John Bruton
Ceist:38 Mr. J. Bruton asked the Minister for Finance the way in which Ireland has benefited to date from the European growth initiative launched in Edinburgh.
Written Answers. - European Growth Initiative.
The Edinburgh growth initiative was launched by the European Council at its meeting in December 1992 and aims at promoting economic recovery and employment in Europe. The Council called on member states to switch, to the extent possible, their public expenditure priorities towards infrastructure and other capital investment; to implement measures to encourage private investment; to make efforts to achieve wage moderation; and to increase competition and improve market functioning, including the functioning of the labour market.
The Edinburgh Council also called for Community measures to promote recovery. Specifically, it called on the European Investment Bank to make available a fund of 5 billion ecu, the so-called "Edinburgh facility", to accelerate the financing of capital infrastructure projects, and for loans under this facility to raise the lending ceiling from 50 per cent to 75 per cent of project cost and the combined (i.e. loans and grants) ceiling from 70 per cent to 90 per cent. It also called for consideration to be given to establishment of a European Investment Fund (EIF), with contributions by the EIB, other financial institutions and the European Commission.
On foot of the Edinburgh initiative, the April ECOFIN Council announced a package of Community and national measures aimed at promoting economic recovery in Europe. In an accompanying document the European Commission estimated that the package would add to growth in both 1993 and 1994, increasing Community GDP to a level 0.6 per cent higher in 1994 than it would otherwise have been and providing employment creation of some 450,000 jobs over the two years 1993 and 1994. Member countries of the European Free Trade Association (EFTA) also announced a package of national measures, in association with the ECOFIN announcement. The April ECOFIN package was reviewed and updated by ECOFIN in October.
The European Council in Copenhagen in June 1993 reviewed the implementation of the growth initiative and increased the Edinburgh facility to 7 billion ecu; it also asked ECOFIN to examine how loans to small and medium-sized enterprises (SME's) could benefit from interest rate subsidies of up to a maximum of 3 per cent over five years, linked to employment creation. The Council also called on the European Commission to prepare a White Paper on growth, employment and competitiveness for consideration at its meeting in December 1993 and invited member states to submit national contributions to its preparation. Ireland has forwarded our national contribution and a copy of it has been circulated to all Members of the Oireachtas.
As regards the direct benefit to Ireland from the Edinburgh initiative, two Irish semi-State companies have benefited from the Edinburgh facility by a total amount of £140 million this year. This figure represents two loan approvals to the ESB totalling £90 million and one loan approval to Irish Telecommunications Investments plc on behalf of Bord Telecom Éireann (BTE) of £50 million. At ECOFIN yesterday the possibility of extending eligibility criteria under the facility was agreed. This extension will mean that additional projects in urban renewal, transport and energy sectors will be eligible for the increased level of borrowing of up to 75 per cent under the facility.
The EIF has not yet been ratified by all member states, although Ireland has ratified it. When ratified, it will provide support for the development of trans-European networks and small and medium-sized enterprises (SME's) through the provision initially of loan guarantees but subsequently through equity participation. As regards the proposed interest rate subsidies for SME's, the Budget Council on 15 November agreed the inclusion of some 45 million ecu in the 1994 budget for this purpose and proposals for their operation are expected to be agreed by ECOFIN before the end of the year. Ireland should be able to benefit under both these headings.
Ireland also benefits from the Edinburgh initiative in a number of indirect ways. To begin with, as a small open economy we are very dependent on the economic performance of our trading partners. Member states of the European Union account for a large proportion of our trade and an initiative which aims to promote economic recovery among them is obviously of advantage to us. In addition, the fact that the European Union is promoting growth internationally, for example by the involvement of the member countries of the European Free Trade Association, is also a step in the right direction from our point of view. Thirdly, collective action by the Union and member states to promote economic recovery can have a significant impact in improving business sentiment which is vital to investment. A further point is that Ireland has long been pressing for the issues of growth and employment to be put at the top of the European Agenda: the fact that this has now been done means that the European Union must attempt to deal with these problems in a co-ordinated way. Finally, Ireland very much welcomes the preparation by the European Commission of the White Paper on growth, competitiveness and employment, which again is aimed at focusing attention on these problems and generating solutions to them. Such developments are clearly in Ireland's interest, as they are in the interests of all member states.