I thank members for their broad range of questions and comments. I appreciate all of the comments. I will begin with Senator Colm Burke's reference to research and development, a point he raised previously. I agree with his analysis and it is fair to say that in terms of the European institutions trying to address and step up the issue of research and development, the Horizon 2020 strategy is the basis for it. The Commission is due to produce new proposals in the next few weeks about attracting some of the top talent in the field of research and development to Europe, but it must be on the hook of Horizon 2020. I am glad to see there is a commitment to allocating significant funding to it. I met the Commissioner for Research, Innovation and Science, Máire Geoghegan-Quinn, at an event in Belfast in the past week or two and I am sure she would like to see even greater funding allocated under the proposed MFF, but there are so many competing interests. On the one hand Ireland would love to see additional funding on top of the proposed €80 billion for research and development and innovation, but we must be realistic and acknowledge that would potentially impact on other funding allocations such as the Common Agricultural Policy, which would be against our national interest. We must find a balance, but I agree we must be ambitious. The potential in terms of private investment in research and development is enormous and that is where there is a need for a joined-up, EU-wide approach encompassing both public spending at a European level, national level and private spending. That is what the Commissioner is driving. I am very impressed by her efforts thus far. She is making a real impact both in the Commission and in her general sphere.
Deputy Dooley asked a number of general questions, including whether there is a sense that a process or modality used in previous rounds is being tweaked or whether there is some new thinking. We have a little of both. If one deconstructs the way in which the budget has been formulated in recent decades, countries such as Ireland risk being disadvantaged because the final outcome is not yet known. We are reasonably satisfied with the Commission's proposals and certainly satisfied with the opening position on the Common Agricultural Policy. We need to think twice before demanding an entirely new way of doing things. There is a conscious effort to modernise the budget in several respects but we are somewhat critical of the Commission's proposal in respect of simplification. There is room for less bureaucracy and further simplification. We hear much about simplification but we need to see it in action. While we are moving in the right direction, much work remains to be done.
It is correct to focus the multi-annual financial framework on the Europe 2020 agenda, which is the growth strategy for Europe for the coming years. The emphasis on research and development and innovation is also an important modernising factor. Even the Common Agricultural Policy, which is viewed as archaic by certain countries that are less supportive of the CAP than Ireland, is focused on greening and modernising agriculture and availing of new opportunities and technologies. Everything needs to be modernised.
The way in which we approach cohesion expenditure is being modernised in the budget and must be tied into national reform programmes and the Europe 2020 agenda. On the whole, the budget is balanced and modernising, although there is no major shift from the past funding model and the main headline expenditure policies continue to be Cohesion Funds and the Common Agricultural Policy.
Unfortunately, the budgetary process always commences with highly divergent views from the member states. Countries from the east are highly supportive of expenditure on cohesion programmes and want the budget to increase. Ireland is strongly supportive of the Common Agricultural Policy and cohesion policy. Other countries - by and large the net contributors - remind us of all the sacrifices being made in the individual member states and argue for restraint and reductions in the budget. Member states are, therefore, starting from different positions and must move towards a middle course through a process of negotiation.
We disagree with those who believe an ambitious budget is not necessary. We need growth and enhanced employment opportunities across the European Union. It is ironic that some of the countries that have signed up to the zero growth agenda, in other words, an agenda of reducing the EU budget, are also those which speak of a need for stimulus. There is, therefore, a contradiction in their position in that they seek an increase of €120 billion in European Union expenditure to stimulate growth and jobs, while also seeking to reduce the multi-annual financial framework. The framework is the budget of the European Union and is designed to achieve economic growth, deliver benefits to member states and demonstrate solidarity. I hope we will be able to blow these contradictions out of the water as the process advances.
A number of speakers asked about a financial transaction tax, FTT. I concur with Deputy Bernard Durkan's position on the matter. The more I have followed the debate on an FTT in the past year, the more convinced I have become that such a tax is the wrong solution. At a time of economic stagnation, if not decline, in Europe, it would be madness to disadvantage Europe vis-à-vis financial services in the rest of the world. Approximately 30,000 people are dependent on financial services for employment in Dublin. It does not make sense to say to investors, job creators and all forms of financial service providers: “No, thank you, why not take your business to Singapore or New York?” As the German Finance Minister, Mr. Wolfgang Schaeuble, stated some months ago, the financial transaction tax is dead as an own resource proposal. It has been proven that it is dead as a potential source of income at the level of 27 member states. A number of countries now wish to move forward with it and they have explicitly acknowledged that agreement will not be obtained among the 27 member states or, for that matter, the 17 eurozone member states. I would not advocate taking the latter approach, which is not feasible in any case. A number of countries have opted to proceed by means of enhanced co-operation.
It will take some time and a great deal of thought and effort to develop a financial transaction tax that is workable across the borders of nine EU member states. The Commission's own proposals, as it acknowledged, were seriously flawed. Ireland cannot block countries from proceeding with such an approach and it would not be in the spirit of European co-operation to do so. At last week's ECOFIN meeting, the Minister for Finance, Deputy Michael Noonan, indicated Ireland would neither participate in nor stand in the way of a financial transaction tax. We must now allow the process to take its course. Those countries which wish to proceed with an FTT can drive it forward in co-operation and consultation with the Commission.
The benefits of the Common Agricultural Policy are clear. For the past 14 or 15 months, the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, has taken a strong position on CAP. This is not only a matter of protecting the incomes of farmers in Ireland or elsewhere, although that is also a concern and it would be an irresponsible public representative who did not care about incomes, livelihoods and the need to sustain rural communities. The key argument in favour of maintaining CAP funding is that the policy assures Europe of quality food at a time of increasing food shortages in the world. Food safety and quality are increasingly a concern for member states. Europe has the best food production and highest standards in the world. This is a disadvantage as it sometimes creates difficulties in bilateral agreements and with the World Trade Organisation. Nevertheless, CAP is worth preserving because we have the best quality food in the world and are able to feed our people and others elsewhere in the world better than anyone else. We must continue with production and convince other member states which do not share our view on the value of maintaining the current quality and level of food production. As the largest exporter of high quality beef in the world, Ireland has a role to play in this regard. We must maintain our position as market leaders across the agrifood sector and demonstrate that protecting the Common Agricultural Policy is not only a matter of self-interest but one of protecting the common interest. I could not agree more with members who have made this point.
Deputy Doherty asked about the reference period for Cohesion Funds, an issue to which Senator Heffernan also alluded. It is not true that Ireland has sought an extension of only one year. We began with a proposal from the Commission which examined the 2007-09 period. In the negotiating box, that was extended by one year following representations by Ireland and others. That is not set in stone, it is simple in the shake up. Our position is to seek to have it extended to the latest possible date, that is, as close as possible to the beginning of the multi-annual financial framework. That would be the ideal outcome in terms of the reference period.
It might be useful to share a paper which was circulated by Ireland for the friends of the Presidency group, the official level group which deals with the multi-annual financial framework, MFF, negotiations, and the GDP and GNI disparity. Our GDP per capita is third highest in the EU in GNI terms we rank twelfth highest and we want that to be reflected in the outcome. We might circulate that paper to members because it is useful and goes through the issues. It will not take too long as it is only a four page document. It sets out more clearly where we are coming from. The other elements we are pushing to have taken into consideration in the calculations are levels of youth unemployment, which in Ireland is one of the highest in Europe, and regional declines in GDP. All of these issues are in the mix in terms of the negotiations and we are pursuing them. Members can rest assured we are not disadvantaging ourselves in our negotiating position, we are seeking the maximum possible flexibility. The reality is that all these measures are relative. While Irish GDP has declined, so too has GDP across the rest of the European Union. Relatively speaking we still are one of the wealthiest states in the EU. That puts us in a difficult position when it comes to the status of, say, the BMW region. We are working hard to get some flexibility but it is difficult particularly when many countries, especially from the east, who are much poorer than Ireland. Having benefited from cohesion in recent decades, many countries which are poorer than Ireland also expect to benefit from it. That is the nature of solidarity in the EU but we are working on it.
The Deputy's colleague, Senator Kathryn O'Reilly, also asked about macro economic conditionality last week when I appeared before the committee in advance of General Affairs Council. Suffice it to say I share the Deputy'sreservations. That payments should be suspended to countries at a time when they are struggling to grow their economies is contradictory. I have expressed these concerns on different occasions in my interventions at the General Affairs Council. I understand the logic behind it. There is merit in trying to ensure that countries meet their targets and obligations but there is range of regulations and measures in place that oblige countries to meet targets. Whether the fiscal treaty or the six pack, the architecture is in place and I have significant concerns about the MFF being used in that way. We must see how that negotiation progresses. Needless to say, a number of countries have expressed concerns, as we have done.
In regard to PEACE funding, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, is spearheading the issue and has made approaches to the British Government on our behalf. We now have a joint proposal coming from Ireland and the UK to the Commission in respect of PEACE IV funding. While I am optimistic about that, some work remains to be done on it. I share the Deputy's view that PEACE funding in the Border region has been vitally important to the communities there and has helped to shape social solidarity and contributed an enormous amount through voluntary and community groups. It is a hugely successful story and we want to continue it.
In regard to the cap on the Common Agricultural Policy, we are broadly in supportive of having an upper limit. There are plenty of examples of bizarre recipients of CAP payments. I do not wish to name them but it will not affect Ireland because no farms benefit on that scale. We support the proposal for an upper limit on CAP payments. That is appropriate because some payments can be considered to be quite bizarre. On the agri-environment options scheme, there is some flexibility under the proposed MFF. There is no reason a similar scheme, if not AEOS, cannot be introduced under the CAP. However, we have to wait and see the budget allocation for the Common Agricultural Policy and whether, under the funding allocated, such a scheme would be possible. In theory it is possible but it depends on the relative budget amounts and, obviously, we are pushing for the maximum. If we are successful it will be possible to introduce schemes of a similar nature in the course of the next few years.
Contributions to programmes such as nuclear technology are not differentiated in the budget, therefore it goes into the central budget and every country contributes according to the gross national income index. They are part of programmes that are part of the EU policy agenda and are paid for centrally. There is no possibility of an exemption and we are not seeking an exemption.
In regard to the European Space Agency, we are making an annual contribution of about €15 million per year. That is not part of the EU budget but is a separate agency. Irish companies and academics receive grants from that agency which benefits all of the European Union. While a space agency may appear to be out there, it contributes much to research and development and various research that takes place in Ireland and in all the member states. We are certainly not seeking an exemption from that.
We are not in favour of the own resources position. We support the GNI index as it is one that suits us. It is the fairest and takes into account relative wealth and different considerations in terms of demography in member states. It is a system that works and we are supportive of it. While there is a clamouring for own resources from some member states and especially from the European Parliament, it is not that widely held. There are different options on the table but the FTT is the one that was being pushed most trenchantly by some member states and, particularly, by the Parliament. That is now off the agenda. Whether others will raise their head and take off in terms of expectations from member states remains to be seen but I do not expect any dramatic move towards own resources during the MFF. I may be proved wrong but I do not believe there will be.
On the issue of rebates, whether we radically change the budget, from a pragmatic point of view we are looking at not dramatically changing the way in which we agree budgets. On that basis, if we are to retain the GNI contributions, Common Agricultural Policy funding, cohesion funding and so on, rebates, unfortunately, are a part of life. They are a reality and certain member states will insist on them. They are the net contributor countries. As always, I expect a row to the end, mainly between the countries which receive the rebates. I do think there is any likelihood of rebates being abolished or not being a part of the MFF negotiation. They are a fact of life and I do not think that is going to change.
I agree with Deputy Durkan's point on FTT, which I already addressed. I am increasingly of that opinion and I thank him for his comments on the growth and jobs agenda. Senator Heffernan asked about the cohesion spend and the proposed change to the reference period. I think I have answered that already. We are not just looking for an extension by one year, but for the closest possible date to the MFF coming into effect. That is supposed to be the beginning of 2014. While wishing our Cypriot colleagues the very best in pursuing the negotiations in the second half of 2012, we certainly hope that the deadline will be realised.
I already alluded to the BMW region and the difficulties in terms of the calculations. We are working very hard but we have to be realistic as well. It goes back to the point of relative wealth. While we have seen a decline, so has almost every other country and that makes it quite difficult to get any significant changes in the negotiations.
Deputy Donohoe asked how the FTT will evolve. I do not think it will be a very rapid process and will take some time to work out. We are talking about 19 countries not being initially part of the FTT. Others may opt to join it if it turns out to be a roaring success. Obviously the UK has a huge financial services sector, but it is largely peripheral countries like Cyprus and Malta which have a very strong position on this, as does Ireland and a few other countries that are really dependent on the financial services sector for employment and contribution to national GDP. We simply cannot afford to disadvantage ourselves versus the rest of the world. We will have to see how it works out, but I would not be of the view that we will be joining it any time soon.
The report of the four wise men on EMU is not strictly related to the MFF and I fear that we could be here all day talking about this. My initial response is that I am very supportive of the thrust of this paper. We face a juncture on whether we want to save the euro or not. If we wish to save it, steps must be taken. Banking union is one of them. Eurobonds and the mutualisation of debt are absolutely essential. I am happy with the paper as it has a parallel process which moves in the direction of debt mutualisation and also requires countries to share more information with each other, co-ordinate fiscal policy, economic policy and so on. I can live with that process, but we must have the assurance that the end game ensures some form of debt mutualisation.
In my opinion the currency crisis is now entirely being driven by perception of unsustainability of debt in certain member states. Once the markets finish with one member state, they move on to the next. It is like a domino effect. The completely incongruous aspect of all of this is the fact that debt levels in Europe are not that high, relatively speaking, compared with other parts of the world. What is driving the markets is a conviction that we will not work together to find a common solution. When we dispel that conviction in the markets, we will take the pressure off our currency, so we have to move in that direction. I would like to see it happen quicker than outlined in the paper submitted by the presidents of the four institutions. Interim measures need to happen to make a clear statement, especially in respect of changing the role of the European Stability Mechanism so that it can directly bail out European banks without routing it through the sovereign. The more we load debt onto the sovereign in country after country in the EU, the more we are fuelling this crisis, the longer it is going to go on, the more dangerous and precarious it gets and the more pressure our currency comes under. Our economic progress can potentially be severely undermined by that. Growth across the European Union cannot really fully be restored until we solve the currency crisis, so it all comes back to this one thing. I am supportive of this paper, but I would like to see it move more quickly and I agree with the Deputy that we need to see more immediate measures to ease the pressure that we are experiencing from the markets. Other countries are experiencing this in more acute terms because they are still borrowing from the markets at exceptional rates.
The Deputy's point about the democratic legitimacy and the gap between the citizens and the institutions is very good and we are all conscious of it. I am pleased to say that it is well reflected in this paper. We have four elements in the paper and the fourth one is about democratic legitimacy and finding ways in which the citizens of Europe can be part of the process. There is also a reference to national parliaments and to the European Parliament, which is very important. We are going to have to look at new ways of bringing the institutions closer to the people. There are proposals floating around------
