JOINT COMMITTEE ON EUROPEAN UNION AFFAIRS (Sub-Committee on the Referendum on the Intergovernmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) debate -
Thursday, 5 Apr 2012

Reaction of Irish Society to the Treaty

Chairman

I remind members and guests and those in the Visitors Gallery that all mobile phones must be switched off completely. It is not sufficient to leave them in silent mode as they cause interference with the recording equipment. The meeting is being broadcast live on UPC channel 801. RTE and others will also relay the proceedings.

I welcome everyone to the second session of the Sub-Committee on the Referendum on the Intergovernmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union in which the focus will be on the reaction of Irish society to the treaty. Addressing the sub-committee this afternoon will be Mr. Brendan Halligan from the Institute of International and European Affairs, Ms Bríd O'Brien from the Irish National Organisation of the Unemployed and Ms Noelle O'Connell from European Movement Ireland. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they give to the sub-committee. If a witness is directed by it to cease giving evidence on a particular matter and continues to so do, he or she is entitled thereafter only to qualified privilege in respect of his or her evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a person or persons or an entity, by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they do not comment on, criticise or make charges against a person outside the Houses or an official, by name or in such a way as to make him or her identifiable.

I invite Ms O'Connell to begin the presentations.

Ms Noelle O’Connell

On behalf of European Movement Ireland, I am pleased to have an opportunity to make a presentation to the sub-committee. I commend the Joint Committee on European Affairs for undertaking this important initiative. Given the time constraints, I hope to present a synopsis of our more comprehensive and in-depth submission on the treaty which we submitted to the committee following collaboration and consultation with our members. I know from following proceedings and having attended a number of the sub-committee's sessions that members have heard a number of excellent presentations and views on the treaty from various groups. European Movement Ireland considers it very important that civil society organisations have an input into the process. As a not-for-profit voluntary membership-based organisation which has been in existence since 1954 and is seeking to increase the connection between the people and the European Union, it is extremely well placed to play such a role.

I intend to concentrate on what we believe are important points about the treaty, namely, that we, as Irish citizens, should have a reasoned and robust debate based on the facts in order that on 1 June we will be able to say an informed and facts-based debate took place, that there was a strong level of information and an explanation of the specific details of the treaty such that all citizens were able to actively participate and engage in the process. Too often in Ireland in referendum debates there is reference to other extraneous issues. It is crucial that the issues connected with this treaty are presented clearly and factually to the public to allow us all to make an informed decision on 31 May. We call on all politicians, the media and stakeholders to engage in a robust and informed discussion based on the facts. There is a responsibility on us all to ensure such a debate takes place. European Movement Ireland will be seeking to ensure an independent, non-governmental, voice is heard in the debate.

There is no doubt the treaty deals with complex fiscal rules which can be extremely difficult to explain, let alone understand, notwithstanding the fact that all of us have assumed a greater knowledge and comprehension of economic matters in recent years. The goal of the treaty essentially is to place in Irish national law rules about fiscal policy already in place at European level. Professor Philip Lane of Trinity College, Dublin has pointed out that the rules set out in the treaty are similar to those suggested in the report on fiscal governance by the Oireachtas Joint Committee on Finance and the Public Service, published in November 2010. Equally, the Department of Finance report of March 2011, outlining the fiscal responsibility Bill, contains similar terms. This point was reiterated by Dr. Gavin Barrett of UCD who appeared before the sub-committee yesterday in a recent article in The Irish Times in which he stated: “In terms of its substance, the fiscal treaty adds very little to rules which have already been adopted at EU level, or (to a more limited extent) are in the course of being adopted or planned”. Why then do we need a treaty which does not introduce significant changes to the rules that already apply? Why incorporate these rules into Irish national law when they are already in place at European Union level?

To answer these questions we must, first, endeavour to understand a little about the history of applying fiscal rules in the European Union. Many commentators have pointed to weaknesses in the original policy framework of the Maastricht treaty and the Stability and Growth Pact. While countries made a significant effort to apply the rules in order to qualify for membership of the euro, once membership was granted, the degree of policy discipline weakened substantially - a phenomenon often referred to as "Maastricht fatigue". In particular, it became clear that applying and enforcing fiscal rules at European level was problematic. By introducing EU rules to national law, the thinking is that it will be harder for countries, large or small, to flout them. Therefore, in principle, one would expect there to be a more equal application of the rules across all member states in respect of the fiscal stability treaty.

One of the key objectives of the treaty is to protect all European countries, including Ireland, from the potential harm of financial contagion from another member state. It is pertinent to note that several non-eurozone countries have signed up to the treaty. They include Sweden, a country with a generous welfare system which paid a high price for poorly managed public finances. The treaty essentially is a two-way process to protect countries, including Ireland, from detrimental policies being pursued in other member states, with the same rules being agreed by all participating countries. A greater domestic commitment from each of our European partners to commit to the fiscal rules laid down in the treaty will serve as a mechanism to build trust between EU countries and create a stepping stone from which we and our European partners can work to ensure a crisis such as that which Ireland has experienced in recent years will not recur. To use the analogy brought forward by Professor John O'Hagan of Trinity College, Dublin, the treaty is a little like the smoking ban in that it is designed to protect against the contagion effect of others' dangerous behaviour.

It is crucial to point to a fundamental difference between this and previous treaties that related to European legislation. I am sure members have already been briefed on this issue, but it is crucial that the general public is made aware of it. The fiscal treaty clearly states that in order for it to come into force, ratification by 12 of the 17 eurozone countries is required. Therefore, even if Ireland does not ratify it, the treaty will nevertheless proceed as and from 1 January 2013 if 70% of eurozone countries ratify it. It is important to highlight this reality. Ireland alone cannot stop the treaty from proceeding and our European partners can carry on without us, with the rest of the eurozone possibly moving ahead with closer economic integration. In that scenario, while we might formally remain a euro member, it is arguable that, having decided not to adopt all of the rules that apply to the eurozone, our influence and voice would be greatly diminished.

The treaty is a step forward in efforts to rebuild the economic and financial system of the eurozone and rebuild the Irish economy. The evolution of EU policy towards a strategy for growth and job creation is dependent on the creation of confidence in the capacity of the eurozone to follow sustainable and responsible policies and rule out a return to the mismanagement of recent years. The treaty is not, by any means, a panacea for all of the ills and economic challenges facing Ireland, the eurozone and our fellow EU member states. Nonetheless, it could be considered a step on the journey to ensuring the European Union, including Ireland, will have safeguards in place to deal with the type of global economic turmoil we have experienced since the end of the last decade.

It behoves us all to ensure the debate on the treaty puts us, as Irish citizens, in the best possible position to make an informed and considered opinion in the referendum on 31 May. Opinion polls show that a principal factor in people not voting is their view that they were given insufficient information to make an informed decision. In this regard, I commend the Government's decision to send a copy of the treaty, together with an explanatory note, to every household in the State.

Ireland is in a unique position in that we, as citizens, have an opportunity to make a decision on this crucial matter. However, with this opportunity come rights and responsibilities. Nobody can deny that Ireland has been through a traumatic period economically in recent years. The referendum represents an opportunity for all citizens to engage in the debate and participate in decisions regarding our future direction and the shape of our relationship with the European Union. Since our foundation as an organisation in 1954, this is something in which we in European Movement Ireland passionately believe and work towards every day, not just on referendum day. We will continue to engage with the debate in the coming weeks and months and look towards the Irish Presidency of the European Council in the first half of 2013 which will be another opportunity for the State to enhance its connections with the Union.

Chairman

Thank you, Ms O'Connell. I now invite Ms O'Brien of the Irish National Organisation of the Unemployed to make an opening statement.

Ms Bríd ÓBrien

I thank the sub-committee for its invitation to participate in this discussion. Ireland is facing an unemployment crisis of an unprecedented scale. It is a crisis led by a significant collapse within private sector employment and exacerbated by the retraction in public sector employment and the underfunding of the community and voluntary sector, a significant employer in its own right and a key provider of public services. The dramatic deterioration in Ireland's public finances arising from an over-reliance on expenditure taxes which evaporated as the economic crisis emerged, the extent of the employment and related taxes loss and the subsequent increase in social protection expenditure have all added to the scale of the crisis Ireland must address. All of this is further compounded by the nationalisation of private banking debt, which adds a layer of horror to the challenges facing the country, and threatens our viability as a people and undermines our ability to address the unemployment crisis appropriately.

At a time when the Government, in its review of the Constitution, should be looking to strengthen the economic and social rights contained therein, we are presented with an amendment that will copperfasten austerity, an approach that the most recent poverty figures illustrate is already exacerbating socioeconomic exclusion in the country. According to the Central Statistic Office's survey of income and living conditions for 2010, there was a sizeable increase in income inequality from 2009 to 2010 as between the highest and lowest income quantiles.

It is also questionable whether the treaty, had it been in place prior to Ireland's economic collapse, would have made any difference. After all, Ireland had been meeting the criteria of the Stability and Growth Pact and entered the crisis with its public finances apparently in good shape. The extent and depth of the country's crisis have their roots in the adoption of a neoliberal economic model that led to an overheating economy with an overexposed banking sector. These are critical issues about which the treaty has absolutely nothing to say.

At European level, Europe 2020 was introduced to replace the Lisbon Agenda, based on a strategy comprising three mutually reinforcing priorities. The first, smart growth, aims to develop an economy based on knowledge and innovation. The second, sustainable growth, relates to promoting a more resource-efficient, greener and more competitive economy. The third, inclusive growth, is concerned with fostering a high employment economy and delivering social and territorial cohesion.

Article 1(1) of the treaty echoes some of the language used in Europe 2020 in its reference to "supporting the achievement of the European Union's objectives for sustainable growth, employment, competitiveness and social cohesion". However, the substance of the treaty gives legal and constitutional priority to fiscal policy over all other policies. Looking at this issue from a purely economic perspective, how feasible is it to realise smart growth without adequate investment in education and the necessary information and communications technology infrastructure? The INOU argues it is not and that, in particular to support and achieve economic development, it needs to be inclusive and equitable. This is an issue not only for Ireland but also for the European Union. Similarly, social policy and its proper development and implementation should not only be viewed as desirable, it should also be seen as imperative if the Union, its member states and peoples are to flourish.

Europe 2020 covers a range of economic, social and environmental policies and sets a series of targets at both European and national level through each country's national reform programme. This series of targets will be hard to meet, particularly in view of the relentless focus on austerity, and is lacking in ambition if the European Union is to seriously address poverty and socio-economic exclusion. It is regrettable that Ireland, as a programme country, is exempt from making a full national reform programme report this year because the troika agreement does not cover all of the policy areas contained in the programme.

One line of argument notes that the terms and conditions of the troika agreement are so stringent that the treaty will have little impact on Ireland's current policy options. A similar line of argument says any return to the financial markets would demand a level of budgetary discipline of the type enshrined in the treaty. However, a further line of argument challenges the relentless focus on austerity and notes that no crisis dealt with by means of policies of austerity has produced the level of growth necessary to get any country out of the crisis Ireland is facing. This line of argument emanates from an interestingly wide spectrum of opinion. Europe's sluggish economic growth is seen as having a potentially negative impact on the apparent upturn in the US economy. In turn and given the open nature of our economy, this presents fresh challenges for Ireland because it is so dependent on the progress of other countries.

The INOU is strongly of the view that without proper investment in Ireland's future, it will be difficult to generate the necessary levels of economic activity that will create sufficient jobs to give people who are unemployed and those who will be leaving education in the coming period a real hope of obtaining sustainable employment. It is difficult to envisage how Ireland can successfully emerge from its current predicament without significant numbers returning to work or obtaining employment for the first time. In the meantime, it is absolutely critical that supports for unemployed persons are maintained and that the quality education and training provision that will assist unemployed persons in securing decent employment in the future, while also ensuring Ireland addresses its current and potential skills shortages, is maintained and developed.

On a technical point, Article 3.1.(b) of the treaty refers to "a lower limit of a structural deficit of 0,5 % of the gross domestic product at market prices". In practice, it is extremely difficult to ascertain what exactly constitutes such a deficit and put a meaningful figure on it. What about other structural issues? I refer, for example, to structural unemployment which has yet again emerged in Ireland and which, if not constructively addressed, will have seriously negative consequences for the country's social development. It is hardly in Ireland's or the European Union's interests if fiscal considerations are to be given such a weighting that addressing other serious challenges will undermine social cohesion and the emergence of growth that is smart, sustainable and inclusive.

Fiscal stability is clearly an essential element in achieving long-term sustainable growth, but it must be pursued in a manner that is equitable and that does not undermine social and economic rights. To this end, it is essential that Ireland seriously strives to address its current fiscal difficulties through the development of an equitable, broader and sustainable tax base. At a time when increasing numbers of people are looking to public services and supports, including income supports, to meet their basic needs, the maintenance of these supports is even more vital. Reform must not come in the guise of retraction, rather it must come in the guise of real reform which strives to meet people's needs in an appropriate way. In that context, fiscal, economic and social policy should be treated with equal gravitas, otherwise socio-economic exclusion will persist and be exacerbated through the current austerity approach. In such circumstances, it is very questionable if the vision the European Union set for itself in Europe 2020 can be realised.

Chairman

I thank Ms O'Brien. Our final guest in this session is Mr. Brendan Halligan.

Mr. Brendan Halligan

On behalf of the Institute of International and European Affairs, I thank the Chairman and members for the invitation to address the sub-committee. We are always very pleased to come before Oireachtas committees to engage in discussions on matters such as those relating to the treaty.

I will begin by considering the implications of the treaty for the European Union as a whole and then engage in a brief examination of its implications for Ireland. My starting point in this regard lies in an emphasis on the fact that economic co-operation between the countries of Europe is the cement which binds them together politically. What began as the Common Market and then morphed into the internal or Single Market has expanded into Economic and Monetary Union, the centrepiece of which is, of course, the euro, which is what is at issue in this instance. We know that the euro was to have been protected by rules applying to the conduct of the public finances of the countries involved. We also know that these rules were enshrined in the Stability and Growth Pact which, interestingly, was originally negotiated in this city during the Irish Presidency of 1996, with Deputy Ruairí Quinn, then Minister for Finance, in the chair. We further know that these rules were ignored and broken, not least by the largest member states. They were unenforceable at national level because they were unenforceable at European level.

The defects to which I refer became obvious and more alarming when the international financial crisis began to unfold in 2007. As we now know, that crisis is as serious, profound and menacing - not least to this country - as the Great Depression of the 1920s and 1930s. These crises always begin with a speculative bubble fuelled by euphoria. They develop into major economic and political crises and that is what we are confronted with. The crisis in Europe reached a tipping point when it became obvious that Greece could not service or repay its debts. As we are aware, the contagion caused by this spread to Ireland and Portugal. Thereafter, Italy and Spain became suspect. As international lenders turned away from us, the other members of the eurozone and the European Union as a whole responded to our difficulties by creating ad hoc and temporary solutions which were elaborated on over a long period but which have evolved to the point where we will now have a permanent institution - the European Stability Mechanism, ESM - which may be seen as the European equivalent of the International Monetary Fund. In addition to this, we are going to be protected by the elaboration of rules for the conduct of public finances. That is the context in which we must view the treaty. It is interesting that the treaty states its primary purpose is to safeguard the stability of the euro area as a whole.

The other point about the ESM which is very important for Ireland is that it will have sufficient capital to do its job. Allied with the money from the IMF, it is probable that there will be €1 trillion available and that this will act as a firewall and prevent contagion. The implication for the European Union as a whole is that the sovereign debt crisis is well on the way to being solved. In addition, we have taken measures to ensure there will not be a recurrence of such a crisis. The conclusion to be drawn in respect of the treaty is that there is a direct correlation between sound, sustainable finances at national level and the stability of the common currency at European level. If the member states of the eurozone comply with the rules, the euro will be stable. This should have the effect which most economists would predict in terms of restoring confidence to consumers and investors and leading to increased consumption and investment and hence increased incomes and employment. The restoration of confidence is utterly and absolutely essential.

In the longer term another of the implications for the European Union is that we will have a currency which will be analogous to the American dollar and the Chinese yuan or RMB. By the end of this century there will be only three major currencies which will be worth anything on the international financial markets - the euro, the American dollar and the Chinese yuan or RMB. Having a common currency which is strong and stable will provide the European Union with the strength to protect its own interests in the international financial order, international trade and dealing with such complex economic issues as the fight against climate change.

The implications of the treaty for Ireland fall into two main categories, the first of which relates to the short-term considerations regarding our ability to borrow in order to finance public expenditure, an ability we will require for some time. The second relates to the way in which we will conduct the public finances in the longer term. In the context of borrowing, we know we are being kept afloat by everyone else, including the global community through the IMF. We also know that the ESM is going to replace two facilities which currently supply us with funding. As and from 1 March 2013, funding from the ESM will be conditional on the ratification of the stability treaty by countries seeking support. In other words and to use a very familiar expression, terms and conditions will apply.

If we are to continue to borrow from other member states, we will have to sign up to the rules set out in the stability treaty. We are expected to do so in accordance with the terms of the treaty, but the people have the right to reject it. In that case Ireland would effectively be debarring itself from borrowing from the ESM and have to find the finance needed to fund public expenditure elsewhere such as from the IMF or on the international markets. We know that the IMF has limited capacity to lend. We know also that it places very strict conditions on the money it gives to countries because it wants to get its money back. Furthermore, we know that the markets would react adversely in terms of this country's risk profile were the treaty to be rejected. If it is rejected by the people in a referendum, the implications are obvious. Public expenditure would have to be cut back drastically at a much faster speed than is envisaged with the troika arrangement. A counter-argument is that other member states would not allow that to happen, but we would be dicing with a serious danger. We must be very careful in evaluating the possibility that the other member states will allow us to break the rules while everybody else is complying with the rules of the club.

The second set of considerations applies to the long-term conduct of the public finances. We know that we will have to include the rules of the treaty in national legislation within one year and comply with them. The Government of the day will have to comply with the rules as elaborated on. The law of the land would prevent a Government from doing what Governments are tempted to do - I speak from a background in which I have been involved in politics for 50 years; I hope all members will enjoy the same length of time in politics - but I have seen Governments behave highly irresponsibly, mainly for electoral reasons. As we know, in 1978 such behaviour led to a decade of depression. That could not have happened had these rules been in place. Neither could the budgetary stance up to 2007 have been maintained had these rules been in place. Very few would argue that that is not a good outcome.

There are other points to make about structural deficits and so on. One could become immersed in a great deal of detail and lose sight of the larger picture. The larger picture for us, as Europeans, is the protection of the common currency, on which the entire edifice of the European Union rests. For those of us in Ireland, it is a matter of continued access to borrowing in the short term when we need it, with the aim, ultimately, of being in a position to return to the capital markets to raise money on our own standing. The implications for Ireland must be clearly and carefully assessed.

We all know that the United Kingdom did not sign the treaty, with the Czech Republic. We know also that the treaty will have to be incorporated into European law within five years. That raises a question about the future of the United Kingdom as a core member of the European Union. We want to remain at the core and I hope we will be. This has implications for us both politically and in terms of economics and I hope they are the ones the sub-committee will address.

Chairman

I thank Mr. Halligan for making that final interesting point which we had not heard previously.

Ms Marian Harkin, MEP

I apologise in advance because as soon as Mr. Halligan responds I must leave to return to Sligo. I am pleased that I have been here for the past three days because we have received a broad spectrum of views and opinions from various sectors, for which I thank the people concerned.

My first question is to Ms O'Connell. She said it was more important that we incorporated this treaty into national law rather than European law, that what we were doing was establishing the Stability and Growth Pact, in addition to the issue of the structural deficit, to which I will return. If we had done this in 2000 or 2002, things would be fine. If we were in a good position, we would look at the treaty very differently because we would say we needed it to prevent contagion. If we were in the position of Finland or Sweden, we would look at it differently, but, unfortunately, we are not. We are in a very different position and because we are not at the level of Finland or Sweden, the treaty alone will not solve our problem. I am sure some members are sick listening to me say this, but it is one of my concerns that the treaty is being put forward as a solution in itself - perhaps not the final solution, although I know people are qualifying this. That needs to be said more often. I said to one of the contributors who spoke this morning that I believed this was one of a series of treaties and that we would have to come back again. If we say the treaty will guarantee all of those things - of course, we in Ireland know that it will not, although it will take us along the road towards it - we need to clarify this.

Ms O'Connell mentioned Professor Lane whom I questioned when he was here yesterday. One of the points he made was that fiscal policy would work if the medium-term macroeconomic outlook was sustainable. The question I asked him was whether he thought the medium-term macroeconomic outlook for Ireland was sustainable and, although I asked him a second time, he actually did not answer the question. I would be interested to hear the views of the delegates in this regard.

I was very interested in Ms O'Brien's presentation. She is right in her contention that the treaty has nothing to say - not even very little to say - about Europe 2020. We deal with that strategy all the time in Brussels, but it is hardly known here. The treaty has nothing to say about it or Article 9, the social clause - one of the reasons I asked people to vote "Yes" to the Lisbon treaty - because it is not being implemented at European level. Many people here are probably not aware that there is a push from the European Commission to attach conditionality to European funds; in other words, if a country does not obey these rules, it may not be able to access some of the funds. I know from my membership of the Committee on Employment and Social Affairs that the European Council is turning its face against social policy, whether we are talking about microfinance, the European Globalisation Adjustment Fund or other programmes. I see that happening at European level and recognise that we need growth.

Ms O'Brien said the treaty would copperfasten austerity. I have some issues with this. GDP can grow in a number of ways - through an increase in exports, a decrease in imports, an increase in private investment or an increase in consumer confidence, although I agree that all of these are iffy. However, this gives member states some flexibility, because if their GDP grows, there will be flexibility in the amounts they can spend. I would like to hear Ms O'Brien's comments on this point. She also said no other country had ever managed to achieve a level of growth that would be sufficient to get out of a crisis. Finland and some other countries faced a similar crisis in the early 1990s. Of course, they had currencies they could devalue and other fiscal instruments at their disposal which we do not have. My question is a difficult one. In order for our debt to be sustainable, we need a deal on our bank debt. I will not quantify the deal, but we need some deal. Does Ms O'Brien think we have any chance of getting one if we vote "No" to the treaty? I know it is a difficult question, but it is one I am asking myself. I agree with her on the structural deficit issue.

Ms O'Brien's last paragraph is the best I have read in all the submissions I have seen. She states: "In that context, fiscal, economic and social policy should be treated with equal gravitas, otherwise socioeconomic exclusion will persist and be exacerbated through the current austerity approach." That needs to be part of the debate. Unfortunately, as far as the fiscal compact is concerned, it is not. I could say, hand on heart, if my fellow MEPs were present, that the Parliament was pushing that aspect, but we are not receiving the same support elsewhere. Therefore, I can understand the issues involved.

I will finish with one question for Mr. Halligan about the ESM. He said he believed there was sufficient capital to do the job, mentioning a figure of €1 trillion. I think it is more like €750 billion or €800 billion, but there are lots of people who would say, even if it were €1 trillion euro - it is not really, if one looks at the figures - that even that is not the kind of firewall that will be needed. I would like to hear his views on that point. I was interested in his final comment that at the end of the century we would have three currencies, and he may well be right. However - we briefly discussed this issue before the meeting started - I do not think we can wait until the end of the century for that to happen. We will have further debates about Ireland, the currency and where we are going. I would like to hear Mr. Halligan's views on the situation in the short to medium term rather than the longer term.

Deputy Timmy Dooley

I will be brief because Ms Harkin covered many of the issues involved. I welcome the representatives and thank them sincerely for their participation in our work. Knowing the disparate audiences to whom they speak, it is helpful that they are engaging with us. It is important that through their networks they try to enlighten them on the treaty, regardless of their standpoint.

My first question is to Ms O'Connell and Mr. Halligan. From a European context, much of the commentary on the treaty implies that there is nothing particularly new in it. It is the Stability and Growth Pact refined into the six pack and largely what we have already signed up to in that pack. The automatic sanctions and so on form an important part of it. It is viewed by some as a bridge to get us through the eye of the storm, but it is not of itself a solution to the crisis or in the long-term management required for the euro. What do Ms O'Connell and Mr. Halligan see as the next iteration of the euro project? What are we likely to see happen in the coming five years? Will there be closer integration at a fiscal level? Do they believe this will drive closer political integration? What do they believe will be the shape of the architecture of Europe within the next five years? Do they expect to see more treaties and, if so, what form will they take?

I thank Ms O'Brien for her presentation which was well put together. Perhaps I missed something, but I am still not sure whether she is supporting the treaty. I was taken by one thing she mentioned. She spoke about the neoliberal economic model being pursued in Europe, a point often made by some inside and outside the Houses. I would not always disagree with her in that respect, but has she identified an economic model being operated elsewhere that she believes would better meet the needs of the peoples of Europe?

Ms O'Brien is right that central to this debate is the question of job creation and getting people back to work because in terms of all the other elements people have difficulty with they are better able to cope if they are working and have an income. From my perspective - I am sure others are of the same view - a major aspect is that we have a functioning economy, a level of confidence and a flow of credit in the economy that will allow small and medium enterprises to employ people. That gets the wheel turning, but in that respect, there is an element of the chicken and the egg scenario. What is required to get the process moving again? That is a question which bedevils politics across Europe in trying to solve the problem. Ms O'Brien might give us her views.

Senator Terry Leyden

I welcome Mr. Halligan, Ms O'Brien and Ms O'Connell. Being part of the European movement, Mr. Halligan will be in favour of the treaty, but he will also support the point that if Ireland is not one of the 12 countries that agree to it, we will be left outside. That is the challenge we face. This is not like the referendum on the Lisbon treaty when the decision had to be unanimous. This is a different type of treaty, but it is better to be positive and included in the first 12 member states to sign up to it, particularly as Ireland is due to assume the Presidency of the European Union on 1 January 2013, which is significant. It is important that we do not assume the Presidency having stood against the European movement in this regard. I know the representatives of the European movement will be actively involved in the debate.

As regards Ms O'Brien's organisation, the Irish National Organisation of the Unemployed, as previous speakers stated, the treaty will not offer a solution to the problem of unemployment, but if we do not sign on the dotted line, we will not be in a position on 1 January 2013 to avail of European Stability Mechanism funds. That will be a major blow in tackling unemployment and providing unemployment supports. Does Ms O'Brien believe her organisation will decide to support the treaty in the referendum and, if not, why not? She has presented a very good document to the sub-committee.

It must be borne in mind also that, on balance, Ireland's membership of the European Union has been very successful. There is no question about this in terms of what has been achieved which we sometimes overlook. I refer to the institutes of technology which were the brainchild of the European Union and all of the major infrastructure provided. It appears all of the work done in the past 30 years now amounts to nil, but the crisis will pass. What would be the benefit to the organisation representing the unemployed if its members vote "No" on 31 May? I cannot see the benefit for them.

I welcome Mr. Halligan back to Leinster House. As far as I know, we served together at one time. I am aware that he has done a great deal of work in the Institute of International and European Affairs. He made a pragmatic point in his presentation when he asked the question: who will fund us? If we switch off this source of funding, where in the world will we be able to tap into a similar source of funding? It is not available. The Americans will not be in a position to help us because they are under pressure too. There is no doubt that the Chinese will invest following the welcome visit of the Chinese Vice President and future President of China, as China knows that Ireland is in a very strong position. My view is that it will be very satisfied to see Ireland play a full role in the European Union and not pulling back from it. Why would a country the size of China invest in Ireland if we were seen to be outside the centre of power in the Union? One of the reasons for its involvement in this country stems from the fact that this is a country in which people speak English and that it has long political links to China dating back to its membership of the United Nations. However, assuming the Presidency of the European Union on 1 January 2013 must have had an effect on it also. China will be a support but not to the same extent as the Economic Stability Mechanism.

I am aware that Mr. Halligan has done tremendous work on European affairs issues and that he will play an important role in this debate. As I said, he has posed a fundamental question: from where will the money come? I do not regard this as blackmail; rather he is being pragmatic. Show me the money that will be available from 1 January 2013 and we might get through the crisis. Whatever the outcome of the referendum, we will have to survive, but we will have a far better opportunity to work our way out of this position by working within the European Union. We have already signed up to many aspects of the treaty and there is nothing particularly new in it. It is a matter of ratifying the agreement made with the European Union to provide the funding for us to allow us to work our way out of the crisis.

Deputy Seán Kyne

I, too, welcome the three panellists. My first question is to Ms O'Connell. She has mentioned that while we might formally remain a eurozone member, it is arguable that, having decided not to adopt all of the rules that will apply to the eurozone, our influence and voice will be greatly diminished. Some commentators have dismissed any issue of the future of the euro as being part of the treaty. However, others have stated that if we are not seen to comply with all of the rules, de facto, we will be stating we are not part of the club or that we have no interest in adhering to all of the rules applied. Ms O’Connell might comment on this point.

In the last session we heard a number of pro-business voices who were all on the "Yes" side. The representatives present might comment on some of the interesting words used, including "stability", "certainty", "responsibility", "investment", "growth" and "positivity". Ms O'Connell might comment on them.

Ms O'Brien stated the treaty would copperfasten austerity. Does she accept the commitments made by the Government in the context of Ireland's participation in an austerity programme, namely, the EU-IMF plan? I refer, for example, to the commitment made that there will be no cuts in the basic rates of social welfare. Moreover, given the training plans and training places offered by SOLAS, FÁS and so on, does she accept that there are opportunities for the unemployed? As she also mentioned broadening the tax base, does she accept the Government's commitment to the introduction of a property tax, as required also under the plan? Obviously, this would not have an impact on the unemployed persons she represents, but it would constitute a broadening of the tax base.

Mr. Halligan mentioned the veto exercised by the United Kingdom. At the time David Cameron opted for the veto he certainly received an immediate boost in the polls personally and it is likely that his party also benefited, as the idea of Britain standing up to big bad Brussels goes down well in that party. However, I note that within the last few weeks, in response to the recent budget announcement and some issues arising from comments made on the petrol supply issue there, there has been an undermining of that confidence. Does Mr. Halligan agree that confidence can be fleeting, both domestically and internationally? Does he also agree that a failure to ratify the treaty here could destabilise international confidence in Ireland, its future, its place in Europe and its future within the eurozone?

Deputy Bernard J. Durkan

I, again, compliment the delegates on their tremendous submissions. While the sub-committee has received many impressive submissions in recent days, these three are particularly important and impressive.

Mr. Halligan has spoken about the necessity for economic co-operation and the Stability and Growth Pact guidelines. The treaty is an attempt to create some structure in this regard to be able to ensure that not only will Ireland keep to the rules in the future but that everyone else will do so also. It is similar to going into a bank from which everyone is borrowing. If some are borrowing on a different basis from the rest, someone obviously will lose out, particularly in small countries. Mr. Halligan also referred to borrowing ability, which is of huge importance. There is not much point in telling the existing institutions that while Ireland does not support them, it will require funding from them for the foreseeable future. It is the same as visiting a bank and telling the bank manager that while one does not intend to pay back the money one has borrowed, one will require funding for the next three or four years and may need more money, not yet identified, in the future. It would not be possible to find a lending institution which would respond favourably to such a request and this point on sustainability has been well and truly addressed by Mr. Halligan.

Mr. Halligan mentioned the importance of the European Union and the recognition thereof as a major market in the world economy. It is almost half the size of the Chinese market and has half the population of China. It has a huge economic impact and is of huge importance to be an aggressive member of that bloc, in other words, Ireland should not be supine or a shrinking violet within the European Union but should be an aggressive portrayer of what used to be the European image and vision. I compliment Mr. Halligan in this regard.

Ms O'Connell covered the entire spectrum covered by Mr. Halligan and raised issues of obvious concern. On balance, however, the concern must be for Ireland's future and the question as to which star it should hitch its wagon. Should people here decide to protest, to react and become part of this? The important point is that Ireland is part and parcel of an institution within which it has influence. It should be perceived to be aggressively influential from within, rather than simply being in agreement with whatever is handed down to it. Equality of membership within the European Union is part and parcel of this issue. As for the reason this did not happen before, the previous Lisbon strategy was not successful for two reasons. It lacked the internal annual review that should have been undertaken. Hence, the semester plan introduced as part of the Europe 2020 strategy proposals obviously will be much better. Moreover, if one member state deviates from the strategy, it will be in the interests of every other member state to point out that so doing is not in the general interest or in the interests of the general good. Ms O'Connell outlined an excellent strategy.

Ms O'Brien presented an extremely interesting submission, on which I compliment her. It is very difficult to represent the unemployed, the underprivileged or even employed persons on low wages at a time of economic stress. It may be much easier to go with the flow and declare one is opposed to and will protest at everything. It is a difficult task. Those of us involved in mainstream politics must give leadership and have a different role. We must have a sympathetic ear and a comforting voice and offer a helping hand to those who find themselves in that position. However, it is not because of something the European Union did to us or is about to do to us that we are in the position in which we find ourselves. It is because everyone, an entire series, did not do the job they were supposed to do.

It is extremely difficult to translate that point into how one should make a decision at this time. As everyone knew, I was among those within my party who had serious reservations about voting in favour of the bank bailout. While it would have been much easier to opt out and declare my intention to vote "No" to that proposal, I knew there would be consequences, regardless of whether it was public or private debt. I compliment Fianna Fáil and the late Brian Lenihan on having the courage at the time to stand up and do what, undoubtedly, was the lesser of the two evils, albeit it was done late in the day and not his particular responsibility. It should have been done approximately ten years earlier. Had those structures been in place ten or 15 years earlier, undoubtedly, we would not be in the awful position in which we now find ourselves.

Another question that arises is difficult for those who find themselves unemployed. It is presented to them and members, by those who have a political agenda, that this constitutes austerity, which is a heavy weapon that will be used. Austerity is not a heavy weapon, but it is something we must bear temporarily, not forever. Those who have studied what happened during the Great Depression in the United States will be aware that they tried to take the easy way out first but that did not work and eventually they were obliged to introduce austerity in order to convince the international markets that they intended to continue to do what was perceived to be the right thing to do economically. While it was difficult to do, they were obliged to do it during a period that was equally difficult. Consequently, one should not try to associate austerity with a permanent policy, as it is not; it is a temporary intervention to return to economic equilibrium. As the Chairman and members are aware, it is the same for balancing a country's books as it is for balancing a household's books. When one can balance the books, one is in a much better and stronger position when talking to the bank manager than if one does so on the basis that one is losing heavily and needs more money.

Incidentally, I note there is a great market for despair. The industry of despair, that is, feeding the public with despair, is a growing one. I do not accuse Ms O'Brien of so doing for one second because her submission has been objective. I compliment her on it because it would have been easy to go in the opposite direction, as some politicians have done, by milking it for everything it has in an effort to achieve advantage, political or otherwise.

My final point is I would liken austerity to a temporary stepping stone to get to the point at which we can restore economic equilibrium and, eventually, economic sovereignty. There has been much talk about sovereignty. Unless we endure temporary austerity to balance the books, we definitely will not recover our economic sovereignty, which is important. It is like the guy travelling across the desert who finds a filling station and says: "This particular filling station seems to be expensive. I don't think I will fill up here. On the other hand, it might be better to fill up and travel across the desert."

Chairman

Thank you, Deputy Durkan. We have a little time left so perhaps we can have five minutes per speaker. I call on Ms O'Connell to start.

Ms Noelle O’Connell

I will endeavour to cover all the committee's questions.

Chairman

There are quite a few.

Ms Noelle O’Connell

There are a few but if I do not cover them in enough detail, please feel free to pose further questions. I will start by issuing a caveat with the instructions to be present here today. I commend the members on their patience and endurance, having sat through a lot of presentations this week. I think it has been a worthwhile exercise as part of the discussion and debate about the treaty. Cognisant of the fact that we were asked to use five minutes for our presentations, I was somewhat limited in some of the areas on which I wanted to expand more fully. I would refer members of the committee to our more in-depth and comprehensive submission we provided a number of weeks ago, which spells out in broader detail some of the topics I covered today. I will be happy to send that to any committee members if they have not already received a copy.

I thank Ms Marian Harkin MEP for her questions and queries. I absolutely agree with her in that we certainly do not believe the treaty is a panacea for all the ills and economic challenges facing us in Ireland, the eurozone and our fellow EU member states. The treaty is not perfect and it is really one step on the journey towards ensuring we have safeguards in place to deal with the unprecedented scale of the economic crisis we have had to endure in recent years. We have heard the analogy of the train journey. We are on board the train in the station, but we would need a crystal ball to know how long that journey will take. This committee has a crucial role to play in ensuring the issues in the debate continue to be discussed. It is important to see it as a challenge and an opportunity to debate and discuss the issues at hand. It is not perfect by any means, or a panacea, but it is a step in the combined efforts to rebuild the eurozone and the economy.

Deputy Dooley posed interesting questions as to where we would be in five years' time. Hopefully, we will be in a situation where we are focusing and concentrating on growth, jobs, competitiveness and other crucially important matters that have been overtaken by the global economic crisis of recent times. We would see it as being crucially important that Ireland continues to have a voice and an input into the process. Frequently we have the "Brussels versus us" debate, but we often forget that as Irish people we are also Europeans. We have a role and a voice that we must ensure continues to be heard.

On the integration side of things, we must get back to focusing on increasing employment and growth in exports. At this morning's session, the agri-community members were speaking about practical issues. That is where we need to be going.

I thank Senator Leyden for his questions. I wish to clarify European Movement Ireland's views on the treaty. We have consulted with our members and our role is similar to what we did in Lisbon 2 when we ran a successful "Just the facts" information campaign. Our role is to ensure the facts are debated and discussed in a reasoned, robust and informed manner. All citizens should have an opportunity to input into the process. People must be consulted and feel they can contribute. After the referendum has taken place, the Irish people should feel they have had a role to play in this matter, as well as having had an opportunity to input into the process and understand the facts at hand. Our organisation will pursue that role actively, including the provision of information sheets on the treaty. As a country, we have all had to become economic experts in recent years. We want to ensure there is a debate and that citizens will have an important role to play in that.

I also thank Deputy Kyne for his questions. He reeled off a number of words such as "stability", "certainty" and "positivity". I might add some other terms such as "informed debate", "discussion based on the facts", "involvement" and "engagement". From the perspective of society and the citizenry, those are matters we will be considering strongly.

Questions were asked about the rules applying to the eurozone. Some commentators have stated that the fiscal stability treaty does not require all participating states to ratify it before it comes into operation. If there is to be closer economic co-operation, and if the treaty is not ratified in Ireland, we must consider whether our influence and voice could be possibly reduced more than if we were to be more closely involved. A similar argument could be made about our ability to continue to attract inward investment should there be increasing uncertainty. From our perspective, it is important to have an informed debate, including an explanation of the facts.

I thank Deputy Durkan for his comments. On behalf of European Movement Ireland, we were pleased to be invited to collaborate closely with this committee. We are always pleased to appear before the committee. Deputy Durkan's comments on the European and Chinese markets bring the matter into perspective. The concern for the future is that we will continue to have a voice which will be heard. Irish people must feel they can continue to engage in the process. Over the next eight weeks we will have an opportunity to do so.

I hope I have covered all the questions. Thank you, Chairman.

Chairman

I thank Ms O'Connell and now call on Ms Bríd O'Brien.

Ms Bríd O’Brien

Thank you, Chairman. Given the focus on austerity in the agreement we have with the troika, our concern would be that, more than likely, it will arise from the conditions and context in which this treaty is being introduced. It will be extremely difficult to get out of all of this without Ireland and Europe investing in their future. We must examine these issues from a variety of angles so that fiscal, economic and social policies will be treated with equal gravitas. That is absolutely critical. It is naive to assume that if one treats a policy as being more important than others, everything else will fall into place, because it will not. It exacerbates structural issues and social inequities that Europe and Ireland are not addressing. They will continue to be exacerbated if we do not start addressing them now.

Senator Leyden said it was important not to lose sight of the benefits of Europe, but I think Europe itself is losing sight of them. Europe is so obsessed at the moment with assuming fiscal issues are at the heart of the euro crisis, it has lost sight of other policies. What is missing from this treaty is the banking crisis that has almost pushed Ireland over the edge, and nearly pushed the entire western world over the edge. This treaty does not address that. It assumes that the issues are all fiscal, but they are not. If we do not start to address issues in parallel where they interact and intersect, we will not address the crisis. This is clear from the way the international markets have reacted time and time again to each response from Europe. The markets have always claimed it does not address the problem. There is a fundamental flaw at the heart of this debate across Europe. I do not believe the neoliberal model this country took to like ducks to water to our detriment and to which Europe is closely linked will get us out of this banking crisis. It will only add to the woes across Europe.

Members asked what way the Irish National Organisation of the Unemployed, INOU, would vote in the referendum. It does not vote itself. The organisation is made up of individual members and affiliated organisations from a cross-section of society. A person's vote is his or her individual choice. We present the concerns and issues from our point of view. We believe this debate needs to take place in a wider context and that some of these wider issues are of critical importance to unemployed people across Europe. Some of the concerns we have about the treaty include the fact it will be enshrined in the Constitution when other rights, such as social economic rights, do not carry the weight they should. It is in the broader debate of where Ireland and Europe is heading that we are raising these concerns.

It is not just the INOU, but eminent international economists, who have stated that no country that has faced the crisis we are facing has gotten out of it through austerity. Finland, for example, has still not gone back to pre-crisis employment levels. Accordingly, we cannot presume economic growth will necessarily produce the types of jobs growth we need or the economic growth to meet our obligations under the troika agreement. What the Fiscal Council came out with this week shows we are in danger of a downward spiral of constantly chasing our tails to balance the books. We must look at where we want to be and how to get there in a way that is inclusive and equitable. I would like to add equality to Deputy Kyne's list of stability, certainty and so forth.

Deputy Dooley asked if there are alternatives to the neoliberal economic model. I would be shot by many of my colleagues in the community and voluntary sector if I did not say the Nordic model, one which many people want us to follow.

Arising from Deputy Durkan's comments, it is important not to presume that because people raise questions around this treaty and challenge the thinking behind the direction of Europe as well as of Ireland, that it is a policy of despair. It is worrying that, as Ms Harkin highlighted, social policy has always played second fiddle not just in Ireland but also in Europe. In fact, it is lucky if it gets to play third or fourth fiddle at this stage. However, the economy and society are flip sides of the one coin. One cannot go off in one direction and hope the other will not throw up significant challenges. Not giving social policy and issues equal weighting and not addressing them throws up massive fiscal and economic challenges. We must bear in mind that no entity like Europe is purely fiscal. We are at a crossroads and our concern is that if we do not have a clear vision of where we are going it will be difficult to get there. Without looking to, or investing in that future, it will be difficult for both Europe and Ireland to play the role people expect and for us to get out of the current predicament.

Mr. Brendan Halligan

Chairman, may I first address the issues raised by Ms Harkin? She positioned the new treaty very well when she said it is not intended to solve all our problems. In politics it is important to prioritise what it is one is trying to do and not to do everything all at once. This treaty is highly prioritised in what it is trying to achieve. It is trying to save the euro and to create an economic zone of stability upon which one can build economic growth. If this stability is not achieved, I do not believe anything else is possible.

It is also reacting to an international crisis for which, as I said earlier, there is no analogue other than the Great Depression. One has to put oneself back in that framework. What is interesting for economists is that there has been a revival of interest in the works of John Maynard Keynes and John Kenneth Galbraith, who wrote extensively on the Great Crash and the role of money. The writings of both are worthwhile reading in these times.

I have said before, and will repeat again, much as I admire the works of Keynes - I believe everyone who has studied economics and economic history would have a similar admiration - it is also relevant to note the Great Depression, initiated by financial madness on Wall Street, as again this time, was not solved by the Keynesian economic model but by the Second World War. I do not believe anyone is advocating that as a way out now. However, for all the contributions and analyses made by economists - I am one of them- there is a need for a great deal of humility on the part of the economics profession in admitting we do not have the macroeconomic answers to get out of this crisis. Looking at the experience of Japan, where economists have come up with the concept of the balance sheet crisis, there have been two lost decades of zero growth. I am influenced by the work of Richard Koo, a Tokyo-based Korean economist, and believe it would be worth our while to look at what Asian economists are writing. Several of them have been in Dublin recently and have attended our institute. I learned a great deal from an Asian eye on the world which is quite different and comes with a different set of values. We cannot lose sight of the fact that we do not have ready-made mechanisms for getting out of this crisis.

Ms Harkin raised a point about the end of the century and my point about the dollar, the UN and the euro. I was simply making the point that if one extrapolates what is currently happening it is not that difficult to work out what the world will look like in 2050 and beyond. What we have seen is the re-emergence of China after two centuries of being in purdah, not least because it was invaded and robbed by imperialist powers. It has re-asserted itself and by the end of this century will be five times the size of the American economy. The point Deputy Durkan made about the relationship between ourselves and China is critical.

It is equally interesting that the Vice President of China came here recently for a conscious and deliberate reason, not least because of what Senator Leyden referred to as the history between the two countries, especially with Frank Aiken at the United Nations. Interestingly enough, the Chinese also used the Shannon Airport development zone as an economic model to develop their special economic zones. The Chinese Vice President's father was given the charge of developing one of the first four zones at Shenzhen, so there was an element of filial piety in his coming here.

We should not underestimate the significance the Chinese are attaching to this small country. They are using it as a way into the European Union for all the reasons outlined by Deputy Durkan. It also partly answers the question raised by Ms Harkin about the sustainability of the medium-term future of the Irish economy. I will try to answer that question rather than duck it. One must base economic development on one's own comparative advantages. We have at least four. We have had one for centuries which was never really exploited until recently when we joined the European Union, that is, of course, the agriculture sector. We now know that the potential for growth in agriculture and agribusiness is astonishing. I say this as somebody who started life as an economist working for a State company in the agriculture sector, the Irish Sugar Company. I only wish we had the same possibilities then. As the sub-committee will be aware, the target is to double our exports within five years, which is highly achievable. There will be a significant market in China, not least for protein products, at which we are very good in producing. Our comparative advantage lies in grass-based production which we have to exploit.

The other sector which is coming to the fore and has a European dimension, if we play it properly, is the renewable energy sector, not least in the area of the country from which Ms Harkin comes which has the best wind energy resources in Europe, if not the world. There is a considerable export market on our doorstep. Renewable energy resources, particularly wind energy - pardon me for saying so - are the new grass and the sector has at least the same potential as agribusiness. By 2050, we could have an astonishing industry, not least using what has been another underdeveloped resource, the country's significant engineering skills, something we frequently overlook. We have a strong engineering tradition and some tremendous engineering companies, including in Ms Harkin's constituency, in which there is a major manufacturer of micro-turbines which has a significant export market, including in China, in which it also has a factory.

The other area is, of course, IT, on which I will not bore the sub-committee because we all are familiar with it. IDA Ireland is proof positive of what can be done in it.

Providing services is something at which we are particularly good. It is interesting that one of the outcomes of the visit by the Taoiseach to China was a memorandum of understanding with the Industrial and Commercial Bank of China on aircraft leasing with IDA Ireland. Half of the world's aircraft are leased from Ireland and that bank is the biggest in the world. This is a significant breakthrough for us, turning Dublin into an even bigger international financial services centre. I suspect it is one of the reasons the Chinese are looking at us very carefully. I am delighted, therefore, that China came up as strongly as it did in the questions posed. After ten years we changed the name of our institution to include the word "International" and it all had to do with China. We have a major Chinese project running for the past six or seven years and it is a great part of our future.

On Ms Harkin's other point about whether €1 trillion will be big enough, I was adding everything together, including the IMF funding and other bits and pieces, and the number comes close to €1 trillion. Whether it will be big enough is an interesting question. The answer is: how long is a piece of string? It can be any length one wants it to be. The ESM and the IMF will be made as big as is necessary at any given moment to prevent an implosion inside the eurozone and contagion throughout the rest of Europe and, most particularly, North America. Contagion would also spread into Asia, which is what Asian economists and policymakers are telling us. The Asians do not want to see contagion spreading as they would be very much affected by it because of the network effect following the globalisation of international financial services. The sum of €1 trillion sends a strong political signal to the markets that we will do whatever it takes. That is the important point.

Chairman

I have a few supplementary questions.

Mr. Brendan Halligan

I will make just one point about confidence, which is absolutely critical. Deputy Seán Kyne has stated it is fleeting; it is. It is easily lost. It is like Humpty Dumpty in that when it is broken, one cannot put it together again for a long time. Were the treaty to be rejected, there is no question but it would have a hugely adverse effect on confidence in the markets. That is something one would have to take seriously into account.

Chairman

A few members would like to come in. I ask them to be extremely brief.

Deputy Bernard J. Durkan

I apologise to Ms O'Brien; I was not being critical of her. I complimented her on her presentation. She has mentioned there was a bad reaction from the markets following the introduction of measures by the European Union in the past couple of years. Ironically, the reason for the bad reaction was the measures taken were seen to be indecisive and insufficient to stabilise the economy. That was the reason they did not go down too well.

Mr. Halligan made reference to the politics of despair. It is a significant point, about which Steinbeck wrote during the 1920s and 1930s. It was utterly appalling and a growing industry. It had the ability, like a fire, to consume people's spirit and turn one person against another. It is dangerous, invasive and challenging. It is difficult to convince those who find themselves unemployed and assailed on all sides and faced with austerity that it is not just for the moment. There will be difficulties and we may have to swallow hard, but, ultimately, austerity offers the way out. Mr. Halligan made reference to my old friend, Professor J. K. Galbraith. What he has stated is true. If there had been austerity at the beginning and for a shorter time, it would have been much more effective because matters would have been resolved without a war.

Chairman

Thank you, Deputy.

Deputy Bernard J. Durkan

To make one last point, I could not let go without mentioning poor old Galbraith-----

Chairman

Twice.

Deputy Bernard J. Durkan

-----because he believed in the social model also. He believed in bringing all the people with him in so far as he could and was very successful at promulgating this philosophy for many years.

Senator Terry Leyden

I thank the delegates for their contributions and responses. On Ms O'Brien's point on the INOU's aspirations for the future, I presume she will follow up the matter with the Government. It is important, in the context of Ireland assuming the EU Presidency, that the points of view she has expressed be incorporated in its plans or proposals, as each country brings forward its ideas for the future of the European Union during the six months it holds the Presidency. Ms O'Brien's points are, therefore, worthwhile. She would strengthen her case by stating the treaty is non-negotiable and that one would be better off on the inside looking out, not outside looking in.

Mr. Halligan made good points. He is a former chairman of Bord na Móna. Bord na Móna and the ESB are the companies which should be leading on the question of renewable energy because they have the necessary engineering technology, strength and financial clout from the point of view of borrowing. One may rely on private enterprise as much as one likes and such companies will do their bit for their own reasons, but what Mr. Halligan has stated strikes a good note. It is one area in which we can create employment and export.

Chairman

When we move on from the pressing matter of the referendum, the committee will deal with the preparations being made for the forthcoming EU Presidency.

Senator Terry Leyden

Excellent.

Chairman

At that stage, we will look for submissions across the land on what we should concentrate on in the first six months of next year.

Ms Marian Harkin, MEP

I thank Mr. Halligan. He is the first person who has attempted to answer the question I asked, which is appreciated. I agree with every word he stated, particularly on renewables, in respect of which there is considerable potential, and the agriculture sector. However, we are also haemorrhaging young people. From the figures for the last quarter for self-employed one-person operations and those who employ two and three more, the bottom is falling out of it. My perspective, given that our debt to GNP ratio will peak, at best, at approximately 147%, is that no developed economy has ever recovered from such a level of debt, even using fiscal instruments we do not currently have in place, without some arrangements being made. That is my concern.

Mr. Halligan has stated the ESM fund will be as big as it needs to be. I understand this. However, I will say this much, that it is not as big as it needs to be and that the longer they wait, the more and more it will cost.

I agree with Ms O'Brien that we will not bring citizens, not only in Ireland but also throughout Europe, on board if we do not balance the fiscal, the economic and the social aspects. At some point we will begin to lose them.

Chairman

We have a couple of minutes left. Would anybody like to respond or make closing remarks?

Mr. Brendan Halligan

I would like to make two remarks. First, I should apologise to Deputy Kyne for not picking up on his point about the reaction to what the UK Prime Minister, Mr. Cameron, did. I remind the sub-committee that Mr. Cameron was asked in the House of Commons to "show some bulldog spirit in Brussels", which of course he did. There is every good reason to believe the Prime Minister's intervention at the Council meeting took no more than ten minutes. He made his point, everybody said "fine" and it was simply passed on. That needs to be taken into account when anybody else decides to opt out. The caravan moves on very rapidly. We need to think very carefully about what will happen with regard to the UK. I never believed the UK would join the euro. I do not believe it will ever join the euro.

Deputy Dooley asked a very interesting question about the future architecture of Europe. It can be foreseen that there will be three rings - an inner core, which will be built around the euro inside the European Union; another layer of countries like Sweden, Denmark and - possibly - the Czech Republic; and an outer ring of countries that cannot endure full membership or do not want to do so. It is most likely that the UK will fall into the final category. We need to think about what the economic and political consequences of that will be for us. It is not an easy one, but we have to do it.

I should have emphasised more strongly the correlation between the treaty on the European Stability Mechanism and the treaty on stability, co-ordination and governance. The two of them have to be seen as two sides of the same coin. The relationship between them is utterly and absolutely critical.

I was asked whether any country has ever emerged from a debt to GDP ratio of 147%. Ireland is an example of such a country.

Ms Marian Harkin, MEP

We have to do it yet. I wish it well.

Mr. Brendan Halligan

It was done.

Deputy Bernard J. Durkan

That is right.

Mr. Brendan Halligan

I am simply saying it was done over a ten-year period.

Ms Marian Harkin, MEP

We had our own currency at that time.

Mr. Brendan Halligan

The debt to GDP ratio was pulled back down to 30%. A ratio is a mathematical consequence of one number being divided by another. The bigger the growth-----

Chairman

It was the growth that did it in that instance.

Mr. Brendan Halligan

I am absolutely certain we can get growth, even in the present circumstances.

Chairman

Yes. On behalf of the sub-committee, I would like to thank all our speakers for their detailed presentations and for engaging with our questioning. We are very grateful for their attendance here today. When the sub-committee resumes in 30 minutes, it will be addressed by Mr. Roderic O'Gorman of the Green Party, Mr. Declan Ganley of the Libertas Institute and Councillor Andrew Muir of the Alliance Party.

Sitting suspended at 3.35 p.m. and resumed at 4.05 p.m.