JOINT COMMITTEE ON EUROPEAN UNION AFFAIRS debate -
Thursday, 1 Mar 2012

Treaty on Stability, Coordination and Governance in the Economic and Monetary Union: Discussion

Chairman

As part of our ongoing consideration of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union we invited a cross section of opinion from Irish society to address this committee. In the past we have had many top economists address the committee. Next week people from civil society will appear before the committee.

Today a number of ambassadors will address the committee. They are Her Excellency Emmanuelle d'Achon, who is the French ambassador; His Excellency Dr. Eckhard Lübkemeier who is the ambassador of Germany; and His Excellency Javier Garrigues, who is the ambassador of Spain.

On foot of the announcement of a referendum by the Taoiseach and the Tánaiste on Tuesday, today's meeting will be a timely opportunity for members to seek the perspectives of fellow member states through their ambassadors on the treaty. I should point out that we asked a number of other ambassadors, including the ambassadors of Greece and Portugal but they were unable to attend today. We hope that they may attend at some stage in the future. The ambassadors are welcome and I invite Her Excellency Emmanuelle d'Achon, the ambassador of France, to make her opening remarks.

H.E. Ms Emmanuelle d’Achon

I thank the Chairman and the members of the joint committee for inviting me to share a perspective on the final draft of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, EMU. As far as France is concerned, we are satisfied with this outcome. This is particularly true given that France had already supported recent measures adopted by the EU to boost growth and reform governance - measures such as the euro plus pack, the legislative six-pack for economic governance, and the European semester. During this unprecedented crisis, we believe that the EU had no choice but to drastically reshape its structure of economic governance.

The draft treaty represents yet another step towards more effective management of the financial and economic crisis through a more efficient system of governance in the EU and particularly in the eurozone. Until now, EU governance was lacking due to a concentration perhaps on the common currency. The treaty, however, will strengthen the economic pillar of the economic and monetary union through enforcement of rules intended to tighten budgetary discipline.

In terms of tackling the crisis, the treaty will be a welcome addition to the European stability mechanism, ESM, and we believe that the ESM will prove to be an even stronger protective shield than the existing EFSF. France will provide, as members may know, about 20% of its funding - more specifically, over five years it will transfer €16 billion directly to the ESM and guarantee a further €143 billion in the long term.

While some are referring to this draft treaty as the "austerity treaty", we in France prefer to view it as a necessary complement to the ESM - a commitment on behalf of member states to fiscal responsibility. After all, if member states are in a position to enjoy the multiple benefits of solidarity with their European partners, they must also be committed to fiscal discipline and the maintenance of sound and sustainable public finances.

Members might remember that France has been a major proponent of tighter economic governance and the implementation of a fiscal golden rule at the national level. Furthermore, we advocate respect for the fiscal rules, something I acknowledge may have been overlooked in France in the past, most notably regarding the Maastricht criteria. Notwithstanding the current crisis, we continue to believe that economic and monetary union is an important historical process designed to bring real economic benefits to eurozone citizens and to member states planning to join the EMU in the future.

In order to maintain the stability of the monetary union over time and prevent other crises, concerted efforts to correct budgetary imbalances in a sustainable manner are essential. In that regard, I assure the members of this committee that France fully appreciates the efforts that have already been made in Ireland and acknowledges the courage of the Irish people in implementing austerity measures which have thus far resulted in reduced budgetary imbalances. Ireland's recovery programme is on track, as evidenced by the opportunity I had recently to visit financial institutions in Luxemburg where I heard very optimistic views regarding Ireland's ability to return to the markets in the near future.

Nonetheless, we believe that on the whole, further efforts are required at EU level to promote budgetary stability, a necessary basis for growth and job creation. The draft treaty provides the means to make this happen. In France we do not believe that this will lead to a two-speed Europe. On the contrary, we trust that European integration is deepening, while at the same time each country remains free to decide which level of integration it wishes to commit to, and according to its own national circumstances.

The ongoing European Council is also focusing on growth in our countries and we hope that its conclusions will set out concrete measures to boost growth and employment; measures that are essential in enabling our people to understand and accept the austerity imposed upon them and thus look to a better and brighter future, and not one of gloom and doom.

With regard to the implications of the treaty for France, as in Ireland, it will mean imposing tougher measures through a further reduction in public spending. As members will know, France adopted an austerity budget this year and our growth forecast for 2012 was lowered from an initial 1% provision to 0.5%. While some measures will not be easy to implement, my country already demonstrated its ability to anticipate the draft treaty in implementing a drastic reduction in the numbers of civil servants and very necessary reform of the French pension system. Austerity should not necessarily lead to recession, thus becoming counterproductive for our economies, and it is for that reason that France remains committed to working hard on growth boosting measures, at both national and European level.

In that regard, I would mention a few steps which have already been taken in France to foster growth in different areas. They include planned investment of €35 billion in higher education; initiation of a consultation process on environmental protection and the benefits of such to the economy; establishment of research and development tax credits for the private sector; and encouragement of investment from SMEs through a specialised agency, which offers financial support to small and very small French firms.

At European level, France is already working in three sectors, an experience we are willing to share with our European partners. We are committed to supporting industry and new technologies in particular; increased employment of seniors; and in order to increase productivity, an increase in the number of training schemes, especially for our young people.

As members know, France has entered an election period. Whatever the results might be and given the current context, my feeling is that the incoming government will have to continue working to restore public confidence in the EU's ability to deal with the crisis and acknowledge that solidarity means discipline and real efforts to boost the dynamism of our economy.

I thank the Chairman once again for his kind invitation. A number of his colleagues from the Dáil, led by the Ceann Comhairle, recently travelled to Paris where they participated in very fruitful visit to our Assembly and Senate. They met, among others, the Chairman's counterparts, and I hope that during the next parliamentary session, he will have the opportunity to meet his French colleagues at the Committee on European Union Affairs. I thank the members for their attention.

Chairman

I thank the ambassador for those kind words. I invite H.E. Dr. Eckhard Lübkemier to make his opening remarks.

H.E. Dr. Eckhard Lübkemeier

I join my French colleague in thanking the Chairman and members of the committee for inviting me to this meeting. As the German ambassador to Ireland, I will try my best to convey to the members the German position on the draft treaty in particular but also on Europe in general. I would also like to stress that I am here as a fellow European citizen. To me, meetings of this kind are part of domestic European politics. European issues are no longer foreign policy issues, they are matters of common concern to all of us and as a conviction European, I see them in the context of our joint responsibility for our common future. Therefore, as the German ambassador and as a fellow European I would like to make the following ten points. In doing so, I will not exclusively focus on the treaty proper. Whatever one's position on the treaty, it will inevitably be shaped by one's view of the European project in general.

My first point is that the current crisis is extraordinarily grave. Precisely because it is grave, we must not and we need not despair. We must not despair because too much is at stake, and we need not despair because there is nothing preordained about the future of Europe and the euro. If Europe or the euro disintegrate, we have only ourselves to blame. Were that to happen, failure would have been of our own making, as would be success. Europe can only be brought down by Europeans but Europe will survive and thrive if we Europeans are determined to see it survive and thrive.

My second point is that we have every reason to ensure that Europe survives and thrives. The European Union is the most successful project in European history. It is based on and it thrives on the recognition that peace, prosperity and democracy go hand in hand and that they are objectives which can only be pursued together. Either we enjoy them together or we lose them together.

My third point is that a strong and united Europe is in our best national interest. Members should note that I did not say the "United States of Europe". We will never be like the United States of America. Our Europe is unique. It is unique in its combination of supranational and intergovernmental features. They reflect and ensure that Europe and the nation state are two sides of the same coin.

As I see it, Europe is in our best interest for two principal reasons: internally, European integration fosters peace, prosperity, democracy and participation in Europe. Externally, Europe enables us to act as a force for good in the world and to promote our values and interests in a world of global opportunities and global risks.

My fourth point is that in such a world, big is better. This is by no means a new rationale. It is the basic idea underlying the Single Market project which is a primary source of our prosperity. Big is better even more so in today's world of multiple and formidable poles of powers. In such a world, the European Union is our way of ensuring that risks and benefits of globalisation are shared and that its rules are shaped in a way that takes into account our values and interests. For in such a world, not a single European country qualifies for the global premier league. As individual countries, we are middleweight at best. Only by pooling our resources are we powerful enough to induce others to co-operate with us on an equal footing. By acting together we can be a much more effective force for good in the world.

My fifth point is that the euro is an essential buttress of a prosperous and powerful European Union. I implied that the United States of America is no role model for our European Union of nation states. What the US does demonstrate, however, is that a single currency provides a boost both to the efficiency of an internal market and the international clout of the actor in control of the currency. An American Secretary of State for the Treasury reportedly put it bluntly, "The dollar is our currency but your problem". Here is the rub. A means unsuited to furthering an end can destroy that end. This is especially true of the euro. Therefore, great care must be taken to neutralise Murphy's law that what can go wrong will go wrong.

My sixth point is that this crisis offers an opportunity to put the euro on a firmer foundation. Rahm Emanuel, President Obama's former chief of staff, once quipped, "Never waste a good crisis". This crisis is not a good crisis but it can be put to good use if we heed it as a wake-up call. The crisis has laid bare structural deficiencies of the eurozone construction, and it has revealed the ruinous effects of too much public and private debt, too little competitiveness and too much financial alchemy. Now is the time to tackle these three sources of the current crisis, and to do so in a way that ensures lasting success rather than just short-term relief.

The committee must not get me wrong. I am under no illusion that there exists a magic formula to prevent any future crisis. Human behaviour can never be made fail-safe but we can and must learn from history so as not to repeat past mistakes.

My seventh point is that the treaty on fiscal stability is vital. It is needed to address the problem of over-indebtedness in a way that convinces both the public and taxpayers on the one hand, as well as investors on the other that this time we are serious about debt reduction.

My eighth point is that the treaty is vital but not sufficient in itself. Fiscal stability or, to put it in more colloquial terms, living within one's means, is not an end in itself. It is a means to the end of long term and sustainable growth and employment. Such prosperity cannot be borrowed from others, and it should not be borrowed from future generations through saddling them with a crippling debt burden. Instead, a high standard of living has to be secured through high productivity and competitiveness. As regards financial markets, we must reinstate market rules in the sector and make it fail-safe for the real economy.

My ninth point is that Germany's commitment to the euro is rock solid. Chancellor Merkel has said repeatedly, "Europe fails if the euro fails". The German Government is acutely aware of what is at stake, but not just the German Government. All major legislation on measures to stabilise the eurozone has been passed with opposition support in the German Parliament. Two out of three Germans believe in the future of the euro. This reflects that all major political forces and the German people continue to see the euro as essential to the well-being of my country. Consequently, Germany has supported and will continue to support the euro even if this means incurring substantial risks and costs.

My tenth point is that Germany needs and wants a strong and united Europe. Our commitment goes further than the euro. To us, the euro is not only an essential economic but also an eminently political project. The euro is essential for the exercise of collective European sovereignty. It is an economic and political project that must not be allowed to fail. Indeed, if there is an institution that is too big to fail, it is the euro. One can count on Germany that it will not happen.

H.E. Mr. Javier Garrigues

I thank you Mr. Chairman for giving me this opportunity to present the views of the Spanish Government on the draft intergovernmental treaty on stability, co-ordination and governance in the economic and monetary union and on its implications for Spain and for Europe. It is a great honour and a privilege to be able to discuss such important issues with the Joint Committee on European Union Affairs.

Spain will sign the draft treaty and trusts that it will be adopted, pending ratifications, during the European Council taking place today and tomorrow. A referendum will not be needed in Spain. The treaty will be ratified by Parliament. The Spanish Government is satisfied that the fiscal compact allows for a balanced approach regarding the need for both fiscal consolidation and the introduction of stimulus to economic growth and job creation. We value in particular the declaration adopted by the informal Council on 30 January regarding the creation of jobs for the young, since around 50% of our youth is currently unemployed.

We see the fiscal compact as an essential instrument to stabilise the eurozone at this critical juncture for Europe. When the euro and the whole European project are riddled with uncertainties, EU members are responding with determination to restore confidence and thus create the right conditions for economic growth and combating unemployment.

The fiscal compact must be seen not as a goal in itself, although we do not question its intrinsic value, but as part of a co-ordinated strategy to establish a sound basis for growth, making sure that the errors of the past can be avoided in the future. As a matter of fact, Spain, together with Ireland and ten other EU member states, took the initiative on 20 February to call for the launching of a plan for growth in Europe which should focus on eight clear priorities with the goal of building greater competitiveness and correcting macro-economic imbalances.

Spain is committed to the euro as a key element of the European project and is willing to take all the necessary measures to guarantee its success. We are convinced there is no way back and for us the solution to the current crisis is more not less Europe. We want to be at the forefront of the efforts but joining in these common efforts is not enough. Spain knows that its first task must be to put its own house in order. We are well aware that, given the overall situation of our economy and in particular our exceptionally high rate of unemployment, Spain's efforts and sacrifices are particularly tough.

We are determined to return to economic growth both through fiscal discipline and structural reforms. Both instruments are necessary and mutually complementary. Fiscal discipline on its own, although essential, could choke the economy and further increase unemployment.

That is the reason Spain has launched an ambitious, three-pronged programme of structural reforms with the goal of creating a stable, sustainable and competitive economy. The first of these is fiscal reform. Regarding fiscal stability, Spain had already introduced in its constitution, even before the fiscal compact, the "golden rule" to establish budgetary discipline. We are, so to speak, one step ahead of the fiscal compact and now we are introducing the necessary legislation to make sure that public debt will not exceed 60% of our GDP.

The central government and all the regional autonomous administrations, which have overspent significantly in the past, will not be allowed to incur a structural deficit except under very specific and restrictive circumstances. Preventive and corrective mechanisms are foreseen in the case of non-compliance. EU corrective mechanisms have thus been transposed into our legislation.

The second is financial reform. The Spanish Government has also adopted important measures of financial reform to improve the soundness and the strength of our system by particularly dispelling doubts about the valuation of real estate assets.

Last but not least the Government recently introduced very ambitious labour market reform. We trust it will effectively contribute to sustainable and stable employment. We take note with satisfaction that it has been widely and positively welcomed in Europe. Fiscal, financial and labour market reform are the three main steps taken so far by the Spanish Government but there will be further structural reforms in the near future.

Spain is already doing her homework to contribute to the consolidation of the eurozone and will always be at the forefront of initiatives, such as the fiscal compact. Spain wants to remain at the decision making core of Europe. Spain's economy will emerge stronger from this crisis and this will contribute to building a stronger Europe. The EU must recover its economic dynamism but it should not lose its soul in the process by sacrificing its commitment to solidarity, its common values or the European social model. In a nutshell, we want more Europe.

Chairman

I thank the ambassador. We will now have questions which I will take in batches of three. The first speaker will be Deputy Joe O'Reilly.

Deputy Joe O’Reilly

I welcome the ambassadors. I thank them for attending and for their excellent presentations. A positive outcome to the referendum to be held here is vital. It is in the country's interest. We have had a hugely proactive and mutually beneficial membership of the EU since joining it. I am firmly of the view that we have been good for Europe and Europe has been good for us. We are inextricably linked to the euro and the success of the euro is as vital to our national interest as it is to the countries the ambassadors represent.

I will address some questions to the ambassadors. First, one of the criticisms of the fiscal compact, as the French ambassador stated earlier, is that it is perceived as an austerity treaty and presented by its critics as an austerity treaty. Will the ambassadors reassure us, and through us the people we represent, that the fiscal compact treaty does not preclude or prevent a jobs stimulus programme? While it prevents improperly balanced budgets, which should be the case, it does not prevent spending on fruitful economic activity and on a jobs stimulus. I ask the ambassadors to comment on that because many of our people fear that in some way it will prevent progressive budgets or budgets that would kick-start economic activity, perhaps not quite Keynesian budgets but budgets that would have a stimulus to generate job creation. A reassurance on that score is important. I am convinced it does not prevent it but I would like to hear that more specifically from the ambassadors.

Second, I ask the panel to comment on the fact that if we are outside the compact treaty we are outside the European Stability Mechanism, ESM, and if we are outside that, even though we are convinced there will not be a need for a second bailout in Ireland, it will damage our capacity to borrow in the open markets. Will the panel comment on that because people need to know that we have the cushion of the ESM to reassure the markets in which we would be borrowing?

Third, could the ambassadors comment on the fact that we will have time to adjust. People outside of here may fear that we will suddenly will have to bring our budgets into line and have an overly sharp adjustment. Is it not the case that we can arrive at a balanced budget over a period of time and by arrangement? Will the ambassadors comment on that? I know the process cannot be indefinite but I understand we do not have to have a sudden jolt in that regard.

Fourth, it would help the Irish case if the ambassadors were to use their good offices to assist the negotiations in which we are involved in terms of restructuring the promissory notes and reordering the timetable for those. That would assist the Irish case to progress on that. While the two are not linked, and we should not link them because the case for the euro and for Europe surviving is a stand alone case, a recognition that progress was being made would help.

Fifth, I ask the ambassadors to comment on another issue which must be addressed. People have to look at the stark alternative. Would the ambassadors be prepared to outline what they believe will happen if the referendum here is not passed? One cannot make an educated vote on this issue without a realisation of the implications of it not being passed, which would be dire both for Europe and for this country. I do not believe it will actually happen and, therefore, regard it as an academic question. At the same time, however, it is a real question for some people.

Deputy Seán Kyne

I welcome the three ambassadors and the other delegates and thank them for their comments. I welcome their strong commitment to Europe and the euro.

Deputy O'Reilly stated the treaty is strong enough to be viewed as a stand-alone treaty. I hope the Irish will vote on the merits of the treaty and not on other circumstances in Ireland or the rest of Europe. My first question is for the French ambassador. Individual members of the French Government have made many comments over the past year or so regarding the corporation tax rate in Ireland. This does not play too well in this country given the importance of our low corporation tax rate to the economy, job retention and the encouragement of foreign direct investment. Some are annoyed over the comments. Will the ambassador comment on this?

Will the Spanish ambassador state whether it was easy to obtain agreement? Former Prime Minister Zapatero negotiated the reduction in the rate associated with the deficit to 3% initially. That was with the support of the current Prime Minister, Mr. Rajoy. Was it easy to obtain consent in all parts of Spain considering the level of unemployment and the previous boom, particularly in the construction industry?

When the fiscal contract is signed up to, presumably with Irish agreement, will this increase the likelihood of eurobonds or more positive soundings from Germany in regard thereto? This question is directed in particular towards the German ambassador. The eurobonds would obviously comprise a larger burden for Germany than for other countries. The German ambassador is on record as not being supportive of eurobonds.

Senator Fidelma Healy Eames

I welcome the delegates and thank them for their presentations. As they now know, Ireland will have a referendum. Our Government will recommend a "Yes" vote but there is no guarantee that the referendum will be passed. Our people are hurting, mainly because of debt. The debt is personal but there is also private debt that has been socialised. One can never be sure of the outcome.

Will each delegate state the outcome for Ireland, the eurozone and the Union if there is a "No" vote? Clarity on this, in so far as it can be given, is very important. We need to deal with facts in so far as we can. To what extent has Ireland been party to the treaty? Do the German, Spanish and French Governments feel Ireland's participation in the treaty process is crucial to its success? Given that Ireland would be the only eurozone country outside the treaty if there were a "No" vote, would Ireland's being party to the treaty be desirable rather than essential? Only 12 of 17 countries need to ratify the fiscal compact treaty. Therefore, why is Ireland required? Is it just desirable that it ratify the treaty?

In each of the ambassadors' countries, is the treaty likely to receive significant opposition in the national parliament? I do not expect it will be the case in Germany. I refer to France and Spain in particular.

As the previous speakers stated, some believe the treaty should be linked to our current bailout conditions while others do not. Irrespective of whether there is an argument in favour of a link, it is in the discourse. There is an expectation that this is the time to negotiate better conditions.

With regard to Ireland's debt and the bailout programme, is it likely that Ireland will receive concessions from the troika, such as a debt write-down or, as Deputy O'Reilly stated, a renegotiation of the promissory note conditions? What are the respective positions of the ambassadors' countries on this?

Ambassador Lübkemeier's country's achievements are very interesting in that Germany rebuilt itself. To do so, it received help through the Marshall Plan and it took quite a long time to repay its debt. It used the funds very well, however. Could the ambassador elaborate on why Chancellor Merkel and the German Government are currently against bolstering the Union's bailout fund when many in Europe regard the building up of this fund, or the fire wall, as it is sometimes called, as necessary and a corollary of the acceptance of the fiscal compact treaty, which was strongly pushed by Germany? This question follows on from what Deputy O'Reilly asked about the fallback position regarding the availability of the ESM. German history is very interesting to us. Germany is a good model because it used the funds it got wisely and rebuilt itself. Germany can be a model for Ireland also but there is a danger that if the cushion is pulled too soon, Germany will ensure that Ireland does not recover.

My final question is for the Spanish ambassador. He spoke about youth unemployment in Spain. Ireland has a similar pattern. It was believed that the second Lisbon treaty would provide for jobs but this did not happen. How can the Irish people believe that the fiscal compact will be any different? I look forward to answers and I would appreciate it if each of the respective ambassadors addressed those questions.

Chairman

I propose that we take contributions in batches of three. There will probably be another two batches after this round. I ask the ambassadors to limit their responses to approximately five minutes each. In this way, we will be able to deal with everybody's questions.

Deputy Timmy Dooley

May I intervene with a view to being helpful? Many members will have similar comments. I ask the Chairman to take more than three contributors at a time and allow the ambassadors to respond at the end? Otherwise we will be here all day. That is my perspective but the matter is entirely in the hands of the Chairman.

Chairman

I will ask my questions now and return to the matter. Some of my questions have been addressed. I am particularly interested in the ambassadors' views on eurobonds. I note a candidate for the office of the French presidency, Mr. François Hollande, said at Le Bourget that he favours the issuance of eurobonds. Might we see them in the short term?

With regard to the firewall, as the delegates know, the ESM firewall will amount to €500 billion. I would be keen to see this increased to a figure closer to €1 trillion. What are the ambassadors' views on making available the unspent, uncommitted money from the EFSF, which amounts to €250 billion? I am particularly interested in hearing the German ambassador's comment on that.

We recognise that over 50% of young people in Spain are unemployed. Circumstances are similar in Ireland where over 30% of young people are unemployed. Six countries similar to Ireland and Spain are now the subject of EU action plans. Those action plans are to be discussed in Europe in the middle of April. Having listened to some European Commissioners, I am concerned that there will not be much funding to implement the action plans and that they will largely comprise a restatement by other member states of best practice regarding youth unemployment. What efforts are being made by the ambassadors' individual countries to ensure these action plans have some teeth and some funding behind them?

H.E. Ms Emmanuelle d’Achon

I do not know whether I will manage to answer all the questions but I will do my best to take them in order. I will revert for a few seconds to the first question asked by Deputy O'Reilly about the austerity treaty. It is very important to avoid presenting this treaty to our population as something akin to further gloom and doom with no perspective on the future. The discussions that are taking at present at the European Council are in favour of finding ways to return to growth and to give hope for greater employment and more jobs for people. I assure members this objective definitely will be defended by all our countries. It is unfair to describe this treaty as an austerity treaty and more than anything else, it must be presented as something bringing more efficient governance to the euro area.

I will turn to the fundamental question of what will happen were Ireland, or indeed France, obliged to hold a referendum. Members are aware there are two possibilities in France in that we can go through Parliament but some voices now advocate going to the people and having a referendum in France as well. Consequently, we must ensure that we have a positive result because the unity, stability and solidarity that now are of the essence between ourselves, that is, between partners, must be implemented. For Ireland, if I modestly may make a comment, your image is so much better than it used to be one year ago. You have made a lot of progress. You are no longer considered to be on the radar of the dangerous states or situations. It is of the essence at present for the people of Ireland to show once again that they believe in Europe and appreciate what has been done for them thanks to the solidarity of the partners. We hope you will undertake the campaign in such a way that will encourage your people to say "Yes". As the Deputy stated, he is optimistic regarding the result. We hope that in all our countries, we will have a good result in this regard. We must campaign and must involve everyone, including the private sector, and must state this is a treaty for jobs and more growth. It is very important to ask the question in this regard very wisely as otherwise, we would give a wrong message to the markets and to international opinion and would show there is no unity in Europe at present. That is my answer to the Deputy's question.

I wish to mention the corporate tax issue, which at times - and last year in particular - has been a question between the friends that Ireland and France are. Members are aware that our president believes strongly in fiscal convergence in the European Union. At the same time, we know perfectly well, as you have explained at length in France and in Brussels, that for you it is a very important question. The low corporate tax rate in Ireland to attract foreign investment is essential for your economy at present, especially during these times of bailout and austerity and it would be very wrong and a red line for Ireland to change it. We have understood the message and we know it is not time for you to discuss this at present. Overall, however, we in France believe in more fiscal convergence to come in the European Union. Members are aware that Ireland has engaged positively on discussions regarding the common consolidated corporate tax base, CCCTB, and we hope that in future, discussions will continue. At present France and Germany are working together to try to bring our corporate tax rates closer to each other. However, we hope that one day, more partners will join us in this regard. We know that for Ireland, it is too difficult at present but hope we will continue discussions in that regard.

In response to the Chairman's question on eurobonds, we think it is a little early at present to discuss that issue. Perhaps in the future, the time will be ripe to adopt such measures. This might well be the case and we are not refusing it. We simply are thinking ahead to ascertain whether that will be possible. As to whether we will increase the firewall, we think we have made progress and that when compared with what the EFSF was proposing, the ESM definitely is a highly interesting tool. The ECB will retain its independence but we think we certainly will have more means in the future. Let us wait until we use these possibilities that now are offered with the treaty. I may have forgotten something. I wanted to say something on-----

Chairman

The ambassador will have an opportunity to come back again.

H.E. Ms Emmanuelle d’Achon

Okay. I will leave it at that.

H. E. Dr. Eckhard Lübkemeier

This is very tricky for several reasons. Although I understand the motivations behind several questions, I must state I am the ambassador and not the decision-maker. Some of the matters on which members invited me to comment and to elicit a response are far beyond my pay grade. It was a nice try but this is a pit into which I will not fall.

Chairman

We had to try.

H. E. Dr. Eckhard Lübkemeier

Of course, like journalists. All I can say is members should invite politicians and decision-makers, such as the Minister with responsibility for European affairs who appeared before this joint committee a couple of weeks ago, and they will get information from the horse's mouth. In addition, your people in Berlin get it from the horse's mouth there as to what is the German position on several issues. Second, I refer to another pitfall, which is members will not hear me comment on what would happen, were the Irish people to say, "No". It is not for me to decide what will be the eventual Irish position on the treaty. Equally, what I also will try extremely carefully to avoid is scaremongering. As I stated at the outset, I am present as the German ambassador but I also am present as a fellow European citizen and this is my modest comment. It is to try to avoid scaremongering about what will happen if Ireland does not ratify this treaty. I for one would put greater emphasis on the positive side of this treaty and on what you stand to gain when you join the treaty.

From our point of view, there is much to gain. There is a lot to gain for this country but also for our common currency because this crisis has shown there is indeed a kind of design flaw in the construction of the eurozone. We have a common currency and a unified single monetary policy but we do not have fiscal and economic co-ordination that is sufficiently close to support the long-term stability of this common currency. I again put more emphasis on the positive note by stating this crisis now offers us the opportunity to remedy this design flaw of the eurozone construction. Part of this effort must be this fiscal compact treaty because it will provide reassurance both to our citizens and to international investors that this time, we are serious about debt reduction. There is no magic formula to live beyond one's means forever and we had to learn this the hard way. Incidentally, we in Germany also were obliged to learn this. Senator Healy Eames is not present but she mentioned the Marshall plan. I would rather refer members to what we were obliged to do during the first half of the last decade when Germany was considered to be the sick man on the Continent, had 5 million unemployed and was experiencing very low, if any, growth rates. For many years, we breached the 3% rule of the Stability and Growth Pact. We had to launch a rather painful reform process in Germany but we were able to accomplish the turnaround. Look where Germany is today. In all modesty, I should say that we did not get any help nor did we seek help to do this. We knew we had to do it ourselves and we did so. In terms of fiscal discipline, we have this golden rule on debt in our constitution. Germany is at 1% net borrowing this year. Even more importantly, we did it in terms of increasing and regaining German competitiveness in the global market. China is now the benchmark in the global market, rather than Europe and the USA. It was painful for German taxpayers, including average workers in my country. Looking at the statistics, there has only been a modest increase in real wages, if at all, in Germany for many years. We will most likely have some real increase in wages this year, but for many years average wages in Germany did not increase. This was part of regaining competitiveness and while it was not the only thing that did it, it was painful enough.

I must admit that I worked for a chancellor who lost office over this painful reform process. We had to do it and we did it, but do not expect me to comment on "What if?", although I want to be helpful. Senator Healy Eames is not here, but we are deeply convinced that everybody should be on board in terms of ratifying this treaty. It is not only desirable, to use her words, but from our point of view it is also crucial that Ireland is part of this treaty because this is about our common currency.

Chairman

Thank you. The Senator had to leave to vote but she did ask me to ensure that her points were answered so that she can read the transcript later. I thank the ambassador for answering those questions.

H.E. Dr. Eckhard Lübkemeier

Eurobonds will probable be discussed later.

Chairman

Yes, we will have time to discuss that. I now call on the Spanish ambassador.

H.E. Mr. Javier Garrigues

I thank members of the joint committee for their interest and very good questions. It just proves how important the issue is for all of us. Following in the footsteps of such heavyweights as France and Germany, I can only agree with what they have said. I would not dare to disagree but maybe I can give a slightly different nuance in perceptions, which might be of interest. I will certainly not try to influence the vote of the Irish people in the referendum by commenting on "What if?" scenarios. I do not think that is constructive.

As the German ambassador has done, I would insist on the importance, in principle, of being part of the solution and being on board. That is how we see it in Spain. We always think it is much better to be in the club where decisions are taken, rather than being left outside and trying to act alone. That is quite clear.

As to the very good question on whether it should be seen as an austerity treaty, that will be inevitable in discussions in all our countries. It is very much the issue in question but in a way it is unfair because it provides for both. Austerity is the necessary step for growth and creating employment, which is how we see it in Spain. The government is convinced that it is the inevitable first step if we want to have a sound basis to start growing again.

I was asked whether this was difficult in Spain because there has been a change of government in my country. The previous socialist government had already started drastic measures to balance the budget. I should stress that there was bipartisan agreement on inserting a golden rule in our constitution, which was significant.

As to how the debate will evolve now, the devil is in the detail and it will become more and more difficult in parliament. There is a general feeling, however, that it is a necessity and that Spain must take the medicine in order to be cured and avoid past mistakes.

I will make a general comment on linkages, preconditions and negotiating strategies. I think it would be a mistake to establish concrete linkages on preconditions. The essential thing is that we are going to negotiate in a spirit of solidarity in the European Council. They are doing this practically as we speak and the discussion is ongoing. I hope it is the case that circumstances in each and every EU member state will be taken into consideration. The EU is not a ruthless machine. We are the EU and we influence those decisions, so we must ensure that these circumstances are taken into account. That is very much the Spanish attitude. We have our own problems, expectations and negotiating targets. I am convinced, however, that we must approach this discussion in a spirit of solidarity and flexibility.

On the question of whether the fiscal compact will help to reduce youth unemployment, I do not think the compact in itself will provide a solution. However, it is a necessary step without which - no matter how much funding we pump into our economies - growth will be artificial and a long-term solution will not be forthcoming.

That is why Spain has introduced ambitious labour market reforms which are essential to deal with the structural unemployment we have had for so many years. Copies of these reform measures are available for the joint committee if members are interested in further information on this issue.

Spain's position on eurobonds and firewalls is well known - we are for it. The possibility of having higher firewalls for eurobonds implies having more instruments. In a spirit of flexibility, we realise that everything we need cannot be achieved or obtained immediately. It is a question of timing, balance and solidarity.

Deputy Bernard J. Durkan

Like the Chairman and other members of the joint committee, I would like to welcome our guests and thank them for their positive and constructive intervention. We must also be positive and constructive in the context of European co-operation. I am not an economic expert but I have read a lot of material written by various economists over the years. Many of their views have since been well and truly dismissed, but I will not dismiss them and I apologise to all economists in advance as I regularly have to do.

My first awareness of economic recovery was in 1953 when I read a book on post-war recovery. Germany, in particular, was in focus at the time. I was amazed. I was eight years old at the time if anybody wishes to do a quick calculation. I got one clear message, and it was that where there was a commitment to the concept of recovery, even in very difficult and isolated circumstances, it was possible to recover.

References have been made to the Marshall Plan and various other matters over the years. A few weeks ago we discussed the Great Depression in the United States, with which this recession has certain parallels, with a group of economists. It was presumed that we would learn from the Great Depression but nothing was learned. One of the major issues is the duration, and all of Europe failed to recognise the possible duration of this recession. Second, the extent of it was not recognised by any European country, including ours. We were told at first that we would have an economic soft landing. There was no basis for that conclusion. Reality had to dawn, and it has dawned.

I fully appreciate and accept the huge sacrifices made by Germany, since reunification in particular. The ambassador correctly referred to that. Anybody who visited Germany regularly before that period and in the last few years will readily recognise the sacrifices made by the German people compared with other people throughout the world. We need to know and understand that when we wish to criticise, for example, Germany's attitude to the rest of Europe. We understand that and fully appreciate it.

We accept that we have a problem in this country and we will resolve it. I do not agree with the notion that everybody else espouses, that if we get a deal the referendum will be approved. That is not the way to go about it. Nobody has ever achieved anything that way. I have plenty of experience in debt resolution on behalf of my constituents. There is a golden rule for that - one assesses the situation, gets a breathing space or debt brake, which is hugely important, and in that space one puts in place the mechanisms that will bring one out of the situation. Lending institutions must be understanding in that situation. They might have to pay some price, and they will. Likewise, the borrower must pay a price.

This country will have to bear some of the price, and we are doing that quite resolutely. However, we need approval, support and recognition. We need to be recognised as doing the right thing. The ambassadors have referred to this already, but we need to know that if we make these sacrifices we will not be forever indebted to the institutions for which we make the sacrifices. It is hugely important that this is recognised. We were conscious of that when some of us had occasion to discuss in the European institutions over the last number of years the possibilities affecting respective countries in the event of the type of occurrence we are discussing now. There must be general, all round understanding.

There is another thing I cannot understand. Of course, we need a stimulus package. Europe needs a stimulus package. However, we must get our economic fundamentals in order first. That is a prerequisite, and the framework must be in place. If that does not happen, the recovery can never happen. That is what happened in the Great Depression in the United States, albeit after ten or 15 years of a long, drawn out debate. The ambassadors' countries must recognise that we are willing to make the sacrifices, as those countries are also making sacrifices. It also must be recognised that after making those sacrifices, we must be able to depend on the larger countries' continued support.

I wish to refer briefly to the issue of convergence, which was referred to by Ambassador d'Achon. This emanates from France and the ambassador made very diplomatic reference to it. I do not agree with it. It is not necessary. It has not been found necessary in the United States. There are different rates of taxation throughout the United States. Generally there is the same economic policy with the same objectives but there are differing means of achieving them, albeit that all allegedly purport to achieve the same objectives.

In the last few weeks, a surcharge was applied to airlines to reduce their carbon footprint and so forth. Who does that affect most? It mainly affects islands. The number of alternative means of moving from place to place is limited. There are only two ways for us to travel off the island, by sea or by air. People in any other European country have two means of travelling as well. One cannot travel by boat if one lives in the centre of Europe but one can travel by air or by train. People have an alternative so they need not be hit by that surcharge. When proposals emanate from the centre, therefore, we expect that somebody would have regard for the possible impact on we who live on the periphery.

I have no doubt that we have the ability to recover. With regard to the referendum, I believe the decision to hold it was correct. It was deemed necessary by the Attorney General. To be absolutely certain that there could be no constitutional challenge, as has happened in the past, the Attorney General made the correct decision. It also gives the Irish people an opportunity to give their imprimatur to what has happened. Considerable progress has been made by way of renegotiation and reconfiguration of our debt, even in the past 12 months, to the extent that approximately €18.4 billion has been shaved from it. That is serious progress and the Irish people will have an opportunity to give their approval or rejection.

Finally, we live in an environment in which everybody suggests soft options or easy ways out. Everybody will seize that opportunity for populist reasons. This applies to countries facing elections in the rest of Europe too. At this stage in my political life I wish to issue a warning. Those who pursue soft options at this time will pay a very high price, indeed a far higher price than has been paid previously. We have the potential to resolve our difficulties or to make the problem even worse. Suffice to say, I know what we must do at this stage. Whether we have the unity of purpose throughout Europe to do that remains to be seen.

Deputy Timmy Dooley

When one speaks after Deputy Durkan, one usually faces the situation where most of one's points have been covered. However, I wish to put some comments on the record on behalf of my party.

First, I welcome the ambassadors and thank them for their frank and open presentations. Unfortunately, I had to leave the meeting once or twice to go to another meeting, but I have read the submissions. The ambassadors will be aware that my party was, from the outset, supportive of holding a referendum. We believe in the necessity to engage our citizens in the European project debate in all instances. This fiscal compact is no different from previous decisions that were taken. It is part of a process of building on the project that was founded years ago. When we joined in 1973 we were very supportive of the fundamentals of the European project, and we remain so and will continue in that vein. We believe it is important in all instances to engage with the citizens and bring them through the various stages. Attempting to do something in isolation, particularly in Ireland, can have a negative effect.

From our point of view, we see this as a stepping stone. We believe there will be a requirement for further agreements that will require referenda, particularly in the area of understanding the necessity, if one is creating a fiscal bloc, to be able to have transfers between member states. I was struck by what the German ambassador said, that Germany did not look outside Germany but had to face up to certain realities. It did so on its own and did not seek broad scale assistance. I am sure the ambassador understands that when one has a country of Germany's size and scale, it is somewhat easier to work within its own borders.

We are a small but open economy which has participated well within the European framework. To deal with our banks, our State borrowed from German banks and we recognise the necessity to pay back those bills. My party, when in government, recognised the importance of that too. The German ambassador cannot say Germany works within its borders but it wants a broader Europe in which to sell its goods. Would the ambassador agree that this is an isolationist approach?

Will the ambassador comment further on the role of the European Central Bank and euro bonds? We believe they are an important step and are disappointed they did not feature in this treaty. While the treaty is all about regulation and bringing budgetary discipline, there is little by way of jobs and growth in it. Other measures will have to be introduced to deal with this. There is also a need for a greater European role in regulation across the banking sector which may form part of future treaties.

The French ambassador spoke about Ireland's image having improved dramatically in the past 12 months. While I welcome it, can she enlighten us as to why she believes this has happened? She also referred to Ireland's corporation tax rate which my colleague Deputy Durkan discussed earlier. She said she and her German colleague are at one on the issue of the common consolidated tax base and corporate tax. That gets extrapolated into meaning tax harmonisation. If we are going to have a discussion about tax harmonisation, let us also look at the way France applies its tax code. Let us put everything on the table.

Perhaps there is not such a disparity between the French tax levying capacity and ours. Unfortunately, there is much commentary abroad that Ireland has a favourable corporation tax rate. France has a higher percentage rate but there are many opt-outs inherent in the way it is levied. It is not welcome to be talking about tax harmonisation or CCCTB, a common consolidated corporate tax base, at this point as it causes great concern among Irish citizens. I prefer if we moved away from that.

The French have stated they want a discussion about it but that we may not be able to deal with it now. All political parties in Ireland have stated the discussion will not be now or at any other time. My party does not intend changing its position, regardless of what changes take place in this House over the coming years. Fianna Fáil will be resolute in protecting what we believe is an important aspect of our capacity to attract foreign direct investment. We say that to the French, the Germans, the Spanish and whoever else wants to listen. We are not for changing. I am not being partisan but I believe there is no political party in this State that has indicated a willingness to move away from that position. We are happy to discuss and deal with the issue but, at the same time, we all need to put our cards on the table. If the French are prepared to accept their tax code has a capacity to deal with corporations in a particular manner that is favourable to them and is below the standard rate, then they should say so.

The sooner we get this harmonisation issue off the table, the better. It will allow everyone to believe, as Deputy Durkan stated, that there is a capacity to share in terms of regulation and capacity to lend. We do not need, however, to put some spancel on a small nation like ours. Our population, compared to France's, is quite small. We are not having a major impact on France's capacity to grow or employ.

Senator Kathryn Reilly

I welcome the ambassadors and apologise that I had to leave the meeting briefly for a vote in the Seanad. I may have missed some of their responses to earlier questions.

In the newspapers today, we learn that documentation concerning the Irish budgetary position has been discussed again in the German Bundestag before it was published here. There is an erosion of trust in the Irish people when they find out that Irish budgetary matters are discussed in Germany first rather than here in our national Parliament. In the past we often lamented we had government by press release where announcements were made to the media rather than to the Parliament. Now, we are in the perverse situation where we are finding out about our economic situation from the German Bundestag as opposed to hearing it here. What are the views of the ambassadors on that?

In a public lecture given by the German ambassador in Trinity College Dublin in January, he stated, "Not least because of its political nature, member states will defend and stabilise the euro". On the objectives of the euro, he stated, "Either we enjoy them together or we lose them together". We are being told that failure to ratify the fiscal compact treaty will mean Ireland will not have access to ESM, European Stability Mechanism, funds, that it will be sink or swim for the economy and Ireland's future in the euro would be compromised. Does the German ambassador agree the European Council would not let this happen and that failure to ratify the project will not mean Ireland will be left behind?

Will the French ambassador clarify if there will be any legal ramifications if there is a change in the French presidency and the new French President decides the terms of treaty are unacceptable? What would the legal process be by which a new President could remove France from the treaty or would France still consider itself bound by the rules?

I know other members have raised the issue of youth unemployment. Spain has a high youth unemployment rate and, unlike Ireland, it is not able to disguise this through emigration. Many young Irish people have emigrated to Australia, New Zealand, Canada and England. The Spanish ambassador welcomed the declaration of the informal Council meeting regarding the creation of jobs for the young. Last week a meeting with the action group on youth unemployment and the Taoiseach's Department seemed to be more a briefing on statistics without much of a plan for what next. Ireland has used up its Structural Fund allocation. There is no fresh funding and little room for funds to be diverted for youth employment initiatives. Spain is undertaking extensive labour market reforms and this treaty will be a step towards that. Does the Spanish ambassador believe there is a need for some fresh injection of capital to address youth unemployment? Can this happen when the fiscal treaty will be so rigid on state finances and spending?

Deputy Dara Murphy

I welcome the ambassadors and have met Ms d'Achon on several occasions. There are four Governments represented at today's meeting. The 17 Governments in the eurozone are in the process of signing up to the fiscal compact treaty. I support comments, in particular about eurobonds, from this country, Spain and in some cases from France. On the reference by the German ambassador that ambassadors are not political and that they are messengers, it could be said that messengers go in two directions. The debate is welcome. This country, once again, offers the opportunity for a broader debate on Europe by virtue of the fact that we are having a referendum. The treaty is a specific one, unlike the previous two, which were much broader. Previously, it was much easier for other non-treaty issues to be introduced because of the broad nature of the treaties. This treaty is specific and it is good that such broad support is evident, in particular from Opposition parties and a large Government majority.

I read Ambassador d'Achon's presentation as I was late in arriving. She referred to economic governance. An issue arises within Europe, which is about its people. The people of Europe are very close, as are the governments but, nonetheless, there is an issue of political governance that is causing difficulty, in particular given that we have a European Parliament - one of our MEPs is present - a Commission and a Commission President. I am concerned that the role of the Commission President is being marginalised at the moment by bilateral movements that have been made. I would be interested in the ambassador's comments on where Europe is going, in particular with respect to a directly elected European President, who should be the person to lead the campaign rather than groups of larger countries taking ownership.

Sometimes the political interests of individual countries can stray in and infect issues in other member states. Reference was made to the corporation tax rate by another Deputy. When he visited this country during the Lisbon treaty, President Sarkozy supported Ireland's corporation tax rate. Not only is the corporation tax rate not an issue for this treaty, as it is not mentioned anywhere in it, but it is not an issue to be discussed at all by the Government and the Opposition. Even if we make progress with respect to the tightening of fiscal measures or a move towards a more federal Europe, other nations that have federal systems, including the United States of America, do not have common tax rates across the states. It must be made clear that while our image within Europe is improving - the current Government deserves much credit for that in the past 12 months - it also gives us a renewed confidence to state that certain issues are not on the table from our point of view and corporation tax is unquestionably one of them.

I am chairman of the European affairs committee in Fine Gael and from meetings I have attended in Brussels it is apparent that we are among a considerable number of nations that feel all countries must have an equal voice in discussions - it is not just this country - and that there must be a stronger role for the European Commission President and the Commission. While we accept that the two biggest nations within the eurozone, the Germans and the French, are being extremely helpful, it is vital that all countries are given parity of esteem. The way to deliver that is through the Commission Presidency. I thank the witnesses for attending today's meeting.

Ms Phil Prendergast, MEP

I apologise for being late. I just came from Brussels this morning. I will read the contributions in full. I welcome the opportunity to attend the meeting. The Chairman, Deputy Hannigan, who was in Brussels earlier this week and will be there again next week, met with the chairperson of the German European affairs committee on his visit. I welcome the fact that we are to have a referendum. It presents an opportunity for discourse with the public, to take all relevant factors into consideration and to show that the treaty is good for us. I recognise that our national interests will be best represented by a stabilised eurozone. I have listened to what my colleagues have had to say. It is important that we continue to communicate effectively both as MEPs representing our countries and regions in Europe that, equally, we have a two-way conversation. These meetings are particularly beneficial for MEPs because one gets a great deal of information - the whole picture - otherwise what we get is a composite.

It is important in the debate that it is clear what the "No" group is saying "No" to and what the alternative is. Everyone must feel his or her voice is being heard. That will be important. I thank the witnesses for attending.

H.E. Ms Emmanuelle d’Achon

In response to Deputy Dooley's point on the image of Ireland, there has been real engagement from the Irish Government in Brussels, participation in many meetings with its counterparts there and engaging by presenting Ireland's case wisely. It is a tribute to Ireland's embassies abroad that this country has been doing an excellent job in economic diplomacy in our capitals. They are presenting Ireland's case with a lot of stamina. It is also important that the Oireachtas would engage with our parliaments and parliamentarians. Members speak the same language and understand each other. Having been with the delegation led by the Ceann Comhairle in France, I noticed how important it is to convey the message directly to the people who have constituencies and can spread the news. Ireland has been doing a very good job in implementing the bailout programme. The country is very serious about it and its credibility is real both in Brussels and in our capital because of Ireland's consistency and ability. We are very admiring of the preservation of social peace in this country.

Deputy Timmy Dooley

Does the ambassador accept that it is on the basis of the decisions we have taken in the past two to three years?

H.E. Ms Emmanuelle d’Achon

The Deputy wants to drive me on a path that I am not going to follow. I have said what I thought of the current Government in charge.

On corporation tax-----

Deputy Joe O’Reilly

I do not remember any other Government.

Deputy Dara Murphy

Deputy Dooley should not try to force the ambassador into saying what we all know.

H.E. Ms Emmanuelle d’Achon

I speak about the measures that have been taken over the years. Ireland is having its fifth austerity budget. That is very well known in France also. I will not comment any further on the corporation tax rate because we do not agree on the basis itself of getting a rate that would be more in convergence. We are working with Germany on some of those issues. As has been said, it is not an issue at the moment. The treaty will give us better tools for better governance and that is what is of the essence at the moment.

As far as the ratification of the treaty in France is concerned, that will be for the next President to decide as I do not expect it to happen before July, some time after we reconvene our parliament. There will be time to choose between a referendum, a constitutional change or a congress of the parliament. What is important at the moment in France is that for the very first time in the history of the Fifth Republic, European issues are becoming a very important subject for the ordinary citizen. That is something very positive because then the discussions will be taken over by the people and the debate will be very interesting.

On leadership in Europe, we agree the Lisbon treaty has led to much progress. The European Parliament definitely has a bigger role. President van Rompuy is presented to us as the leader of Europe and he does much work on building consensus. It is a first step and perhaps one day we will have more political integration. I will not comment further on it today.

H.E. Dr. Eckhard Lübkemeier

Only a few minutes of the meeting remain so it is time to take off the gloves in a sense. I would like to respond to the taxation issues raised specifically with regard to Germany and France. Tax harmonisation is not on the table. What is on the table is CCCTB which is tax base harmonisation, which, by the way, Ireland is committed to discussing. Who knows what the outcome of the discussion will be, but there is agreement that the issue has been and will be taken up at European level. It is with regard to the tax base and not tax rates and I want to be very clear about this.

I do not see my government pushing for harmonised tax rates across the board in Europe. We are interested in increasing the efficiency of the Internal Market. Opt outs were mentioned and one can also call them loopholes. This is something we need to address so we have a level playing field throughout Europe. It would improve the functioning of the Internal Market if we were able to do this. This is our approach to the issue. It is not that every country must have the same tax rate when it comes to corporate taxation. Perhaps one day we will decide collectively this might be useful but at this point what we are arguing in favour of is starting a discussion. Member states have agreed we will have a discussion on the corporate tax base. We see this in the context of improved functioning of the Single Market and having a level playing field and more transparency. Loopholes or opt outs-----

Deputy Timmy Dooley

Does the ambassador accept-----

H.E. Dr. Eckhard Lübkemeier

This is our approach.

Deputy Timmy Dooley

Does the ambassador accept a common base would mean winners and losers? It would impact very significantly on the revenue generated through the taxes of foreign companies in a small nation like Ireland which has been heavily dependent on foreign investment.

H.E. Dr. Eckhard Lübkemeier

No, I do not.

Deputy Timmy Dooley

From our point of view, leaving harmonisation aside, the impact of CCCTB on our capacity to generate revenue through corporate tax would be significant. We would be a loser.

H.E. Dr. Eckhard Lübkemeier

Why?

Deputy Timmy Dooley

The documentation produced on CCCTB identifies winners and losers.

H.E. Dr. Eckhard Lübkemeier

Will the Deputy show it to me?

Deputy Timmy Dooley

I do not have it with me but I would be happy to share it with the ambassador.

H.E. Dr. Eckhard Lübkemeier

I would love to see it.

Chairman

Perhaps-----

H.E. Dr. Eckhard Lübkemeier

The famous PricewaterhouseCoopers paper argued the effective corporate tax rate in Ireland is higher than in France. I want to make clear that from our point of view this is not the case. All I can say from the German point of view is that we dispute the study.

Chairman

We can return to this matter on another occasion.

Senator Fidelma Healy Eames

It is a subject for another day.

H.E. Dr. Eckhard Lübkemeier

In my view this is a side issue but it has been raised several times and I thought I should respond. Speaking not as the ambassador but as a German citizen it should not be put forward in the referendum campaign in this country. I can assure the committee tax harmonisation in this sense is not what we are after. We have an interest in a thriving Irish economy, and a thriving Irish economy needs foreign direct investment. It is Ireland's economic model. To some extent it is also the German model because we are also an exporting nation. We have a very open economy.

Deputy Dara Murphy

It is very important to state it has nothing to do with this treaty. We have agreed to take part in a discussion but it will require the full support of each member state to change taxes.

H.E. Dr. Eckhard Lübkemeier

Definitely.

Deputy Dara Murphy

While we may have a discussion, it is not something which can be forced upon the Irish people in any way shape or form.

H.E. Dr. Eckhard Lübkemeier

No, absolutely not.

Deputy Dara Murphy

We are more than happy to discuss it but it would be disingenuous for anybody here to suggest the discussion would start from any point other than that we expect to retain control over our taxation policy in this country.

Chairman

It would need agreement from all 27 member states, not only the eurozone countries but all EU members.

H.E. Dr. Eckhard Lübkemeier

We are two-way messengers. We have consistently relayed this home.

Chairman

It is outside-----

Deputy Timmy Dooley

My comments are not personal.

H.E. Dr. Eckhard Lübkemeier

I do not consider them to be.

Deputy Timmy Dooley

The only purpose of my communication with the ambassadors today is so they can take back a very clear message that it is not-----

H.E. Dr. Eckhard Lübkemeier

And that is how it should be.

Chairman

It is outside the scope of this-----

H.E. Dr. Eckhard Lübkemeier

That is the beauty of the European Union. We can have an open and frank discussion among ourselves.

Deputy Timmy Dooley

Absolutely.

Chairman

That discussion may be for another day because the particular issue is outside the scope of this meeting.

H.E. Dr. Eckhard Lübkemeier

It was raised several times-----

Chairman

Yes, it was.

H.E. Dr. Eckhard Lübkemeier

-----and I wanted to make clear our position on the issue. Undoubtedly, it will be raised in the campaign here-----

Chairman

Quite possibly.

H.E. Dr. Eckhard Lübkemeier

-----just like eurobonds. We have stated we are opposed to eurobonds for several reasons. I wish to draw the attention of the committee to an interview the Chancellor gave several weeks ago. During the interview she did not rule out eurobonds forever. What she stated is that they are not a quick fix and cannot be used at the beginning of the process of deeper integration. These were more or less her words. It would not involve the mutualisation of current debt but perhaps it may be an option in the future.

When deeper integration has been achieved, there may be arguments in favour of eurobonds. Please take into consideration if it were a quick fix and Germany were to be saddled with the debts of the rest of the eurozone, we would lose our triple-A status. We are the last remaining major eurozone economy with triple-A status. Whether one likes the rating agencies or not, this tells one something. Everybody should be interested in Germany maintaining its triple-A status because we are now the anchor of the eurozone. Please do not overburden us to such an extent that it would result in us not being able to extend the type of solidarity we have already extended and which we will extend in the future. As I stated, we are in this together, but we also need to be for it together. This implies that everybody plays by the agreed rules in terms of getting their own houses in order. Collectively, we need to get the European house in order but each of us must get our own domestic house in order also.

The treaty is fairly clear on ESM and that is all I need to say on how to access ESM funds in future. I do not state this to be destructive. Please understand from the point of view of a creditor nation one wants to have some control over what happens to the money and guarantees one offers to others. It is a simple quid pro quo. Otherwise, there would be no domestic political support in Germany for this treaty or for any solidarity measure.

Senator Fidelma Healy Eames

The ambassador forgets that for every borrower, which we are, there is a lender.

H.E. Dr. Eckhard Lübkemeier

Yes.

Senator Fidelma Healy Eames

The person who funded is part of the-----

H.E. Dr. Eckhard Lübkemeier

This is about ECMs.

Senator Fidelma Healy Eames

Yes, I know.

H.E. Dr. Eckhard Lübkemeier

The Senator asked this question. We can hark back to-----

Senator Fidelma Healy Eames

There is a history to this. We are where we are as a result of the reckless lending at ECB level, in respect of which there is a moral and financial responsibility. This is not as simple as Dr. Lübkemeier is making it out to be. It must be remembered that at the end of all we do are Irish citizens, most of whom are being saddled with debt they did not incur. We are not acting alone in this; the picture is much bigger.

H.E. Dr. Eckhard Lübkemeier

Yes. For every Irish citizen, there is a German citizen also.

Senator Fidelma Healy Eames

Yes.

H.E. Dr. Eckhard Lübkemeier

I fully understand. The treaty does not force Ireland to spend its revenues in a particular way. That is for each member state to decide. The treaty asks that countries stick by agreed rules - that is it. What each country does with the money it raises is up to it. The sovereign decision of the member state is to how spend the money it raises.

We have an almost existential interest in the survival of the eurozone, not least for economic reasons. Some 40% of our exports go to eurozone countries and 60% go through the European Union. I agree that China is our most important trading partner but Europe will remain our economic homebase. We have an existential interest, for political reasons, in the survival and stability of the eurozone. We are ready to extend solidarity and have been doing so. We will be doing more in the future. There is no doubt about that.

Senator Fidelma Healy Eames

I regret to say I missed the answers to my earlier questions.

Chairman

They were answered. The Deputy can read the answers in the transcript of the meeting.

Senator Fidelma Healy Eames

I appreciate that. However, I am at a loss here because I do not know the answers given.

Chairman

I agree the Senator is at a loss but she will be able to read the response to her questions in the transcript.

H.E. Dr. Eckhard Lübkemeier

I am available to meet bilaterally with the Senator.

Chairman

We must move on as we are under a time constraint.

Senator Fidelma Healy Eames

I agree.

H.E. Dr. Eckhard Lübkemeier

On the future architecture of the European Union, this is perhaps not the point in time to start a new discussion about institutional architecture. However, there will come a time when we should debate among ourselves the future institutional set-up and checks and balances within the European construction. We have been - this is the view not alone of the parties of the ruling coalition, but of the opposition - traditional supporters of an enhanced role of what is the supranational part of European edifice, namely, the Commission, European Parliament, European Court of Justice, ECJ, or qualified majority voting. We have a great deal of sympathy for this. I regret that in the course of tackling the current issues the European Commission was not in the driving seat. However, it must be remembered that what we are discussing are issues that are still in the competences of the member states. They are not yet communitarised.

The treaty contains provisions which strengthen the future role of the Commission. Several parties in Germany can envision - I am not speaking now as the ambassador - a directly elected Commission President in the future. I am deeply convinced there is a need to engage with and, as my French colleague said, to involve the people more than in the past in this process. Otherwise, we will be in trouble in the future. This is only one way of doing things. Another way is to involve national parliaments more in the process. The European Parliament can do its bit and has been doing it. It has been strengthened but could be strengthened even further in the future. In my view it is equally important, if not more important at this juncture in the history of the European Union, that we get national parliaments more involved. We must enhance the ownership of national parliaments in this process because they are much closer to the citizens than are MEPs.

Chairman

Thank you. I now invite Mr. Javier Garrigues to respond briefly.

H.E. Mr. Javier Garrigues

I would like to respond to Senator Reilly's question and comment on unemployment in Spain, in particular youth unemployment. It is a huge problem. While it bears similarities with the Irish situation, there are also differences. As the French ambassador said, we are great admirers of how well Ireland is doing in recovering. It is very much on track. One of the essential factors in this regard is the capacity of Ireland's population to emigrate. The huge Irish diaspora contributes to that phenomenon. The situation in Spain is not the same. We were a country of emigration. However, this reversed dramatically in the 1970s when we became a country of immigration. We are now returning to being a country of emigration but at a much lower pace. Ireland has the advantage of a young, well educated and qualified population and of being an English speaking nation.

In response to the Senator's question, we need to put our house in order and to restructure our labour market, which we are doing. We would welcome funds from the EU, be they leftovers or new funds. This will be the negotiating line of Spain in Brussels.

I welcome this opportunity to attend this meeting. I hope that committee members leave having a better understanding of our positions on the treaty. I now have a much clearer perception of the different positions and nuances of the Irish parliament and MEPs present. Thank you.

Chairman

On behalf of the committee, I thank all three ambassadors for taking the time to come here today and for their presentations. I also thank them for the manner in which they responded to the questions asked, which was at times a robust exchange. We have all learned a great deal about our respective positions. Thank you.

The joint committee went into private session at 1.30 p.m. and adjourned at 1.35 p.m. until 2.15 p.m. on Wednesday, 7 March 2012.