The Minister of State with special responsibility for European affairs, Deputy Creighton, will attend the General Affairs Council meeting next week and has agreed to meet us today. I understand her time is limited and so we will endeavour to have proceedings completed within one hour if that is agreeable to the committee.
General Affairs Council: Discussion with Minister of State
I am delighted to be back at the Oireachtas Joint Committee on European Union Affairs in advance of next week's meeting of the General Affairs Council. I thank the Chairman and members of the committee for facilitating the change of date given that I am not available to attend on Thursday of this week, as I will attend the Foreign Affairs Council in Brussels on that day.
The General Affairs Council will gather for an all-day meeting in Brussels on Monday next, 5 December. I will represent Ireland at this Council meeting. The Council meeting has a full agenda, so I will seek to inform members of the main issues which will arise and Ireland's perspectives on them. The main agenda items for next week's Council meeting include the next Multiannual Financial Framework, MFF, on which the Presidency will present a progress report. We will consider preparations for the December European Council on 9 December, including considering the draft conclusions and engaging with European Council President Van Rompuy over lunch.
The Commission will provide Ministers with a presentation of its legislative and work programme for 2012; as well as on the European Semester process on foot of its recently published annual growth survey.
As has become the practice, the December General Affairs Council will have a particular focus on the Enlargement and Stabilisation and Association Process, and is expected to adopt a set of Council conclusions on this issue.
The first item on the agenda for next Monday morning is discussion of the EU's next MFF. This will be the fifth and last GAC discussion of the MFF under the Polish Presidency, whose mandate was to develop a more detailed understanding of the Commission proposals: the real negotiations are not expected to start until January 2012 under the new Danish Presidency.
A Presidency report will be tabled later this week and discussed at General Affairs Council. This report will then go forward to the December European Council which will take note of it. It is likely to summarise discussions so far, but may also list generally agreed points, such as the seven-year duration of the MFF. The Polish Presidency has done a good job at teasing out some of the key issues and at setting the scene for the negotiations ahead. The Danish Presidency will take the baton forward after Christmas.
As committee members know, we want a properly funded and properly functioning EU, with the right mix of priorities, fair allocation of resources and a focus on jobs and growth. We see a need for continued food security and safety, which warrants only gradual changes to the Common Agricultural Policy. We also have an express national interest in defending our share of CAP payments. We expect that overall resources directed at the CAP are likely to remain fixed at best, and it will be in the research and innovation areas that we will see any future increases. We want to identify all possibilities for benefitting from available EU funds, especially in the Europe 2020 areas, including competitiveness, productivity-enhancing measures, employment, climate change and energy. The MFF is likely to feature in GAC discussions each month for the foreseeable future. In the morning we will also hear from the Commission on its recently published Legislative and Work Programme 2012. The programme translates into concrete actions for the year ahead the political priorities identified by President Barroso in his State of the Union address in September. This marks the beginning of a process of stakeholder engagement intended to ensure a broad ownership of political priorities and individual initiatives. The Commission work programme is also an important pipeline of work that will feed into our preparations for the Irish Presidency in the first half of 2013. The Commission is also expected to brief the General Affairs Council, GAC, on its 2012 annual growth survey. The key message of the growth survey is that, faced with a deteriorating economic and social outlook, clearer and stronger efforts are needed to put Europe back on track towards growth and jobs.
The annual growth survey marks the opening of the second European semester cycle during which member states co-ordinate their economic policies. It is also the first since the adoption of new legislative measures to strengthen economic governance. If we are to restore economic credibility and stability, the Semester has to be a real process. It cannot be enough for member states simply to enter into commitments for structural reform, as they have done on many occasions in the past. They must also live up to and deliver on them and hold each other to account in doing so. The time for paper exercises is long since over.
Next Monday morning's session will also provide Ministers with an opportunity to look ahead to the European Council meeting of 9 December and to examine its draft conclusions. The key item on that agenda will again, not surprisingly, be the rapidly evolving economic situation in Europe. Leaders will reiterate the need for speedy and full implementation of the measures and commitments member states have entered into, including with regard to structural reforms and fiscal consolidation. This is a point the Taoiseach and other members of Government have been making consistently and we welcome its inclusion in the draft conclusions.
Heads of State and Government will return to the issue of growth enhancing measures, which they previously considered in October. They are expected to endorse an initiative to fast track a range of measures aimed at boosting growth and job creation. They will invite the Council and the European Parliament to facilitate these efforts. To this end, the proposals identified in the Commission's recently published annual growth survey are highlighted as offering considerable potential to foster sustainable growth. I warmly welcome this return by the European Council to these issues at this early stage. If efforts to stabilise the European economy and financial system are to mean anything to the European public, theses efforts must also deliver real results in terms of sustainable jobs and growth for the people of Europe.
The European Council will also take note of the Commission's annual growth survey and will track progress under the euro plus pact, in which 23 member states participate, including all 17 members of the euro area. Employment policy, including the need to fully mobilise labour for growth, is expected to be a particular focus in this discussion, building on preparation that will take place at the Employment, Social Policy, Health and Consumer Affairs Council meeting at the end of this week. The discussion will continue over lunch, when the GAC will meet with President Van Rompuy to hear from him how work is progressing on the report he will present to the European Council on enhanced economic governance, including the possibility of treaty change.
It is clear that we face an unprecedented economic challenge in the euro area. Pressures in the markets remain exceptionally high and an increasing number of member states are finding that they are vulnerable in this regard. As the Taoiseach has said, European leaders must make and implement clear decisions quickly to protect our shared currency, to support member states that are working towards economic recovery and to introduce strong rules to ensure fiscal discipline. This requires a balanced approach. As a first priority, we must move swiftly and decisively to address the immediate and urgent difficulties facing us. This means making use of existing instruments to their full potential so that markets can be convinced that we are all fully committed to defending our currency.
We also need to take steps to secure the position in the medium and long term. That must mean stronger economic governance, in Europe and, in particular, in the euro area. In his report to the European Council, President Van Rompuy will identify the steps he believes need to be taken, including, where possible, treaty change. Ireland will engage constructively in this process.
Economically, we remain extremely vulnerable and our recovery is fragile. We have a vested interest in a credible and stable currency and are ready to explore with colleagues the steps we need to take in the short, medium and long terms to bring this about. Next Monday's GAC will be a good opportunity for a ministerial level exchange on these issues, including in identifying where particular political sensitivities lie.
The European Council will revert to the issue of energy on 9 December. Leaders will follow up on progress since orientations were last provided by the European Council in February. The draft conclusions will focus on completing the internal energy market, energy efficiency, developing energy infrastructure and external energy policy. They will also assess the initial findings of nuclear stress tests, based on a Commission report, and the progress report on the security of nuclear power plants. Enlargement will be another key item on the agenda for the European Council, an issue to which I will return. The question of Bulgarian and Romanian accession to Schengen may also arise, as may international issues, including Iran. Leaders will also take stock of progress concerning negotiations on the next multi-annual financial framework.
The centrepiece of the GAC's afternoon session on Monday next will be consideration of draft conclusions on enlargement based on the Commission's strategy and reports issued on 12 October. It includes the Commission's enlargement strategy for 2012 and progress reports on each of the five candidate countries and the four potential candidate countries. The Commission's enlargement strategy reaffirmed the EU's commitment to the enlargement process as something that is in the mutual interest of EU member states and of aspirant countries. Commissioner Füle stressed that the central theme of this year's strategy was "transformation", explaining that enlargement aims to help countries transform into modern, dynamic societies. The key country-specific recommendations of the enlargement package were that Serbia be granted candidate status, with negotiations to open as soon as Serbia has achieved further significant progress in normalising relations with Kosovo; that negotiations be opened with Montenegro and that work begin on a "renewed positive agenda" with Turkey.
More generally, the Commission has recommended the early opening and late closing of Chapter 23, which deals with judiciary and fundamental rights and Chapter 24, which focuses on justice, freedom and security. It proposes that action plans be put in place to monitor progress in these areas. This is meant to allow the maximum time possible to establish credible track records in the areas such as the fight against crime and corruption and judicial reform. This will be of particular relevance in relation to the opening of accession negotiations with Montenegro. The report also recognised negative trends in the area of freedom of expression and has recommended this issue be further integrated into accession negotiations under Chapter 23.
Ireland supports the Commission's recommendations and hopes to see them reflected in the Council conclusions adopted. We also support including a date for accession for Croatia of 1 July 2013.
I am pleased to have this opportunity to brief the committee and look forward to members' comments and questions.
I thank the Minister for her presentation. Following its meeting two weeks ago with the Deputy Prime Minister of Serbia the joint committee formed the view that it was desirable that Serbia be granted candidate status, with negotiations to open as soon as Serbia had achieved some significant progress in normalising its relationship with Kosovo. Also, the joint committee discussed the issue of the Court of Auditors last week, at which our Irish member was present. One of the outcomes of the 2010 report appears relevant to one of the issues about to be discussed, namely, the multi-annual financial framework. It transpires that in 2010 there was in the region of a 7.7% breach of spending rules in respect of the Cohesion Fund. That is nearly four times the accepted level given by the accountants. Moreover, there was an increase on the figure for the previous year in the level of what I will call irregularity, rather than abuse, in respect of Cohesion Fund expenditure. As the multi-annual financial framework is in the region of €367 billion during a six to seven year period, were there to be a breach at that level, European Union taxpayers would lose approximately €29 billion. Moreover, were the trend in the previous year to continue, that figure would be far greater. The Minister of State might draw attention to this matter in her discussions next week. It is certainly one to be rectified and about which the joint committee has expressed considerable concern.
I welcome the Minister of State and thank her for the detailed presentation. She has indicated there is a full agenda which, clearly, is the case. However, I would have thought the only issue on any agenda at present would be working towards finding a solution to the crisis that has enveloped the European Union, particularly as it relates to the survival of the euro. The position is worsening on a daily basis and the very survival of the euro and the European project hangs in the balance. In addition, there appears to be almost an expectation that consolidation of the eurozone in some form will take place. In particular, a core group will seek to charge ahead with changes to the existing treaties and in so doing will make it virtually impossible for those member states such as Ireland that potentially must go through a detailed process with regard to treaty changes. Is the Minister of State concerned by comments in which people appear to suggest it will be possible to move ahead without bringing along the centre countries such as Ireland which must go through a much more democratic process with regard to changes to the treaties? The Minister of State should expand a little more on this issue. It would also be helpful in advance of the forthcoming discussions were she in a position to share with Members of the Oireachtas any other solutions or potential solutions under discussion. While I acknowledge that much of what is under discussion is in a draft state, it would be helpful were members provided with some insights in this regard.
Although matters such as growth, broad economic policy, energy and the other items would be highly relevant in a more normal environment - members have discussed them in the past - the crisis is at such a key point that it really is the only item on the agenda that warrants discussion.
I thank the Minister of State and apologise for being late for part of her analysis.
In respect of treaty change, there is growing concern this crisis could be used as a means of furthering the integration project. There are significant concerns that a scenario could be put to the people in the near future in which for them to remain within the eurozone the State would be obliged to cede more of its fiscal powers. In addition to interest rates, currency matters and the obvious fact of being tied to the troika, we would be obliged to cede further fiscal powers, to the point where it might be almost pointless calling a general election in the State. How could one vote for two competing parties, one of which will state it will invest in public services and the provision of infrastructure, when in reality, as a result of the ceding of fiscal powers and the capacity to invest in an economy or infrastructure or to prevent the privatisation of public services, all of these various issues could be controlled at European level? This could minimise the capacity of a Government to make a real intervention to change the direction of the country.
As there is considerable concern, the Minister of State should outline in detail the nature of what is under discussion and be open with the joint committee about what is entailed by treaty change and what fiscal powers we would be obliged to cede to remain within the eurozone. Will a gun be put to the heads of the people? The Minister of State's constituency colleague, Deputy Eoghan Murphy, wrote an interesting but alarming article on thejournal.ie recently, in which he outlined the two choices before us. There is real concern that the crisis could be used to the advantage of those who wish to see full political integration which has not been the expressed will of the people in various referendums.
While the author of the Nyberg report has moved on to greater things, it is clear that he attributed collective responsibility for the crisis in Ireland to a number of bodies, including in government the Department of Finance, the Central Bank of Ireland and the Financial Regulator. He blamed these bodies collectively for their failures in regulation and oversight. If, as the Government suggests, we are about the business of restoring Ireland's reputation and showing fiscal accountability, is it appropriate to put forward for nomination a Secretary General of that very Department? Is it appropriate to put forward a Secretary General who recently presided over the debacle in respect of the figure of €3.6 billion? Does it really help Ireland's reputation that his nomination has been rejected? I note his was the only nomination to have been rejected recently. Was it appropriate for the joint committee to have been used in the way it was at its last meeting, to create a red herring as to the reasons the nomination had been rejected by the budgetary control committee of the European Parliament? The Minister of State should deal with these questions.
I apologise to the Minister of State for my late attendance. I thank her for her presentation in which she outlined what was included in the programme in the coming days.
Ireland's role in Europe is extremely important and it is great to see it is playing such a constructive role. I wish to raise one issue that is slightly off the agenda, namely, the positive things coming from the European Union. I seek the Minister of State's reaction to the proposal I am about to make. One issue raised before the joint committee, on which members have received documentation, pertains to the Erasmus programme which has enabled 5 million people to become involved in education and there is talk of doubling the size of the programme. I refer to its benefits for young people in Ireland and how people can gain experience abroad. The Minister of State was involved in the production of a report dealing with the Lisbon treaty and the eight week time period for consideration of new proposals from the European Union within the joint committee. I also have suggested two days should be set aside in the Seanad for bringing into the public domain issues emanating from the Union. I have just downloaded the European Commission's programme for 2012 which indicates that 129 proposals will be discussed during that year. While I do not suggest the Seanad should take over the role of any Oireachtas committee, it would be appropriate for it to bring into the public domain issues arising. While members hear about meetings attended by the Minister of State, the Taoiseach and other Ministers, a great deal of other work is under way, about which the public does not hear. A debate in the Seanad on, for example, the Erasmus programme, would be useful to make that information available. What is the Minister of State's view on that proposal? It is important to publicise information on where we can benefit from positive developments that are happening especially in the lead-in to the EU Presidency in 2013. In the past few days €37.5 million was voted through on the globalisation fund. I understand there are concerns that we may not be able to draw down all of that fund. If there are problems, let us have a debate on this now and not after the closing date, which is in June 2012. What is the Minister of State's view on those matters?
Before the Minister of State replies, I wish to advise members that because reference was made to the issue of the former Secretary General of the Department of Finance and because of the matters that came up at our meeting last week, the committee decided last week to forward the transcripts of our deliberations to the chairman of the budgetary control committee of the European Parliament, Mr. Jan Mulder, it being the committee that makes the determination there. It was decided that I should contact him immediately after the meeting, which I did last Thursday, and we sent on the transcripts. That committee is meeting this evening and deliberating on these matters and we will know the outcome.
We may have an influence in Europe after all.
We may well have.
It is well acknowledged that our influence and reputation in Europe were diminished in recent years, but I am pleased to report to the committee that position is slowly being turned around. We are working very hard to restore Ireland's reputation and influence at a European level.
I will begin by addressing Deputy Dooley's remarks. I agree with him that the eurozone crisis is clearly coming to a very critical point and we need to see decisive interventions by European leaders at the European Council on 9 December but while the General Affairs Council deals with preparation, monitoring and implementation of decisions taken at the European Council, we have a broader agenda, part of which is very important in that it deals with the multi-annual financial framework, which we have discussed at almost every meeting for the past five months. It would be remiss of us to simply drop that agenda which is focused on Europe 2020, the jobs and growth strategy and on what I consider to be in our national interest, pursuing a more dynamic and competitive European economy. I do not believe we can afford to simply throw out that or ignore that discussion because of the current eurozone crisis. We need to focus on both in tandem because, clearly, we need growth to achieve our targets and to make our way out of this very dark place in which we find ourselves now.
Deputy Dooley said there is now a consensus that a small group will charge ahead with proposals on deeper fiscal integration. That is not accurate.
I do not believe I used the word "consensus".
The Deputy did-----
Okay, but it was not my intention.
-----because I wrote it down. There is no such consensus. We are working towards an analysis of some of the pitfalls and shortcomings that exist within the eurozone and they are quite evident. It would be irresponsible of us to ignore them but to say that because a few reports in newspapers have leaked that certain officials in one member state have been discussing some sort of an enhanced co-operation or fast-track approach does not mean there is a consensus. I am very pleased to inform the committee that, for example, one of the most influential people in this process, the German Finance Minister, Mr. Schåuble, clearly ruled out the prospect of enhanced co-operation and said very clearly that it is the German Government's position to work within the treaties and if there is a requirement for treaty change, it would happen among the EU 27 and that it must be anchored in the existing structures of the European Union. I and the Government wholeheartedly support that position, so there is no consensus that there would be some form of enhanced co-operation. It would be very much anathema to what I believe in and what the Government is pursuing at a European level.
In terms of the treaty change issue, which was raised by Deputy Mac Lochlainn, I will try to answer the questions put forward by both Deputies and the concerns expressed or at least the questionmarks that hang over all of this. The bottom line is that we have to look at the proposals that are on the table. First, we have not yet seen the proposal from President Van Rompuy. That will be forthcoming by the end of the week and I hope we will have an opportunity to discuss it with him over lunch on Monday. We have not seen proposals coming from other member states. We saw a non-paper proposal from the Finns, the Dutch and the Germans a number of months ago about possible areas where treaty change might be needed but that is very much an open process at present. We are feeding into this. As I said in my opening remarks, Irish officials are attending meetings in Brussels this week to discuss with President Van Rompuy again the areas where we may require change and then focusing on how we might achieve that change. I make no bones about saying the euro currency and monetary union was designed with a number of flaws in the process. It has become increasingly evident that we cannot have and maintain a currency union which is based on completely divergent fiscal policies, an absolute failure by member states to co-operate, co-ordinate and integrate their decisions-making processes and a failure to work together to ensure the rules of the game are followed. I, on behalf of the Government, and the Government will play our part in pushing and pursuing an agenda to ensure we can put in place much better rules and regulations, which are not simply aspirational but which can be enforced by the European institutions as we emerge from this crisis. There are two questions facing us, the first of which relates to finding a solution to the immediate crisis, which Deputy Dooley raised, and the second relates to how we pursue the issue of closer co-operation and co-ordination between member states to ensure we save our currency and we make it work and be stronger for the future.
I do not buy into this talk of conspiracy theories. I wrote about this in The Irish Times last week. It may well be the Sinn Féin agenda and I do not mean this as any personal criticism of Deputy Mac Lochlainn but his party has a different philosophy and outlook from mine and the two Government parties. I do not believe this is a question of handing over or ceding fiscal sovereignty or fiscal powers or, for that matter, that we will arrive at a point where it is pointless holding general elections or that there is some sort of a covert agenda. I do not buy into the conspiracy theories about the European institutions or the European member states having a covert agenda where we want to go down the road of privatising everything in sight in order to erode the provision of public services and the responsibilities and roles of governments and national states in providing services to their people. That is clearly not the track record of our Union. Ireland joined the European Union 39 years ago. We are approaching the 40th anniversary of our membership and every step of the way has been about strengthening social cohesion, social policy, developing workers’ rights, the rights of women, gender equality and all forms of equality as well as ensuring young people are treated fairly in the labour market. There is absolutely no evidence to support the suggestion of a conspiracy theory agenda among the European institutions.
We are in a really difficult place right now. We have a sovereign debt crisis, a banking crisis and a currency crisis which we need to resolve. To do that requires the fiscal consolidation we are seeing in Ireland and elsewhere. I do not enjoy talking about this to my constituents or to other members of the public who come to my office every day asking about adjustments and the prospect that faces us next week in terms of the budget, but we have to do this because there is no alternative. We have to make the programme work and we have to find solutions on a common basis across the eurozone. We cannot retreat into ourselves or pretend we can solve this crisis on our own; we cannot. We have a common problem which requires common solutions and this means finding a long-term path for our currency which will stabilise it and ensure it is robust and fit for purpose.
The first question was on what we want to see happen in the short term, and this is key. The Taoiseach has outlined it, as have I in many speeches and contributions in the Dáil and Seanad and before this committee in recent weeks. Our position is not necessarily that of all member states and this is the point; 27 sovereign nations are coming together to try to find a solution with various priorities and national interests and all types of concerns and demands from their electorates, and it is not easy to arrive at a point where we can find consensus.
The Irish Government's position is that we want to see very clear and decisive intervention from the European Central Bank and we want to see it happen very quickly, preferably prior to Christmas. We wanted to see a clear statement to this effect from European leaders on 9 December. It is very evident that a number of member states have concerns and reservations about this, many for historical and political reasons, but this does not mean we do not pursue our agenda or try our best to convince them it is the way forward. The Government feels it is the only obvious way to solve the immediate crisis, with the issues of strengthening and stabilising the eurozone, our currency, fiscal co-operation and co-ordination as a medium and long-term strategy. One cannot happen without the other.
If we can make progress and arrive at agreement on deciding how we want to achieve fiscal co-ordination between member states and deal with the question of budgetary oversight, we are much more likely to arrive at agreement on the issue of intervention by the ECB and, potentially in the medium term, the development of a eurobond system which I for one believe we need. We cannot continue to operate on the basis that 17 sovereign nations effectively ignore each other, do not abide by the rules and do not have a common debt arrangement whereby we pool our debt instruments. We must go down this road. It is a process of persuasion which will require a meeting of minds that has not happened to date. If we do not achieve it I hope we can move closer to it on 9 December. It will be part of my discussions with my counterparts next Monday at the General Affairs Council and my discussions on the margins of the Foreign Affairs Council on Thursday.
The Taoiseach and I and a number of our delegation will attend the EPP congress in Marseille next week which will be a precursor to the European Council meeting on Friday. We are using every possible opportunity to speak to, influence and work with our colleagues. The Taoiseach's trip to Berlin was an important part of this.
An interesting, timely and well-considered intervention was made yesterday by the Polish Minister for Foreign Affairs who spoke off the same hymn sheet as the Irish Government, particularly on intervention by the ECB. Much is happening and many member states are inching towards our position. I think we will see a coming together and some type of meeting of minds in the coming ten days. I am optimistic. The bottom line is that we cannot afford to allow our currency to fail, and neither can Germany, France, Italy, Finland, Slovakia or any other EU member state inside or outside the eurozone. Therefore, it is in our interests to work together.
There is scaremongering - and I genuinely consider it to be that - populism and sometimes opportunism on the part of certain politicians or political parties to pretend there is an alternative to saving our currency. It is not somebody else's currency, it is ours and we need to make it work. We do not have printing presses printing worthless punts and we do not intend to do that. The consequences of this for the State would be catastrophic. We need to look at where we are and the opportunity we have to work with our partners to save our currency. Once we have done this we must set about from early January 2012 ensuring we have a blueprint to make our currency more robust.
During the lifetime of our currency we have seen 60 breaches of the Stability and Growth Pact by member states, core and periphery, big and small, triple A and non-triple A. We need to ensure this cannot happen again. We cannot have the same type of regulatory failures we have seen in this State where there has been a nod and a wink and we turn a blind eye. It cannot happen at national domestic level and it cannot happen at European level. I feel very strongly about this. This is not about ceding sovereignty, it is about making our currency robust for our people for the future.
The Minister of State used gentle terms such as "budgetary oversight" and "fiscal cohesion" but she has not defined what they are. She spoke about scaremongering and seemed to have quoted people, but I did not make the point that Europe would force us to do A, B and C. I made the point that we are losing the opportunity to have choices because of the loss of our fiscal powers.
You said we were ceding fiscal power and that it was pointless to hold a general election.
Yes, absolutely.
You spoke about the privatisation of public services. I consider that to be scaremongering.
This is not a debate.
I will ask the question of the Minister of State again.
The Minister of State has replied very thoroughly.
I did not receive an answer. I will ask the question again. Will the Minister of State define what she means by cosy terms such as "budgetary oversight" and "fiscal cohesion"? What do these actually mean? If the Minister of State clarifies these today there will be no space for scaremongering. If she defines in clear terms what the new treaty change would entail-----
We do not know yet. That is what negotiation involves.
Until the Minister of State gives us an answer she is talking nonsense when she refers to "budgetary oversight" and "fiscal cohesion". Until we see the detail of what is required we cannot give it a name or a term. Therefore-----
It is absolutely impossible to tell you something that is potential. First, there is no agreement that there will be a treaty change and second, if there were to be a treaty change there is no agreement or consensus as to what precisely it would involve. As I stated, we have officials in Brussels discussing it this week. I will be in Brussels on Monday negotiating and discussing with other member states and the final decision will go to the Heads of Government on 9 December.
When I speak about "budgetary oversight" it is very clear it means that we know what a Government in Greece or Germany is doing which may impact on our currency and that they know what we are doing which might have implications for their currency. This is very clear. This is what I speak about with regard to "budgetary oversight". It is impossible to spell out the detail of something that has not been agreed yet. In a general sense, this is what I am speaking about.
We will move on as only 15 minutes remain and a number of members wish to contribute.
What about my question on the Secretary General?
I will come back to it and to Senator Burke's questions.
I welcome the Minister of State and it is good that she is here. I was heartened to hear her reassurance in response to Deputy Dooley that she does not anticipate or is not concerned that there is a real movement towards a two-tier Europe. This is my impression of the matter, but it is important that the Minister of State also has this impression. It would be good to hear the Minister of State say in her response to these questions that she is confident we can avoid this scenario and that we will be fit to work as an entity and maintain our structures as they are. The alternative would be a doomsday situation for the country and I endorse the Minister of State's view that we must avoid it at all costs.
With great respect to my good friend and colleague Deputy Mac Lochlainn, I also endorse strongly the Minister of State's view that we cannot maintain the euro without overall broad parameters of control and a symmetry - for want of a better term - of action in the various eurozone states. There must be budget parameters to maintain the credibility and strength of the currency. This is a given and it must happen. The Government would be right to proceed on this basis and I was interested to hear the Minister of State say this. Does the Minister of State believe we can achieve this? I believe we can but I would like to hear her comments.
Does the Minister of State think we can put the necessary budget controls in place to give the euro the credibility and renewed strength it needs on international financial markets without radical treaty change which would take us back to potentially divisive referenda?
Senator Kathryn Reilly and I are dealing with such an issue in Cavan town. However, I can see how the matter, which is very real for those concerned, could become confused and submerged as an issue in a referendum, although it has nothing to do with the referendum. The level of pain people are experiencing could be channelled off into positions on a referendum that would not be helpful to anyone, nor would they address the referendum as such. How realistic are the possibilities that we could achieve the kind of cohesion and budgetary controls required? This country has set an extraordinarily high bar as an example in recent times, but that is not replicated throughout Europe and therein lies the difficulty. How confident is the Minister of State that we could achieve this without referenda? Deputy Mac Lochlainn will surely be reassured to know that we are not talking about specific budgetary decisions; we are talking about budgetary parameters, expenditure levels and keeping within realistic overspends.
There are many Jeremiahs around at the moment, and I was talking to some of them yesterday. They are talking about a double-dip recession coming very shortly, but let us pray that they are wrong. One of them who spoke to me about this yesterday is a senior parliamentarian and is convinced of it. While we will have Jeremiahs everywhere, I personally like to believe in the glass being half full. I have always felt that was the way to look at life. Will the Minister of State respond to the question about fears of a double-dip recession and whether we can avoid it? Let us pray that we can.
I am conscious of the time constraints but I ask the indulgence of my colleagues to make one last point. I have a group of visitors from Kingscourt in Leinster House today. They are very welcome, although I am sure they are not watching this debate.
One never can tell.
They could be, but I doubt it. I had to excuse myself when leaving and I told them where I was going. They asked me to ask a question about all the bureaucratic controls on European aid, particularly on the EU Leader programme. There are a couple of experts among them. One person said that a friend of his was partly through a programme of receiving aid that was European-funded and controlled. However, he got so frustrated with the bureaucracy associated with it that, rather than accepting grant aid and going through the process, he opted out and went under his own resources. That was the question they wanted me to ask, so I will be proud to say that I posed it and that the Minister of State answered it.
I am inclined to agree with Deputy O'Reilly about bureaucracy becoming a self-sustaining industry. Does the Minister of State agree that Chancellor Merkel's vision for Europe has probably moved on from enhancing fiscal discipline to one of developing fiscal union?
The Minister of State mentioned workers' rights and over the years there has been huge progress in this area. Does she have any fears that the present crisis may be used by big business and the markets to row back on some of these rights that have been won and established over the years?
I thank the Minister of State for her frank address to this committee. In representing Government policy, she quite rightly recognises the issues facing this country and the European Union. The position is correct. I am not necessarily ready to applaud everything that governments do, but it is important to recognise that we are between a rock and a hard place. The correct decision must be made. In the past, everybody joked about tough decisions having to be made. Such decisions may be tough but they must also be the right ones. That is the important point.
I am amazed that people have lost sight of an obvious thing that is sticking out like a sore thumb at present. There must be a co-ordinated approach throughout the EU on fiscal, economic and political matters. The whole economic area has to move together. If one country decides to take advantage of a situation and move forward or backwards, it will not be in the interests of the EU. That is not what a union is. The theory is promulgated in some quarters that we can go it alone, but John Donne said no man is an island and we are not an island either. If we wish to be left as an island, isolated as some outcrop in the Atlantic, then that is the way it will be. However, we must recognise that we have a strong and compelling interest in ensuring that we are part of that European inner sanctum and a driving force within it, and that we contribute towards it. In addition, we must ensure that all other constituent parts of the Union are doing likewise. Whether we like it or not - larger or smaller countries, big or small economies - we all have a co-ordinating role to play.
It is injudicious and unhelpful to suggest that a co-ordinated approach is in any way an erosion of our democracy or sovereignty. That is not true. There is no sense in me going to my constituency tonight and telling people there we will have a stimulus package, that they should spend more money, that we should break the Union, set our own agenda, go back to our punt and all that kind of nonsense. Do people realise what they are saying to people whey they say such things? Are they fully conversant with what the consequences will be? Do they really know? It is no good comparing ourselves to Brazil - a country with a population of 200 million and massive resources - and saying that we can do what they did.
We can also suffer as a result of any erosion of our role within the EU. The Minister of State referred to that at the beginning. The role played by this country within the EU is of fundamental importance. Since starting out in 1973, we have been able to make a solid, stabilising contribution to the Union as it has evolved. That is no small matter and we still have a huge role to play in this regard.
My colleague, Deputy O'Reilly, referred earlier to the fear of a double-dip recession. I also hear this being mentioned regularly. Those who study history should consider the Wall Street Crash of 1929 and the United States depression in the 1930s. The current recession is the only one that is comparable to the Great Depression. There is no sense in saying that we have a little bit of an economic downturn because this was always on the cards. It is a matter of identifying the extent to which the institutions we have in place are capable of tackling the issue.
I will finish now, Chairman, but I want to say one more thing, although it is not a reference to my colleague, Deputy Pádraig Mac Lochlainn, who has a good knowledge of the reality of the situation. The fact is, however, that it is no good revving up the public to the beneficial effects of taking an easy route. There are no easy routes from here on in. We will have to make our contribution, stand our ground, carry the burden and show others that we are capable of doing so. If we welsh or shrug away from it, not only are we lost but the EU will also be lost, along with the European concept. If we want to go that route, let us examine the consequences. Will it just be a dip or a continuous dip for the next 25 years?
The next generation of children will suffer.
I know that the Minister of State is in a considerable rush, but there are two other contributors, so perhaps they can be brief.
I will be briefer than the previous two speakers. In October, we described the European crisis as a paradigm shift, but it has probably changed since then. We will probably have to alert ourselves as to what the newsreels are saying with the Italian situation. When we spoke in October, the cost of borrowing for Italy was at 4.93%, and today it stands at 7.89%. So it is a paradigm shift, as I described to the Minister of State on that day in October. I thank the Minister of State for her comprehensive report.
The other issue I raised with her in October was the capacity of the political system to respond to the accelerated manifestation of the market in the context of European stability. Her report was strong and robust and we need to be careful in the use of language on this issue particularly in the coming weeks. What Deputy Durkan might describe as being between a rock and a hard place other people would describe as having a gun to the head. The Minister of State's report has gone a long way to persuade me that the strategy the country is adopting in terms of the epic struggle to restore our credibility in Europe is working. What are the implications in layman's terms for the ordinary person on the street if we had to take out the printing machine and print the punt?
I am concerned at the reports that some of our European partners are drawing up contingency plans in respect of the possibility of an emergency package for the Italian people and the consequences of same. There are reports today that suggest that Britain is drawing up a contingency plan in the context of the creaking eurozone crisis. What are the consequences for the people who believe in the simplistic notion that we can take out a photocopier, restore the punt and walk away from this issue, as an option? Can the Minister of State give a synopsis of what she believes would be the implications for the people?
I thank the Deputy and ask Senator Kathryn Reilly to be brief.
The Minister of State mentioned that there were breaches of the Stability and Growth Pact and how a blind eye was often turned to them. She mentioned making the fiscal rules legally enforceable by the European authorities. What fiscal discipline would the Government support? What would be the effect of any sanctions to be enforced in strengthening the economic governance of the Union? What is the Irish position in terms of sanctions and fiscal discipline in these negotiations?
I thank Members for their contributions. Senator Colm Burke asked about the proposal for a role for the Seanad in European scrutiny and debating the enormous work programme which the Commission presented two weeks ago. I support that proposal and have said so in the Seanad. I am making arrangements to meet the Leader of the Seanad in the near future for a discussion on how that proposal might be implemented. As I am not a member of the Seanad I have to respect its integrity. However, I think there is a role for elevating the debate on European affairs to a different level and the Seanad presents a great opportunity to do that. Without taking away from this committee, which does a very important job in bringing together Members from both Houses, I agree there is a role for the Seanad and I look forward to supporting that proposal. I support the work of this committee.
In regard to the issue of the Government's nominee to the European Court of Auditors, raised by Deputy Pádraig Mac Lochlainn, that our nominee did not come through the budget committee in the European Parliament with flying colours is not a positive development from Ireland's point of view. It would have been preferable had he come through that process. While I do not want to comment on the internal workings of this committee I do not accept the point that it was a red herring raised by the committee last week - it was relevant. If an Irish Government nominee is somehow campaigning against the interests of the State, it is appropriate to raise it, and I respect that fact and thank the Chairman for forwarding the findings from the committee last week. That is part of the purpose of this committee. All Oireachtas committees must play their part.
Deputy Joe O'Reilly raised the issue of a two-speed Europe. I feel very strongly about this. We have a European Union based on a number of principles: principles of equality and respect for nation states. Around the table of 27 at the European Council and at other ministerial formations, we are equal, we all have a role to play and a voice. I would object to the idea of creating an inner core. One can argue that we have an inner core in the eurozone but that is for a specific purpose that is specifically designed to support the currency. Of the ten member states outside the eurozone, the vast majority want to get into the eurozone. and it is important that they play a part in the discussions surrounding the eurozone.
All treaty changes are subject to unanimity - that means all 27 member states must be part of discussions pertaining to treaty change and the broader issue of the European treaty. This is a very important point of principle in terms of solidarity between member states. Solidarity has been eroded and has come under intense pressure, particularly in the past 18 months. Under pressure, we need to pull together rather than break away from each other. Therefore, I would have major concerns about such a proposal. However, I do not believe that is being actively considered by member states and member state governments.
Can we achieve necessary budget controls without radical treaty change? That remains to be seen. Obviously, the Government is doing a certain amount of work by exploring different options and different elements of what might be required. We await President Van Rompuy's proposals next week and we are examining some of the proposals put forward by other member states.
On the question of a referendum, there can be treaty changes that do not require a referendum and there are treaty changes that do: it depends on whether there is a technical handing over or sharing of competence between member states and the Union. We do not know the answer to that as yet. If we decide that it is in Ireland's best interest to move forward on the basis of changes that will require treaty change, which in turn will require a referendum here, then so be it. Why should we rule out something that could be in our interests, simply because of a fear of our electorate. I reject that completely - I have great faith in the public and in its capacity to make decisions and to decide on Ireland's best interests.
I do not subscribe to the view that the people do not support the European project or European integration. History proves that not to be case. When Ireland joined the European Union in 1973 it had an 80% approval rating by Irish people who saw Ireland's future as being at the heart of Europe. In successive referenda, the people voted to support treaties which have deepened co-operation and integration. The Eurobarometer poll always shows the people are positively disposed to Europe and Ireland's place in Europe. We should not fear a referendum. I accept the point that a referendum can be divisive. If there is to be a referendum we will lead the debate and we need to respect each other's positions. I respect Deputy Mac Lochlainn's perspective; I do not always agree with him, but I do sometimes. We must have a mature debate and not descend into the hysteria we have witnessed in previous referenda. If we arrive at a point where we need a referendum let us make a concerted effort not to descend into hysteria.
On the question of a double dip recession, clearly the European economy and other global economies are on the verge of recession. Thankfully, the Irish economy has just emerged from recession. We are on a positive growth trajectory, we are ahead of target for this year, and we can continue on that road.
Last week I spent two days in Iceland meeting members of the Government, academics, business organisations and women's organisations. It was very interesting. According to the Anglo-Saxon media, Iceland is the great example and we should follow its model and break away from the European Union. There has not been the investment of one penny in Iceland since the banking crisis. Iceland's return to growth is as fragile, if not more so, than ours. The Icelandic people are anxious about the fact that they have a tiny currency that is not pegged to any major currency and that is not tradeable on global markets. They are banging at the door to join the European Union, not because they want to share our rules and regulations on labour markets and freedom of movement for workers, as they already benefit from this because of its membership of the European economic area, but because they want to join our currency. They see a current problem in the eurozone, but they also see the euro emerging from it stronger, better and more fit for purpose and want to be part of this. We should watch that space and reflect on this point.
To look at Ireland, why have we returned to growth? I am not delusional about it; I am conscious that we have a deep problem in the domestic economy and face a major challenge with unemployment. We have, however, maintained our attractiveness as a destination for investment. Why? Not just because of the corporation tax rate - that is an element - and we have a well educated workforce - the OECD can put question marks over this - it is largely because we have access not just to the Single Market but also to the euro currency, can trade without the implied costs of having a different currency and are part of a currency union that, although it faces questions, ultimately is seen as sound and that has a long and stable future. That is seen as a huge benefit to Ireland and why, despite the fact that inward investment slowed down for a period, it has picked up and we have managed to save jobs. We should not be proud of a 14% unemployment rate, but in Spain and other countries there is a 23% unemployment rate, and much higher youth unemployment. We should be grateful that this is still an attractive place in which to invest and that companies have stayed here. Some of them are even expanding and creating jobs during our darkest economic days. I see a bright future for Ireland and that we will remain on a growth trajectory, even if the rest of the eurozone ends up in a further recession. We do not want this to happen, as we are reliant on exports and need export markets. Our biggest market is the eurozone area and the European Union, but I firmly believe that irrespective of this, we will continue on our road to recovery.
On Deputy O'Reilly's "bar lobby" from Kingscourt, when I have discussions with my counterparts in the Bundestag, red tape and bureaucracy are major issues of concern. Some of it is self-imposed by the Governments but some results from overzealous directives from European institutions. No ill will is intended, but sometimes these things can be misjudged. We are insisting through our negotiations on the multiannual financial framework that there be much greater simplicity in drawing down funding under the Cohesion Fund and the Common Agricultural Policy. A major argument I have been making on the MFF at the General Affairs Council, which Deputy Simon Coveney as Minister for Agriculture, Fisheries and Food has been making in his negotiations on the CAP, is that there is a need to keep bureaucracy at a minimum. Rather than increasing it through new green provisions and environmental requirements, we should simplify the procedures for farmers in drawing down funding under the CAP, and do likewise for business.
The European Commission has a very ambitious work programme for 2012, much of which will be carried over into the term of the Irish Presidency in 2013. The reduction of regulation and the furthering of the Single Market agenda will be major issues. The 12 legislative proposals on the Single Market are only the tip of the iceberg; there will be another 38 after that. If there is to be a priority for our Presidency, it will be to drive that agenda and ensure that, as we try to stabilise the currency, we do not forget about the growth and jobs agenda. We must minimise red tape and bureaucracy, make it easier for SMEs to access the market and trade across borders. Issues ranging from the digital market to venture capital to copyright are being dealt with as a matter of priority. Again, these will be up for discussion at the European Council in December. There is a positive agenda we can sell. It is hard to focus on because we are being distracted by other challenges, but we must focus on the Single Market agenda which is of crucial importance to us.
Deputy Walsh asked about Germany and fiscal co-ordination versus fiscal union. Angela Merkel is probably the most vocal in rejecting the prospect of having a federal European Union. Eurobonds, however, offer a federal solution that would suit Ireland very well. Often, however, the perception is very different from the reality. We must educate ourselves on what we need to happen and what we want.
Is there a fear big businesses will renege on the commitment to provide for improved conditions for workers? They cannot; it is all in the jurisprudence and body of law and regulations which have emanated from the European Union in the last 50 years. If a business reneges on its commitments, it can be taken to the European Court of Justice. We have a legal framework, by which people must abide. It is one of the great strengths of the European Union, that there is no prospect of backing out of obligations and responsibilities in respect of workers' rights because there is no wriggle room. Many businesses complain about this, saying it is too much, but there must be a balancing act between workers' rights and the creation of an environment in which businesses can create jobs and wealth to pay for the public services about which Deputy Mac Lochlainn spoke. That is a balancing act the European Union has performed better than any other region in the world. If we look at China or the USA, we can see that we have done it better and that we should not seek flaws in something we have done very well.
I agree with everything Deputy Durkan said. There is no easy route. We must get on with the difficult task that lies ahead.
Senator Reilly asked about fiscal discipline and sanctions. As all of the options have yet to be discussed, I do not want to pre-empt what will happen. The European Court of Justice is in the mix, having been put forward by our German colleagues. That is a good idea. As a Government, we have yet to consider many of these proposals in more detail, but on the face of it, it is a good idea. There is a system of peer review and when a member state breaches the rules of the Stability and Growth Pact, no one wants to accuse it of breaking the rules and demand that it pay a penalty. We all operate on the basis of bilateral and multilateral relations and people do not want to lose friends, rather they want to gain them. It is not a good environment in which to impose rules or ensure people abide by them. Having the option of being able to refer a problem to the European Court of Justice for a ruling might be the way to go. On the face of it, I favour such an option, but the Government must analyse the different proposals made. Therefore, I do not want to cast anything in stone.
Deputy Keaveney asked about the situation in Italy. The eurozone crisis is being fuelled by the crisis of confidence, trust and credibility. The longer this continues the more the trust and credibility are eroded. While the Deputy can call it a sovereign debt crisis, there are other countries with worse debt problems than most of the eurozone countries. The United Kingdom has a bigger debt problem than Italy or Spain, for example, but the vultures do not hover around that country because there is a credibility issue in the European Union which is born of a political crisis and now we need a political solution to it. I will continue banging that drum and repeating that mantra until we finally see decisive action from the European leaders on that front. The Taoiseach will go to next week's European Council with a very clear message on the ECB. I will bring the same message to the General Affairs Council.
In terms of the potential impact of a eurozone collapse, the implications for Ireland are very grave. First, we have an immediate funding problem in running the services in the State. We are running a primary deficit of approximately €18 billion. If the eurozone collapses and by implication the bailout programme and packages fall on their face, we will have a major question next week. How will we fund the activities of the State?
Correct.
Who pays to keep our schools open, keep the lights on, run our hospitals and pay the Garda?
That is agreed.
That is a major challenge and is an immediate implication of a euro crisis. The other issue is that of capital flight. I do not need to tell members of this committee how many billions of euro have been invested in our banks already to make them relatively stable in the context of the European banking crisis. The prospect of enormous capital flight from our banks means that we face a renewed crisis in our banking system just when we have restructured and recapitalised our banks. While none of us is happy with how that has happened, we really do not want to open that can of worms again.
Going back to the time of the devaluation of sterling in the early 1990s, interest rates on mortgages in the State were approximately 17% or 18%. We cannot seriously contemplate going down that road when people are put to the pin of their collar trying to meet mortgage repayments and deal with all the pressures coming at them from left, right and centre.
The other potential impact would be a dramatic reduction in wages. Two weeks ago I attended a conference in Florence which has been run by the Aspen Institute, a US-based think tank, for the past couple of years. There were representatives of the IMF and people from throughout the financial sector. Some of them suggested that if we defaulted on all our debts, for example, or allowed the currency to collapse, we would then automatically experience a wage reduction of approximately 50% for public sector workers in Ireland - they pointed to Ireland as one example. Our public servants have already taken a 14% pay cut, which is dramatic. We have seen the debate pitching the public against the private sector, but 14% is pretty dramatic. I accept that in the context of the various pay agreements in the previous 15 years, it might not be as dramatic as some might say. I ask members to imagine the impact that a 50% cut in wages would have on families. This would not take five or ten years to get over: it could take 30, 40 or 50 years to get over. We would be talking about going back not to the 1980s but probably to the 1960s or 1950s. So the implications on that front are very clear.
We would also face the potential of further brain drain. With capital flow out of the country and a wages collapse, tens of thousands of our educated workforce would leave the country for sunnier destinations, which would not only have short-term implications for today and tomorrow, but would also have dramatic implications for our attractiveness as a destination for inward investment. I have already spoken about the inward investment issue and the perception of Ireland as a place that is still safe and trustworthy. It is a good place to do business for multinationals which want to access the currency zone and the Single Market. If the euro collapses we would be back to paper money that is worthless. Pegging it to sterling would not help because sterling will take its own hit, by the way. Nobody knows this better than the British Prime Minister, Mr. David Cameron, MP, and the British Chancellor of the Exchequer, Mr. George Osborne, MP, who are demanding a seat at the table lest they be left out of any of this because they are so concerned about the impact on sterling. We would not peg ourselves to sterling and would need to look to an Asian currency. I could go on discussing the implications.
It is scaremongering.
Conspiracy theories.
These are not conspiracy theories; they are-----
We both agree that a euro collapse would be disastrous for Ireland.
It would be disastrous. We can agree on that and have agreed on it previously. I was asked to spell it out and have probably covered half of it. If the committee wants me back next week for part two, I will happily come back.
I thank the Minister of State. I think everybody will agree that has been a very wide-ranging response.
Hear, hear.
We would all like to attend that lunch with President Van Rompuy at the General Affairs Council. I do not know what the Minister of State will do for the rest of the day, waiting for it to come.
I asked her a question to which she did not respond - I do not really want her to respond. I asked about the 7.7% breach of spending rules in respect of the Cohesion Fund. In discussing the Multiannual Financial Framework, the Minister of State should inquire as to what measures are proposed to ensure that will not happen in future years.
I apologise. The short answer is that I will do so.
Thank you.
The joint committee went into private session at 4.58 p.m. and adjourned at 5 p.m. until 11.30 a.m. on Thursday, 15 December 2011.