Leader, Senators, I am deeply honoured to be the first President of the European Commission to address the Seanad. I do so at a time when Ireland has passed a quarter of a century as a member of the EU, a period of rapid political, economic, structural and social change. This is, of course, true everywhere, of every nation, region and in the global economy. However, it is rare to find any period of such profound transformation as successfully managed as it has been in Ireland. I wish to briefly survey what has happened and try to determine the lessons we can draw for the future as we approach new European challenges in the millennium ahead.
During my long political career, both when I was Prime Minister of my country, Luxembourg, and now as President of the European Commission, I have always been struck by the broad enthusiasm of Irish people and Irish politicians for the process of European integration. I do not believe that this is predominantly or solely for reasons of fiscal transfer — the agricultural subsidies and/or access to the Structural Funds. It always seemed to me that Ireland's determination to make its membership of the European Union a resounding success also derived from its desire to strengthen its own identity, to release its own cultural forces, to broaden its economic and political relations and to seek wider platforms for your business and trade; indeed, a desire to seek more freedom, more influence and more outreach in a multi-polar complex world, a desire to participate, share but also to learn from the best practice of others.
I understand these sentiments very well, coming as I do from the smallest member state of the European Union. The European Union, contrary to what some think, does not crush individualism, culture or identity. On the contrary, what we observe, is that it offers wider opportunity for all European identities to flourish.
Ireland is a fine example of that. It seems to me that Irish culture and influence is now felt far more widely than ever before in Europe and in the world. In the last 25 years, I believe there have been other forces that have strengthened the comparative advantage of smaller nations: first, the flexibility and the ability to take expeditious economic and political decisions and second, the astonishing growth of the global information society and the global network economy that is in the process of being built. This has meant that distance from market is much less of a handicap than before in those fast growing service sectors of the economy where Ireland has excelled.
Size in itself is less important. Europe is increasingly moving towards an economy of brain, not brawn, intelligence and innovation rather than muscle and repetitive shop floor working. Today Schumpeter's theses are right — small companies, fast on their feet, can be immensely successful, growing quickly in the local, European and global economies, and creating many jobs in the process.
The third reason is perhaps more controversial to prove but I think true. It is that smaller countries have been, by the very nature of their size, and because of the scale of the external forces bearing upon them, more able to forge social consensus on the right combination of economic and social policy. To some extent it has been a question of sink or swim for all small countries. I do not want to suggest these matters have been easy to resolve — far from it — but the costs of non-agreement are particularly prohibitive for small countries. The footloose international investor will not invest in areas of social pandemonium.
Again, Ireland's success with its social dialogue has been a major contributor for defining where your country finds itself today. Finally, the traditional emigration of people from smaller countries for education, work, etc., and particularly in Ireland, was always seen in terms of a loss of human resources and the sad break up of families. While this is undoubtedly true, there is also an upside in the forging of strong links with many other parts in the world, learning other ways and importing them. Ireland's strong links with the United States are a case in point. Links with European countries have grown ever since the flight of the Wild Geese and the establishment of the Irish Colleges in Leuven in Belgium, Salamanca in Spain, Paris and Rome.
Any reading of Ireland's political and economic relations with the European Union over the last 25 years would lead one to focus on six main reasons for your outstanding success. The first is the overall management of the economy from the middle of the 1980s onwards. By the middle of the 1980s Irish GDP/ capita was barely two-thirds of the Community average, Government borrowing was persistently above 10 per cent of GDP and the debt ratio was spiralling above 100 per cent of GDP along with negative employment growth. Barely a decade later, following the process of fiscal consolidation, we find the following dramatic change: Irish GDP/capita is now above the Community average and inflation is in the 2 to 3 per cent bracket. The average growth rate is estimated to be above 10 per cent this year, after 8.3 per cent in 1996 and 10.6 per cent in 1997.
Furthermore, the Commission forecasts further very strong economic growth next year and for the year 2000, as well as a Government surplus estimated at 2 per cent of GDP for this year, with the stock of Government debt being substantially reduced, in addition to a 4 per cent growth in employment this year, resulting in Ireland's unemployment rate now being 8 per cent, the lowest for 14 years.
The nexus of this outstanding economic performance has meant Ireland has joined economic and monetary union, beginning in barely six weeks time. Ireland's economy will benefit even further from this in the future. This is, to use a German word coined to describe the rebirth of Germany after the Second World War, a true wirtschaftswunder.
The second reason is the strong social partnership that has developed as an integral part of its economic and planning process. I have always believed that strong social partnership is the complement not the antithesis of competitiveness. Ireland's social partnership is a shining beacon in this regard because it has become an integral and accepted part of the economic and social planning process, providing predictability, partnership, solidarity and cohesion. Partnership 2000 is the most recent example.
The more we can forge strong social partnerships right across the European Union, taking into account the different specificities of each member state's traditions, the stronger we will be. We have to go further in the future — encouraging new forms of stakeholding by employees in companies and continually improving the training, adaptability and employability of our workforces in line with the employment guidelines process set up by the European Commission and agreed by the European Council. I would like to pay tribute here to the work of Commissioner Pádraig Flynn who has advanced this agenda so successfully.
The third reason is the very strong and sustained effort to improve the educational and training systems. Ireland's major investments in education and training are also now paying off, as the employment figures show, but no one can rest on their laurels.
For example, we find today a generalised European shortage of skilled information technology specialists of at least 500,000 people and growing fast, as demand for these skills for the euro and millennium bug problems exceeds supply. Not enough students are following information technology courses. Here, further efforts are needed to ensure all children are brought up to be fully IT conversant so as to encourage the flexibility, adaptability and innovative abilities of everyone, and to ensure that sufficient children go on to study these subjects in higher education.
The fourth reason is the professional and productive use made of the Structural Funds in Ireland. According to the ESRI, the cumulative effect of the two recent rounds of the Structural Funds shows that their combined effect in the period 1995-9 has been to raise the level of Ireland's GNP by between 3 and 4 per cent above the level it would have been without the Structural Funds while the long run supply side impact on productive potential is estimated to have raised the level of GNP by 2 per cent above the level which would otherwise have been reached. This efficient use can, I think, be explained by four key factors: Ireland's effective medium to long-term planning of public expenditure; strong social partnerships; well targeted domestic fiscal and monetary policies; and concentration of funds on three main areas, productive investment, human resources and infrastructure. While it is clear that there remain a number of major areas still to tackle, such as the divergence in Irish regions, reducing long-term unemployment, the remaining infrastructure gaps, public transport and waste water treatment, I am confident these can be overcome. Your history suggests so.
Fifth, the outstanding public service you have constructed. The accolades for your public service can be adduced from having run five quality Presidencies of the EU, shaping, in the chair, some of the major recent political developments of our time. In 1990, for example, the Irish Presidency played a considerable role in helping to clear the way for German reunification; in 1996, Ireland's chairmanship presided over some of the key steps to EMU and the Amsterdam Treaty. Can I remind you that more than 400 Irish officials work in the European Commission making their contribution? I am happy to say, in my own Cabinet, I am lucky to have three outstanding Irish assistants. Ireland has quite rightly made sure that some of its brightest people work on European issues, a good investment decision.
Sixth, pursuing open market trade policies, encouraging inward investment, and making full use of the EU's internal market, the largest market in the world. By the pursuance of open market policies and access to the Single Market, Ireland's trade profile has radically changed over the past 25 years. The UK, having taken 55 per cent of Ireland's exports in 1973, now only takes a quarter, but exports to other EU countries have doubled from 20 to 40 per cent. Here is the hard commercial evidence of Ireland's new pro-European focus, but I note that in percentage share terms exports to Northern Ireland have declined by two thirds in the same period. With the successful peace process, maybe this will change in future.
Senators, your record of success in the EU is one that is widely admired. It could hardly be anything else, but permit me to focus on the new challenges for Ireland in the future as the European agenda changes. In the near and medium terms, I see the following political priorities for the EU.
On the external side, the first is to build an effective common foreign security and defence policy. Contrast our Treaty powers in trade matters, where our Trade Commissioner, on the basis of a mandate for the Council of Ministers, negotiates head to head with the United States or any country in the world on trade, trading concession for concession, dollar for dollar, euro for euro. There is no domination of Uncle Sam on trade matters.
Contrast this with the timidity and our failures to act in Bosnia, Kosovo. On foreign policy/ defence the British Prime Minister, Tony Blair, is quite right that we must do better in the future. The Union is paralysed by procedure, over-caution and timidity. Houses burn in Kosovo. Atrocities are carried out on our borders or in former colonies of member states.
Any peace agreements that are brokered are done by the Americans. The EU is strong economically. It must be politically as well. This means the capacity to act decisively externally, to influence, defend our common interests as well as provide economic aid and trade concessions.
Likewise in defence, taking fully into account the sensitivities of all the member states, a common European defence capacity has to be built up on rational industrial structures — common procurement; common standards; joint purchasing; interconnectivity. Costs will then fall and European defence budgets will be trimmed — common sense surely. At last we are seeing moves towards this. Europe can make major gains here. Just look at Airbus with 50 per cent of the world market.
The second is to make full success of the enlargement process. As you know this is an open, not closed, approach. We have begun negotiations with six countries. We are carefully monitoring the others to bring them into the process if and when they are ready. I believe Ireland can provide a major model, an example to these aspiring new members of how to be economically successful and how to make membership of the EU a success. There is nothing wrong with replication. However, before enlargement we must build an institutional structure in the Union that is even more efficient and sensitive to national interests, but capable of taking expeditious decisions. This, of course, means ensuring that smaller member states can continue to play their major role in the process of European integration. It means more qualified majority voting; a streamlined Commission structure and fewer Councils; more openness and accountability; a Union closer to our citizens and more comprehensible along with a European Parliament that should have much stronger links with national parliaments. I believe we should view institutional change as part of building competitive advantage.
On the internal side by far the most important political priority is to ensure the success of the single currency. I believe the effects of the arrival of the euro from next year will be very powerful — more dynamic and transparent markets; low interest rates; fewer consumer rip-offs; a surer climate for investment; government deficits under the permanent control of the Maastricht disciplines, releasing productive capital for the private sector; integrated capital/financial services markets driving down the cost of capital in the euro zone and strengthened European external economic power.
I felt this at first hand when I met China's political leaders three weeks ago who told me that the Chinese National Bank will hold a significant part of their reserves in euros. With the euro, the EU is a big global economic player. The doubting "EuroThomases" will remain. On and on they will drone. Will the Euro be stable? Yes, it will. Will the asymmetric shocks blow EMU apart? No. Will governments stick to the Maastricht disciplines? Yes, of course. I ask you to consider one question. What would have happened to the European Union's currencies during the recent financial turmoil if the euro exchange rates had not been fixed last May?
Three-quarters of the way through the recent financial turbulence the Italians lowered their interest rates. Ireland did as well — twice within a month — with no apparent difficulty. A more severe short-term test for the euro project is hardly imaginable. It passed with flying colours.
The euro will inevitably lead to a closer coordination of economic policy in the future. The euro-11 has been set up for this purpose, although ECOFIN with all 15 members will take any decisions. There will also be a dialogue with the European Central Bank as foreseen in the Treaty and I believe that sooner rather than later the other member states outside will join the single currency.
The fourth is to build a really entrepreneurial Europe. I have said this many times. We will not create far more employment in the European Union unless and until we are able to grow our small/medium companies into world beaters. That is where jobs will come from. We have to be able to develop European ideas, European brilliance inside the EU with a vibrant pan-European venture capital community and integrated capital markets. One figure only: the 5,400 companies quoted on NASDAQ, the American second market, employ 9 million people. We have nothing like this yet in the EU.
This means that all governments must get the risk-reward ratios right in their economies. Surely if we can do this: we have a future of enormous promise before us. I see a very powerful dynamic being created, composed of the benefits of the single currency, the Single Market, now nearly completed, widespread availability of pan-European risk capital, supply side opening — the information society is growing very rapidly, energy opens next year, electronic commerce, to open the whole European/global market for our 18 million companies, social solidarity and a well trained, adaptable workforce, and enlargement. The real economic challenge for us is to capture and derive full benefit from the synergies of these factors. If we do, and I believe we can, we will be on the path to tremendous success in the next century. If you agree, help us achieve this for the benefit of all future European generations.
Let me now make some remarks about the Agenda 2000 process, including the financial perspectives. You will be fully aware of our proposals which are fair and balanced. We are faced with constraints that severely constrain our margins for manoeuvre. There is a need to stick within the Edinburgh financial guidelines to finance not only the main Community spending policies but also to help the pre-accession and accession countries and ensure equity as regards the contributions of the 15 member states. Not the easiest calculation to make. In short, we have to concentrate our resources where they are most needed.
As the Taoiseach said on 4 November at the Irish Institute of European Affairs:
We, Ireland, are moving towards a situation in which our receipts from the EU budget will decline significantly and our contribution to the EU budget will rise. That is not a sign of failure on Ireland's part — but a sign of success. That is why, with Ireland's GDP well exceeding the 75 per cent Objective One threshold, under the formulas we have put forward, Ireland, like other similar cases, should be given a transition status with Structural funding progressively reduced in the 2000-2006 period. However, we propose that Ireland should continue for the time being to benefit from the Cohesion Fund.
I am, of course, fully aware of your Government's position on the review of the Common Agricultural Policy and the future financial perspectives. In the former, we must work towards a more competitive, sustainable and balanced agricultural sector while ensuring the interests of rural farmers are fully taken into account. On the own resources issue, we have put forward a range of options for consideration by the member states.
These negotiations have now begun in earnest. They are highly complex, but I very much hope we will be able to achieve political agreement by March next year. Otherwise, there will be a serious programming problem and unnecessary uncertainties. I believe that if we all work together we can achieve a balanced and equitable result that protects everyone's key interests. But it will not be easy.
Lastly, I would like to share with you a most poignant moment I had two weeks ago in Brussels when virtually all the Members of the new Northern Ireland Assembly came to visit the European institutions in Brussels. I think the visit opened some eyes to the benefits that European integration, common understanding and working together can bring. Most were struck by how people from 15 member states so often at war over centuries now work together in the European institutions, looking forward to the future and not back to the horrors of 100 million dead in European wars this century.
They were able to draw parallels between the process of European integration and their own role to build a new Northern Ireland. They learned how the European Union has financed no fewer than 10,000 cross-community programmes to bring Protestants and Catholics together in Northern Ireland, benefiting 500,000 people. The aim throughout has been to show that where communities can work together in practical partnership and co-operation, peace, prosperity and social progress will follow. Our Structural and Social Fund contributions have also greatly helped the peace process. I would like to place on the record here my profound admiration for the contribution of successive Irish Governments towards achieving the British-Irish Agreement.
In my speech to the new Assembly Members I challenged them not just to seek money from Brussels but to contribute to the European Union in the future, using the words of President Vaclev Havel who said:
. Let us teach ourselves and others that politics can be not only the art of the possible — especially if this means speculations, calculations, intrigues, secret deals and pragmatic manoeuvring — but also the art of the impossible, namely the art of improving ourselves and the world.
So I hope another small step towards the peace process was made in Brussels.
The origin of the EU has always been the desire of European leaders to ensure that peaceful co-existence would replace Europe's terrible history of war between its peoples. We will continue to work with the Irish and British Governments to find creative ways to support the peace process in whatever way we can in line with the Cardiff European Council conclusions.
Distinguished Senators in European political life we should never forget our vocation to work to improve the lives of ordinary people, to inform and explain matters fully, to build the broadest consensus possible and to design inclusive political and economic systems. This is essential in European politics and becoming more complex as people rightly demand more control over their lives, more say and more involvement.
I believe European integration is a noble political goal. As I sit through hours and hours of meetings in the Council or Parliament, I can only wonder at the progress we have made together in the last 40 years — towards friendship, peace and common understanding and working towards our common goals. Ireland's contribution to European integration has been profound and enduring. There are 25 years of proof and centuries more to come. Thank you so much.
