Seanad Éireann debate -
Thursday, 16 Nov 1989

Vol. 123 No. 5

NESC Report — Ireland in the European Community: Motion (Resumed).

Debate resumed on the following motion:

That Seanad Éireann takes note of the National Economic and Social Council, Report No. 88. Ireland in the European Community: Performance, Prospects and Strategy.

—(Senator McGowan.)

Éamon Ó Cuív

Last Wednesday I was beginning to speak about the subject of subsidiarity and I am glad to see that this is mentioned in the Minister's speech, because subsidiarity, in my view, is very important. The tendency, over the last 20 years, has been to centralise things and this is a dangerous trend in the long term. It is very much in our interest that as far as possible all powers of decision be devolved to the most local region possible. As well as that, it is very important to us as a nation that the decision has been taken that this is one region with subsidiary regions. It means that the role of the Oireachtas will be enhanced rather than otherwise. It is also much easier for people, particularly in the more remote areas, to deal with people in Dublin than it is for them to deal with people in Brussels.

It is a fact, and a fact of which anybody involved in development is aware, that the bigger and the further away a bureaucracy is the less responsive it can be, by its very nature, to local needs. It is also true that where schemes of a minor nature are devised far away they tend to be devised more with the aims of the devisor at heart than those for whom they have been devised. The best approach we could have as a country would be that the big projects would be dealt with at European level and that the smaller projects would be dealt with locally. In this way we would reverse the trend that has been evident for some time.

I would like to say a word on the question of cohesion. The Minister stressed in her speech that it is very important that it be accepted that the giving of grants under structural aid is not, in itself, sufficient to overcome the problems of the differences in the level of development in the various regions. We should look to the various methods tried to develop the Gaeltacht as an example that grants alone, without overcoming the other cost factors, will not ensure the development of more peripheral regions. Our experience has been that in this situation one would — as I have often said — spend half the day paying money into the system and the other half of the day trying to devise methods to extract money out of that same system. The cost of doing so dissipates a lot of the good that the money being spent could do. Therefore, we must insist that measures outside of structural aid be incorporated in European policies so that the disparities in income and in development of this country compared with the more developed countries nearer to the centre of Europe would be overcome. If this means subsidies for basic services we would have to say that if the EC is to live up to the aim of cohesion so be it. Our policy on this must always put people first and it must be seen to ensure that the interests of the people in the peripheral regions are catered for.

I would like to say just one word about emigration. I am not one of those people who can look with equanimity at areas being denuded of their population. I do not think that the migration of large segments of the population is either desirable or acceptable. In terms of emigration, people tend to think of the emigrants but I have seen too often the effects of emigration on the residual community, communities of old people and the weaker sections who are not able to develop their areas as we would like them to. We must ensure that both the social and economic policies of the European Community reverse this trend and create throughout this country viable, self-sustaining communities that can provide the necessary social structures that would make it attractive for our young people to stay. My experience has been that where these social structures exist and where the employment exists most people by free choice want to stay in the area from which they come.

On the subject of grants and structural aid, we have to, at this juncture, look at the general effectiveness of giving capital grants to industry, etc., as a mechanism of this stimulating development. It is a convenient way for the payer to transfer resources but I have often felt that it does not address the problems of the payee. What we need much more fundamentally is to ensure that the services available in the peripheral areas are at the same cost as those available in the more developed areas.

If we do not aim, through our participation in Europe, to create a community whose standard of living and whose expectations are as high as the richest country in Europe, we will fail the people. In my opinion we have a very great obligation to get away from any lethargy we might have had in the past and ensure that the European Community, and our membership thereof, is used in a positive way to ensure that the development that we desire in this country is available. In the words of President Kennedy, some people see things and ask "why" while other people think of things that never were and say "why not?" In my view we must face Europe with the second attitude. Within that community we can, if we put our minds to it, carve out a niche for ourselves that will ensure us a vibrant, vital role in Europe and economic development at home that will ensure that our young people will be able to stay.

Mr. Kennedy

It was Lorenzo Natali, Vice-President of the Commission of the European Communities speaking at the opening of the Centenary Symposium organised by the Commission of the European Communities to commemorate the centenary of the birth of Jean Monnet held in Brussels on 10 November 1989 who said:

Our generation has been fortunate to have had a man of inspiration like Jean Monnet who launched Europe on its first shared venture. But what kind of Community do we want to find the day the scaffolding finally comes down?

It is in that context that I welcome the publication by the National Economic and Social Council of the results of its major study on Ireland and the European Community, a report which was commissioned in May 1987 and which reported on 13 September 1989. The terms of reference of the council were:

(1) To undertake an in-depth study of Ireland's comparative performance in the European Community;

(2) To assess the problems and opportunities inherent in the unification of the internal market; and

(3) To put forward and to evaluate the policy options available, to mitigate the problems and to capitalise on the opportunities.

It is, of course, interesting to recall here today that it was on 9 May 1950 that Robert Schuman, the French Foreign Minister, made the famous declaration to which Jean Monnet had contributed in a decisive fashion, and which began the process of integrating the countries of western Europe into the European Community. On 18 April 1951 the Treaty of Paris was signed and that marked the creation of the first of the three Communities, the ECSC, the European Coal and Steel Community, whose task indeed it was to create in this sector a common market without barriers to trade, and without distortion of competition so that economic activity would develop in a healthy environment.

This first step resulted from the untiring efforts of a few men of great vision, courage and integrity, people such as Schuman, De Gasperi, Monnet, Hallstein and Adenauer. These men shared a vision of a Europe bound together by economic and social ties instead of being divided into competing and often hostile groups. They realised how terrible the cost had been to ordinary people who had witnessed two dreadful wars in the first half of this century. They realised how deeply people yearned for peace, a peace that would endure. To Schuman and his colleagues the basis for such an enduring peace lay in economic co-operation among the European states persuaded to share their resources and to trade freely with one another. The cooperation in coal and steel was but a first step. However, the real advance was achieved with the signing of the Treaty of Rome on 25 March 1957. On 1 January 1958 the European Economic Community, the EC, and the European Atomic Community, EURATOM, became a reality. This set the European states on the road to economic and social unity and has made the possibility of war between them utterly inconceivable. In this context Karl-Heinz Narjes, Vice-President of the Commission of the European Communities, draws what I believe is a very useful and historical comparison. He states, and I quote:

The Schuman Plan was announced five years, a mere 60 months, after the end of the last world war.

The situation five years after 1918 was very different; 1923 saw Franco-German relations reach the lowest ebb in the history of the Weimar Republic, with the occupation of the Ruhr and the emergence of passive resistance. This situation underlines not only the different situations prevailing after the two wars but also the political vision of the men of 1950. The gap indeed between 1945 and 1950 was very short, in any event shorter than the time we have allowed ourselves today between entry into force of the Single European Act and the completion of the internal market.

Of course it is of interest for us to recall here today that the Treaty of Rome created an entirely separate and distinct legal entity to which each acceding state surrendered portion of its national sovereignty. The creation of the Community saw the emergence of a new and autonomous legal order which had to be recognised as having supremacy over national law, if the Community was to function as the treaty intended. This, of course, was something entirely strange to the Irish legal system, for under our Constitution Irish law stems from the Constitution and from laws duly made by the Oireachtas. At that time no executive act would make applicable in Ireland rules, regulations or principles emanating from an outside law-making authority, nor could an Irish statute so provide because such would be contrary to the Constitution. The problem was, of course, solved by the Third Amendment of the Constitution which was enacted by the people of Ireland on 10 May 1972 authorising the State to join the European Communities and providing that, and I quote:

No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State necessitated by the obligations of membership of the Communities, or prevents laws enacted, acts done or measures adopted by the Communities, or Institutions thereof, from having the force of law in the State.

The NESC report is indeed a major study of Ireland in the European Community, its performance, prospects and strategy. It presents a detailed analysis of the effects of EC membership on the Irish economy, an assessment of the likely effects of the completion of the internal market by 1992 and an outline of the approach which Ireland should take to current and future European integration. The NESC report in my view makes two crucial conclusions:

(1) Ireland has made little or no progress towards catching up in economic terms with the rest of Europe and the Community is still developing in an unbalanced way, which could be to Ireland's detriment;

(2) Ireland needs to adopt a more explicit and coherent and fully articulated European policy or strategy.

Following a detailed analysis of the relative merits of different levels of economic integration, the council unanimously concluded that Ireland's interests lies in advanced economic integration. Consequently, Ireland's strategic approach should be the objective of creating a European economic and monetary union. The NESC report emphasises that in advocating economic and monetary union it means a Community which will have sufficient resources and policies to create a genuine economic union and to manage a unified European economy.

On the other hand, the recent Delors report adopts a quite different definition of economic and monetary union. The NESC report says that the Delors report on economic and monetary union, the blueprint compiled by European Community central bankers under the chairmanship of Jacques Delors, President of the Commission of the European Communities, ignores the essential role of the central European Community budget in maintaining an economic balance and in achieving the convergence which is essential if such a union is to succeed.

The report considers that the policy measures envisaged in the Delors report would be quite inadequate to create the level of integration and economic convergence necessary to sustain monetary union. Their analysis of the implications of economic integration clearly shows that by continuing to neglect these requirements the Community as a whole will sacrifice its central objective, namely a genuine common market, a monetary union and economic cohesion and convergence.

The council considers that Ireland should insist that the argument on economic and monetary union should be widened to include a more adequate analysis of the role of public finance in economic and monetary integration. The council further concludes that the long run benefits of market completion are likely to be distributed unevenly with the greatest benefits accruing to the regions in which large scale industries and highly innovative sectors are most prevalent. Ireland, of course, is not such a region. Consequently, I argue that the completion of the internal market should not, on its own, be expected to narrow income disparities between regions in the EC, let alone bring about a convergence. This, course, is the fundamental conclusion which informs the entire report of the National Economic and Social Council.

For many citizens of the European Community, the regional dimension of its policies is of paramount importance. The Community, as we know, has three sets of policies which are aimed at overcoming structural problems which inhibit the economic development of certain regions, enterprises and individuals. The Community's social policy is aimed at improving the employment opportunities and the working conditions of Community citizens. It is funded from the European Social Fund. The agricultural guidance policy of the Community is intended to address the structural problems in the agricultural sector and is funded by the guidance section of the Community's agricultural fund, the EAGGF. The regional policy aims to improve the conditions of depressed and under-developed regions and is funded by the European Regional Development Fund, the ERDF. However, these three Structural Funds have one important feature in common, their small size in relation to the total Community budget, in relation to the total Community GDP and, most significantly I would suggest, in relation to the scale of the inequalities and the structural problems in the European economy.

The NESC report predicts that in the budgetary period 1988-92 it seems likely that the proportion spent on priority regions, such as Ireland, will increase only from 65 per cent to 70 per cent and that consequently a doubling of the funds by 1992 will not represent a major change in the focus of the Community structural policy.

Finally, it is clear from this report that the development of the Community has not facilitated the convergence of Irish living standards and that it is unlikely to do so unless there is a seminal and important change in Community direction. Economic integration tends to reflect and, indeed, to reinforce existing advantages and disadvantages, so that the creation of a single European market cannot on its own be expected to cause living standards to converge. It is appropriate, therefore, that Ireland, with a relatively long period of EC membership and now about to assume the Presidency of the Council of Ministers, should, indeed, lead the peripheral and smaller economies in any analysis of the deficiencies and difficulties of European economic policy and in the search for new directions.

This report — an excellent report — paints a picture of 16 years in which Ireland has been a relatively passive recipient of directions from Brussels. With this analysis, the NESC report, the Government and the Taoiseach should develop a more active and indeed a more creative approach to participation in the European Community.

Mr. Foley

At the outset, I wish to welcome the Minister here this evening and to compliment her on her excellent work. I would like to congratulate the members and staff of the National Economic and Social Council for their excellent report on Ireland in the European Community. It is important that we in this House have an opportunity to discuss the latest NESC report. This is a very important and comprehensive study. It deals with issues which will have a major impact on Ireland's performance leading up to, and subsequent to, the completion of the internal market in 1992. NESC have been complimented on this report as the best and most significant report to be published by any individual or agency to date. NESC have attained an importance as a forum where the principles of economic and social development can be discussed in a non-political atmosphere by the social partners, leading to constructive economic and social change of the political process.

The report provides a detailed analysis of Ireland's performance since we went in to the European Community in 1973 and sets out the obstacles which this country has to face in competing in a unified European market. It highlights the hard decisions that still have to be taken in the process of integrating and playing a more active role in the EC.

It is accepted that the status report is very much on target as we begin to focus on 1992 and what we have to do to prepare for it. Allowing for the fact that work is ongoing for many years, the run up to 1992 has started in a very serious way. We are now mentally geared to concentrate on it in a real way. The main thrust of the NESC report is to highlight the fact that we now need to adopt a more explicit and fully articulated European policy or strategy. We have a unique opportunity to develop a successful disciplined economy, that in good times and bad will, to a large extent, perform so as to protect employment — especially at this time when we have massive emigration — incomes and living standards. There are a number of models in continental Europe and further afield of this type of economy that perform consistently and very successfully.

We are a small, open economy with a limited domestic market on an island situated some distance from our main markets, emerging from a state of underdevelopment. We will only succeed in raising the living standards of our people and giving them the social services and cultural amenities that they are entitled to if we combine all our resources and work together on an agreed strategy towards common objectives. There is no doubt that the approach of the single market, combined with our greatly improved economic performance, has increased Ireland's appeal as a location for industry. The attraction of major companies, the growing interest in Ireland of Japanese and other Far Eastern companies, are very encouraging developments. I welcome the Government's commitment to give every support to our industrial promotion policy abroad.

There are other encouraging features within our outstanding export performance of these last three years. One has been the export performance of the indigenous sector. Surveys conducted by Coras Tráchtála indicated that exports from this sector grew by 23 per cent in 1988 and that an additional 4,400 jobs were created in the process. Notwithstanding these trends, the central issue relating to industrial policy in the future will be how, in the light of the impending removal of barriers, to aim for Community trade. We can ensure that indigenous industry in particular adapts and performs. It is also appreciated that agreement has now been reached on the Community support framework for Ireland, namely, the context in which the greatly increased structural funding for Ireland will be invested up to 1993. The contribution of the Commission to the National Development Plan for the period 1989 to 1993 will be £2.860 billion. Taking account of additional funding for new Community initiatives in which Ireland will share, the total support to Ireland over the five year period in question will exceed £3 billion. This is a tremendous achievement and is the outcome of long, intensive, carefully conducted negotiations with the Commission. In relation to our economy it is a significant addition to our investment resources.

The overall total amount for the Community was fixed and our share of that total had to be decided in relation to the shares of other member states. Ireland has secured the highest per capita share of the best developed regions in the Community. By 1993 we will be in a position to double the 1987 allocation from the Structural Funds at today's prices. From the beginning of our membership of the Community our principle was clearly established that all the State would be treated as one region. This principle has never been departed from in our relationship with the Community nor has it ever been called into question on either side. It represents an entirely rational approach. After all the population of Ireland as a region is just over three million. In other European countries such as France, Spain and Italy individual regions have populations of up to nine and ten million. The concept of Ireland as one region has always been accepted and acted upon, and rightly so. With our present direction within the EC, I look forward to achieving our aim of increased employment, raising living and working standards and improving our social framework.

Dr. Upton

Ar dtús is mian liom fáilté a chur roimh an tuarascáil seo. Is mian liomsa buíochas a ghabháil leis an Taoiseach de bhrí gur iarr sé ar an NESC an tuarascáil a dhéanamh, agus is mian liomsa comhghairdeachas a dhéanamh leis na húdair. Tuarascáil mhór agus tuarascáil mhaith atá ann.

There are three fundamental conclusions reached in the report. The first is that the economic integration in the narrow sense will not serve to reduce the regional disparities and the forces they have unleashed may increase inequalities within the Community. Secondly, as Senator Kennedy said, the EC has developed in an unbalanced manner leading to lack of genuine integration and a continuance of regional disparities. Thirdly, the report makes it quite clear that Irish interests in their view are best served by the attainment of genuine European Economic and Monetary Union. Many of the effects that will be attributed to a Single Market will occur because of the internationalisation of economic activity.

The NESC has brushed away much of the nonsense that has been produced in the form of euphoric forecasts about the defects of the Single European Act. It has demolished the myth that the Single European Act will provide sudden and much needed jobs for the Irish economy. It set about clarifying the generalisations in the Cecchini report as they are likely to affect Ireland. How will the gains of 1992 be distributed? The report provided some answers. It makes clear that what is true in general for Europe will not necessarily apply to Ireland unless important changes are introduced. It is good that somebody started a bit of straight talking, or perhaps more correctly that someone has begun to think of what the reality is in contrast to what message the hype seeks to convey. It is also clear that all the options that are available to Ireland are difficult and they all imply changes. There will be winners and losers. That is a contrast to the illusion which is around that subsequent to the Single European Act we will all live happily afterwards.

It is a pity that there was not an Irish expert involved in the preparation of the Cecchini report. It is also a pity that the publication of the report followed the submission of the national plan to Brussels. This is another example of the Irish habit of bolting the stable door when the horse has gone.

The report makes clear that the best option for Ireland is in supporting the Single European Act. That is in accord with the country's decision to join the Community and with the decision of the Oireachtas to introduce the Single European Act in the recent past. The report commits us to more than economic union. It commits us to support EC integration in relation to the development of the Community's social policy, research and development policy which has cohesion measures to enhance economic and social cohesion as well as the development of a policy to protect the environment.

The report identifies four measures which are necessary to counterbalance the adverse effects of the Single European Act. It calls for the development of Structural Funds which, until now, have not been effective in ending the disparities that exist in a number of States, the introduction of macro-economic coordination, the introduction of budgetary and fiscal transfers and differential application of Community policies such as agricultural policy or internal market policy.

The report makes it clear that redistributive measures must be introduced to counteract the divergent effects of the Act. It is now imperative that Ireland makes its case for the introduction of each of these initiatives in a coherent fashion. We should seek to create a climate where the regional effects of the Single European Act have a central position in the agenda. This will mean a marked contrast to attitudes that prevailed in the past. The regional disparties have been rectified and, to a fair degree, we have not been prepared to make the difficult choices that would be needed to achieve this objective and that statement also holds true for the European Community. We have been prepared to accept short term improvements in the welfare of certain segments of the Irish community, such as large farmers, while allowing the situation of smallholders to remain difficult. We have been preoccupied with the short term at the expense of the long term and now we are beginning to pick up the tab.

There has been some talk of the social dimension but more talk is desirable and should be welcomed. It is to be hoped that when people talk of the social dimension they are aware of the full social implications of the Act. The Labour Party want to see the major problem of unemployment come within the ambit of the Single European Act. It is essential that there is no misunderstanding on this central point and that everybody is aware that the social dimension extends beyond relatively minor adjustments to undesirable effects of economic integration. The country must start to formulate specific policy proposals that will be brought to the centre of the debate on the social dimension. Irish needs — and the needs of other Europeans in similar positions — must be addressed from an Irish perspective. That will only happen if we take the initiative in generating proposals. Nobody will look after our interests if we do not do it ourselves.

It is time we clarified what these interests are and how they are best served in the context of the longer term. That is a problem in a society like ours where political realities determine that the long term is never longer than the next election and the next election is never longer than four and a half years. There is need to ensure that whatever debates take place the long terms gets the consideration and importance it deserves. If that occurs it will mark a welcome maturity. We all have an obligation to level with the public in the long term and we must begin to think in terms that relate to what is happening down the road.

The report draws attention to the Commission's proposal for social dialogue. That attention is welcome and overdue. The report calls for a consensus at national level and at the level of the firm. The call is welcome. As they say blessed are the peacemakers. If that consensus is to be achieved many changes will have to be made. This will be a great change for some of the industrial relations on the employer side. It will be in marked contrast to the dominant ideology of free market economics. It will be at odds with the attitude of "let the market rip and we will not bother too much about the poor."

It is time that the case of the weak and the under-privileged was stated. It is time, for example, that more attention was given to the pre-budget submissions of groups such as the Conference of Major Religious Superiors. The welfare of the one million who are now existing below the poverty line in Ireland should and must be a top priority. The Labour Party feel that the development of social dialogue has much to contribute to the development of Irish industry. We will go further and say that social dialogue is an essential ingredient to that development.

I now want to say a few words about the food industry. The impact of EC membership on the food industry has been a disappointment. There are now 38,000 people employed in this sector compared with 49,000 when we entered the Community in 1973. There are forecasts of further shake-outs in the industry. The need for quality and marketing in the industry has been the subject of a lot of talk, some reports and not nearly enough action. The industry is plagued with problems that relate to seasonality, quality of product and an industrial policy that has supported grants and fixed investment rather than grants which would ensure that food produce is high, is of consistent quality and that it is marketed effectively. Some of these problems have been compounded by the Common Agricultural Policy and by the structural nature of Irish agriculture. Neither of these problems have been effectively addressed and now we are beginning to pick up the tab for that negligence in the form of declining employment in the sector.

The food industry is faced with a static product base in milk and to a lesser extent that is also true in the meat sector. The response to this problem as far as one can judge is a frantic scramble for milk, with co-operatives engaged in cut-throat competition, which in these days is termed a milk war. It is a pity that the ingenuity which goes into these wars is not channelled into adding value to Irish products which can be exported. We have the lowest level of added value in respect of our food products in Europe.

The situation in the case of the meat industry is particularly alarming. The technological capacity of that industry remains very low. The meat industry seems to major in the exploitation of grant opportunities with little attention to matters like product development or marketing. It is a pity that the system encourages this type of behaviour, where the wise birds of the trade can take to killing cattle, sawing them down the middle, putting them into a refrigerated truck and making for Europe confident in the knowledge that somewhere between the eastern bloc border or the south of France they will be able to unload and even if the worst happens they can convert the factory back home into a dance hall or perhaps a centre for slot machines. It seems clear now that the scale of much of the food industries is too small. It is imperative that the players are provided with the encouragement to attain the necessary skill so that value added in Irish food products can be increased and jobs can be saved and increased. Expansion would be especially welcome in this sector as it is based on indigenous material and has many of the characteristics being cited as essential for worthwhile industrial development.

There is a need to look at our education system and the values that underpin it. It is difficult to take a country seriously as being committed to business and industrial development when the anxiety of most parents, as indicated by competition for university places, is to land their children into a profession where, in general, they make a modest contribution to job creation. If we are serious about solving the major problem of job creation the system, and the values that are fostered, will have to put job creation as a very important priority. It will have to ensure that those who develop industry will, in relative terms, as well rewarded. Is there enough emphasis on relevant research, research which is economically useful as distinct from research that is interesting to the researcher? Is there enough emphasis placed on harnessing all the expertise available in the country for industrial development? We have had relatively little strategic thinking about Europe. As I said, already we have been unable to think long term.

Would we have been better served had we been more questioning about the value of the Common Agricultural Policy? Should we have been more vigorous in suggesting that some of the common market agricultural policy resources be diverted into the Regional Fund? Above anything else, it is vital that we should begin to contribute to the formulation of European policy. If we do not do that we will face a series of rearguard actions.

We are going for the single market and in doing so we are going for change. There will be winners and losers and for the sake of the losers it is essential that the social dimension gets the attention it deserves. We must act seriously, coherently and vigorously to ensure that this happens. It seems to me that we are already behind in this work. I am glad to see there is talk of further studies in relation to how the different sectors will be affected. We must act to improve our infrastructure, particularly in communications. We must improve our technological awareness and capacity. The State and the educational institutions have a vital role to play here. It is clear that there must be much greater emphasis on indigenous industry. We now seem to have gone full circle when we are back to the stage when Irish industrial development is to be provided from our own resources in contrast to the situation where it was mainly to be generated by foreign investment.

The European Community is a political institution. It was founded with the fundamental objective of avoiding war in Europe. The turmoil in Europe in recent days presents new challenges for the Community, and indeed new challenges for this country. The report has given the facts and it should have dispelled much of the euphoria about the Single European Act. It has given us a clear idea of what we need to do. It is good that somebody has been honest with the Irish public. It is a pity it did not happen sooner.

Mr. O'Reilly

This report is very welcome as an excellent document in itself and it is also welcome as a very timely and worthwhile study of the implications for us of membership of the EC. It is important at this juncture, on the eve of 1992, that we do some very effective stocktaking about our situation within the EC and that we go forward with a very clear and very concise notion about our real business.

If this report is a worthwhile stocktaking exercise and a worthwhile analysis of the EC and its implications for us over the years it also has some very stark and very bleak news for us. We cannot escape the sad set of realities in the report. The report makes it clear that we are farther from the average European living standards than ever we were and that is a very serious, very damning and a very challenging comment.

The report points out that we have the highest rate of unemployment in Europe. We have approximately 250,000 people unemployed at the moment, a very serious problem for those people who are affected. The money we are giving to our long term unemployed is not adequate. We are far from the average European living standards with the highest rate of unemployment in the EC.

We also have the highest level of emigration in the EC. Every year 48,000 people leave the country. The number of people who leave every year, to put it in more imaginable terms, would make a very large crowd at an all-Ireland football final in Croke Park.

That is the scale of the number of talented young people who leave every year. That emigration has very serious implications because it is the young people who have the skills, physical energy and the capacity to create wealth who are leaving. Not only are they the wealth-producing sector but they are the ones who could give our society the required vibrancy, the required development that it will need in future years. We are bedevilled with the crisis of emigration. That is one of the stark, bleak and damning findings of the report.

The report states that we are below the European level of average income, that we have the highest rate of unemployment in Europe and have a damning, crippling, depressing level of emigration. If all that is not bad enough, the report also finds that the flight from the land has intensified beyond measure. Our family farms are decaying and the number leaving the land multiplies by the thousand on an annual basis.

One-third of those remaining on the land live below the poverty level. That is part of the findings of the report of the Commission on Poverty, and is an extremely serious matter as well. We are confronted after our term of membership of the EC, as we look at this very fine document, with the reality of low living standards relative to the rest of Europe, with monstrous unemployment, tragic and famine-like emigration and vast rural poverty.

That is a very serious state of affairs, but within that there is another very sad reality which I must submit to this House for consideration. I can say without fear of contradiction that there is not sufficient Government concern about the problem. We have within the island two structures. We are developing a two-tier society. I am convinced that we are losing sight of the reality of rural poverty in the west, the north-west and in other depressed, disadvantaged regions. What we are creating is an island of poverty within an island and that is a very serious and damning fact.

I want to draw attention, first, to the fact that one-third of our farmers are living in poverty and that the small family farm is decaying as an entity in rural Ireland. I also draw attention to another very simple reality, that in the north-west of this country, for instance, in my own county of Cavan at the moment, a very simple and important reality is that the entire county road structure is breaking down. The implications of that for the quality of life of the people who live along those roads and often, too, for those who live beyond them, those who live in the back hills as it were, are serious. If the road structure of a county affects the quality of life of the people it also affects the economic life as well as the food processing sector which is strong in the area I am talking about. In my county activity in that sector has been brought almost to a standstill. The commercial life of the county generally is affected. The school buses can no longer travel on these very bad roads. In addition, the public health nurses and the general practitioners are talking of not being able to travel on those roads for much longer. That is an example of an area within the country becoming the victim of tremendous neglect and deprivation by central government. There are large areas of this country which could have benefited tremendously from the severely handicapped areas money available from Brussels if an application in that respect had been processed. The counties of Cavan, Monaghan and a number of counties in the west that have not been classified as severely handicapped could be so classified if an application to Brussels was made immediately. That classification would cost us very little in real terms because we would get up to 75 per cent funding from Brussels. The remainder would come from central government here but there would be a return to the Exchequer of such moneys by the hardheaded business and farming communities of these areas.

We are missing great opportunities. We are missing the opportunity to fight for equalisation of our position in relation to the other countries in Europe. As an island, Ireland, according to the NESC report findings, is falling below the level of living standards in the rest of Europe. As an overall entity Ireland is failing to perform on many levels within the EC. It is bad enough that Ireland is slipping within the EC but we are allowing dangerous regional disparities to develop, even within the country. That is why I cited the example of the roads of County Cavan and of the position in relation to the exclusion of the area from the severely handicapped areas category.

We must immediately change our entire approach at the negotiating table in Brussels. We must identify with the other areas of the EC which are disadvantaged, which are peripheral, which are suffering from peculiar problems and poverty. We must unite with those areas and develop a co-ordinated and strong position in relation to seeking adequate regional and social funding. If our Government do not go to Brussels making very specific and strong demands, in conjunction with the other weaker members of the Community, we will continue to fall behind the rest of Europe.

We must change our approach to the administration of the regional funds here. We must use the vehicle of the local democracy in local councils to identify the projects that qualify for benefit from the Regional and Social Funds. Having done that, we must permit the local authorities to play a very active role in the distribution of those moneys. It is regrettable that when the recent national plan was being drawn up the local authorities were not given a major role in its preparation.

My final contention in relation to our performance at European level is that we must seek in a vigorous fashion to redress the imbalance that exists. As a peripheral country we must seek additional aid. Having done that we must go down the road of redressing the imbalances within our own country.

Until we solve those difficulties we cannot say that we have adequately participated in the EC or that we have responded to the demands of our people. While unquestionably the essential conclusion of the NESC report is that the country, on balance, benefited from membership of the EC, as is undoubtedly the case, it is unfortunate that we have not managed those benefits in a better way. It is unfortunate that we have not delivered more to the poorer regions of the country.

We should look at the plight of the farming community bearing in mind that one-third of farmers live below the poverty line. There is a major flight from the land. We must look at the question of intervention and of putting beef into intervention. The time has come when we must consider changing from the highly expensive system of putting beef into intervention to one of subsidising the producers and, indirectly, the consumers. In that way we would be making the food available to the consumer at a cheaper price. It can be very expensive and time consuming to put beef into intervention. We should look at this because, ultimately, it is wrong to be putting beef into intervention if there is no justification for it. We will have to examine that scheme.

Finally, the time has come when we must decide to use our membership of the EC to achieve a greater distribution of wealth throughout the Community. We must pursue policies that will lead to our advancement at EC level.

Mr. Ross

First, I should like to say that to a large extent — I know the NESC report does not cover political events — we should recognise when we read this report that it has been overtaken by what has happened in the last few weeks in eastern Europe. Whether we like it or not, we cannot ignore that fact when we are considering the report. Who knows in what shape the EC will actually be by 1992? It is impossible to say whether East Germany will be a member then, whether Hungary or Austria will be members, whether the EC will consist of 15, 20 or 30 members, whether, indeed, the EC will exist or whether it will have a need for its existence.

As Senator Upton said quite so rightly, whereas the European Community is now principally an economic community, a community which sets barriers against the rest of the world in an economic way, it was set up originally as a political entity. If it was a political entity then it will, presumably, maintain that political structure in the years to come. But, one has to ask, if it was set up as some sort of a buffer between the East and the West, whether such a middleman, or such a third power, is necessary any longer? If the East and West conflict now no longer exists in the traditional conventional sense which we remember, there is no need for a third military or political power of such great might as the European Community.

Reading the NESC report, as I did this morning, one feels to a certain extent that maybe one is reading a report which was good on the day it was published but which by today is no longer relevant. Having said that, I would like to come to one or two general points about the report. The first one is that it appears now to be accepted that Ireland and the EC are rushing headlong into integration of an economic, political and fiscal nature with each other. The report no longer is the sort of report which questions the basic of the EC, or whether we need an EC at all. The report, having accepted 1992, and having accepted union of all sorts, merely asks how Ireland can adapt towards what it now regards as inevitable.

We should, from time to time, sit back and look at these fundamental presumptions about the EC and ask whether in Ireland we still approve of the direction in which the EC is going. As the devil's advocate, it seems to me that we should ask the question not just because all political parties have now accepted the European Community but because there are certain straws in the wind which we have seen in the last year or two and which are not encouraging signs for us as a member of the EC.

I say this in the full knowledge that even The Workers' Party appear now to have taken the European Community on board. Certainly the Labour Party do not mutter about it any longer. It is now very unfashionable to even question the direction in which the EC is going. It was only as recently as last year that we saw the take-over of Irish Distillers by a foreign company, Pernod Ricard. That indicated a fundamental problem which Irishmen and Irish industry are going to experience more and more in the years ahead. It was disappointing to see the Fianna Fáil Government, the traditionally nationalist Government of this country, accepting such a take-over of a native, indigenous industry without really a murmur of opposition or questioning. It is absolutely true that the Minister for Industry and Commerce at the time referred the bid for Irish Distillers from a European consortium to the Fair Trade Commission but there was no real effort on the part of the Government here to question whether the integration which we are experiencing with Europe is something which is going to benefit our native industries or is going to benefit the bigger industries in Europe.

My feeling is that what will happen on the road to 1992 and in 1992, is something which we may as a people greatly regret in the years ahead. Whereas Irish Distillers was taken over by a foreign company, a European company, with great ease — the only difficulty Pernod Ricard found was that there was someone else from Europe who wanted it but there was no difficulty faced from this end — I believe it is quite possible that many other Irish indigenous companies will now find themselves faced by a takeover from France, Germany, the United Kingdom and from all the far bigger industries and powers in Europe. If we accept 1992 in the way we are accepting it in this report, we will be able to do absolutely damn all about this. The result will be — it may be inevitable but it should still be questioned — that all the best companies, and certainly the best public companies in Ireland, will be taken over by their much larger foreign competitors and all the bad ones will be left to fester, to go under and go bankrupt as a result of unimpeded competition. It is conceivable, although it would have been unthinkable ten years ago, that Allied Irish Banks, the Bank of Ireland, Cement Roadstone and all the other major Irish public companies will no longer not only be quoted on the Irish Stock Exchange, in which I should have a vested interest, but they will no longer exist as independent companies.

I have heard from nobody in this debate, or in any debate about the European Community, or from any Government in the past five years, any questioning of this particularly unhealthy and difficult trend. If it is not too late, the Minister, and the Government, should not sacrifice indigenous industry on the altar of efficiency. It is quite possible that we really will not have any indigenous, efficient industry in 1992 and the years after it. The consequence of that will be the banks like the Deutsche and the Dresdner banks will take over AIB and the Bank of Ireland because the Government will not be able to stop it. I see the Minister shaking his head but they will take over these companies and they will decide who is employed in those companies, whether there will be Irishmen or foreigners employed in them, and what expertise is used. The Government will have very little control over the matter.

Acceptance of the EC, of course, means sacrificing a certain amount of autonomy but in this particular area it is something which needs a rethink, it is something which not just for sentimental reasons but for good, solid economic and parochial reasons as well we should reconsider. Otherwise we may be handing over too much control not only over the financial aspects of our industry but over employment and who is employed here. That is the direction in which we are going.

The second and only other point I want to make is about the European Monetary System or the ERM as it has come to be known. The benefits of that system are something which all of us here should probably applaud. It is not something which is particularly well understood and it is not something which was anticipated as being so beneficial in the years when it was introduced, as long ago as 1979. Indeed, in 1979 we entered that system with mixed feelings. I can remember that at the first summit meeting when the system was set up we actually withdrew and decided not to go into the system. There was great confusion and then a week later we changed our minds and went into the system after a lot of coming and going and to-ing and fro-ing to Brussels. There were great difficulties for Ireland about that because it involved a break with sterling and an attachment to the European Monetary System. It was a big step, a step which many here did not understand. To a certain extent we were stepping out into the unknown when we had been cosily attached to sterling since the foundation of the State.

While the entry into that system was traumatic at the beginning, while it was something which I do not think the Government even understood at the time, where nobody knew exactly where the system was going, it has been of great benefit to Ireland. One of the reasons is because of the enormous amount of foreign investment in Government stocks here. The attachment we have now to the Deutschemark as opposed to sterling has meant that not only are we linked more closely to German inflation, which is far lower than Britain's which we were linked to before, but we are also linked to German interest rates which are also far lower than the British interest rate. Initially it appeared a foolish move to detach ourselves from the UK which was just about to enter into a period of great prosperity and low interest rates but now we are reaping the rewards.

The greatest single reward we are getting is the £3,000 million or so which has been invested mostly by German banks but by other banks throughout Europe in Irish Government stocks which has been an extremely effective way of the Government borrowing money. I can remember in 1980 as a stockbroker going around German, Dutch and French banks attempting to convince them that now we were a member of the EMS they should be investing in Irish Government stocks. At that time they were very reluctant. Most of them did not even know there was a market in Irish Government stocks and they certainly had no investment in Irish Government stocks but gradually, as a result of the European Monetary System, they have realised that they can now invest and there is virtually no currency risk to themselves. The result has been that there has been a free movement, despite exchange controls which we imposed on ourselves against Europe, of money into the Irish market which has been very, very beneficial not only to the Government but also to the Irish people.

The only danger the Government should be aware of — of course the Department of Finance are aware of it — is that if at any stage the large investment which is made into Irish Government stocks looks a little unhappy with the home that it has found, there would be a flood of money, maybe £1,000 million or more, attempting to come out of the country in one day. That is something which the market, obviously, could not take. That is not something which is anticipated as going to happen today or tomorrow, but at some stage all that money, because money will be flowing freely around the markets of Europe, will undoubtedly look for another more attractive home possibly with the EMS but possibly with higher interest rates. When that happens we will feel the harsher edge of EMS membership and we will have to find an alternative method of funding. At the moment it has been of great benefit to us and we have not felt the breeze of British higher inflation or British higher interest rates as harshly as we might have done if we had remained attached to the British market.

Finally, if we are to continue going in this direction we should hear more from the Minister and from the Government about where we are going in terms of a common central bank and a common currency. The logical conclusion of the financial direction in which we are going, the monetary direction in we are going, is towards a central bank and a common currency where currency fluctuations are just eliminated from the European equation. It may not be particularly good for those of us who earn our living in the financial services sector that currency speculation within the countries should be eliminated but it is something which would be of enormous benefit to trade and industry within these currencies because currency hedging is a very skilled and a very chancy type of a business which costs industry money. Were this to be eliminated by the introduction of a common European central bank, by a common European currency, we would find it would be of great benefit to us all. We are half way down that line and we have been great beneficiaries. Finally, I should like to welcome the fact that this report was commissioned, and to welcome the fact that we are debating it, but it may be right to say that even at this stage the report is irrelevant.

Mr. Hourigan

I should like to join with the Members who complimented the NESC on the preparation of this report. I should like to stress that our future, economically and otherwise, certainly lies within the framework and structure of the European Economic Community. However, we have not, as a very disadvantaged nation on the periphery of Europe, received the treatment from the European Economic Community that we ought to have received. We are severely disadvantaged geographically; we are severely disadvantaged as an island and by the fact that we have a very small population. In spite of these significant disadvantages, we must acknowledge that we have been net beneficiaries as a member of the European Community over the last number of years. We have been net beneficiaries to the order of £900 million. The financial situation of this country would not be what it is today if we were not a member of the EC.

Successive Governments since 1972 have not laid sufficient stress on the special treatment we were entitled to get. We had every right to receive that assistance as an under-privileged member of the Nine, in the first instance, and subsequently of the Twelve. Who knows, in the future it may be 15, 20 or 30 nations. I recall that in 1972 there was great euphoria amongst the major political parties about our joining the EC. Those parties went on a very vocal, vigorous campaign to convince people that our place was in Europe. Various vocational and voluntary bodies were involved and with others, I advocated membership of the European Community.

Our views, were perhaps, based on a false and inaccurate presumption, but that was not surprising. That presumption was that our agricultural industry had unlimited prospects within the context of EC membership. We accepted that our industry ran the risk of getting into difficulties from time to time and acknowledged that certain industries would go the wall. We knew that in 1972 but we accepted that against a background of unlimited potential for agriculture. Unfortunately, we know that in the early eighties the whole scenario changed and our agricultural prospects diminished. A quota on milk production was imposed and opportunities in other areas of production were curtailed. We succeeded very well in the special arrangements on the milk quota. However, I suggest that we have now to face a new and very difficult problem. I do not think reference was made to it in the debate, at least not while I was in the House. Our problem is that a large section of our farming community are living below the breadline. I am talking about the non-dairy farmers, those who do not have a licence to produce milk for sale. We have many beef farmers, tillage farmers and mixed farmers. An exception to the dairy farmers might be sheep farmers who are doing better than those in the other sectors. We must acknowledge that many farmers are living below the poverty line. I do not think it has been said loud enough or often enough that there is virtually no future for the non-dairy farmer.

That is the stark reality. Assistance must be made available to enable those farmers earn an adequate income from their enterprises. That position has come about very quickly. In the past, people measured farmers' incomes on the basis of how many acres they had. A farmer with 100 acres was considered a big farmer. A holding of 50 acres was considered viable. If a farmer had 30 or 20 acres he was considered to be getting into the danger zone. Now one has to assess the farm income on the type of enterprise engaged in on that farm. I could not overstress that point. It is a tragedy to see all the fine land of this country on which people cannot make a living because they are restricted in what they can produce.

Acting Chairman (Mr. R. Kiely)

As it is now 4.30 p.m. will the Senator please move adjournment of the debate?

Mr. Hourigan

I move adjournment of the debate.

Debate adjourned.

Acting Chairman

When is it proposed to sit again?

Mr. Fitzgerald

At 2.30 p.m. next Wednesday.