asked the Minister for Enterprise and Employment the steps, if any, he proposes to take in the days ahead to secure the long-term viability of Irish Steel.
Private Notice Questions. - Irish Steel.
I call on Deputy O'Rourke to put a question on behalf of Deputies Michael Ahern, Ned O'Keeffe and Tom Kitt, in whose names the question also appears.
asked the Minister for Enterprise and Employment to give a full account of his European contacts, meetings and activities with regard to obtaining approval for the plan for Irish Steel and the plans, if any, he has to ensure a successful completion of this matter in view of its urgency.
I thank Deputies for putting down these questions.
The House will recall that I made a detailed statement to it on 20 September 1995 following the signing of an agreement on 6 September 1995 between the Minister for Enterprise and Employment, the Minister for Finance and ISPAT International to transfer all of the shares of Irish Steel from the Minister for Finance to ISPAT International subject to the approval and support of the Commission and unanimous support of the other member states at the Industry Council. That agreement was welcomed by the management, workers and the trade unions in Irish Steel and the general community of Cobh. The agreement was also welcomed by the Government and all of the Opposition parties.
Immediately following the signing of the agreement, the European Commission was notified of the details of the agreement under Article 95 of ECSC Treaty and approval of the State aid involved was sought. All requests for additional information by the European Commission were responded to promptly by my officials. Following consideration by DG IV of the Commission, a draft positive recommendation was submitted to the meeting of commissioners recommending assent to the State aid application under Article 95 of the ECSC Treaty.
The Commission appointed consultants to review the viability of the Irish Steel case. The Government and Irish Steel had to pass stringent viability tests. The business plan put forward by the Government on behalf of Irish Steel passed these stringent viability tests and the commissioners accepted the positive recommendation of DG IV on 11 October 1995. The Commission proposals were submitted to the Council of Ministers with a strong recommendation for assent to be given under Article 95.
We realised that some member states had reservations about the nature of the State aid involved, the long-term viability of Irish Steel and the effect that a new Irish Steel-ISPAT International might have on the European steel market. These reservations were mentioned during the ECSC working group meeting held in Brussels which provided a forum for member states to express any concerns prior to the matter going before the Council of Ministers. A number of countries expressed reservations which had to be dealt with by me and my Department. Following further consultations, the remaining objectors were the UK, Luxembourg and Denmark.
In the light of the views expressed by those member states, there was daily contact between ourselves and other member states to overcome the concerns mentioned by them. In addition I undertook visits to the capitals involved. I met Minister Timothy Eggar of the UK in London on Tuesday, 31 October, Minister Mimi Jakobsen of Denmark in Copenhagen on Wednesday, 1 November, and Minister Robert Goebbels of Luxembourg in Luxembourg on Friday, 3 November. The purpose of these visits was to ascertain the likely position of those member states at the Industry Council and to provide any information which would soften or overcome their objections to the Irish Steel Article 95 case.
In addition, I met Commissioner Van Miert and the Irish Commissioner, Pádraig Flynn, in Brussels on Tuesday, 31 October to inform the Commission of the difficulties which had been expressed by some member states and to see if solutions could be found to overcome those difficulties.
As well as my ministerial actions in support of securing a positive result in regard to Irish Steel's application, the House might like to know that the Taoiseach discussed the matter with the UK Prime Minister, Mr. Major, during the course of an EU summit of European leaders in Majorca in later September.
At the Industry Council on Monday and Tuesday, 6 and 7 November the Commission's proposal recommending assent under Article 95 of the ECSC Treaty was on the agenda. The unanimous approval of all member states was required. Fourteen member states, including Ireland of course, were prepared to allow the State aid for Irish Steel subject to some conditions. The UK indicated that it had major problems and during the course of the Industry Council bilateral contacts took place between the Irish and UK delegations to see if the gulf between the two positions could be bridged. The main problems centred on production limits and other restrictions being imposed on Irish Steel-ISPAT International. The UK wanted production limits which would make Irish Steel commercially unviable. I, as the Irish Minister, was prepared to do a deal with the UK Minister but not at the cost of making Irish Steel unviable. Following intense negotiations throughout Monday and yesterday, the position between the Irish and UK delegations narrowed but the UK was not prepared to finalise an agreement with Ireland which would have put both a cap on future Irish Steel production and ensure the viability of the plant. At the end, we were prepared to accept a capping of sales of finished steel on the EU market over the next five years. I cannot discuss the figures that were considered, in the interests of ISPAT International and Irish Steel. The response of the UK was to seek to impose a condition that production of finished or semi-finished product over a certain level would be exported outside the EU. This imposition would be intolerable for Irish Steel and, despite reasonable goodwill on both sides, the gap between the Irish and UK positions could not be bridged because of the impact the restriction would have on Irish Steel over the five years for which restrictions were proposed.
The Council of Ministers agreed, at the suggestion of the Spanish Presidency and the EU Commission, that the Irish and UK delegations should continue to seek agreement over the next few days which could then be brought to COREPER for approval and submission to a forthcoming Council for automatic ratification as an "A" point. The other member states were prepared to agree to the proposal on this basis.
In the next few days my Department will hold urgent meetings with top representatives of ISPAT International to discuss the matter. I will be in contact with the UK Minister to see if the remaining gap between Ireland and the UK can be bridged. It is hoped that with goodwill on the part of the UK, they will appreciate the special circumstances of Irish Steel and come to an agreement with us which will not threaten the viability of Irish Steel. Because of the importance the Government attaches to reaching a solution for Irish Steel which ensures the future viability of the plant, protects the employment in Irish Steel and provides such an important input into the economy of the Cobh area, this has to be considered an important issue in our economic relations with the UK.
I will do everything within my power to ensure that the difficulty with the UK authorities is resolved. Although I was disappointed that a deal was not finalised, with goodwill on the part of the UK Government, we should be able to come to an agreement.
I appreciate the positive support which the workers, unions, management and also the Opposition parties have given in my attempts to put Irish Steel on a sound footing and to secure agreement. I hope to see a continuation of that support in my efforts to convince the UK of the desirability of the UK joining all the other member states of the European Union in approving the very modest State aid involved in the Irish Steel case.
I accept what the Minister has attempted to do to date. My concern is that he would outline clearly the steps he proposes to take in the next three days, which will be crucial to the survival of Irish Steel. In view of the stalemate that has arisen between himself and the British Industry Minister, who is clearly trying very hard to protect the position of British Steel, does the Taoiseach propose to address this issue with John Major in the immediate days ahead? In light of what the Minister said about a capping arrangement, does the Government propose to revise the terms of the package offered to ISPAT? Does the Government propose to agree limits on the output of Irish Steel or impose constraints on the plant's future development capacity?
Yes, of course there are limitations on the production and capacity of Irish Steel. That is an integral part of the agreement as put to the EU. It is an absolute requirement of State aid applications that there are caps on capacity.
Further to what was agreed in the survival package?
No.
That is what I had in mind.
As required in all State aid applications, production capacity of the plant cannot be increased for five years. That was an integral part of the package agreed. Within that capacity Irish Steel-ISPAT set themselves production targets. Obviously certain member states feel that, whatever may be stated in a plan as presented, production levels might continue to increase, and they have sought assurances in that regard. The Government requires that any upper limit on production would give ISPAT the opportunity for productivity and efficiency improvements, which it hopes to achieve. On the other hand we have to be realistic because unanimity is required in this regard. There must be give and take and certain caps are envisaged on production. It is an area in which there is room for flexibility. We cannot agree to an arrangement whereby production limits undermine the deal agreed with ISPAT.
That is the point I am making.
We are not willing to concede restriction levels on our proposals that would undermine the deal with ISPAT and render the proposal unviable.
On the specific steps to be taken in the next three days, first I intend to meet ISPAT to discuss with it in great detail the position we have reached and to see if we can find an agreement with the UK and persuade it to lift its veto. Since the Council meeting I have made contact with Mr. Eggar and further contact will be made in the next couple of days with a view to breaking the deadlock. We will use every vehicle to persuade the British that it is fruitful to achieve a settlement. The Taoiseach has, on more than one occasion, discussed this issue with the British Prime Minister. It is a very important issue for the Irish people and we are treating it with the importance it deserves.
I thank the Minister for his comprehensive reply. I accept the Taoiseach spoke to John Major on this matter in September last, but if the matter is so urgent — I accept the Minister is approaching it with great urgency — surely the Taoiseach should again directly approach John Major about it. I noted before he left for the sad funeral at the weekend the Taoiseach said he would raise with John Major the issue of the peace process. While not wishing to be facetious, the Minister has ready access to the Taoiseach and on this occasion I would ask him to use it to ensure he telephones the British Prime Minister on this issue — we hear daily that he has interesting and fruitful telephone conversations with the Prime Minister on other matters.
I watched Mr. Eggar last night on television and, to use an old fashioned Irish expression, I did not like the cut of his jib when talking about this matter. I am not seeking to denigrate junior Ministers — I was in that position for three years and, I hope, fulfilled my role — but I suggest the Minister should get in touch with the senior British Minister in that Department, the President of the Board of Trade, because this issue is so serious that we should not deal with intermediaries if direct contact would have a more desired effect.
On behalf of our party — I submitted a letter to Commissioner Flynn on this matter — I wish to put on record our fullest support for the Minister in his quest to ensure the agreed plan is the one finally accepted. Any watering down of that should not be allowed because it would have serious consequences for employment. Does the Minister envisage getting in touch directly with the senior British Minister and will he urge the Taoiseach today to get in touch with his opposite number on the matter?
There was contact on this matter at the Majorca summit and subsequent contact much closer to last week's meeting between the Taoiseach and the British Prime Minister.
What reply did he get?
Was that contact made by telephone?
The issue of the reply is a matter between the two men concerned. At the end of the day we must deal with the position taken up by the UK Government. I recognise the British have difficulties with this matter and we have made considerable efforts to meet those difficulties. The British were not the only people whose economic interests were at stake in this matter; 14 of the 15 member states recognise the Irish Steel case and their concerns have been met.
We must continue to work towards alleviating the remaining concerns of the British. I will be working primarily with the Minister responsible, Minister Timothy Eggar. I assure the House that if there is merit in further contact between the Taoiseach and the Prime Minister, with Minister Lang or with anyone else, we will consider that. Primarily, we must work on the substantive issues put forward and try to sell the strong merit of our case. We will do that in every available forum.
I acknowledge the role of Commissioner Flynn in his support at an earlier stage in helping to get this proposal through the Commission. It has been important to have support for this proposal at all stages. The Commission is 100 per cent behind it and recognise the strength of our case. I appreciate the expression of support from Deputy O'Rourke for our efforts.
I need not repeat what has been said on this matter in the past 14 years about the concern for the security of jobs at Irish Steel. Its workers breathed a sign of relief some months ago when the deal was reached with ISPAT. Since then we all have been aware that some difficulties would be encountered at the Council of Ministers. I am concerned that up until last week there does not appear to have been any direct contact between the Minister and his opposite numbers to ensure that we would not have to wait another number of weeks before a final decision is reached. That is causing grave concern and angst to many of my constituents in Cobh. Will the Minister confirm what is meant in regard to capping production? Will such capping relate to future increases in production or to a cutback on current production? The viability of the company depends on current production levels. A cutback on present production would not augur well for the company's future. I offer the Minister my full support on this issue. We have worked together on this matter for many years and there has not been any division between the parties on it.
I am appreciative of the Deputy's question as there appears to be some misunderstanding in this regard. There is no question of cutting existing production levels. The main issue is how rapidly can production grow. Everyone recognises there must be substantial increases in production in Irish Steel to secure its viability. Some of our partners are concerned that if production increases were of an explosive nature they would damage the market and they are seeking assurances on restrictions on production growth. We all recognise their concerns and where it is necessary to have unanimity, efforts must be made to address their concerns. The plan envisages significant production increases over the next five years.
Under any State aid application restrictions will be imposed. The primary restriction is normally in respect of capacity, but we cannot afford to cut capacity. Normally a steel plant requiring State aid would have to cut back on its capacity and drop significantly its tonnage levels. That is not possible when the plant in question has one mill and one furnace and our colleagues recognise that, but they want assurances that there will not be indefinite explosive growth from the level of current capacity. We consider there is room to make agreement but, as Deputy Ahern said, we cannot allow unrealistic limitations to be imposed which would threaten the viability of the proposal.
Regarding the Deputy's first question, I assure him that we did not start to make contact only in the past week, there has been continuous contact to try to get this proposal accepted. Obviously, as one gets closer to Council contacts must be intensified and I believe it was right and necessary that I should have visited the capitals concerned to bring negotiations to that level. That illustrates how serious we view this matter and that means of communication, rather than any other, enables one to get to understand the other person's position. We were pleased with the outcome of our meetings with officials in Denmark and Luxembourg and we must continue to work with officials in the UK.
What proposal did the Minister put to the British Minister on Tuesday? How wide is the gap between the Minister and his counterpart in the UK on this issue? The plant's capacity is approximately 450,000 tonnes and the viability plan has been based on that and on further efficiencies to save the jobs of the 350 workers. Do the British suggest that less than 450,000 tonnes of steel be manufactured at Irish Steel? Will the Minister indicate the quantity of steel that will be manufactured to alleviate the fears of the staff and management and those who work in the service area? I understand that as of today production will be reduced to satisfy the British requirement. Such a decision would reduce the viability of the plant.
I agree with the Deputy that the British have sought restrictions on the plant that would damage its viability. We cannot agree to that and that is why we have not been able to reach agreement with the British. I will not outline figures or the gaps between the two sides. There are areas of flexibility. One can consider production paths into the future which would be consistent with the viability of the plant. Issues concerning the destination of sales could be considered to address some concerns. Some restrictions could be imposed on the amount of sales entering the EU market. We will consider those issues and try to be flexible in that regard. Viability must be at the forefront of our considerations. Within that parameter, while we are willing to discuss and make arrangements, we cannot jeopardise the plant's viability. That is our bottom line.
Has there been movement by the British side?
There has been movement by the British side. They moved forward from what I thought was an unrealistic position, but it has not been sufficient.
Will the Minister agree that the attitude of the British Minister for Industry is purely one of British self-interest in that it amounts to 400 British jobs as against 300 jobs here? Will he agree that it flies in the face of the notion of a spirit of European solidarity, as expressed at various European Council meetings, some of which I attended, to tackle unemployment on an EU basis? Will he agree that we are at a watershed regarding EU policies on unemployment and if we lose the battle here it will have serious implications for the future?
The proposal we put forward was credible and deserved the support of the 15 member states. It was credible because our plant has one mill and one furnace and it was always accepted that it would have to be considered as another State aid case. Compared with cases that preceded it, it is a cheaper State aid case. As it involved privatisation, there could be no question of future State aid. That might be of concern to others, including British Steel, which would fear the possibility of the State continually supporting a plant to its detriment. For those reasons, we put forward a strong and credible proposal which was accepted by the Commission and has now been accepted by 14 of the 15 member states of the European Union. There is a strong onus on the British to be reasonable in its approach. I understand it has concerns about its industry, but the other member states had such concerns also. The other member states have recognised the reasonableness of our approach. I am trying to strike a deal with the British. The system gives them a veto and we must deal with that, but our strong, credible proposal deserves their support. In the coming days we will be working to get that support.
At this stage I ask for brevity as I must bring this matter to a conclusion.
In the light of the possibility of further constraints on the output and capacity of that plant I wish to ask the Minister a number of questions. What discussions has he had with ISPAT since he returned from his discussions with the industry Ministers? Does ISPAT continue to be interested? Is there a point below which their interest would no longer continue? Will the Minister confirm to concerned workers and their families in east Cork and in Cork generally that he is in constant communication with ISPAT with a view to keeping the deal intact? It is patently obvious in light of the fact that 14 of the 15 member states have given their approval to ISPAT——
We cannot afford the luxury of repetition. Will the Deputy put her question?
Is it the Minister's perception that we have a trade war between British Steel and Irish Steel and, if so, does he perceive that to be anti-competition and against the spirit of the EU? Is it his intention to speak with the Taoiseach and get him to take the matter out of the hands of the British Industry Minister who is absolutely and over-whelmingly influenced by British Steel——
I am calling the Minister to respond.
——and bring it to the attention of the Prime Minister to have the matter finally dealt with and disposed of?
The Deputy has put a number of questions to me, some of which have been answered. Yes, I have had discussions with ISPAT, following the Council meeting and I have arranged for further discussions with the company. They are still interested in the plant. Obviously, there is a point beyond which they could not sustain their interest and that relates to the whole issue of viability. Reference to trade wars, and that type of language, is not helpful to finding a solution. As I said to Deputy Kitt, a strong credible proposal is being put forward under an article of the Coal and Steel Treaty which has been used on six occasions during the past two and a half years. Within that context it is a reasonable and small case and one that stands on its merits. I assure the Deputy we will use whatever methods are available to us to influence a favourable outcome.
I repeat my request to the Minister to ask the Taoiseach this afternoon to directly contact the British Prime Minister. There is much contact between them on other matters. This is a practical issue which will be easily understood and appreciated by the British Prime Minister. The British have been tardy in other matters, and that is regretted. It may be possible to arrange a proper meeting to discuss the views of the Taoiseach. Will the Minister do that this afternoon and report back next week on what the Taoiseach and the Prime Minister said?
I assure the Deputy I will keep the Taoiseach closely briefed, that we will communicate with the relevant Ministers and do whatever else is necessary and appropriate. I will not give an undertaking to make an approach which for political consumption would look good. We have to work in a systematic way. First, we have to work meet with ISPAT to discuss the British reservations.
I thought the Minister met ISPAT.
Yes, but we have to meet them following the Council meeting. We must look at all the options and be in a position to answers all the objections. We have to use diplomatic and political contacts in the appropriate manner. We need to take a moment to reflect with ISPAT, the promoter, and to examine the position.
This is not the time for reflection.
There are differences between us and we have to find a solution. Real matters of substance have to be discussed. When we have dealt with the different issues we will use any diplomatic approach necessary.
At what level of production did ISPAT say they would not have a role?
I do not have that figure and I do not think anyone would have such a figure.
What happens if it falls below 300,000 tonnes?
Obviously, at a certain point it is not viable.
If the level fell below 300,000 tonnes?
For example, existing levels of production would not be sufficient to secure long-term viability. There has to be growth and we recognise that.
Does it have to be in excess of 300,000 tonnes?
Certainly there has to be in excess of 350,000 tonnes in raw steel.