and the credit feasibility of many governments over the years and that their opinions are still being taken seriously, there is an opinion that an independent alternative needs to be put in place as quickly as possible. The Commissioner's views on that would be very much appreciated.

Views in the Irish political system on retaining the 12.5% corporation tax are unanimous on the grounds that tax policy is needed to protect the interests of a peripheral country which is far away from continental Europe and the main centres of populations and markets. That argument will continue to be made.

Does the Commissioner see a role for other European Union-wide taxes, in particular ones which could be used as effective financial instruments in their own right, such as the idea of financial transaction taxes in terms of currency speculation and a European-wide share market? Does the Commissioner see a role for other Union-wide taxes, particularly ones that can be used as effective financial instruments in their own right? The idea of financial transaction taxes in terms of currency speculation and in terms of a European-wide share market, if we are looking for wider controls, is perhaps the area where commonality can be found and better standards might be achieved.

Prionsias De Rossa, MEP

I welcome Commissioner Barnier. We see each other across the floor in the European hemicycle from time to time.

During the past week or so, I sent the Commissioner a discussion paper which I prepared on a report I am doing for the employment committee of the European Parliament on social services of general interest. I note that the Commissioner, in his Single Market Act, has addressed some aspects of this issue of what are known as social services of general interest in Europe but which is referred to here as public services, both economic and non-economic, such as transport which is an economic service and social services such as health services which are regarded as non-economic.

It is the social services which I am dealing with. In my research into this area a number of matters have become clear. At present there are financial constraints, particularly in Ireland, on public services, both economic and non-economic, but there is also legal uncertainty because of the impact of European rules on the delivery of these services. For example, a couple of years ago Dublin Corporation proposed to provide a broadband service for the city which would be accessible by the citizens but abandoned the proposal because it was informed by the Commission that it could not do so because, as a public authority, the corporation was not allowed deliver this service which would be seen as in competition with private providers.

I note there is an attitude in various sectors of the Commission that there is no problem but all of the research I have done indicates that there are serious problems, both in regard to how state-aid rules apply and how procurement rules apply and, indeed, in a number of other areas. I am not looking to open up that whole area now because it is a complex one, but it is clear that there are legal solutions required. I am merely asking whether the Commissioner is willing to consider such legal solutions. I am not asking him for a commitment to agree to the ones that I might produce.

There is also the issue of quality standards. There are proposals for a European quality standard framework. Is it the Commissioner's view that such a framework would also be of value in delivering such services?

The Commissioner mentioned that there is a need to kick-start the economy, and that is obvious, certainly in Ireland. I will not go into the Irish circumstances which have already been dealt with by my colleagues. However, I would point out that services of general interest account for approximately 26% of GDP across the European Union. Social services account for approximately 13% to 14% of GDP. There are in the region of 20 million people employed in delivering social services across the European Union and it is an engine for the economy, not only in terms of the employment it provides but also in terms of the services it provides. Education, for example, is critical to the smart economy which the European Union is promoting. Any proposals which make innovation and development in that area less likely will also impact on the economy. They will impact on those who require the service and also impact on the added value that such services will provide for the European economy.

On Article 9 of the Lisbon treaty, the Irish public are probably the most informed electorate in Europe. We were the only state to hold referendums. We had not one, but two referendums. We are very well informed. I am not just saying we here in this room are very well informed, although we are probably more informed than most European affairs committees in national parliaments.

One of the key selling points for the Lisbon treaty in Ireland was Article 9, the so-called social clause or horizontal clause which obliges the European Union to take account of all of the social objectives as well as the economic objectives of the European Union in developing its legislation and policy. That is not only a question of having a social impact assessment, for example, of the Single European Act, but that such an Act contributes to the achievement of the social objectives of the European Union. One could conduct a social impact assessment and state the impact is zero and, therefore, it is okay, but it may not contribute anything to the development of the social objectives such as full employment, addressing poverty of which 80 million citizens in Europe are at risk of, etc. This issue of the implementation of the social clause, Article 9, is a key one to reassure the population of this State that they voted "Yes" in good faith and it was the correct choice.

Deputy Thomas Byrne

Cuirim fáilte roimh an Coimisinéir inniú. I thank the Commissioner for coming here today.

There are a number of issues, some of which have been raised. I endorse what Senator Leyden stated about the universal service obligation on postal services, which is an important issue.

Senator Donohoe mentioned the common mortgage market. That always sounds like a good idea, but one of the root causes of the property bubble here was the ruthless cut-throat competition from British banks who came in and reduced interest rates. We were all delighted. We were offered 100% mortgages and consumers were very happy. Unfortunately, consumers became over borrowed and over mortgaged because of that competition. I suppose the key step is to ensure the consumer and the system is protected in any further opening up of that market.

Corporation tax has been mentioned. The corporation tax rate is a sovereign issue for this nation but I suppose it is just as well to remind the Commission of how important it is to our economy. In our tax returns only last month, corporation tax exceeded expectations partly because the multinational sector is doing well but also because our low rate attracts them in to do business and pay tax here.

I am interested, in particular, in the proposals on access for small and medium enterprises to the capital markets. If that were possible, if the Commission was able to assist in that, it would be welcome. Certainly, the capital markets are the last entities on the mind of small and medium-sized enterprises who are being refused by the banks. If there was access to capital from sources other than the standard retail banks that would be helpful in the development of the Irish economy. I would welcome Commission action on that in 2011 or as soon as possible.

Senator John Hanafin

I welcome Commissioner Barnier. We did not need to arrive at the Parliament to discover who our best friends in Europe were. We learned that at home.

I prepared a report for the committee entitled, The Need for Strong EU Financial Regulation. Long before the Greek debt crisis, it became apparent that the financial markets were not properly regulated and were a real danger to the future of the European currency in terms of the ability to manipulate markets, media and national debt. I was specifically referring to the short selling of Greek sovereign debt. It is something that, unfortunately, we must deal with. It is still out there. We are not through the crisis yet although we are on our way. With that in mind, what does the Commissioner think we can do to ensure that sovereign debt cannot be traded in this fashion again?

Chairman

The Commissioner received a fairly concise response from the committee members which is reflective of political opinion within this country at present. References to the public service obligation in respect of the postal service are well made in light of members' concerns regarding the fact that previous exercises in privatisation and deregulation in some public service areas did not work as anticipated. That is why certain questions relating to this matter were posed.

Reference was also made to corporation profits tax, which is essential for the well-being of this country. The latter is the case because Ireland is an island nation which is very much on the periphery of Europe. A number of distinct costs arise as a result of that fact.

The Commissioner made some inspiring comments in respect of solidarity. Members of the Houses of the Oireachtas in general are of the view that there is a need for solidarity and collective responsibility throughout the European Union and among the various member states in order that one country might not progress at the expense of another. In light of current circumstances, we are of the view that EU member states should combine forces to ensure we use all the resources at our disposal in a positive manner to bring about economic renewal.

The Commissioner also referred to the determination to succeed, which is very important. The general consensus in this country at present is that the people are determined to succeed and to take on the burden of economic recovery. That burden can only be so great as to be bearable by citizens if we are to succeed economically.

I now call on Commissioner Barnier to reply to the various questions and points that were raised, to some of which I obviously did not refer.

Commissioner Michel Barnier

I will try to be proactive and use the services of the interpreter to make matters more precise for the committee and for me.

I thank members for their attention and for the questions they posed. The Chairman referred to responsibility and collective solidarity. These are two terms which are very important because I have decided they go to the heart of the European crisis. I know Ireland quite well at this stage and I have a great deal of respect for its people. I accept that the country is experiencing a difficult period and that many citizens have been asked to make major sacrifices. In light of what I know about this country and about Europe, I am of the view that Ireland will bounce back.

Ireland has some solid trump cards of which it came into possession, with the help of the EU, during the past 15 or 20 years. Training and education in Ireland are better than anywhere else. There is also the country's capacity in the areas of technology, biotechnology, health and services. I must not forget to mention the agriculture and fishing sectors, with which I am very familiar. If it follows on that with Europe and the help of these various trump cards to which I refer, Ireland will be able to bounce back.

I will now comment on what we have been trying to do in Europe in the aftermath of the Greek crisis and also the crisis with the euro. We have put in place governance programmes. We have control mechanisms relating to regulation and financial supervision which contemplate all European risks. We are considering which tools should be used in order that we might have good governance. What we are trying to do in respect of these two matters would have been jolly useful in the past. I am not only speaking about Ireland in this regard. If, in the future, we have good tools which will enable us to monitor what is happening and, where necessary, sound the alarm, then we will be in a good position.

There have been property bubbles in certain other European countries. We have noticed that levels of competitiveness have gone backwards in many countries. Two examples in this regard are France and Greece. We have also noticed that there are serious difficulties with budget deficits in many countries and we must raise the alarm in this regard. If we put in place good European monitoring tools, we will be better off and will have a better opportunity to get out of trouble.

What we are trying to do at European level with the other 26 member states is good for Europe and good for Ireland. My colleague, Commissioner Rehn, is going to be here next week and members can discuss this matter with him. Commissioners must be available in order that people can engage in an open dialogue with them. The Commission is an independent body. This is where the general interest of Europe is really vested. The Commission is engaged every day in seeking the gravity centres between different countries regardless of whether they are big or small. The visits of my colleagues and mine to Ireland highlight the fact that we are very aware of what is happening here and that we wish to show our solidarity.

Deputy Howlin referred to achieving a good balance. In essence, we are discussing different kinds of balance. We must ensure the deficit is dealt with but we must also see to it that growth is not adversely affected. I am sure members have discussed with each other questions such as whether taxes should be increased or whether spending should be reduced. I have a different balance to identify. For example, we are discussing capital requirements in the context of Basel lll. If there is too much regulation, then we may experience difficulties in the context of regulatory capital. Each member state must, therefore, deal with its own imbalances. I will leave supplying the answers to these questions to Commissioner Rehn because they relate more to his area.

With regard to what Ireland is in the process of deciding at national level, it is moving in the right direction with its plan of using background capacity and with the help of the European Union.

Deputy Howlin and Senator Boyle asked another question about rating agencies. The thermometer does not get rid of the fever.

Deputy Brendan Howlin

As long as the thermometer works.

Commissioner Michel Barnier

My job is to make sure it does work.

Deputy Brendan Howlin

Who completes the checks?

Commissioner Michel Barnier

We are going to continue the reform of the rating agency sector. My predecessor, Mr. Charlie McCreevy, had started to work on this issue and we will continue to improve on the reforms so as to achieve full transparency of the methods used, suppress conflicts of interests, make transparency compulsory and ensure more diversity in the rating agency market which is currently concentrated within only three agencies involved. We are working to broaden the market and, perhaps, establish a European market.

In the public debate we had yesterday we dealt with the question of how sovereign debt should be rated. This issue was raised by several members of the committee and the question was asked whether we should use the same method to rate products or countries. We are ready to legislate in these four directions to ensure the thermometer works, beginning next year.

Senators Leyden and Boyle and Deputy Byrne raised an interesting topic, namely, the company tax rate. My colleague, Mr. Šemeta, is starting work on how taxes might be co-ordinated. I am not talking about income tax, as that is up to individual countries to decide. What we are interested in is looking at how the internal market can work better, which is important for all small and medium enterprises. We want to work on two taxes, but to work within the rule which protects Ireland, unanimity, nothing will go through which has not been accepted by Ireland and other countries. Our plans should not stop Ireland from participating in this work. One of the areas on which we want to work is the co-ordination and streamlining of VAT, while the other is the basis on which the rate of corporation tax is worked out. It would be good for European industry in general to work out a common base. I am not talking about rates which are decided by each country. We are opening a new file on this and it would be good for Ireland to participate in this work.

Senator Leyden mentioned General de Gaulle, a reference to which I am very sensitive. This morning the Minister for Enterprise, Trade and Innovation, Deputy Batt O'Keeffe, gave me a book about General de Gaulle in Ireland. I was very touched; it was because of General de Gaulle that at the age of 14 years I decided to go into politics.

Senator Terry Leyden

A wise choice.

Commissioner Michel Barnier

I was the youngest Deputy in the French Parliament, but that is a title one loses very quickly and I lost it ages ago. I became a Gaullist and a European when I saw General de Gaulle shaking the hand of Chancellor Adenauer. I have responded to Senator Leyden on the issue of corporate taxes.

The postal services directive is different from the services directive. There are three directives dealing with postal services and we are going ahead with a managed liberalisation of the services. Senator Leyden was right in saying this must be done fairly. I do not need to be convinced on the importance of post offices and postal services in remote areas. I was president of the Alps region in France, a remote and mountainous region, and know how important postal services are to such regions. When I was asked to review the directive, I was the first to say we had to set up a user group to evaluate the application of the directive. When we think of the numbers working in postal services, we are talking about a figure of 5 million, not to mention users and firms. The user group will meet for the first time in 2011.

Senator Donohoe asked about different bonds that could be used to fund European projects. President Barroso is very much in favour of this proposal, but it has not yet been referred to all member states. We think, on a European basis, bond issues for European infrastructural projects would be interesting. This is an idea that should be of interest to Ireland. I am working on the mortgage market questions which is a very difficult topic. We must ensure we learn the lessons of the past and Ireland is very well placed in that regard. We are working on very well-targeted proposals which should protect consumers. Generally speaking, the Single Market Act is designed to deepen the market economy but with the help of citizens. I say this specifically because I have the feeling that citizens in small and medium enterprises believed the Internal Market was not made for them, that it did not give them anything and that it was for the big fish, the top people. Each citizen and firm is essential to create competitiveness and growth.

Ms Nessa Childers, MEP, referred to derivatives but I referred to all transactions. We will make everything transparent such as registration, compensation and standardisation. We will do so in parallel with the United States and I discussed this with the Americans during my visit last week. With regard to a tax on financial transactions there needs to be a distinction between the proposed resolution fund and a tax on financial transactions. We are commencing work on the first part of that topic which is the prevention and resolution of financial crises. It is proposed to set up a fund so the banks pay for the banks and the citizens do not have to pay for the banks. I am quite in favour of taxing financial transactions but that is a different debate. As for having more transparency in the lobbying system I would be in favour of a system whereby consumers and civil society would be listened to. I have discussed the topic of public services in detail with Mr. Almunia who is well known to the committee. We hope to publish a report in 2011 on social services and its link with the fundamental role of the Commission which is public aid.

I am interested to know more about the example of broadband services in Dublin. I would like to understand what has happened. I refer to a social clause in the Single Market Act which was debated by us. I certainly will be listening very carefully to the proposals. I have made up my mind that I will use the social clause to show Mr. De Rossa, MEP, that one can take further action in the Internal Market without compromising the rights of citizens. We can keep this topic under discussion.

Deputy Thomas Byrne said small firms should be able to accept capital in the Stock Exchange. We have been considering having a special Stock Exchange for small and medium-sized enterprises, of a network of regional stock exchanges.

Senator Hanafin referred to the financial markets. The Commission's documents on short selling, on naked short selling, supervision and derivatives will show there is a strategy of responsibility with transparency. We want to know who does what and to ensure the very sophisticated speculators know that we will know who does what. This is why we have to be very clear on naked short selling that now there must be obligatory cover within three days. We must ensure the new authority, SENA, will have sufficient powers of control to co-ordinate the different national regulatory authorities and to suspend people or take specific actions. The document on supervision has been adopted unanimously by the Council and by the European Parliament for which I thank the Irish EU representatives. This is now a general framework which will be added to on a weekly basis. No financial product, market, stakeholder or state will be spared a good, solid, intelligent and efficient system of regulation. I thank the committee.

Chairman

I thank the Commissioner for his comprehensive response. I hope the views expressed by the committee members are of benefit to him in the course of his work. I know the Commissioner's address to the committee will be an inspiration to the members of the committee and to the Houses of the Oireachtas in general.

The joint committee went into private session at 11.55 a.m. and adjourned at 12.10 p.m. until 11.30 a.m. on Thursday, 18 November 2010.