asked the Taoiseach if he raised at the Council meeting of heads of state last week the continuing high level of interest rates; if he sought an explanation as to the reasons for this high level considering that inflation is now at a lower level in the western world than heretofore; if he demanded US action to bring about an immediate reduction of interest rates in order to help to commence economic revival; and if he will state the Government's policy and intentions on the matter.
Ceisteanna—Questions. Oral Answers. - Interest Rates Level.
1.
The general view of Community Governments is that US interest rates are too high and should be reduced. This view, which the Government share, has been conveyed on behalf of the Community, to the US authorities, most recently at the Williamsburg Summit.
Could I put it to the Taoiseach that Ireland could do more? Does the Taoiseach feel Ireland could give a lead at heads of state meetings like the one the Taoiseach recently attended, considering that at present Irish industry is crippled by high interest rates and that interest rates are now regarded as the biggest barrier to growth and employment in the Community? Indeed, I will go so far as to say that many firms in this country now pay more in interest rates than they do in wages.
The problem posed by the high level of interest rates is very serious in this country and elsewhere. It is determined by a number of factors, a principal one amongst which is the level of interest rates both nominal and real in the United States. The view of our own Government and other Governments in Europe as conveyed to the United States Government at Williamsburg through the Community representation there and other heads of Governments of Community states was clearly that the American interest rates position is distorting the world economy. Any possible pressure was put on the American Government at that meeting by countries who individually are more powerful and influential than we are, and collectively on our behalf through the Community representation.
Would the Taoiseach not agree that, on the face of it, there would appear to be serious political manipulation by the United States in the whole question of interest rates, considering that interest rates and inflation usually stay fairly close together? There would seem to be a very strong political decision making process behind the present rates of interest, brought about mainly by the funding of the American deficit which is basically military expenditure. Countries like Ireland and other countries in the EEC generally are paying for the high level of military expenditure by the United States. Considering the virtually unanimous view at the Williamsburg Summit about the high level of interest rates, does the Taoiseach not feel Ireland should give a stronger lead in the EEC and not adopt such a defeatist attitude towards this high level of interest rates which seems to be politically motivated based on the upcoming Presidential election in America?
We have taken a very strong position on this. In recent months one of our objectives was to ensure that the Community position as expressed at Williamsburg collectively and by certain member states would be expressed as cogently as possible to the United States. To a large degree that was done. I cannot say that the Williamsburg meeting can be regarded as a success in all its outcomes.
On the point made more directly by the Deputy, it is undoubtedly the case that the high level of American interest rates is connected with the level of the American budget deficit which is, I think, in terms of GNP per head almost as great as our own. The impact of that on the interest rates situation there is a distortion. There are problems there which the American Government have to resolve as to how to manage their own economy. There is a limit to the extent to which we can tell them in detail how to resolve them. They are aware of the general European view and the strength of that European view.
Will the Taoiseach assure the House that he will continue to express the worry of the Irish Government about these levels of interest rates and make sure pressure is applied through the EEC on the Reagan administration in America? If he will assure the House of that I will be satisfied.
That question will continue to be a major preoccupation and priority of the Government and other EEC Governments.
Deputy Brennan's question asked specifically if the matter was raised at the recent heads of state meeting which took place after Williamsburg. If it is a major priority of the Government as it should be, was it raised at that meeting and, if not, why not?
Mention was made of the issue. As it was discussed so recently with the United States at Williamsburg, the centre of gravity, if you like of the discussions at the EEC meeting on economic and social issues was somewhat away from that point. One of the things being looked at was the question of the internal coherence of Community policies themselves even in the face of the American situation. I will be making a statement to-morrow about the European Council and drawing attention to a particular aspect of the Presidency statement at the end in regard to the economic and social situation.
If the social aspects received such priority at the heads of state meeting, one of the major social problems is unemployment caused by the high interest rates and surely the heads of state could have taken that opportunity to reiterate Europe's view of the American situation to the American President. Was that done?
The matter has just been dealt with at Williamsburg with the Americans. Clearly the preoccupation and concern of the European Governments remain because the problem remains and will continue to be expressed to the United States Government.