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 -
Friday, 27 Apr 2012

Reaction of Irish Society to the Treaty (Resumed): Discussion with SIPTU

Chairman

I remind everybody to switch off their mobile telephones, as they interfere with the broadcasting equipment.

I welcome everybody to the seventh meeting of the Sub-Committee on the Referendum on the Intergovernmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. Following the decision of the Government to hold a referendum on the treaty, the Joint Committee on European Union Affairs established this subcommittee to host an extensive debate on the treaty and its implications, not just for Ireland but for the European Union as well. Over the last number of weeks we have hosted a fairly intensive series of meetings, hearing from various sectors of opinion across Irish society. We have held those meetings under a series of headings: views of the treaty from across the European Union, the realities of what the treaty means for Ireland, and the reactions of Irish society to the treaty. In this morning's session, which is our last one, we will focus on the reaction of Irish society to the treaty. I am pleased to welcome to the committee the general president of SIPTU, Jack O'Connor. Members of the committee will be aware that the national executive council of SIPTU has decided to recommend in favour of the fiscal treaty referendum proposal if the Government commits to an off-balance-sheet stimulus plan to create tens of thousands of jobs.

Before I ask Mr. O'Connor to begin his presentation, I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. 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 committee. However, if witnesses are directed by the committee to cease giving evidence on a particular issue and they continue to do so, they are thereafter entitled only to qualified privilege in respect of the evidence they give. They asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or official by name or in such a way as to make him or her identifiable.

We will be very interested to hear Mr. O'Connor's submission.

Mr. Jack O’Connor

I thank the Chairman and members of the committee for the invitation to appear before it to discuss SIPTU's view on the fiscal compact treaty. We published our analysis on 19 April and we have included it as an appendix to our presentation. I assume members have it. In it, we distinguish between the text of the treaty and the strategy underpinning it. The concept of a debt brake would be tolerable, although we believe the provision in the treaty is unnecessarily severe and restrictive. It could possibly work in a green-field situation, but this is not the case in Europe today. The countries of the Union differ vastly in their stages of development and fiscal robustness. The strategy of those driving the agenda is to achieve what is referred to as an adjustment in the stressed countries through a one-sided austerity approach. This will most severely affect working people and the less well off. Indeed, it has already so alienated people that it threatens the future of the EU project itself. Moreover, it will not work, as it will further depress domestic demand, aggravating the crisis. Exports within the Union will contract. External exports will not be sufficient to stimulate recovery because advanced industrialised economies are growing only anaemically, if at all. Countries must be afforded a chance to create jobs and grow. There is an urgent need for parallel balancing measures to stimulate growth. However, there is little concrete evidence of anything of substance in this regard at EU level.

Our report also addresses the consequences of a "No" vote. It would mean we would not have access to ESM funding in the event of our being unable to return to the financial markets at the end of next year. We have analysed the alternatives advanced by those advocating rejection of the treaty on 31 May, and we doubt their viability. Unless we can come up with a viable alternative to ESM funding, it would be illogical to vote "No" on the grounds that it is an austerity treaty, because rejection would mean even greater austerity. We are making a different point.

The Government clearly hopes to ratify the treaty to enable an approach to the markets with access to the ESM as a backstop. This makes sense as far as it goes. However, we believe it will not be sufficient to convince lenders to fund us at sustainable rates. We need to show evidence of growth and a reduction in unemployment. If we cannot borrow independently we will have to fall back on another bailout, even if we vote "Yes", and unless the political direction of Europe changes substantially, the conditions will be horrendous.

There is another problem. Article 3.1(b) of the treaty requires “rapid convergence” towards a structural deficit of 0.5% of GDP. However, when debt servicing as a proportion of GDP exceeds economic growth, two consequences arise: debt cannot be stabilised unless through fiscal adjustment - that is, ongoing austerity; and an aggravated structural budget deficit develops. In its report, Strengthening Ireland’s Fiscal Institutions, the Irish Fiscal Advisory Council discusses the major economic difficulties that would result from attempts to comply with the fiscal compact. It concludes that even after 20 years of running primary surpluses at 4%, with real growth running at 3% each year, Ireland would still not be compliant with the structural deficit rule. We are faced with having to run primary surpluses for years, whether we ratify the treaty or not. Therefore, if we are not on a solid growth trajectory soon, we will all be on the road to perdition. Accordingly, we must do everything we possibly can to stimulate growth and domestic demand, which has now fallen by 26% - dramatically more than in any other country in the EU. In the absence of a stimulus plan at EU level, we must do it ourselves.

In the current fiscal circumstances, the Government is effectively prohibited from increasing public spending. However, a stimulus plan can be developed off-balance-sheet. This would entail the use of about half of the remainder of the National Pensions Reserve Fund, say €2.5 billion, combined with about €4 billion incentivised from private pension funds through exemptions from the pension fund levy, augmented by the European Investment Bank. This could result in a fund of more than €10 billion for infrastructural investment, to be leveraged in at about €3 billion per year. The Construction Industry Council asserts that each €1 billion invested in infrastructure can generate 10,000 jobs. In addition, more than 51% of investment in infrastructure immediately accrues to the Exchequer through savings and the flow of tax revenues. Appendix 3 contains our own policy document which was published last September and also a separate submission which, I believe, was made on behalf of Goodbody's to the Department of Finance on infrastructure bonds. Appendix 4 explains in detail how this could work.

There are many things we cannot do. However, this is something we believe we can do. It is ideology free and can be supported across the entire political spectrum from left to right. It would alleviate the misery of unemployment and offer some hope. Accordingly, SIPTU has decided that despite our many reservations about the treaty and, more particularly, the strategy underpinning it, we will support the referendum proposition on 31 May, in the hope of working with others to effect change from within, if a domestic stimulus plan on the lines we suggest is put in place, or a better alternative. It would substitute for the initiative that is absent at EU level and provide us with a fighting chance of recovery. Otherwise we cannot support the proposition on 31 May.

We acknowledge that the Government could not be expected to develop a scheme within six weeks, although we have been promoting the concept since last September. However, there are things it can do within that timeframe. For example, it can formally decide to offer exemptions from the levy to incentivise the pension funds to invest, say, 6% - 3.5% net of its balance sheet - amounting to upwards of approximately €4.5 billion. It can engage with the pension funds at top ministerial level to obtain agreement in principle. This is crucial as engagement at a lower level will not result in progress. It can direct all Departments and public agencies to fast track preparation of suitable projects.

It is time for the people at the top of the pensions industry, as distinct from the pension funds, to wake up and smell the roses. They are managing upwards of €80 billion which is owned by people in Ireland. We could be within 20 months of Armageddon and they are carrying on as though it is business as usual. It is time they indicated their willingness to sign up to a fair proposition which would entail fair return all round while helping to save the country. I thank the Chairman and members for hearing our presentation.

Chairman

I thank Mr. O'Connor.

Deputy Bernard J. Durkan

I welcome Mr. Jack O'Connor and thank him for appearing before the committee and putting forward his views cogently and constructively. We live in a particularly difficult time. I pay tribute to Mr. O'Connor for the constructive work to which he has contributed and in recent years in very difficult circumstances. Does he accept, having listened to the Taoiseach, the Tánaiste and the Minister for Finance in the past couple of weeks, that a great effort is being made to try to introduce a stimulus package that is sustainable, even in present circumstances, by virtue of possible sale of non-strategic assets which would result in major investment in the economy? Agreement has, apparently, been reached in respect of that with our European partners. Would it be prudent to try to ensure, before spending for whatever purpose, that we have a sound economic base on which to put it and that the Government is endeavouring, with the support of business, the trade union movement, and all interests, to bring that about, as opposed to what happened in 1977 when a stimulus package was imposed too early on the back of two economic crises, the oil crisis, and the result was a disaster because within 18 months it had failed and created a debt problem which we have to this day? That did not work.

On this occasion would Mr. O'Connor agree it is the intention of Government, the entire trade union movement and business sector who provide the jobs to achieve a proper balance and that we cannot afford any mistakes as there is too much at stake? I welcome his statement that a "No" vote, unless there is some clear alternative that is tangible and visible and can be explained to everybody, only makes a bad situation worse.

Ms Marian Harkin, MEP

I thank the Chairman and Mr. O'Connor. It is very pleasant to come in and listen to somebody who is offering solutions and is not just complaining about the situation, of which we are all aware. In his presentation Mr. O'Connor used the phrase, the "Road to Perdition". Most of us realise that is a road we are on and we need to find a way off it. His proposals indicate a possible way of getting on another track. He mentioned the National Pensions Reserve Fund and private pension funds and gave the figures as well as a certain amount of investment from the European Investment Bank. Has he had any contact with the European Investment Bank? There is a certain amount of money left in the National Pensions Reserve Fund and there is a possibility of leveraging private pension funds.

Mr. O'Connor mentioned an off balance sheet stimulus plan. Is that possible? With the promissory note we had hoped that its deferment would not add to the overall debt ratio but it is clear from the recent EUROSTAT figures that it was included and rather than being under 10%, it is 13.8%. It sounds good to say it is an off-balance sheet and we would all like it to be so but how is that possible?

I agree with Mr. O'Connor that on its own the treaty will not work and there is a certain realisation of that at EU level. Yesterday the ECB President, Mario Draghi spoke about a growth compact but what is needed is to put flesh on the bones of those arguments. From an Irish perspective, Mr. O'Connor is doing that. However, from an EU perspective, the French presidential candidate Monsieur Hollande and others are asking about the possibility of a financial transaction tax. In principle, is that something with which Mr. O'Connor agree? At an EU and Irish level would it help to raise some of the funds mentioned? Monsieur Hollande has also mentioned project funds which is not unlike some of Mr. O'Connor's proposals. It entails raising money to fund certain projects.

In the medium to longer term does Mr. O'Connor have a view on eurobonds and the mutualisation of the debt? He made a strong point, with which I agree, that given the current situation with growth, debt, GDP, etc., we need to run surpluses for 20 years to get back on track. In that context, unless there are hugely significant growth levels - we have no reason to believe that will be the case - we will be hitting a blank wall at some point. I would like to hear Mr. O'Connor's view on the mutualisation of the debt, whether it would be through eurobonds or a debt redemption fund. The proposal is that all of the debt above 60% of GDP, for each country, is pooled and we all go back to 60% of GDP debt. We would have to deal with the outstanding debt but we could borrow at low interest rates. It is a medium to long-term strategy, particularly for countries like Ireland unless growth levels are phenomenal. When we look at our nearest trading partner and the rest of Europe, there is no reason to believe growth will increase. Does Mr. O'Connor have a view on that?

Chairman

In his presentation, Mr. O'Connor says he will support the referendum proposition if a domestic stimulus plan is put in place but the next point in his presentation recognises the Government could not be expected to deliver a scheme in the six weeks between now and the referendum and that there are measures the Government could take in that timeframe. What does the Government need to do to get Mr. O'Connor to say that people should vote "Yes"? One of the points Mr. O'Connor's presentation states that the Government can direct Departments and agencies to fast-track preparation of suitable projects. A number of projects are shovel ready. Is it sufficient for Ministers to agree in principle to offer exemptions on the pension levy and talk to the pension funds to explain this point? Is that level of engagement sufficient or must we go further? I am trying to tease out what Mr. O'Connor expects from the Government to enable him to support a "Yes" vote.

Mr. Jack O’Connor

I will deal with the related questions of Deputy Durkan and the Chairman before dealing with the question of Ms Marian Harkin, MEP. One question was on whether I agree that a great deal is being done by the Government to bring about a stimulus. I do not doubt efforts are being made. We know that a number of members of the Government, from both parties, favour the proposition SIPTU has been promoting for some months. Deputy Durkan referred to a sustainable stimulus but I am not sure this relates to whether it can work or whether it is the right time to do it.

Regarding the Chairman's question, there is potential to gain access to €4 billion or €5 billion from the private pension funds through exemptions from the pensions levy. We cannot make progress on that until the pension funds know the Government is serious about it. That involves a decision by the Government at Cabinet level to take this measure. It also requires engagement at the highest level with the pensions industry. It cannot be progressed by low-level engagement on a project by project basis. The industry needs to know this will happen and that there is an expectation it will play its part.

I draw a distinction between the pensions industry and the pension funds. It is probably necessary to get to the big funds. If a Cabinet decision to do this was taken, if engagement took place with senior Ministers and senior players in the pensions industry and if it was clear that a direction had been issued to people in Departments and public agencies that suitable projects were to be identified, prepared and fast-tracked, we would view the whole matter more positively. I cannot speak for the SIPTU executive but it would be quite clear that something was being done. It would be quite clear that this could happen and was going to happen. I am concerned by Deputy Durkan's comments-----

Chairman

I ask Mr. O'Connor for clarification on the money put forward by private sector pension funds for infrastructure. If the infrastructure is a new road, would the repayment to the pension funds come through tolling or from shadow tolling where the Government pays? Are stipulations being put forward on how the money is recovered?

Mr. Jack O’Connor

There are various ways of doing it, which are detailed in appendix 4 of the document I have supplied. Some ways entail using approaches employed in the Netherlands and other European countries, where there is a tradition of pension funds being involved in these matters. It does not have to entail tolling. It relates to the question posed by Marian Harkin, MEP, which I will address in a moment. There are various ways of doing it. For example, a bundle of 20 schools projects at €5 million each could be put out there and the whole project could be developed similar to a public private partnership, PPP. The capital cost does not go on the Government balance sheet. The cost of servicing the project goes on the balance sheet but it runs for 20 years. Those models exist elsewhere in Europe and are clearly detailed in the appendix.

Ms Marian Harkin, MEP, asked whether this can be done off-balance-sheet. We have spoken to people in the CSO who interpret and understand the EUROSTAT rules. As long as there is co-funding and the State involvement is less than 50%, we can construct models that will meet with the approval of EUROSTAT. It is an ongoing practice. Other practices are more controversial from the EUROSTAT view. They entail a requirement for the end user paying, as in the case of the toll road example provided by the Chairman. There is no problem doing it as long as the State investment is less than 50%.

Deputy Durkan adverted to two points about the sale of State assets in the course of his question. We do not need to do that, except by reason of complying with the troika. If we can access this source of money, there is no need to do that. It is not a good idea to sell State assets in the current environment; however, that would not be true of all State assets. We consider that a dangerous road because it means one is looking at strategically important assets being on the table in the event of another bailout. If at all possible, we must try to avoid going down that road. I am concerned as to whether this is the time to do it. SIPTU has a suspicion this is one reason the initiative is not being embarked on more vigorously. They may be people who are advising those in government that the economy has not found its level, in other words, that labour prices should fall further. It is clear from the statistics that unit labour costs from peak to trough have fallen by 19% vis-à-vis all our major trading partners and domestic demand in the economy, which many see as the real economy, has fallen by 26%. The next nearest is Estonia which is running at around 15% or 16%, following which is Spain which is regarded as being in serious trouble. The latest EUROSTAT figures has it at 11.5%. Therefore, we are out in the stratosphere in terms of the degree to which domestic demand has fallen and is still falling.

According to the latest CSO figures, the gross household savings ratio has risen to 14%. Of course, this is not all savings, because people are deleveraging and so on. So far as the level is concerned, we have literally fallen through the floor boards and there should not be any issue about whether we should wait to do this. There may be issues about how to do it. I am not suggesting nor do I want to give the impression that we have come here with a magic solution. It is technically difficult to do it and there are problems with it, but they are capable of being overcome.

Deputy Bernard J. Durkan

May I clarify something, please? I may not have stated my case clearly enough. I was not referring to labour costs but to the timing and the degree to which the current deficit is being pulled back on the basis that we have had quotations from people who appeared before the committee in respect of the Great Depression. One of the lessons to be learned from the Great Depression was when to intervene, the strategic time. My point was in respect of the deficit, paying our bills and keeping our house in order on the basis that this would generate a huge amount of confidence which is necessary. There is no doubt labour costs have shrunk and we are competitive.

Chairman

I thank Deputy Durkan.

Mr. Jack O’Connor

I did not reply in full to the questions from Ms Marian Harkin, MEP. We have not had any direct contact with the European Investment Bank as of yet and we do not think we are the appropriate people to make direct contact. Contact should be made by the appropriate personnel in the Department of Finance who should promote a practical proposition rather than making inquiries. In our engagement with people in government we have not been given any indication of a likely problem. The problem is how to make the thing work with the pension funds. We have not had an indication that there would be a problem with EUROSTAT if we go the traditional route. In respect of the off balance sheet, I do not think there is much doubt that is possible if it is done the way we are suggesting.

It is encouraging that growth strategies are being discussed. For a long time at EU level it appeared those words could not be used. However, what is emerging is not very encouraging thus far, other than what has been stated in the challenge to the French presidential election. We would support a financial transaction tax. There are some issues around it but we would support it. The EU trade union movement supports it. The project bond is essentially what we are talking about.

In regard to eurobonds, the EU trade union movement and SIPTU have argued for eurobonds or for a method by means of which debt would be shared or, at least, underwritten. In a union where there is such disparity between the economic status of one country as against another, various papers have been written on how best it could be done. There is a need for a decision in principle to do it after which one has to work out how to do it. Speaking in a personal capacity, if the euro survives I would see this happening; I do not see the euro surviving in perpetuity unless it happens. At the risk of sounding terribly cynical, it will need the pigeons to come flocking home to roost in the order books of German manufacturers before the realpolitik recognises that it has to happen. The point we are making in the approach we are adopting is that there are things we can and should be doing. I cite the example of a trade union representative. As a trade union representative I have stood many times in front of workers and recommended that they accept very difficult propositions, and I have been severely criticised for doing so by people on the left and those who take a different view. Any time I did so, I was confident in the belief that everything that could possibly be done had been done. I do not believe we have done everything that we could possibly do and we have not done enough to make this happen.

Senator Kathryn Reilly

Like previous speakers, I welcome Mr. O'Connor to our final sitting. He said his position in SIPTU is that he cannot recommend support for the treaty unless the Government moves to implement an economic stimulus and that SIPTU only see characterising a strategy underpinning the treaty as a one-sided austerity approach, principally at the expense of working people which will not work. It is clear the Government has no intention of implementing a stimulus near the figures mooted in the press recently. There was a reference to the sale of State assets and the Government said yesterday that more money from the sale of State assets could be put into job creation. Would SIPTU accept those funds as the stimulus? At what point will SIPTU take a decisive stance? Mr. O'Connor said that unless there is a stimulus plan SIPTU cannot accept the proposition. Does that mean SIPTU will advocate a "No" vote or remain neutral? Will SIPTU abstain from campaigning? What is his timeframe based on the three examples he gave on potential actions the Government could take within the next few weeks?

Yesterday we heard from Mr. Jonas Sjöstedt, the Swedish MP who spelled out what the treaty would mean in the real world. Mr. Michael Taft from Unite gave figures some time ago that it could mean an additional €6 billion to €8 billion in cuts over the next few years. Mr. Sjöstedt explained the situation in Sweden in the 1990s when the country went through a recession, including the collapse and nationalisation of banks. Of course, the Swedes retained their right to use monetary tools which did help, but in order to come out of recession the country ran a very high deficit over a number of years.

How can we grow our way out of recession when we are precluded from running medium-term deficits, when such a deficit is necessary to revive economic activity? In regard to the specific clause in the ESM, it will only stand if it is ratified. The Government has a veto over the clause via its veto over Article 136, amendment to the EU treaties, which gives legal effect to the ESM. The Government can secure the removal of that clause if it so wishes. In France, François Hollandehas stated that if elected as President, he would not ratify the treaty. The treaty, as is, would not be ratified. There would be scope to remove that clause.

Having read Mr. O'Connor speech, why does he considerthe exercise of this veto over Article 136 and thus the restriction to the EFM is non-viable?.Does he think SIPTU should join those calling on the Government to remove this clause and to remove the ambiguities surrounding the funding for the State via the ESM?

Deputy Paschal Donohoe

I welcome Mr. O'Connor to this meeting and thank him for his contribution. I have a number of points to put to him. If anyone advocates the Swedish route for the Irish economy, he or she should be cognisant of what our Swedish colleague said yesterday. He estimated 100,000 public sector workers were released and that social welfare payments were cut by one fifth. In order for Sweden to access the funding needed at the time, it had to put in place intensely sharp cuts in its economy almost immediately. He demonstrated the severe level of change that had to be put in place quickly. I stand to be corrected, but I believe recent information on the Swedish economy and society shows that the level of inequality in society has sharpened quite dramatically in recent years.

Mr. O'Connor touched on the mutualisation of debt and the role of eurobonds. Is it not the case that any such plan if implemented would refer to future debt as opposed to current debt issues? If such a plan were to happen, it would only happen in return for tighter budgetary integration and oversight. Even if people have concerns regarding the level of debt provision within the stability treaty, eurobonds and debt mutualisation will only happen across Europe if the budget oversight and targets that are recommended in the treaty are put in place. People speak about the federalisation of debt but they seem to forget that the flip side of the coin is the federalisation of economic policy or far tighter economic integration. The implementation of the treaty or something similar to it will be a precondition for the mutualisation of future debt, if that were to happen.

Mr. O'Connor has a point in respect of the role that funds from the Irish pensions fund industry can play in our economy. I have two observations. We must recognise, and this point is made in the supporting documentation provided by him, that Ireland is an economy that is dependent on capital flows from other economies into our country. If it were to happen that French pension funds would be required to be invested in France, German pensions funds were required to invest in Germany and if something like this was to develop across Europe as a whole or across the world as a whole, the nationalisation of global capital flows would have major negative consequences for Ireland because we depend on those people investing in Ireland to fund the things we need at present. Second, let me put the case of Irish pensioners who have their funds invested in an Irish pension fund. They will want investment decisions to be made in such a way as to deliver the best rate of return for them, to allow their current level of pension provision to be maintained or to allow future pension aspirations that they have to be delivered. They would have questions about whether their money should be invested on the basis of their aspirations being met and their current level of pension being maintained or whether their funds should be invested on the basis of what others think is the correct thing to happen in our economy.

Having said that Mr. O'Connor is on to a very important point. The way to square that circle - Mr. O'Connor at least hints at this in his recommendations - is to look at a greater incentives package for Irish pension funds to be invested locally as opposed to enforcing it. If incentives were to be put in place, and Mr. O'Connor talks about the pension levy and other reliefs that could be put in place, I would want to see it looked at very carefully. I cannot see a way forward for our economy without addressing the weakness that Mr. O'Connor identified on what is happening locally.

We have an analysis from 19 April 2012 on what would happen if Ireland was to default. It is acknowledge in the course of the report that we are one of the most open economies in the world and we cannot anticipate the implications, where thousands of jobs in our financial services industry could evaporate and foreign direct investment could dry up. I welcome the fact that the risks of unilateral actions have been identified. In fairness, I will not quote selectively, given the pitfalls of others, but in the analysis, it states that it could work but we do not know what could happen and therefore it is not a place to go unless there is no alternative. I want to acknowledge the fact that this is identified here. I praise that initiative, in which SIPTU and its colleagues have been involved. A new organisation or think tank was founded recently, to which SIPTU contributes directly, where economists are employed to flesh out the options and put them forward. That initiative is very welcome. People like me want to engage and understand these options. The fact that Mr. O'Connor's organisation is doing that is to be lauded because there is a distinct lack of it in Ireland.

Deputy Timmy Dooley

I too welcome Mr. O'Connor and thank him not only for his presentation but the analysis he has given of the treaty. It is a welcome contribution to this debate. I am somewhat disappointed that SIPTU has not been able to come out in favour of the treaty, particularly when one takes into consideration the very real benefits that workers in this country have derived from our being such an integral part of the European project for so long.

I accept a lot of his analysis, which is useful and a fair analysis of our current situation and what we would like to do. I would argue it is somewhat silent on the broader facts of the current position of the European project. To that extent, it fails to take into account the decisions that have to be taken, not just by Ireland but the broader economies of Europe to try to reach a balanced budget and become a more frugal society in terms of our capacity to deliver and develop growth.

I again thank Mr. O'Connor for his contribution. Why has he involved himself in the debate if he cannot offer guidance to his workers on a "Yes" or "No" vote? I see a lot of what he has done as a useful contribution in a pre-budget environment. We are well aware of his ongoing submissions to the Government, which other organisations also make, in an effort to try to steer the Government in a particular way when it is involved in the budgetary process. People set out various options from their perspective and Mr. O'Connor has done just that. The document has come too late or too early and should be part of the budgetary planning process rather than a contribution to the referendum debate.

It is somewhat disingenuous of SIPTU to become part of the debate without saying "Yes" or "No". From some perspectives it would seem to propose a guarded "Yes". People on the "No" side will say it is it is a guarded "No". That is disappointing.

While I respect the large membership base of support and that Mr. O'Connor is trying to appease and reflect its views, I am disappointed he has not been able to show the kind of leadership which is necessary in society to help us to move beyond our current position. Leadership is a very difficult characteristic to show on occasion, particularly when things are not as one would like them to be this. In this instance, we are trying to move beyond our current situation.

Mr. O'Connor has shown great leadership in the past and is somebody I respect, but I am disappointed on this occasion that he has not been an advocate for "Yes" or "No" vote. I and my party support the treaty for all the reasons we believe necessary.

Chairman

The stimulus package is a great idea. I have spoken to some members of SIPTU about it and will talk to my Government colleagues about it. I cannot say it is something which will be resolved before 31 May.

My question is similar to that of the last speaker. Let us discuss the day before the treaty vote, 30 May. Will Mr. O'Connor sit it out? He said, "Unless we can come up with a viable alternative to the ESM funding it would be illogical to vote No on the grounds that it is an "austerity treaty" because rejection would mean even greater austerity." We have mentioned selective quotation. If SIPTU sit this out and somebody is asked the day before the vote what its view is, would Mr. O'Connor be happy for his view to be summarised by a selective quotation stating SIPTU believes rejection would mean even greater austerity?

Mr. Jack O’Connor

I propose to deal with the questions in the order in which they arose.

On the question posed by Senator Reilly on whether what is being talked about in the media today, namely the proceeds of State assets, would meet our demands, I addressed that in responding to Deputy Durkan. Our view is that we do not need to sell State assets if we have access to other potential sources of finance. We do not think it is a good idea to sell State assets, especially given the current market conditions. We do not think the treaty is about Ireland, rather it is about copying things that are being done elsewhere. I do not think the Government or any other Government made up of the parties which constitute our political life would want to sell State assets in the current environment.

I was asked when we are going to take a decisive stance. We are taking a decisive stance. We are saying that if the stimulus plan is put in place we will go along with it on the basis that we would hope that the Government and future Governments would work with others to try to change it.

On abstaining from campaigning, it was not our intention to engage in active campaigning. We endeavoured to offer an analysis to our members and assist them in arriving at whatever decision they think is appropriate.

Mr. Jonas Sjöstedt, MEP, explained the situation in Sweden. Deputy Donohoe referred to this issue. I do not know whether the experience of Sweden or other northern European countries who experienced cataclysmic economic collapses in the early 1990s is a good example. The conditions are totally different. We are operating against the background of the most serious collapse in the economic system since the Wall Street crash. They were able to devalue their currencies and play into quite a buoyant economic environment.

People refer to running deficits. Deputy Dooley used the word "disingenuous", to which I will return. I am not suggesting anyone is being disingenuous but all of us need to recognise it is not a case of voting "Yes" and we will have austerity and vote "No" and we will be in clover or vice versa. The reality is that as a result of what happened we are in a mess people of my age group will not see the end of in their lifetimes.

Whatever we do, we will run primary surpluses for a very long time unless debt restructuring takes place. The Government is constantly working on that but there will have to be a significant change in the political outlook in Europe before we get debt restructuring. We should tell people this is not a choice between things being terrible or wonderful. Whether one vote "Yes", "No" or abstains, this will be a long and difficult road. I say to Senator Reilly that in regard to the treaty on the functioning of the European Union I had very much hoped to find a solution to the ESM conundrum because I do not like the treaty, particularly not the strategy underpinning it.

I refer to Deputy Dooley's question about how much benefit was derived by workers in Europe. The Europe from which workers derived benefit is not the Europe in which we live today. The Deputy refers to the Europe of the post-war settlement, the Europe of François Mitterand and Jacques Delors, even of Helmut Kohl. This is the Europe of the others, of neoliberalism gone mad, the Europe that reflects the outlook of the people at the top of the financial system who were allowed to run riot and almost destroy the whole bloody world. Excuse my language. There is nothing whatsoever of benefit to workers in the outlook of those who are running Europe at present.

I was hoping, therefore, to find a way around the ESM problem but I do not believe such a way has been found. I would like to think it would work but I do not share the view that it is feasible to threaten to veto the treaty on the functioning of the European Union proposition around the ESM, in the belief we will get a better outcome. First, we would be threatening to veto a proposition that establishes a fund on which we might have to rely, directly or indirectly. Second, and more particularly, not all the people one deals with in the governments of Europe share our broad outlook on democracy, whether from the left, the centre or the centre-right. There are people on the hard right who are increasingly influential in Europe, who are becoming key players in the formulation of government policy, either by participating in governments or by supporting them from the outside. They would be only too happy to say to Mrs Merkel, "Don't bother letting them veto it. Just don't offer it to them at all". One could be playing into that agenda and frankly I believe that would be risky. We all have to take risks but when one is taking risks that affect 4,500,000 people and their families one must think carefully, especially when the situation is in so much flux, as at present.

Returning to the Chairman's question, if anybody comes up with a solution to that ESM problem between now and 31 May, I will vote "No". If anybody can credibly solve that problem I will vote "No". However, I must admit that anything we have come up so far does not answer it. To be perfectly honest, that is the only reason I am not saying "No".

I refer to Deputy Donohoe's question. I dealt with the issue of the Swedish experience in responding to Senator Reilly. She mentioned the growth in the level of inequality in Sweden but I do not attribute that to economic policies pursued in the 1990s. Without any disrespect to the Senator or her colleagues, I attribute that to the shift to the right in Sweden over the past two elections. The social model there is being very skilfully dismantled.

On the mutualisation of debt, I agree with the Deputy. Countries will not agree to expose themselves unless they have assurances that the rules of the game will be played by everybody. The flaw in this proposition, however, as I see it, is that we are being asked to accept the rules without the mutualisation. There are many people of various persuasions who believe this is the first element of a broader construct and I hope it is. However, there are many people who are working very hard to ensure it is not and they are growing in influence by the hour in Europe. To assume that if we sign on for this it will lead in turn to some form or other of debt sharing is a big leap.

Deputy Paschal Donohoe

I do not suggest that is the case.

Mr. Jack O’Connor

I accept that.

Deputy Paschal Donohoe

I accept Mr. O'Connor's point about the risks-----

Mr. Jack O’Connor

If the proposition was: "Vote for a debt brake and you get eurobonds", I would say "Yes". I would visit every place where we had members and ask them to vote "Yes". That is not the proposition, however.

I accept what the Deputy stated in regard to the role of Irish pension funds but I ask him to understand we are not suggesting that pension funds be required.

Deputy Paschal Donohoe

Yes, I accept that.

Mr. Jack O’Connor

We say they should be incentivised because we can then invest them upwards of a net 3.5% of their balance sheets. In circumstances where people will forgo 2.5% in any case, they would get it back. For the Irish pensioner who is concerned about this, what is being spoken about is a good deal, if one is looking at things over the longer term. The claim that the pensions industry can get a person 0.5% a year more over 20 years is a big assumption given performance during the past ten years. If those concerned tell me I can get another 3% or 4%, they are not guaranteeing it - that is the point. There is mention of the State having to guarantee this stake but there is no mention whatsoever of a guarantee in the casinos in which these people play. If they were able to say they could get me 5% or 10% more in my pension, what use would it be to me if I have to pay security guards when I am retired because we do not have a police force, because we have allowed our economy to collapse? What use is it to me if I have to go to China to visit my children because they cannot get a job here? This is a much bigger issue than gaining a couple of per cent on a pension fund.

I acknowledge the Deputy's remarks in respect of the Nevin Economic Research Institute, which is called after Donal Nevin, one of the most respected figures in civil society when I was young. Many people do not remember him but he was general secretary of the Irish Congress of Trade Unions and was a renowned statistician. We would like to be able to do more and should be doing more but we cannot afford to.

I come to Deputy Dooley's point. It is unfortunate he used the word "disingenuous" because-----

Deputy Timmy Dooley

I put it in context.

Mr. Jack O’Connor

I would not mix it with the Deputy on disingenuity because he would know more about it than I would. Apart from that, he asked a very good question about why we enter the debate in any case. The reason is to point out that irrespective of whether we vote "Yes" or "No" to address the collapse of domestic demand in our economy we will arrive at a place where it does not matter. We are not that far from that place. This is a possibility to do what we always do, or should do, as trade unionists, namely, to try to ensure we get the best for working people in every situation. The point, which applies to people on the right, the left and the centre, is about whether we go into this treaty and whether the structural deficit rule is applied rigorously. One would have to hope it would not be and that the words "rapid convergence" that appear in Article 3 are interpreted by sane people rather than by zealots. Even assuming that it is interpreted flexibly, however, unless we can get ahead of the space where debt servicing exceeds economic growth - unless one can reverse that equation - then one will be permanently unable to do so. The fiscal council is saying that, not me, and they are by no means well disposed to my outlook on the world. The fiscal council's paper has described how one literally cannot get there. The point is relevant to Deputy Durkan's question about when is the right time to do it. We have to do this, and find a way of doing it, to get ahead of the curve.

There is another point about all of this concerning my union's position.

Chairman

Will Mr. O'Connor accept a short intervention from Deputy Dooley on the last point?

Deputy Timmy Dooley

I do not mean to interrupt Mr. O'Connor's flow because his contribution is exceptionally welcome, but we must accept that there is a decision before the Irish people. It will be at the end of May and there is one question to be answered, "Yes" or "No". The negotiations are over. Rightly or wrongly, the Government has come to the conclusion that this is the best that is available to the Irish people. Mr. O'Connor's contribution is welcome but I think it is a contribution at a time when a negotiation might be under way. He is an exceptionally good negotiator, as is his union. To use the Taoiseach's analogy yesterday, however, the train has left the station and the negotiation is over. The fiscal compact is there and now it is a decision for the Irish people to vote "Yes" or "No". Unfortunately, I am still disappointed, although I would put the word "disingenuous" in context. The fact of the matter is that the Irish people are left with a decision to take. I would have hoped that the union movement generally would be in a position to say whether they are for or against it.

It goes back to the point I made at the outset - it is a valuable document and would be useful in terms of a negotiation process, but that is over. Perhaps Mr. O'Connor could try to move beyond where he is, although maybe he cannot. I can understand why he would not, but it would be helpful if he could say so. From my perspective, I would like to hear him say "Yes".

Mr. Jack O’Connor

I imagine you would, Deputy Dooley. There were many times I was hoping that various people at different levels in the politician system would say "Yes" as well.

Deputy Timmy Dooley

Mr. O'Connor often heard the word "Yes" and some would argue that is part of the problem, that he heard "Yes" on too many occasions.

Mr. Jack O’Connor

Never on the issue of collective bargaining, which applies to every other worker in Europe except the people I represent.

The point I was going to make in response to all of this is that this is a construct of the establishment. The European trade union movement was not consulted about this and the social democratic parties of Europe had little or no say in it. This is a construct of the other side. As a trade unionist, and given my own union's role in the history of this State, which extends right back to the 1916 Rising, I insist that if the establishment wants endorsement from trade unionists, there will have to be something in it for working people. They will have to have some say in it and unless the treaty does so, I will not vote for it, nor will I ask other working people to vote for it.

Admittedly, our Government cannot do very much. We are a small country and have very little immediate leverage, in our current situation, in the European arena. There is something we can do in the domestic arena, however, but we are not doing it and as long as we are not doing it I will not vote for it. I am not able to stand in front of my members and say that everything that could have been done has been done.

Chairman

Thank you, Mr. O'Connor. I will take a very short intervention - I mean less than one minute - because we are all under time pressure.

Senator Fidelma Healy Eames

I had responsibility for the Social Welfare and Pensions Bill in the Seanad so I could not be here any sooner. I welcome Mr. O'Connor to the committee. It is the first opportunity I have had to address him. I am really struck by his last point when he said he would not vote "Yes" for this treaty because there is not much in it for working people. I would have to disagree completely. The very fact that working people will know that their incomes will be paid, and that doctors, nurses, gardaí and teachers will be paid, means the State will run. There is a lot in it for working people. I want Mr. O'Connor to clarify why he would not acknowledge that.

He also mentioned that the Government could veto the ESM.

Chairman

That point was covered in its entirety earlier.

Senator Fidelma Healy Eames

Okay, I will retract that point. I would like to hear Mr. O'Connor respond to my comment that there is a lot in the treaty for working people.

Chairman

I will take two more brief points from Deputies Donohoe and Durkan before concluding.

Deputy Paschal Donohoe

As somebody who will be campaigning vociferously for a "Yes" vote, I strongly welcome Mr. O'Connor's contribution. In his analysis, he has accurately outlined many of the vulnerabilities the country faces at the moment. In the context of the challenge that our total economy faces, he has outlined what could be done to address our domestic difficulties. I hope that is something we can respond to. There will be many challenges about meeting the points he has identified within five weeks. In terms of what we need to do to get our economy away from the huge difficulties that could grow in future, the analysis is of interest. Mr. O'Connor has identified how our ability to access funding in future is good for people who work. I want to acknowledge the contribution that he and the trade union movement have made.

Chairman

I now call Deputy Durkan and I will allow Senator Leyden in, although we are meant to vacate this room now.

Deputy Bernard J. Durkan

I want to re-echo the words of my colleague and congratulate Mr. Jack O'Connor on the constructive way in which he has approached this issue, including the question he has raised. In his positive submission on the options available, he clearly pointed out that negativity is not a way out either. He clearly pointed out that there would be consequences for all of us in society if we went in a particular direction.

He has responsibilities and we realise that. A huge burden of responsibility has been thrust upon him and his members right now. We know that and fully appreciate it. The same applies to us as Members of the Oireachtas. We feel we have a difficult role to play as well, but we also appreciate Mr. O'Connor's position. I particularly want to compliment him on his analysis and the way in which he has pointed out the options that may be available. He has not come to a conclusion that he has a particular answer, or that we have, but he recognises that we are pursuing a road that needs to be pursued.

Senator Terry Leyden

I would like to welcome Mr. Jack O'Connor, the head of SIPTU. I am sorry I was not here earlier but I was dealing with the Social Welfare and Pensions Bill in the Seanad. As a member of SIPTU I am in a dilemma because I am following the Fianna Fáil "Yes" vote. Mr. O'Connor is making me think of SIPTU's position, but I will not do that.

Deputy Timmy Dooley

I am happy about that, Terry.

Senator Terry Leyden

Thank you. I think he is taking the position of Monsieur Hollande in France where it is said that he looks slightly like becoming the President of France on 6 May. If so, he may come up with something in line with Mr. O'Connor's requirements by 31 May. It is unlikely but that is his aspiration. He wants to have an expansionary jobs budget. The Government would have been well advised to have consulted the trade union movement during the negotiations. Mr. O'Connor made the point that there should have been more of an input from the trade union movement in this regard. I regret that. The Labour Party, which is in Government, was remiss in not talking to and consulting SIPTU more often, particularly given that SIPTU provides funds to the party. I am a member of SIPTU, but I do not receive any funding from SIPTU when I stand for election.

Chairman

We have to move on.

Senator Terry Leyden

I am talking about the contributions that are made to members of the Labour Party. That is enough. Mr. O'Connor has made a very good contribution to today's meeting. He spoke very well. His approach is logical. I hope he will recommend that people vote "Yes" on 31 May.

Ms Marian Harkin, MEP

I agree that Mr. O'Connor's analysis has been very good. I concur with what he said about negotiation. The Taoiseach said yesterday that the train has left the station. I accept that is true as far as Ireland and Europe are concerned. There is still time for negotiation here, however. I agree with Mr. O'Connor that access to the European Stability Mechanism is necessary but is not sufficient to solve our problems. We can see that. The unions are trying, while there is still some time, to stitch something into this that might help to solve the problem.

Chairman

I invite Mr. O'Connor to respond to what has been said and to make some concluding remarks.

Mr. Jack O’Connor

This is the first time I have met Senator Healy Eames.

Senator Terry Leyden

Is it love at first sight?

Deputy Timmy Dooley

Was a rumour circulating?

Mr. Jack O’Connor

She misquoted me twice in her contribution.

Senator Fidelma Healy Eames

Mr. O'Connor can enlighten me.

Mr. Jack O’Connor

She suggested that I said I will not vote "Yes". I said I will not vote "Yes" unless certain things are done. She also suggested that I said I will vote "No". I have not said that. I am not in favour of vetoing the European Stability Mechanism treaty. I outlined my reasons for that earlier.

Senator Fidelma Healy Eames

With respect, the point I was making related to what Mr. O'Connor said about there being nothing in the treaty for working people.

Mr. Jack O’Connor

As I said earlier, this is a construct of the other side. It is being implemented in parallel with the strategy to affect an adjustment in Europe, principally at the expense of working people. The people in Greece, Spain and this country who are suffering more than any others are the people in the lower income groups and the working people. If this were a different construct, such as the kind of context that was presented by Deputy Donohoe earlier, we would be able to provide for debt-sharing and investment for growth in parallel with adjustment. In such circumstances, I would have an entirely different view of the treaty.

Senator Fidelma Healy Eames

Okay.

Mr. Jack O’Connor

It is all about the other side's agenda.

Senator Fidelma Healy Eames

It is about parallel tracks.

Mr. Jack O’Connor

I acknowledge what Deputy Donohoe said about the approach we are taking. He said that many challenges would be encountered if what I seek were to be done within five weeks. I acknowledge that as well. It would not be too difficult to do what we outlined in point 17 of our submission. It would not be too difficult for the Government to decide to put the levy and the pension funds on the table, with a view to trying to attract investment. It would be completely self-financing. If it were not, the Government would not do it. If the funds do not play ball, the Government should not do what we are proposing. If such a decision were taken, it would not be too difficult for top Ministers to engage with the pensions industry and with the main funds.

Approximately a dozen funds account for most of this sector. Some of them are owned by State companies. It would not be too difficult to direct all Departments and public agencies to line some suitable projects up. I am not talking about digging holes and filling them back in. I am talking about projects that are critical for productivity and the development and growth of our economy. It would not be impossible to do those things in five weeks. If it does not work, so be it. At least I would be able to tell my members that the Government is doing everything it can and advise them to vote in favour of this proposal on that basis. I am not able to say that, however. When I look the employer in the eye, I want to believe at a certain point that he or she has done everything possible. If that is the case, I can tell the members we have to go with this. At this moment in time, I am not in such a position. I have great respect for Deputy Leyden, as I have for every member of the union.

Chairman

I think Mr. O'Connor means Senator Leyden.

Mr. Jack O’Connor

I was giving him a promotion.

Senator Terry Leyden

I was there before.

Mr. Jack O’Connor

I know.

Deputy Timmy Dooley

Mr. O'Connor can give him a few bob for his next campaign.

Senator Terry Leyden

No.

Mr. Jack O’Connor

I want to come to that point. I do not have a great deal of criticism about the way the Government engaged with the trade union movement on this issue. I am not sure that it had a great deal of time for such engagement, given the pace of events. Nothing happened for two years before all of this happened within a matter of weeks following the involvement of people at the top of the banking system. It would be better if we had better engagement. A year and a half or two years ago, when I was president of the Irish Congress of Trade Unions, I attended a meeting with the general secretary of the Confederation of German Trade Unions. He told me he has direct contact with Mrs. Merkel even though he comes from the social democratic tradition. They have a different approach to things in Europe. They have a real social dialogue. They are not forfeiting it. Mrs. Merkel is not forfeiting it. We would do well to try to develop a similar infrastructure here. The structure we had here - it was not the same as that in Europe - was discredited.

I will explain the problem I have with the question of financing. If the day comes when those who are able to throw money around at elections in support of parties that hold views which are different from those in accordance with the interests of my members are prevented from doing so, I will gladly withdraw the few cent we give to Labour Party people. There are many things we could do with that money. We can do that when we get a level playing pitch. With respect to everybody, part of the reason we are in the mess we are in is because people with a great deal of money are able to buy political influence. In addition, those who control this country's means of communication have too much influence over the way people vote. If we lived in a real democracy-----

Deputy Timmy Dooley

That is a debate for another day.

Mr. Jack O’Connor

Senator Leyden asked the question and he is entitled to an answer.

Senator Terry Leyden

Mr. O'Connor is a great debater. I will say that much for him.

Mr. Jack O’Connor

I have never managed to get elected to the Seanad.

Deputy Timmy Dooley

Is Mr. O'Connor not lucky?

Mr. Jack O’Connor

I do not know. Sometimes I look across there and-----

Deputy Timmy Dooley

It looks easy.

Mr. Jack O’Connor

No. It is not easy. My union played a very big role in the founding of this State.

Deputy Timmy Dooley

I accept that.

Mr. Jack O’Connor

The man who commanded the forces in the GPO was the acting general secretary of my union. The 1916 Proclamation was printed in the basement of Liberty Hall. The leaders of the Rising lived in Liberty Hall for several weeks before the Rising. We played a role throughout that time. At one point in the difficult years between the wars, my union handed over an entire year's contributions to the Government and did not ask when they would be returned. My union regards this State as one in which working people are entitled to live and stay without having to emigrate.

Senator Terry Leyden

Absolutely.

Mr. Jack O’Connor

We have the fullest respect for everyone engaged in the democratic process. We fully respect the fact that there are many easier ways of earning a living than by becoming a public representative, irrespective of one's party. We fully acknowledge that the people in government, be it in the former Government or the present one, have had to encounter enormously difficult times. We are not endeavouring to hold anyone to ransom; rather, we are pointing out there is something that could be done that would benefit everyone if it could be made happen.

I thank the Chairman and members for my reception today and the way in which my union has been treated in this institution over the years.

Chairman

I thank Mr. O'Connor. All the members are very grateful for what has been a tour de force this morning. The presentation was excellent, one of the best. In the past four weeks, all the presentations have been very good. We have learned an awful lot from them and they were intelligently put together and thoughtful. They contributed greatly to the debate. We will be preparing a report over the next eight to ten days so the committee will meet again, probably the week after next, to discuss it before it is finalised.

I thank everyone present. Everyone has been a stalwart in respect of committee's proceedings. Many had to reschedule their Easter arrangements because of our schedule. Ms Marian Harkin made her way from Europe to attend these meetings. We are very grateful to all those in attendance and those who are not. We have managed to see several dozen witnesses over recent weeks. I do not believe there is anybody whom we have not consulted. Consequently, the process has been very worthwhile. I look forward to producing a report that will summarise the extent of our consultations and which will be helpful in the overall debate on the referendum.

Senator Terry Leyden

It has been great working with the Chairman.

Chairman

The clerks and assistants have made my work easier.

Deputy Timmy Dooley

On behalf of the Fianna Fáil group, I pay homage to the Chairman and secretariat on their work organising the various contributions over recent weeks. It is appropriate to recognise the thoughtful work of witnesses on both sides. I have a stated position and have engaged in robust interaction with the various parties, including Mr. O'Connor today. I respect those who hold an opinion that may be contrary to mine and who want to reflect the views of the people they represent. They have devoted time, effort and energy to addressing themselves in a useful way to the continuance of democracy in the State.

Chairman

Do any other party leaders wish to speak at this stage?

Deputy Bernard J. Durkan

I thank the Chairman and congratulate him on co-ordinating these hearings. The most important decision likely to be made in the next 20 years is about to be made. The sub-committee's hearings are critical for the people and economy in general. They are of major importance to the future of Europe. The Irish have a clear opportunity to indicate to their European colleagues that they are capable of leadership also. We have never shrunk from it in the past, as Mr. O'Connor just said, and we will not now. We hope the correct decision will ultimately be made by the Irish people, who have a huge responsibility.

Senator Kathryn Reilly

I did not get a promotion so I am not a party leader.

Chairman

It is only a matter of time.

Senator Kathryn Reilly

I thank the Chairman, secretariat and members of the committee for the debate over recent weeks, and especially for facilitating those speakers whom Deputy Mac Lochlainn and I requested. I look forward to discussing the document in the coming weeks. We will try not to be too troublesome.

Ms Marian Harkin, MEP

I had better not describe myself in any way. Having attended and listened to a number of hearings, I have learned a great deal. I have learned from listening to others and that has been very valuable. Anybody who has taken the time to listen to and analyse the contributions will be wiser at the end of the process. I certainly am.

The sub-committee adjourned at 11.45 a.m. sine die.