Dáil Éireann díospóireacht -
Tuesday, 16 Oct 2012

Vol. 778 No. 3

Pre-European Council Meeting: Statements

The Taoiseach

The meeting of the European Council in Brussels on Thursday and Friday of this week will represent a welcome opportunity to take stock of developments in relation to a range of economic policy matters. The meeting will also provide leaders with an opportunity for an exchange of views on the European Union's relations with its strategic partners without the constraint of seeking to agree a set of conclusions on this issue. The EU's relationship with China will feature prominently in those discussions. It is expected that we will also discuss foreign policy matters, including possibly the evolving situation in Syria. I think that it is fair to say that this week's summit meeting will, for the most part, be of a preparatory nature, with our deliberations following up on previous developments and feeding into decisions to be taken at future meetings.

It is worth noting at the start that this week's meeting of the European Council will not address the issue of the Union's budget over the period 2014-20, the so-called multi-annual financial framework. President Van Rompuy has convened a special separate meeting of the European Council for 22-23 November at which it is intended an agreement will be reached on this critical piece of business. Ireland will support the work of the Cypriot Presidency and of President Van Rompuy and his office to ensure the success of that meeting. I will, of course, brief the House in advance of next month's meeting.

Under the economic policy heading, EU Heads of State and Government will focus on reviewing progress in the implementation of the compact for growth and jobs and on engaging with President Van Rompuy on his interim report on strengthening the Economic and Monetary Union, EMU. The banking union, particularly the proposals for a single supervisory mechanism for euro area banks, will form an important part of the latter discussion.

The compact for growth and jobs, which we agreed in June, is an important reinforcement of political commitment in this area and provides a clear framework for actions at national and EU levels. The key task that we face in the period ahead is driving it forward with real commitment and momentum. That will be the focus of this week's discussion. Of course, the compact also supports a vital national interest. The reality is that Irish recovery depends on European recovery. Europe will have recovered from the current crisis only when our economies are growing again and creating jobs. That is why we see the compact becoming a key driver of the Irish Presidency programme. It will underpin crucial work on our primary growth and jobs priorities, including further unlocking the potential of the Single Market, including the digital single market; deepening the Union's external trade relations, including with key strategic partners such as the US, Japan and China; progressing the youth transitions package being produced by the Commission in December; and managing effectively the third European semester cycle of economic and fiscal policy co-ordination.

It is clear that one of the major challenges facing Europe at the moment is the high rate of unemployment, especially youth unemployment. The Commission will put forward a youth transitions package, including a youth guarantee, later this year and we will seek to prioritise work on this during our Presidency.

The promotion of the Single Market will be central to Ireland's Presidency agenda. A recent assessment by President Van Rompuy of progress on the 12 so-called levers of the first round of Commission proposals under the Single Market Act shows that, as the deadline of the end of the year for their agreement approaches, the picture is a very mixed one. In particular, unless real momentum is injected, despite the considerable efforts of the Danish and Cypriot Presidencies there is a danger that only half of the levers will be agreed. We are falling short in areas as various as public procurement, professional qualifications and energy. I will be making my strong support for early progress clear at this week's meeting and stressing that advancing the Single Market will be at the heart of our efforts as President in the new year.

The Commission has now brought forward its second round of proposals under the Single Market Act. These have the real potential to contribute in a meaningful way to our efforts to secure jobs, growth and investment, and I look forward to early progress on them. It goes without saying that the Government supports these further efforts to improve the operation and governance of the Single Market as the cornerstone of the Union and as a lever for increasing competitiveness, growth, productivity and mobility in Europe.

The effects of Single Market fragmentation are felt most strongly within the small to medium-sized enterprise, SME, sector. We are particularly supportive, therefore, of measures that assist SMEs, including through improving their access to long-term investment funds and tackling disproportionate "red tape".

The outcome of the mid-term review of the digital agenda for Europe is expected by the end of 2012 and, therefore, the follow through will fall into Ireland's Presidency. It presents an important opportunity to assess the delivery of the digital single market to date, allowing member states to address any shortcoming and to redouble efforts towards implementation.

A further critical issue for the Union is how to respond to the challenge of getting the European economy back on track by improving the EU's global competitiveness, promoting economic growth and creating jobs. Research and innovation are, therefore, of major importance, given their potential role in contributing to economic recovery, competitiveness and growth across the EU.

We also see the potential for trade to be a real driver of growth and will work to try and make progress on a number of fronts. We will prioritise the development of EU-US trade during our semester as Presidency, including with an informal ministerial meeting on this theme in Dublin in the spring.

As we have followed our path through the economic and financial crisis, it has become increasingly clear that the euro needs to be grounded on the foundations of a strengthened EMU. Under President Van Rompuy, we are in the process of carefully assessing what needs to be done. Only then can we move to determining how best to take those steps forward. It is crucially important that we get this right.

We need to ensure that, over the years ahead, the Union develops the ways and means of strengthening the underpinnings of our shared currency through an enhanced EMU. As recent years have all too clearly illustrated, this process of developing what President Van Rompuy has termed a "genuine" EMU is not an optional extra. This is an exercise that is critical to the stability and well being of the euro area and, indeed, the entire European Union. It is, of course, critical to Ireland's economic and financial well being into the future. A stable euro is fundamental to our national interests.

The House will recall that European Council President Van Rompuy presented his initial "vision for the future of Economic and Monetary Union" to the June European Council meeting. In response, he was asked by leaders to develop his thinking in close co-operation with the Presidents of the Commission, ECB and euro group, and to return with a "time-bound roadmap for the achievement of a genuine Economic and Monetary Union".

He will present his interim report to this week's meeting of the European Council and his final report to the December European Council meeting.

I welcome the consultations that have taken place over the last months between President Van Rompuy and Presidents Barroso, Juncker and Draghi, but also with representatives of member states and the European Parliament. President Van Rompuy's interim report, which was published on Friday, 12 October, is all the stronger for having had the benefit of a wide range of inputs. I very much welcome and endorse the recognition in the interim report that moving forward on the integrated financial framework, the so-called banking union - especially the single supervisory mechanism for euro area banks - is a political priority. I would add to that and say that it is of pressing urgency not just for Ireland, but for the euro area as a whole.

In June, we agreed that breaking the sovereign-banking link was imperative. I worked hard with my colleagues to achieve that acknowledgement and we must now ensure that we deliver on that undertaking. Having set out our stall in this way, expectations are now high that we will deliver, and this is a real credibility test for the Union. Be in no doubt that we will be punished for any back-sliding or stepping away from what has been agreed. I am encouraged by the steps already taken, and the Commission brought forward last month the formal legislative proposals for a single supervisory mechanism. The draft European Council conclusions recognise that we are still aiming for agreement on the single supervisory mechanism by the end of the year.

If the Union is to be credible, commitments entered into at the level of Heads of State or Government must be honoured. I am confident that will be the case. I welcome the fact that the draft conclusions being worked on in preparation for our meeting later this week, including at the General Affairs Council in Luxembourg today, at which a Minister of State, Deputy Creighton, is representing Ireland, call on the euro group of finance Ministers to draw up the exact operational criteria that will guide direct bank recapitalisation by the European Stability Mechanism, ESM, "in full respect of the 29 June 2012 euro area summit statement". This is a vital anchor for the work ahead.

The recognition in President Van Rompuy's interim report, that once a single supervisor is in place, a common resolution mechanism is required, is also welcome. I strongly support the need for swift progress to make these steps a reality. The interim report rightly recognises the important steps we have taken towards stronger economic governance, both in terms of developing an integrated budgetary framework and an integrated economic policy framework, since the outbreak of the crisis. We now have a broad range of instruments at our disposal, including the six-pack, the two-pack, the stability treaty, the enhanced Stability and Growth Pact and the European semester and Euro Plus pact. We must ensure that we implement, in full, what we have already agreed, or are in the process of finalising, before we seek to open new opportunities. Implementation must remain our priority. It is regrettable that sometimes it can seem easier to agree on new mechanisms even before we have seen how our existing tools work in practice. I will continue to press for implementation of what we already have at every level.

President Van Rompuy has sought a mandate over the coming months to explore further a number of new possibilities suggested in his interim report, including a possible "fiscal capacity" for the euro area and possible "contracts" between member states and the EU institutions, perhaps covering the country-specific recommendations generated as part of the European semester process. These ideas, while potentially interesting, need to be fleshed out so we can be clear on what might be involved. They raise many questions and complex issues but they may ultimately have a contribution. I look forward to hearing more from President Van Rompuy later in the week.

I caution that we need to be very careful that any "fiscal capacity" must not cut across the ongoing negotiations on the multi-annual financial framework. Concluding those negotiations is an immediate priority. Agreement would send a positive signal of the Union's willingness and ability to reach a compromise on something as fundamental as the funding of the EU over the seven-year period from 2014. We must not deflect ourselves from that goal.

Democratic legitimacy and accountability is the fourth building block identified by President Van Rompuy. This must not be an afterthought, and on the contrary, it must be central to our work in strengthening the EMU. We in Ireland know better than anyone across Europe that democratic legitimacy and accountability is not an optional extra but must be standard equipment. We need to pursue a balanced approach in this regard in addition to any enhanced role for the European Parliament. National parliaments, including the Oireachtas, must be central to whatever mechanisms we seek to develop.

In his final report to the December European Council, President Van Rompuy will examine "what can be done within the existing treaties, and which measures would require treaty change" as he sets out a roadmap to strengthening EMU. In this regard Ireland's position is similar to that of the great majority of member states that wish to see the Union make the maximum possible use of the wide range of instruments available to it. Discussion of the possibility of treaty change at some stage in the future must not be allowed distract us from getting on with what needs to be done now. I note that the Government strongly holds that any new arrangements, including those adopted under the existing treaties, must avoid fragmentation of the Union and maintain the integrity of the Single Market. In a larger Union there will sometimes be areas in which some member states, including those who share a common currency, will wish to go further together. This must respect key principles.

The European Council will this week further consider the EU's relations with its strategic partners, focussing in particular on the relationship with China. Since the entry into force of the Lisbon treaty, High Representative Catherine Ashton has sought to enhance the effectiveness of the Union's engagement with key partners, such as China, the US, Russia, India and Brazil. An enhanced framework for summit preparation has provided momentum to this process and there has been progress towards assuring what she has described as "fewer priorities, greater coherence and more results".

The discussion on China is timely as it comes shortly after the most recent EU-China summit in Brussels on 20 September. The summit, which was Chinese Premier Wen Jiabao's last before he steps down, reflected on the great progress that has been achieved in the past ten years. The relationship has become increasingly rich and multi-dimensional and covers areas such as trade, global challenges, human rights and agriculture. The EU believes that the principles of openness, fairness and predictability should be a corner stone in our relations with China. We should be firm yet fair in applying the rules that govern international trade. The recent EU-China summit confirmed both sides' commitment to launching negotiations for an EU-China investment agreement. Such an agreement would facilitate investment in both directions and should, we hope, result in an additional source of growth and employment in this country, following on from our own strategic partnership signature with China.

Ireland has entered a new phase of engagement with China following my visit there earlier this year and subsequent visits by a number of Ministers. The announcement that Ireland and China were establishing a strategic partnership has moved our relationship to a new level. With two-way trade between Ireland and China already at nearly €8 billion, the potential for this partnership is evident. Together with my colleagues in Government, I will continue to work to realise that potential.

The European Council may also consider a number of other items, particularly in the sphere of foreign policy. The evolving situation in Syria may be included on our agenda in light of discussions at yesterday's meeting of the Foreign Affairs Council in Luxembourg, at which the Tánaiste represented Ireland.

This week's meeting of the European Council presents us with an opportunity to consolidate and build upon the important progress that the Union has made over recent months in both bringing a degree of stability to our common currency and in looking ahead to sketch out what kind of economic and monetary Union we will need for a stable and prosperous future. I trust the meeting will offer important impetus to our efforts in building upon the compact for growth and jobs; progressing banking union, with its clear link to the direct recapitalisation of euro area banks by the ESM; and provide us with an opportunity to reflect calmly on the EU's relations with our strategic partners, especially with China. As ever, I will play a full and active part in the deliberations at this week's European Council meeting and I look forward to reporting back to the House next week upon my return.

Deputy Micheál Martin

Since the leaders of Europe last met they have yet again failed to show the urgency or vision required to tackle this unprecedented economic crisis. Having announced that they had made a "decisive" breakthrough, they then entered into three months of backtracking by some countries and inaction by others.

The strategy adopted by many of the leaders, including the Taoiseach, was to return to the issue in October but that strategy has failed to progress the work of the summit.

Were it not for the actions of Mario Draghi, there is no doubt that we would be in the middle of another panic. With his decision to face down the destructive orthodoxies of the Bundesbank, a major step was taken to restore at least some long-term confidence in the sovereign bond market. It was a move which came three years too late. Ireland and Portugal would have avoided the need for international support if the OMT facility had been in place in 2010. Spain would not have seen the mounting pressure of the past year and others would have had to divert fewer resources to rising interest payments. In contrast to the way Jean Claude Trichet was conservative and restrictive, Mario Draghi has been aggressive and ambitious. Unfortunately, he appears to be against a major move on dealing with the Irish promissory notes, a matter to which I will return.

In the three months since the June summit, there has been no significant progress on any matter within the competence of the European Council. There has been no progress on a banking union, on structural reform, on the Union's budget or on debt sustainability. Unfortunately, there have been significant steps backwards. The joint statement of three finance Ministers setting limits to their interpretation of the agreement reached in June was the logical outcome of lack of preparation which preceded the negotiation and the failure of countries, such as Ireland, to engage with them intensively in the weeks after the summit. At the same time as they were issuing their statement, our Government was briefing journalists that everything was going well and on course for delivery in October. There is no reason to believe that this week's summit will mark a significant step forward.

The Taoiseach and Tánaiste have undertaken no diplomatic initiative in recent weeks and have tabled no proposals for the summit. Given that the Taoiseach has not supplied any material for this debate, it is necessary to seek it in Brussels. On Monday, President Van Rompuy circulated the agenda and background documents for the summit. Ireland and debt sustainability are not mentioned, the only relevant point is to be found in the document he circulated about the future of economic and monetary union. On page 3 of the document, it states: "During the transition phase [to a bank resolution scheme] and after the establishment of an effective Single Supervisory Mechanism, the ESM will have the possibility to recapitalise banks directly, relying on appropriate conditionality." This is almost word for word the interpretation of the agreement reached in June that was included in the statement of the German, Dutch and Finnish Ministers.

The Taoiseach, however, has been very vocal in the Irish media banging the table and saying a deal is a deal. What is now clear to anyone who bothers to look at the evidence is that there was no agreed understanding of the agreement reached in June because no serious background work went into it. On the first night of the summit, the Taoiseach and the Tánaiste agreed to move on to the next business without any agreement on banking debts. They were so convinced that nothing was happening the Tánaiste flew home.

The success of the Italian and Spanish prime ministers in demanding a new policy opened up a possibility for Ireland which was acknowledged in the final communiqué. While the Taoiseach was busy patting himself on the back and praising his negotiating skills, he once again over-spun a development. Ireland does not need the same support which Spain is seeking. Ireland wants fairness in the handling of banking-related debt which we took on in the interests of wider European solidarity and which the Taoiseach acknowledged in previous statements. The Taoiseach has consistently failed to push this argument because it gets in the way of favourite partisan attacks, of which we had an element earlier. What the Taoiseach also consistently refuses to acknowledge is that in February of last year, before the change of Government, our partners in Europe had already agreed to the principle of addressing the sustainability of our debt. Yet over a year and a half later, no major push has been made to achieve this. Time and again it has been a case of hoping that something comes along.

The promissory notes are the core of our issue. They were created as an exceptional measure to address an unprecedented situation and where the ECB and EU demanded the full honouring of these debts. The interest payments are returned to Government through the Central Bank, so it is the repayment of the principal which matters. They are not standard sovereign debt and they can be restructured in a way which lifts their unreasonable burden on the Irish people. Mario Draghi is right when he says that the European Central Bank is precluded from the simple monetary financing of government which would be involved in writing off the promissory notes. What it can do is to extend their duration markedly so that they do not oblige unreasonable and growth-destroying austerity. They are a technically complicated instrument but the solution is not particularly complicated.

The Taoiseach

Why did the Deputy's Government not do it at the outset?

Deputy Micheál Martin

What would be completely unacceptable would be to repeat what happened this year. The Minister for Finance, Deputy Noonan, came into this House without notice to announce a supposed breakthrough in regard to this year's repayment. All that actually happened was that a promissory note which could be restructured with little difficulty has been converted into normal sovereign debt. It took days before anyone was able to get past the Government's spin but it was and remains a bad deal.

At the same time, the Government proceeded with a programme of paying off unsecured and unguaranteed bonds without comment. The tough position adopted by the late Brian Lenihan in regard to these bonds was abandoned in return for nothing at all.

The Taoiseach

Some neck.

Deputy Micheál Martin

I asked the Taoiseach about that earlier at Question Time but he did not reply to me.

The Taoiseach

Why did the Deputy's Government not restructure them?

Deputy Micheál Martin

The ECB would like the entire debt to be converted into normal sovereign debt but we should absolutely refuse to do this. After a year and a half of false dawns, non-existent technical papers - we have never been able to get a hold of that technical paper between the troika and the Taoiseach because it probably never existed - and distractions, it is time for the Taoiseach to actually undertake the long-promised diplomatic initiative. He cannot keep waiting for others to do the work or for things to get so bad that Europe has no alternative.

President Van Rompuy has circulated a draft set of principles rather than decisions about the future management of economic and financial matters at European level. Most of his proposals should be strongly supported by Ireland. The proposed single supervisory mechanism, SSM, for the financial system is an obvious necessity. We should oppose attempts to limit this to just the largest pan-European banks. We should also strongly support a uniform bank resolution regime, including deposit insurance. This is being opposed in some countries on the basis that they do not want to pay for failings elsewhere. What they are missing is that one way or the other, within a currency union, one cannot expect to feel no impact from what happens in other member countries. Directly or indirectly, there will be a financial hit and it is better that the risk of this be limited by having a deposit insurance and resolution regime which gives confidence to the wider system. Just as the OMT facility has reduced everyone's cost of borrowing, it is a case where a joint guarantee makes the guarantee less likely to ever be needed.

The document to be discussed also refers to the need for increased fiscal capacity for the euro zone. Translated into real speech, this means that there should be a larger budget which can be used to help regions with big economic problems. I welcome this proposal which has been made in the face of the opposition of stronger countries. I hope the Taoiseach will support the proposal, although his speech was somewhat ambiguous in regard to it. Without a much larger budget to transfer resources between states, the eurozone will be all about control and will fail to give a credible path to growth for all of its members. It is being proposed that leaders will agree a time-bound roadmap for agreement on reforms over the coming months. This is reasonable but it is not reasonable to exclude Parliaments and wider European society from these discussions.

When regular statements in advance of European Council meetings were introduced, it was a development welcomed by everyone in the House. The Taoiseach explained that it would involve a real exchange between the Government and the Opposition during which he would outline in detail the Government's approach to upcoming summits. As with nearly every piece of reform proposed by this Government, the reality has been very different. In almost 19 months of these sessions, the Taoiseach has yet to give the House a single piece of information not already in the public domain. In some cases, the Taoiseach has refused to give detailed replies to questions at exactly the same time that his staff have been sent out to provide the relevant information to a journalist - always accompanied by ridiculous and self-serving spin. On other occasions, we have had to go to Brussels to obtain information withheld by the Taoiseach.

In the middle of the never-ending search for short-term headlines, what has now become clear is that this Government has no European policy, except the hope that things turn out all right. It waits until outcomes become clear before saying anything and then rushes out to find new ways of praising its own efforts. The now undeniable reality is that the Taoiseach has opted out of the level of diplomatic activity within the European Union undertaken by all of his predecessors for the past 40 years. He and his senior Ministers have delegated profoundly important negotiations to officials while failing completely to outline and promote Ireland's position on nearly every fundamental issue being discussed by the Union. On issues of both immediate and longer-term importance, this non-engagement strategy has already caused damage. The failure to prepare for June's deal on sovereign debt and the further failure to follow it up has allowed an opportunity to become a new crisis.

Since August of last year, deep reforms of the Union designed to save it and the euro have been on the agenda.

At no stage since then have the Taoiseach or Tánaiste stated what Ireland is specifically seeking in these reforms. During the negotiation of the fiscal treaty, the only thing they sought was that it be worded in a way to try to avoid us needing to have a referendum, something they thankfully failed in achieving.

Since early this year the President of the European Council has been preparing proposals for further structural reform of the Union, including possible treaty changes. These proposals are now due to be presented for fast-track negotiation. Instead of setting out a national position like every leader, the Taoiseach told the House that he would wait to see the proposals before giving his opinion. That has been the trend the whole way through, before and after the fiscal treaty referendum and now into the present set of proposals and negotiations on the reform agenda. The European Union has been the most successful multinational organisation in history. It brought peace to a conflict-riven continent and enabled living standards unimaginable in the past. It deserves to have this history acknowledged and it deserves better from its leaders.

Greater urgency, ambition and solidarity is required if Europe is genuinely to return to growth and job creation. Leaders like the Taoiseach need to stop sitting back and start engaging with each other in a meaningful way. This week’s summit and its agenda does not reflect the seriousness of the crisis facing the Union. It is another wasted opportunity, which we may soon regret.

Deputy Gerry Adams

I wish to share time with Deputy Crowe.

It seems that Thursday's summit of EU leaders will be dominated by the future role of the ECB as a supervisor of eurozone banks, getting eurozone member states to buy into the so-called annual contracts that will commit them to structural reform of their labour markets, welfare and pensions systems, and the creation of what has been described as a federal eurozone budget that is distinct from the EU budget. The summit is shaping up to be another quarrelsome affairs with reports today suggesting that there is little prospect of an agreement between the Greek Government and the EU and IMF on a further package of significant cuts, and that Finland is expressing grave concern about the new budget proposal. What is the Government's position on this and on the annual contract for reform of the labour market and welfare and pensions systems? Is the Taoiseach in favour of a eurozone federal budget? Is he for annual contracts to reform the labour market and the welfare and pensions system? Have these been discussed with the trade union movement and business organisations? Does the establishment of a eurozone budget not risk exacerbating the division that exists between those inside and outside the eurozone? If he agrees to such a budget, is that not another important step towards fiscal unity? Does not drive another nail into the coffin of his claim that he wants to be the Taoiseach who restores Irish sovereignty because it appears that fiscal unity of the Union and Irish sovereignty are mutually exclusive positions?

Thursday's summit will also see the continuing battle between France and Germany over the use of austerity measures but the Taoiseach is for austerity and this is not a concern for him. That brings me to the crucial issues of bank debt. First, there is no sign of a deal on the Anglo Irish Bank promissory note debt. The Government now claims that it will be March 2013 at the earliest before the matter is concluded, and last week ECB President Mario Draghi cast further doubt on potential promissory note deals. From the start of this European wide debt crisis, as I reminded the Taoiseach earlier, Sinn Féin has advocated a write-down of private bank debt. This needs to be sorted out at this summit. Bank debt needs to be separated from sovereign debt. The burden of bad banking debt - the so-called legacy issue - which was foisted on the shoulders of Irish people also needs to be removed.

I welcome the Government's conversion to this point of view. I have noted the Taoiseach's recent declaration that the Government had long argued for the separation of bank and sovereign debt. That patently contradicts his declaration in this Chamber last January that he would not have the word "defaulter" stamped on our foreheads and that he had not sought a debt write-down. At the time, he was for leaving Irish citizens to shoulder the burden of the bank bailout and, as other Sinn Féin spokespersons and I said at the time, that was politically, economically and morally wrong. It is good he has changed his position and I welcome that, but now he must deliver. It is imperative this debt be removed.

As we discussed earlier, in June, the Government oversold the deal, which was described as "a seismic shift" and a "game changer", and I note his remarks during Taoiseach's Questions earlier about the issue of the write-down of legacy payments. That is the big question. Was there a commitment that the State would benefit from a write-down of legacy payments? European Commission President, Jose Manuel Barroso, supports breaking the link between bank and sovereign debt but draws a distinction and refused to be drawn on legacy debt, describing the issue of putting billions into bad banks as a discussion on semantics. Last week, the new chief of the ESM said the issue had not been discussed by any European leader. It appears other leaders are rowing away and no one else is rowing in to support the Government's interpretation of the June deal. I hope the Taoiseach is right but this needs to be clarified and he has to return to the House with a clear position. That needs to be his primary objective. He repeated in his contribution comments he made in Europe a week or two ago:

We must now ensure that we deliver on that undertaking. Having set our stall in this way, expectations are now high that we will deliver. Be in no doubt we will be punished for any backsliding or stepping away from what has been agreed.

There is a certain irony to this and I hope these words do not come back to haunt him; they should be stamped on his forehead. The reality is there has been no bailout for our citizens. We have endured brutal health cuts, reductions in the number of special needs assistants, cuts to child benefit and other social welfare benefits, cuts to home care packages and home help hours, the imposition of a household charge and new stealth taxes. No matter how it is spun, the budget will inflict further cuts and hardship on those least able to afford it.

Even the IMF has concluded that austerity is not the answer to the economic difficulties of Ireland and other European states. The answer is jobs and growth. Other Sinn Féin spokespersons and I genuinely welcome the recent jobs announcements, but 33,000 jobs have been lost since the Taoiseach took up office. We would need an announcement similar to that of Paddy Power every eight days for the next year even to return to last year's jobs figures. That is a sense of the magnitude of the challenge facing us. Across the EU, 24 million citizens are unemployed with almost 500,000 in this State. Emigration is not a solution. It is a huge burden on families and communities, especially in rural areas.

Last week, Sinn Féin launched a fully costed, practical series of detailed proposals to tackle the jobs crisis, a copy of which I sent to the Taoiseach. We propose a jobs stimulus plan and I commend it to him. Austerity will not work and the Taoiseach faces a big challenge to return to the House the week after next with a proper deal which writes off our bank debt.

Deputy Seán Crowe

Despite assurances since the last European Council meeting, we are all still uncertain as to whether banking debt will be separated from sovereign debt and how this will come about. We heard about a seismic shift, a game changer and that a banking deal was done to separate Ireland's banking and sovereign debt. However, recently, high profile member states have moved away from the Government's June statement and there is a view that people were gilding the lily regarding what was agreed at the time.

The recent statement from the German, Finnish and Dutch Finance Ministers, that the agreement does not involve legacy debts, carries huge importance because the countries are the strongest triple-A rated states in Europe. Their statement was a game changer and hugely significant. The June statement will not be implemented without the support of the Germans, Dutch and the Finns. My party colleague, Deputy MacDonald, said the message from these Finance Ministers was that Ireland should get lost. The Minister for Finance, Deputy Noonan, has been quoted as saying the Government is engaged in a diplomatic offensive to implement the decision of 29 June to break the link between banks and the sovereigns and to enhance the sustainability of our debt. Our concern is that the diplomatic strategy and diplomatic offensive does not appear to be working.

Irish people were told they should pass the fiscal compact treaty so as not to send a negative signal to the EU and the markets and that it would strengthen Ireland's hand in negotiations on its debt. Despite ratifying the fiscal compact, the concessions on our bank debt the Government had hoped for, on foot of ratification, may not materialise. Without any irony, we are being told that any re-negotiation would send a negative message. Ireland must get a fair deal as soon as possible. It is the Government's job to get the deal. I would warmly welcome any deal that reduces the burden working people have to pay for the gambles of bankers and speculators. As long as banking and sovereign debt are tied together, the Irish banking sector and, by consequence, the State's finances and the economy cannot function effectively in the best interest of Ireland and its people.

I listened to the debate on negativity. Many of us will be glued to the television screens tonight to watch the football game against the Faroe Islands. I watched the press conference with Giovanni Trapattoni yesterday. He said he had the confidence of the dressing room. I am sure the Taoiseach has the confidence of the Cabinet and his backbenchers but the difficulty is that he is losing the confidence of the fans or the people of Ireland. We want to wear the green jersey and we want to see it work. We want to see Ireland qualifying but we are not seeing the results. Perhaps, similar to Mr. Trapattoni, we need to examine the system we are using. People referred to this as a fractious meeting but perhaps we need a Shane Long for the negotiations with our European counterparts.

The Taoiseach

Is Deputy Crowe suggesting we make a few changes?

Deputy Shane McEntee

Bring back Packie Bonner.

Deputy Gerry Adams

Henry Shefflin.

The Taoiseach

The team will perform.

Deputy Seán Crowe

It sounds silly to make the connection but the question of whether we qualify and go to Brazil means a huge deal. It will lift the spirit of the country and it will lift the spirit of the country if the Taoiseach delivers. We want to go to Brazil and we would like to see our economy like Brazil's. Its economy was a basket case a number of years ago but now it is a driver for change in South America. There are many similarities even though one involves a football game and is not serious.

The Taoiseach referred to the topics he will raise, one of which should be the social cost of policies. Many Governments do not understand what people are going through. The people of Greece, Spain, where they have 53% youth unemployment, and Ireland know what is going on. Deputy Adams referred to the number of people unemployed, which is approaching 500,000. This is hurting people and none of us got involved in politics in order to hurt people. We want to bring about the change and we have an opportunity to do so but we must look at our strategy to bring it about.

Youth unemployment is at least 30% and 200,000 people have left our shores over the past two or three years. Emigration is not the answer and we all know its effect. We grew up seeing our friends and family members having to leave and we thought it was all behind us, but emigration has returned. We have an opportunity to bring about change, which is what people want to see.

The Taoiseach referred to the conflict in Syria. Today, I received messages about human rights lawyers in Bahrain and people being arrested. These people were not involved in violent conflict or advocating violence; they want to see peaceful resolution and change in their country. It is important we are on the side of change there. We should be on the side of those in Europe who want to build a free Europe, a federation of people who want freedom and independence for countries. We have the opportunity and I wish the Taoiseach well. We have the opportunity to bring home silverware and to build confidence in our people. People want to see it happen and I have no doubt that if the Taoiseach comes back with a separation of sovereign and banking debt, he will have the eternal gratitude of the House.

Deputy Mick Wallace

I propose to share time with Deputies Clare Daly and Catherine Murphy. I hope the Taoiseach has a better relationship with his Cabinet than Giovanni Trapattoni has with the dressing room.

Acting Chairman (Deputy Olivia Mitchell)

Less of the sporting analogy, please.

Deputy Mick Wallace

The IMF has admitted it underestimated the negative impact on growth of steep cuts in public spending. In Tokyo, the World Bank warned of cuts in growth across the developing world. Ms Lagarde said last week that eurozone countries should not blindly stick to tough budget deficit targets if growth weakens more than expected. She said they should allow automatic stabilisers, higher welfare spending and lower tax revenue to kick in if the economy deteriorates. The IMF is not saying that austerity is too hard, too unfair, causes too much pain in the short term or hits the poor more than the rich. It says that austerity may not achieve its goal of reducing debt within a reasonable time.

The largest problem cases are Greece and Spain, which mirror many of the problems here. There is little doubt that austerity is devastating the Greek people. Workers, the unemployed, pensioners, small and medium-sized enterprises, women and young people are all suffering more than they should. The economy has contracted by 22% and workers and pensioners have lost 32% of their income. Unemployment is at 24% and youth unemployment is at 55%. Austerity policies have led to cuts in benefits, the deregulation of the labour market and further deterioration of the limited welfare state that had survived the neoliberal onslaught of the past 20 years. People with common sense are screaming that we need to prioritise the needs of workers, pensioners and the unemployed, not the interests of multinationals and bankrupt banks.

For the likes of Greece, Spain and Ireland to continue to take on board the problems of the failed banks is too great a task. I hope the Government is successful in getting a deal from the Europeans so that the debt of banks is taken on by the European system.

It does not belong to the Irish State or taxpayer. This must be made clear. The EU will eventually come around to that position. It will have to. Greece and Spain will not survive if they continue to take on so much of the debt.

The International Monetary Fund, IMF, is now saying Greece needs a reduction of €30 billion in its debt and the ECB and the EU must take the hit. The IMF is not exactly a radical body, yet these are the people who are saying Greece will not meet its targets. There was a notion that Greece would bring its debt down to 120% of GDP by 2020. It is now admitted that the figure will probably be 140% unless the problem of the debt Greece cannot pay is tackled. The same applies to Spain and will apply to us.

I was amused by the announcement that the EU had been awarded the Nobel peace prize. The timing of the prize is odd. In the last few years, the EU has changed from an institution that uses economic integration to promote peace to one that is sacrificing peace on the altar of free market economics. The handling of the eurozone crisis has transformed the EU into a source of conflict and sometimes violence on the streets.

We have seen some odd Nobel peace prize winners in the past. I remember Henry Kissinger being awarded the prize in a year when 50,000 people died in Vietnam. That was the first anomaly that caught my eye. A few years ago, shortly after President Obama was elected he said he would escalate the war in Afghanistan and Pakistan. He kept his word and was given the Nobel peace prize.

The EU is promoting unemployment and class division leading to violence on the streets. I see nothing very peaceful about that. The founder of the Nobel peace prize said its recipient had to support peace in every manner. One cannot say that of the EU at present. This is the same EU that supported the war in Iraq, and many of its member states had troops in Afghanistan. We supported Israel and backed it on almost every issue regarding Palestine and we have undermined the elected Government of Palestine.

It was gas to listen to José Manuel Barroso praising the EU for its defence of human rights and saying it merited the peace prize. This is the man who, when he was Prime Minister of Portugal, defended the invasion of Iraq. How can someone who defended the invasion of Iraq against the wishes of his own people talk about human rights? I do not understand that.

Deputy Catherine Murphy

We were told the statement of the summit meeting of 29 June was a game changer. It created hope and an expectation that the statement would be followed through with action. Since then, countries such as Austria, Germany, Finland and the Netherlands have put a serious doubt over the statement of 20 June. Mario Draghi downplayed the idea of monetary financing which is what Ireland needs.

When it was suggested that there might be an extension of the time to close our budget deficit the Tánaiste went on television and said people "wanted this over with". I agree that people want to see some hope. I use the word "hope" rather than "confidence" which is the terminology of the markets. In the absence of some degree of certainty it will be impossible to engender that hope.

I read the Taoiseach's statement but I could not see any follow through on the statement of 29 June. The Taoiseach must state clearly that the statement of 29 June has not given the certainty it was intended to give. It has not clarified the position regarding legacy debt and has opened up a dialogue that is really damaging. Will the Taoiseach seek a new statement or a clarification of the statement of 29 June? If that statement was the view of EU leaders, surely the forthcoming Council meeting should issue a clarification of what was intended. We urgently need that.

We owe something like €51 billion over and above our GDP, and it is increasing. This is predominantly because of the socialisation of banking debt. People would have been prepared to put up with punishment if they had seen an end to the crisis, but they are not prepared to accept the current paralysis. It is affecting the national mood, discouraging people from starting businesses and driving emigration, which is not a solution.

At the forthcoming Council meeting, I ask the Taoiseach to raise the urgent need to clarify what was meant by the statement of 29 June. Does it include legacy debt? We could accept postponement of the solution until March 2013 if it was clear that we are working towards a solution by that date. There is, however, a serious doubt among most Irish people that what was said on 29 June actually meant that legacy debt would be dealt with.

The IMF statement on austerity is most serious. I will be astonished if it does not find its way onto the agenda for the Council meeting. If the IMF is indicating that austerity will further damage the prospect of recovery, serious attention needs to be paid to that view in terms of changing direction.

Deputy Clare Daly

I know nothing about football. I hate it. Even I know, however, that Giovanni Trapattoni's chances are considerably better than those of the Taoiseach and the leadership of the EU if they continue on their current path.

The Taoiseach

We are not playing the Faroe Islands.

Deputy Clare Daly

I favour Giovanni Trapattoni's chances more than those of the failed strategy of the EU leadership, including the Government. We are listening to the same stuff as before. We are told we have turned a corner and the worst is over. We hear talk of bank deals and all the other points made by Deputes. This smacks of unreality. What is being dished up for the citizens of Europe is a continuing diet of austerity.

Respected Nobel prize winning economists, and not only radical socialists, have repeatedly said the problem is being misdiagnosed and the wrong solution prescribed. Austerity has never turned a situation around. It was tried in the 1920s, in Latin America and in Asia. It never worked. As Joseph Stiglitz said to International Bar Association conference in Dublin earlier this month, it has only succeeded in turning downturns into recessions and recessions into depressions. The eurozone is now heading for recession not only in the peripheral countries, but in the heartland, with the second successive drop in GDP.

The IMF has admitted that it got it wrong and that its calculations were wrong. It is not surprising; we know that from the statistics. What is surprising is that the European leaders continue to go down that path. It is a toss up whether the charge should be gross incompetence or criminal negligence.

The consequences of these actions can be seen most desperately among the population of Greece due to the shrinking of that country's economy and the desperate hardship. It is happening everywhere else across Europe as well. There is the madness of the massive €3 trillion being hoarded by private interests and not invested in job creation, while 25 million people are unemployed. That is the contradiction at the heart of the EU and I do not foresee any way forward being pointed out at this meeting. The meeting is taking place against the backdrop of emerging differences between many of the leaders rather than addressing the problems in Greece and Spain. The Germans are pushing for more fiscal discipline and further surrender of economic autonomy. What will be the Taoiseach's response to that?

It is clear now that it is not a case of if the Greeks will exit from the euro but when they do. What will the contagion effect be in countries such as Spain or Italy? There are divisions even in the heartland of Germany. The predominant interests want to keep the eurozone together. If the Germans exited the eurozone, they would have serious problems. They would face having a strong deutschmark and being disadvantaged competitively when selling into the shrinking market of a crisis-ridden eurozone. It is not in their interests to do that. There is a contradiction, however, because the summit is tinkering around the edges, looking at issues such as the banking situation and the ECB increasing its supervisory role and so forth, while it is demanding commitments and contracts on an annual basis relating to structural reforms in the labour market and so forth. I cannot see any way out of this unless the banking debt is dealt with.

There is probably a more important meeting taking place in Europe tomorrow, a meeting of the European Trade Union Council. It represents 60 million workers across Europe and will meet in Spain tomorrow. It is putting forward the idea of an international movement of ordinary people throughout Europe and putting the interests of workers and ordinary people and public investment in jobs and job creation before bailing out failed banks.

Minister for Foreign Affairs and Trade (Deputy Eamon Gilmore)

I welcome the contributions of the Deputies to this debate. It is important the House has an opportunity before European Union summit meetings to discuss the issues that will arise and to have its input. It struck me, however, that some of the contributors appeared to be speaking as if the 29 June meeting never happened and the conclusions were never made.

I will travel to Brussels on Thursday morning to represent Ireland as the incoming holder of the Presidency of the European Union at the tripartite social summit. This forum meets twice a year ahead of the spring and autumn European Councils. It is an important opportunity for an exchange of views between the social partners, the European Commission and the current and subsequent holders of the Council Presidency. The discussions on Thursday will focus on promoting growth, jobs and social inclusion, with a particular emphasis on the involvement of the social partners. I look forward to having a constructive dialogue with the EU social partners on the EU's growth and employment priorities. These issues will be at the heart of discussions at the European Council meeting. They are subjects that are of the greatest importance to our citizens and they will be at the heart of our Presidency.

Having agreed the compact for growth and jobs in June, the Heads of State and Government will now return to it to review progress on its implementation. The compact represents an important achievement from the June Council meeting. Ireland had consistently made the point that as well as necessary structural reforms and consolidation, member states and the EU must have a clear focus on the creation of sustainable jobs and growth. It is through growth not just here at home, but also in our main trading partners and markets, that we will be able to get our people back to work and our economy back on a sustainable footing. The compact provides a clear framework for actions at national, EU and euro area levels, and it is important the European Council would take stock and set additional orientations, as necessary, with a view to ensuring it promotes growth and employment. However, the compact will mean little to people across Europe if it does not contribute to employment and jobs, especially among young people. We must strengthen the European Council follow-up on this point and we will continue to do that in Brussels this week.

The other main element under the economic policy that this meeting of the European Council will address is President Van Rompuy's interim report on strengthening economic and monetary union. As the Taoiseach said, if the European Union is to remain credible, the commitments that were made at the end of June must be honoured in full. The Commission has brought forward a proposal for a single supervisory mechanism. It is important that work on that be advanced as a matter of urgency. The June meeting made a very clear decision to separate bank and sovereign debt. What must happen now is to see that decision implemented in practice. That is being worked upon and is part of the discussions this Government is having with the ECB and our partners.

If I may borrow the football analogy mentioned earlier, there is a fundamental difference between Giovanni Trapattoni's record and this Government's record in Europe. Trapattoni returned from Europe without a win or a single point, while this Government has won all its games in Europe, including the reduction in the interest rate and the decision to separate bank and sovereign debt. I have every confidence we will deliver the best possible outcome for the Irish taxpayer in respect of the bank debt deal. It is not a question of when it will be done, but of the substance of the agreement we will secure.