I welcome the Minister for Finance, Deputy Paschal Donohoe, back to the House, exactly a week since he was last here.
Finance (European Stability Mechanism and Single Resolution Fund) Bill 2021: Committee Stage
The Minister is very welcome. I would like to speak to the section. I have a number of questions for the Minister regarding the amending agreement. My colleague, Senator Higgins, engaged with the Minister on this legislation on Second Stage. She is at the Conference on the Future of Europe today and could not attend the Seanad but looks forward to engaging again with the Minister on these issues on Report Stage.
The amending agreement in the legislation allows that, as part of a memorandum of understanding relating to a financial assistance agreement, the sale of public assets can be attached as a conditionality. We know, for example, that the Greek Government is in the process of selling its stake in a number of the country's largest ports. This is part of a much larger process of privatisation of state assets that was a key condition of Greece's bailout from the International Monetary Fund, IMF, following the recession. The selling off of state assets should not form part of any financial assistance agreements. We know from areas such as housing and climate that the selling off of public assets and infrastructure often means countries cannot deliver key public services to their citizens. Does the Minister think it is appropriate for the selling off of public assets to be allowed within financial assistance agreements such as this when we have a large volume of evidence showing that such actions undermine social cohesion and the long-term public finances?
I have a number of questions on the eligibility criteria contained in the amending agreement. The amending agreement is purporting to change the precautionary conditional credit line because it did not work and only nine countries qualified, but it is making the same mistake again. When Senator Higgins engaged with the Minister, he pointed out that many of the fiscal criteria had been suspended in regard to the credit line and the credit that had to be provided during Covid. However, that too shows that the precautionary credit line and the tools we had were inadequate and that additional and different approaches needed to be taken in respect of the Covid crisis. This does not represent a different approach. We are facing more global crises such as the climate and biodiversity crisis and we will need functioning tools for financial assistance. Has there been any assessment of how the eligibility criteria for this agreement will be able to support countries in respect of climate or strategic social infrastructure, for example? Eligibility criteria and complying with the terms of any agreement should never be placed at odds with aspects of EU law, with human rights or with the environment. Has the Minister engaged with his EU counterparts on how complying with the European Stability Mechanism, ESM, might force countries into a situation where, in order to get financial assistance, they have to undermine themselves with regard to the extremely important issues I just mentioned?
The amending agreement grants extensive powers to the board of directors in respect of the eligibility criteria. The agreement provides that the board will notify the depository once ESM members have completed their applicable national procedures. Does this include engagement with national parliamentarians? We need to have the space to debate how changes to the eligibility criteria might affect our ability to access financial assistance and how that would intersect with the other public policy goals we have in our parliaments. We cannot have a situation where national parliaments of ESM members, some of which may be majorly disadvantaged by changes in the criteria, are not consulted. Will the Minister commit to a review, to be published, of the precautionary conditioned credit line mechanism and the eligibility criteria set out in annex III? That annex offers a modelling of risk scenarios, including risk regarding climate, and the readiness or appropriateness of the precautionary conditioned credit line, the relationship between the ESM eligibility criteria, or memorandums of understanding, MOUs, where applicable, and EU law and policy, including law and policy in respect of human rights, environment and social cohesion.
I would also add that the provisions of this section and this legislation seem premature as the Conference on the Future of Europe, where MEPs, national parliamentarians and citizens are debating and discussing our collective future in the EU, is ongoing and the output of that process may well result in changes to EU policy in respect of this area. Will the Minister and his counterparts be looking at how the conference's outputs intersect with things like the ESM? I look forward to the Minister's response and I may bring forward amendments relating to these issues on Report Stage.
I thank the Senator for the issues he has raised on behalf of Senator Higgins. I look forward to debating these matters with her directly on Report Stage. I will go through the different issues the Senator raised. The first relates to the eligibility criteria and whether it is appropriate that any government be in the position of selling off its share in an asset it currently publicly owns. That did not happen here in Ireland. Our ports, airports and infrastructure went into the global financial crisis publicly owned and they exited publicly owned. Our important semi-State bodies continued to be in a position where they were either entirely or mostly publicly owned. It can be the case for some governments that that is a decision they decide to make, in conjunction with the engagement they have with the ESM. It is a decision that we mostly avoided having to make here in Ireland but I respect the fact that other governments may decide that it is an appropriate decision for them, as opposed to other decisions that they would otherwise take.
My broad point on what the Senator has said, which goes back to an issue I touched on during our debate last week, is that the issue of conditionality must be seen in light of the fact that other taxpayers are ultimately paying into this fund. As Ireland becomes a bigger and bigger net contributor in the years to come, this Parliament will be asking the Government of the day if these funds are used and under what criteria they are accessed. That is a question taxpayers who are contributing into these funds ask of their governments and it will increasingly be asked of an Irish Government too. That is why I believe that while conditionality is a difficult question and one that raises difficult matters, the principle is nonetheless one that should be preserved. If funds are being accessed, whether through lending or even grants, as is the case now with EU recovery fund, they should be accessed on the basis of clear criteria.
As to whether this is in any way at odds with the law of the European Union, the answer to that question is that it is not. One of the reasons this legislation is so complex is that it has to be consistent with the law of the European Union on all matters, whether that be the preservation of the Single Market or the balance that is in the law of the EU between the roles of European central institutions and national governments.
The answer to the question of whether we will consider the output of the Conference on the Future of Europe in relation to these and other matters in the future is "Yes". We will do so because the process that is under way is a good one. It will be helpful in making the decisions we need to make on the future of the EU to have a forum within which the views of a wide range of parliamentarians throughout Europe can be considered.
I am not committing to the publishing of a review on this because it is ultimately something that will be about a potential relationship between another national government and the ESM, which I hope never happens. It is not appropriate for me to commit to a review of a relationship that could be taking place elsewhere between an EU institution and another national government. Of course, I will always be available for debates and discussions on these issues, both in this House and the Dáil, because it is an issue that will be important to parliaments.
This leads on to the question raised on the role of national parliaments. Again, while I disagree with the Senator, I acknowledge his point. The relationship is fundamentally one between the ESM and the governments of the EU, which in turn are accountable to their parliaments, as opposed to the ESM operating directly to national parliaments. The appropriate area of accountability should be between the ESM and national governments, while governments are accountable to their parliaments. If we were to give a further role to national parliaments, first, it would undermine that important balance of accountability and, second, it is very conceivable that the ESM could operate in an atmosphere in which time and a display of urgency really matters. With that in mind, practically, the best and most appropriate relationship to preserve is that between governments and the ESM, given all the further issues that could be involved if we were to elongate or change the process to directly involve the role of national parliaments as well.
On the final set of questions about whether it is premature to move ahead with something like this, Senator Higgins is probably referring to the work that is under way on the future of the Stability and Growth Pact. If any discussion or change takes place regarding the criteria for the pact or how it operates, we will need to consider the implications of that for other parts of the architecture of the EU. That being said, it is very much up to the ESM, within which countries are represented, to reach an agreement with countries on how funds should be made available to them. It will always be mindful of where the view of the EU is, in the round, on these issues. We need to accept that the ESM needs to have the capacity and ability to do that work itself, especially if we are in a situation where a matter is urgent or where we could even be in a crisis-like atmosphere in which time matters when responding to these issues.
On whether issues of social cohesion are taken into account, again, this a matter that national governments tend to be highly aware of when they are trying to reach agreement with the ESM on funding issues. These issues are recognised. To be truthful about the matter, in a crisis situation there are differing views on how that social cohesion can be recognised and maintained in a process like this. From my experience of how these issues evolve, this is an issue the national government that is engaging with the ESM is always highly aware of.
I appreciate the Minister's comments and I look forward to Report Stage.
Amendment No. 1 is in the name of Senator Higgins who is not present.
I move amendment No. 1:
In page 7, between lines 17 and 18, to insert the following:
8. The Minister shall, within 12 months of the passing of this Act, publish a report setting out the measures taken to ensure appropriate safeguards and separation between ESM cooperation with the EU Commission on any area of policy and ESM engagement with private investors.”.
I second the amendment.
This amendment seeks "a report setting out...measures...[for] appropriate safeguards and separation between ESM cooperation [and] the EU Commission on any area of policy and ESM engagement with private investors." On Second Stage, my colleague, Senator Higgins, outlined how it is unclear what the firewalls will be regarding engagement with private investors in terms of the ESM. I would be concerned if, on the one hand, the Minister is seeking to play an active role within the European Commission in the implementation of its policy functions - there is a policy ambition that is concerning in this refrain - and, on the other hand, there are plans to segue in respect of private investors. How will we firewall these two parts of the process? How will we be clear on what exactly the Commission is doing in comparison with what the ESM is doing?
I do not propose to accept this amendment to add a new section 8 to the Bill. This amendment provides for the publication of a report outlining details on two separate matters: first, measures taken to ensure appropriate safeguards and separation between ESM co-operation with the EU Commission in the area of policy; and second, ESM engagement with private citizens. I will say a word about each in turn.
On the first matter, my understanding of the objective of the proposed amendment is to gain assurances via the proposed report that the new enhanced co-operation between the ESM and the Commission will comply and be consistent with EU law, in particular with measures adopted in the field of EU economic policy co-ordination. A key concern expressed by the Senator in her previous engagement on the Bill relates to the future role of the ESM. I appreciate her concerns and recognise it is clear that the content of conditionalities is directly linked to the measure of economic policy co-ordination under the SGP. As such, the space for autonomy of the ESM in this area is limited and its role must be predominantly related to its function as lender.
In defining the new role for the ESM, the euro area member states recognise there are limitations to the role of the ESM. In practice, the Commission's liaison with the ECB and the ESM would collaborate on the design and negotiation of policy conditionality. The ESM would contribute, from its perspective as a lender, to areas that are directly relevant to the beneficiary member states' financing needs and ability to repay the ESM, as well as the organisational and operational aspects of the funding of the member state to help to restore its financial situation. The latter task pertains to the operational organisation of the debt office, its management strategy and technical assistance.
In addition, it is important to note that the compatibility of the existing ESM treaty with the exercise of competencies of economic policy under the EU treaties has already been checked by the European Court of Justice, ECJ, in the Pringle case. In this judgment, the ECJ underlined the role of the Commission as the institution called to ensure consistency with EU law in the course of ESM operations. The new arrangements regarding the enhanced co-operation between the ESM and the Commission in the ESM treaty amending agreement have been carefully crafted to respect the parameters laid down by the Court of Justice. Given the ECJ recognises the Commission as the institution with responsibility for ensuring consistency, it is not appropriate for the Minister for Finance to publish a report regarding matters that are the responsibility of the European Commission.
On the second matter, the Senator proposes that I publish a report on ESM engagement with private citizens and investors within 12 months of the passing of the Act. However, in its annual report, the ESM details its funding and investor relations activities for the previous 12 months.
I made this report accessible to the Oireachtas in accordance with my obligations under Article 30(5) of the ESM treaty. I am therefore satisfied the information the centre is seeking is available and will continue to do so each year in the ESM annual report. While I will not be accepting the amendment, I am happy to engage further with the Senator on the matter, especially on Report Stage.
If the Senator is specifically concerned about the new role of the ESM, I can assure her that in accordance with recital 11(a) of the amending agreement, the ESM's involvement in such negotiations can only be at the request of the member state in question. In addition, the ESM's involvement will be on an informal, non-binding, temporary and confidential basis.
I will withdraw the amendment with a view to further engagement on Report Stage.
Amendment No. 2 is also in the name of Senator Higgins.
I move amendment No. 2:
In page 7, between lines 17 and 18, to insert the following:
8. The Minister shall, within 12 months of the passing of this Act, conduct and publish a report outlining where compliance with EU fiscal criteria has precluded public strategic investment or required public services or infrastructure to be delivered "off balance sheet" and the additional costs associated with such short term expenditure versus long term investment.".
This amendment asks the Minister to publish a report outlining where compliance with EU fiscal criteria has precluded public strategic investment or required public services or infrastructure to be delivered off balance sheet and the additional costs associated with such short-term expenditure versus long-term investment. As my colleague, Senator Higgins, has highlighted, the EU fiscal rules have been used as an excuse not to invest in public services or deliver services off balance sheet. We know with the suspension of EU fiscal rules that this is no longer an excuse and we need a proper examination of how those rules have impacted our public expenditure.
This amendment will provide for the publication of a report outlining where compliance with EU fiscal criteria has precluded public investment or required public services or infrastructure to be delivered off balance sheet with the additional costs associated with such short-term expenditure versus long-term investment. It is important to recognise the EU fiscal rules do not limit the level of Government expenditure, nor do they require infrastructure to be delivered off balance sheet. Additional public investment is always possible if it is matched by revenue-raising measures or offsetting expenditure adjustments elsewhere or both. In addition, to avoid penalising spikes in Government investment, the framework allows investment to be smoothed over a four-year period.
I take the opportunity to bring the Senator's attention to the review of EU economic governance which the Commission relaunched. This review provides an opportunity for stakeholders to engage in this public debate to build a consensus on the future of the governance framework. I encourage the Senator to engage in the debate through various forums and will be happy to engage with her further, but I am not in a position to accept the amendment.
I will withdraw this amendment with a right to resubmit and further engagement on Report Stage.
Amendments Nos. 3 to 12, inclusive, have been ruled out of order as they are in conflict with the principle of the Bill as read a Second Time.
When is it proposed to take Report Stage?
Is that agreed? Agreed.
When is it proposed to sit again?
At 2.30 p.m. on Tuesday, 2 November 2021.