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JOINT COMMITTEE ON EUROPEAN AFFAIRS díospóireacht -
Thursday, 3 Jun 2010

EU 2020 Strategy: Discussion

I apologise for the delay and the inconvenience caused by debates on the Order of Business in both Houses.

I thank the Chairman for that apology, but I hope he will point out that we are an hour late largely due to the disruption by the Opposition parties.

I hate to disagree with the member of the committee, but I would happily enter into a debate on the issue at any time other than at this moment. I have indicated the grounds on which I will do so in the Lower House.

People have been waiting for some time. I want to put on the record the serious matter of our discommoding them.

Without prejudice, I could also put on the record that the issue under debate in the House was that the public will need to wait next week and for several further weeks for answers to questions that have been legitimately raised.

Representatives from the Departments of the Taoiseach, Finance and Enterprise, Trade and Innovation are present. The committee thanks them for being in attendance. In particular, I thank the Department of the Taoiseach for drawing together the various witnesses. We appreciate the effort involved. As the committee has indicated, we recognise the importance of this issue.

There is another vótáil in the House. I will go through the procedures first, after which we can suspend and then proceed without interruption. Those who have mobile telephones that are not switched off or otherwise decommissioned should please do so. Apologies have been received from Deputy Treacy and Senator Prendergast.

In January, we considered the consultation document on the EU 2020 strategy. We discussed it with the Minister of State, Deputy Roche, and agreed a contribution that we made to the Commission at the end of January. Subsequently, the Commission published a draft EU 2020 strategy, which was presented to the European Council last March. The Council broadly endorsed the draft, but a number of outstanding issues remain to be agreed by the Council this month, including the headline goals for poverty reduction and education. Member states are also beginning to draft their national action plans under the 2020 strategy. In these, they must set out how they intend to reach the strategy objectives nationally.

I welcome the various Departments' delegates, who are in attendance to discuss this matter with us. Mr. John Callinan, Assistant Secretary in the European and international affairs division of the Department of the Taoiseach, is accompanied by colleagues from the Departments of Finance, Enterprise, Trade and Innovation, Community, Rural and Gaeltacht Affairs, Foreign Affairs and Education and Skills. I thank them for attending but I must suspend the sitting. The hearing could continue in my absence, but Deputies must depart.

I suggest we suspend the sitting.

Until after the vote.

Yes. Not suspending would not make sense.

The witnesses can remain in their places.

Sitting suspended at 12.31 p.m. and resumed at 12.44 p.m.

The rest of our colleagues are returning from the vote. We hope they will arrive here shortly and do not get delayed. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence you are to give this committee. If you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise nor make charges against any person(s) or entity by name or in such a way as to make him, her or it identifiable.

If the witnesses have digested that, I call on Mr. John Callinan to address the committee. After an opening address, with provision for the witnesses to make their interventions, there will be a question and answer session.

Mr. John Callinan

I am from the Department of the Taoiseach, where I have responsibility for the European Union and international affairs division. I am accompanied by my colleague at the Department of the Taoiseach, Mr. Richard Holland and colleagues from a number of Departments, Mr. Tony Gallagher, Department of Finance; Mr. Alan Gibbons, Department of Foreign Affairs; Mr. Tommy Murray, Department of Enterprise, Trade and Innovation; Mr. Jim Walsh, Department of Community, Equality and Gaeltacht Affairs; and Mr. Seamus McLoughlin and Mr. Pádraig Ó Conaill from the Department of Education and Skills. On behalf of myself and my colleagues I thank the committee for the invitation and welcome this opportunity to give the committee an update on the European Union's new strategy for jobs and growth, Europe 2020.

This strategy is very broadly based, hence I am joined this morning by colleagues from other Departments that have lead responsibility on various aspects of the strategy. The committee has had some discussion of the Europe 2020 strategy. Nonetheless, I propose to start with some general remarks about the background to Europe 2020, the context in which it is being formulated and its key aims and objectives. I will then briefly describe the processes involved, where we are now in that process and the next steps to be taken at EU and national level. In particular, I will outline the five headline EU targets under Europe 2020 that constitute a principal driver of the strategy, which will in part be the subject of discussion and, hopefully, agreement at the forthcoming European Council in June. Finally, I will outline Ireland's current overall position on the Europe 2020 process, including commenting briefly on our position on each of the five headline targets. We will be happy to hear the views of the committee on the strategy and to provide clarification or answer any questions.

The formal launch of the current phase of discussion began with the publication of the European Commission's initial communication on the strategy on 3 March. In that communication, the European Commission suggested the new strategy should aim to address the major structural challenges facing Europe today, including climate change, globalisation, an ageing population and the economic downturn. The strategy therefore seeks to enable Europe to emerge stronger from the current economic crisis and to turn the European Union into a smart, sustainable and inclusive economy, delivering high levels of employment, productivity and social cohesion. In many respects, the Europe 2020 strategy aims to provide a framework for closer co-ordinated action across the EU, at institutional and member state level. The overall framework proposed by the European Commission covers a number of elements, including five headline targets; the setting of national targets by member states in pursuit of those EU-wide targets; at EU level, seven flagship initiatives in key areas that will contribute to the overall effort by the member states; the preparation of a national reform programme by each member state, outlining the policies and measures to be taken in pursuit of the objectives of the strategy, including the headline targets; a set of ten integrated guidelines to guide member states in preparing and implementing their national reform programmes and arrangements for implementation, monitoring and reporting.

It is worth recalling the context in which the new strategy is being created. We are, in many respects, in a new phase or era of the European Union, bearing in mind the recent entry into force of the Lisbon treaty, the new institutional arrangements that brought about and the appointment of a new European Commission at the same time. In addition, Europe is increasingly finding itself having to grapple with issues of wider, often global, reach, such as the economic and financial crises, or challenges like climate change and energy security.

The Europe 2020 strategy is itself just one part of wider developments at EU level that are continually evolving in parallel and which collectively comprise the Union's response to the major challenges it is facing, both internally within the Union, and globally. In March 2009 the European Council invited the European Commission to draw up proposals for a successor to the Lisbon strategy for jobs and growth. That strategy ran from 2000 to 2010 and it is fair to say there are mixed views as to how successful it was. It is certainly the case that gains and progress made under the Lisbon strategy were to some extent obscured, or in some instances reversed, because it concluded its course in the middle of the economic crisis and recession. That said, it would be wrong to dismiss the experience and benefit of the strategy and it is clear that the learning that can be gleaned from it has influenced the shaping of its successor.

As part of its preparation for the new strategy, the Commission issued a consultation paper and sought comments from interested stakeholders. The member states, including Ireland, submitted initial responses which were published on the Commission's website, along with many other submissions from a wide variety of interested parties and I acknowledge the committee made a submission at the time. The Government's response to the Commission document was generally supportive of its principles and priorities, including the aim for tighter focus on a limited number of key objectives. Jobs and growth remained at the heart of the proposed strategy, which also offered clear recognition of the various starting points and national circumstances of the member states.

Following the consultation process, the Commission published its formal communication in March this year, ahead of the spring European Council meeting. In turn, that meeting of the Heads of State and Government gave broad endorsement to the overall approach put forward by the Commission, while recognising that much of the detail needed further work. In its communication, the Commission proposed five headline targets covering employment; research, development and innovation; climate change and energy; education; and social inclusion, with a particular emphasis on reducing poverty. These are intended as headline Europe-wide targets which will help in measuring progress achieved in implementing the new strategy. Three of the five headline targets were agreed at the spring European Council meeting and, as mentioned earlier, further work is being done on education and social inclusion with a view to seeking agreement on these at the June European Council meeting, to be held this day fortnight.

The broad principles of the overall governance structure and monitoring mechanisms were also agreed at the spring European Council meeting, including the concept of preparation of national reform programmes, monitoring by the European Commission and annual assessments of progress in council formations and at the European Council. This is broadly a continuation of the arrangements that applied under the Lisbon strategy. In this context, we have supported a target-based approach but wish to see systems for monitoring, measuring and reporting being proportionate and not overly burdensome.

As we move towards agreement on the headline targets, the emphasis will increasingly shift to the setting of national targets and the preparation of the national reform programmes. Each member state, including Ireland, has already had initial exploratory discussions with the European Commission and the Spanish Presidency, including hearing the Commission's views and concerns on the setting of these national targets and how they might contribute to the EU headline targets. Bottlenecks that could constrain growth at both national and EU level are also being identified and, in tandem, the Commission is developing proposals for action at an EU level, including under the flagship initiatives.

Europe 2020 is intended to have a greater emphasis on clarity of purpose than its predecessor. Under the former Lisbon strategy there were 24 integrated guidelines to shape the preparation and implementation of national reform programmes. This has been reduced to ten guidelines under Europe 2020, although, taken collectively, they remain broad in terms of their scope. These integrated guidelines cover the broad economic policy guidelines and employment guidelines and will provide guidance for developing and implementing the strategy at national level. They are being finalised at the relevant sectoral councils, with a view to being endorsed by the European Council when it meets later this month.

At the spring European Council meeting, it was also agreed that there should be a better alignment in terms of timing on the reporting and assessment of the national reform programmes, the Stability and Growth Pact and country specific recommendations under the broad economic policy guidelines. However, there was also a widely shared view that there should be clear separation between the actual instruments involved under Europe 2020 and the Stability and Growth Pact. Ireland recognises the need for the European Council to provide high-level leadership and direction to the Europe 2020 strategy. We have also stressed the importance of other council formations in terms of the detailed work on the various policy areas involved, including in carrying out the analysis underpinning EU-wide targets and individual flagship initiatives.

Europe 2020 has featured prominently in discussions in various parts of the Oireachtas, not least at meetings of this committee. It was a major element in the Dáil statements on 31 March on the spring European Council meeting, and was the subject of an Adjournment Debate on 27 April. It has also been the subject of parliamentary questions to various Ministers, and the Minister for Community, Rural and Gaeltacht Affairs, Deputy Pat Carey, issued a statement earlier this week on Europe 2020 and poverty. In addition, initial consultations on the strategy are taking place with the various social partnership pillars. These consultations will continue in the second half of the year as we move to preparation of our national reform programme.

I will now speak about the five headline targets and Ireland's position and there are two key issues that should be noted. The European headline targets provide the framework both for action at EU level and for developing member states national targets and programmes. Those national targets are to be set in consultation with the European Commission taking into account the relative starting positions of member states and their national circumstances. The conclusions of the spring European Council meeting explicitly recognise that this is not a simple or mathematical burden-sharing exercise.

The three headline targets agreed at the spring European Council meeting concern employment; research development and innovation; and climate change and energy. Specifically, the European Union has set itself a challenging target employment rate of 75% by 2020 for people aged between 20 and 64. It has committed itself to achieving expenditure on research, development and innovation of 3% of GDP and also seeks to establish a satisfactory parallel means of measuring output or outcomes in this area. It has reaffirmed its commitments in the energy and climate change area of 20% improvement in energy efficiency, 20% renewable energy penetration and 20% emissions reduction, with a commitment to increase the latter to 30% if other major regions commit to comparable reductions. In education, work is progressing on an agreed indicator to measure progress on improving educational attainment rates. Similarly, discussion of an agreed means of promoting social inclusion, including measuring poverty reduction, is also continuing at sectoral council level.

Ireland has welcomed the Europe 2020 strategy as it provides an important framework for the EU to achieve the higher levels of sustainable jobs and growth while responding to the global financial crisis. We fully support the core elements of the new strategy, which are growth based on knowledge and innovation and a more sustainable and greener economy with high employment and social inclusion. These objectives are broadly consistent with the Government's national strategy, Building Ireland's Smart Economy.

We support the view that Europe 2020 must focus on the key areas of competitiveness; research and development and innovation; the completion of the single market; employment activation measures and training; a low-carbon green technology economy; sustainable use of resources, including the development of agriculture and food resources; and increased access to world markets to maximise the advantages of globalisation.

The creation of jobs and growth are central to the new strategy and key to improving social cohesion in Europe. Of the five headline targets, three directly concern issues of social inclusion. These are employment, education and the reduction of poverty. As already mentioned, Europe 2020 aims to increase employment levels to 75% of people aged between 20 and 64. Work is progressing on seeking agreement on numerical and appropriate indicators for educational attainment and poverty reduction targets. Developments on these two issues are expected next week in the lead up to June European Council meeting. In addition, under the new strategy one of the flagship initiatives, European platform against poverty, aims to combat social exclusion by ensuring that the benefits of jobs and growth are shared throughout society.

Clearly, these headline targets should not be seen in isolation. There are linkages between all the targets. They are interrelated and mutually reinforcing and supported by common policies. One specific area of concern to Ireland was the absence of any meaningful reference to the agriculture and food sector in the initial documentation, particularly the European Commission's March communication. This sector makes a very important contribution to economic activity and jobs in Ireland and throughout the EU, and should continue to do so.

Ireland argued strongly that the important contribution of this sector must be recognised and embraced in the Europe 2020 strategy. Supported by other member states, Ireland was successful in having this addressed in the conclusions of the spring European Council meeting, paragraph (g) of which stated:

All common policies, including the common agricultural policy and cohesion policy, will need to support the strategy. A sustainable, productive and competitive agricultural sector will make an important contribution to the new strategy, considering the growth and employment potential of rural areas while ensuring fair competition. The European Council stresses the importance of promoting economic, social and territorial cohesion as well as developing infrastructure in order to contribute to the success of the new strategy.

We now seek to have the agriculture and food sector included as a specific action point under the proposed industrial policy for the globalised era flagship.

I have tried to capture the key elements of the evolution of the Europe 2020 strategy. Given the breadth and diverse nature of what it covers and given that it is being developed as we speak, it would not be possible to cover every last detail. However, I and my colleagues will be very happy to hear the members' views and comments and will try to answer any questions or possible clarifications if this would be helpful.

I thank Mr. Callinan for his presentation. I wish to concentrate on the issue he raised in regard to education and social inclusion, with an emphasis on reducing poverty. Key among the benefits we received from the European Union was the European Social Fund's investment in education and training. ESF funded courses in what were then called regional technical colleges and the Dublin Institute of Technology helped to expand access to education among lower and middle income groups. In the era before the abolition of third level fees, young people from these groups encountered difficulties in attending colleges. It was an egalitarian measure in that sense. The money was also invested in courses which aimed at putting people in employment. Many of the courses were innovative and included subjects such as multimedia and computer technology. Ireland should push to renew this type of approach. Given the challenges we currently face in funding third level education, we should attempt to persuade the European Union to invest ESF money in education and training. I would appreciate it if Mr. Callinan can provide an update on that issue.

Inequality often rises in countries which were successful in reducing poverty. Current research indicates that income inequality is bad for the people who live in these countries, including the well-off. Studies of developed countries over the past 30 years provide evidence that those with the least income inequality enjoy the longest life expectancy rates, good mental health and better educational outcomes, as well as sending fewer people to prison and having lower rates of teenage pregnancies. When we speak about reducing poverty, therefore, it is important that we also seek to achieve income equality. This should be a central feature of the new strategy.

I thank Mr. Callinan for his contribution. I will make one point about the strategy before raising some specific questions.

I emphasise the importance of this strategy in the context of the challenges that Europe is going to face. There is an understandable focus at present on the budgetary difficulties with which Europe must contend but I believe Europe 2020, if implemented, will make as big a contribution to addressing these difficulties as the so-called fiscal adjustment programmes aimed at reducing expenditure and increasing taxation. One of the consequences of the strategy would be an increase in economic activity in Europe, thereby generating tax revenue to fill the budgetary holes. The heart of our difficulties is not budgetary but the fact that the European economy is not growing quickly enough and that its parts are growing at different rates. The proposals would make a huge difference in responding to that challenge.

This leads to my first question regarding the implementation of the strategy. It is widely acknowledged that its predecessor, the Lisbon strategy, did not have the profile or degree of implementation that it deserved. How are we going to change the priority given to the implementation of Europe 2020 in light of what we have learned from the Lisbon strategy?

There is a focus in the strategy on reporting back to the European Commission, which is appropriate. However, how will we ensure national Parliaments are informed? We learned from the recent Lisbon referendums that people see a delivery deficit in regard to Europe. That deficit would be filled quite quickly if the strategy's measures were delivered. Communication with national Parliaments and member states is important.

In regard to Mr. Callinan's comment on the omission of agriculture, I believe the omission is somewhat broader. The main strand of employment highlighted in the strategy is in industries that result from investment in research and development. However, not everybody in Europe will be able to work in nano-technology or cloud computing. We need to employ these people. This issue is of huge importance to Ireland but it is also relevant throughout Europe. This omission of the more traditional major employment sectors is a weakness of the strategy.

Mr. Callinan's comments on research and development were apt. We may hit our research and development objectives without employing people and generating economic activity as a result. I did not previously hear the phrase "innovation intensity". This sounds nice but what does it mean and how is it measured?

Senator Donohoe has raised some of the points I intended to address. We face an emotional rather than an academic challenge in connecting this important strategy for growth and jobs with the citizens of Europe, even in terms of making them aware of its existence. The Lisbon strategy failed to resonate with the ordinary citizens of Europe and half of our political class regularly confused it with the Lisbon treaty. The Irish Government should regard this challenge as a central element.

The target of achieving an employment rate of 75% for those aged between 20 and 64 is ambitious. There was no shortage of similar ambition in the Lisbon strategy but how can we make that a reality? A much tighter regulatory and monitoring system will be required if we are to deliver on the targets set in Europe 2020.

Under the Lisbon strategy, the national action programmes were the focal points for member states. That process failed to some degree where member states did not raise their games or fulfil the objectives. They were the missing chinks in the armour of what could otherwise have played a very positive role. We need to intensify the comparison between member states' scoreboards so that the European Commission can assess on a regular basis macro-economic targets, including in particular, competitiveness and labour costs. This process should include an element of naming and shaming if we are to incentivise member states to up their game. The target of 3% of GDP for research, development and innovation is the same target as that in the Lisbon strategy and was set over ten years ago. How do we compare with other European countries in this regard? What will be different about this strategy in terms of delivering on the target?

Senator Donohoe raised the question of unemployment, which this committee has discussed in previous meetings. We have medium- and long-term goals but in order to tackle the short-term problem for people who have lost jobs in manufacturing and construction we need a co-ordinated, EU-wide approach. Such an approach needs to be integrated into the EU 2020 strategy to give it credibility and relevance to people. It should link into the small business legislation, with a focus on SMEs and a "Think Small First" principle. Can the officials explain how they think we can achieve this?

I welcome the delegation and will comment on the presentation. The EU 2020 strategy is essentially a roll-over of the Lisbon strategy, with a few variations. The Lisbon strategy was a failure in terms of delivery. Its targets were fine and the strategy for turning the European Union into the most competitive entity in the world, in terms of growth and economic development, was good. However, this was not achieved. We are lagging behind and did not reach the levels set for research and development. No financial supervision mechanisms were put in place and the present system is chaotic. Jobs were not created and no progress was made on the elimination of poverty so the strategy was a failure for the ten-year period.

How will we guarantee that the new ten-year strategy for sustainable growth and jobs will be delivered? Do we have the mechanisms to achieve them? We still do not know what the financial supervisory and regulatory framework will be or to what levels there will be budgetary control over member states. While there is provision for national targets and a national reform programme, these have always been present in strategies of this nature.

How do we ensure that we produce a substantial increase in sustainable jobs and make some progress on the elimination of poverty? Is there any clear evidence of a target for eliminating the risk of poverty, as proposed by the Commission? Member states disagree on the matter at the moment. Will it be decided on at the European Council later this month?

Climate change and poverty are two areas in which, according to the Lisbon treaty, the European Union was to show leadership to the world and the strategy contains legal provisions which underpin those aims. Can the delegates give an assurance to the committee that no money for overseas aid will be used for climate change or buying carbon credits? Can they assure us the EU will look to achieve real climate change by means of sustainable development, new sources of energy and innovation, instead of kicking the issues to touch or using offloading mechanisms to get out of our commitment? What is the position of our own Government in this regard?

We recently discussed the failure to implement an environmental waste directive from 1975, ten years after we joined the European Union. Our failure has made hundreds of thousands of rural houses susceptible to pollution, which will take an enormous amount of money to rectify. We were taken to the European Court of Justice recently and were found to be at fault. We have not been active in implementing the environmental directives and, of all of the directives, the largest number not to have been implemented are in this area. That will make it difficult to reach our targets.

Deputy Creighton referred to the 3% research and development target and pointed out that it was the same target as was contained in the Lisbon strategy. We are half way towards it, having started at a low base, but we are still a long way from reaching it. We pride ourselves on the smart economy strategy and on innovation but we are not putting as much money as other countries into research and development. I do not have any problems with the overall thrust of the strategy or its headline targets but I wonder what is different in terms of delivery mechanisms, supervisory mechanisms or regulatory mechanisms. It is important that, in 2020, we do not find ourselves back where we started before the Lisbon strategy came into being.

As the witnesses will see, there is considerable interest in this subject. When the committee made a submission on this issue it made a number of recommendations. We are glad to see the agriculture and fisheries sector included as that generated considerable debate in this committee. We have also emphasised our impression that parliamentary representatives in various member states did not seem to understand each other's position. For example, it would be helpful to understand how a German Member of Parliament might have thought the situation which arose last year could have been dealt with. Likewise, it would be helpful to know how Greek Members of Parliament saw the situation. There needs to be a cohesive approach and a common understanding among parliamentarians in the member states, as well as between Governments.

Can the officials say to what extent they are in touch with their counterparts in other member states who are involved in the compilation of the 2020 strategy? One of the faults of the Lisbon strategy was that there was no proper monitoring system. There was no annual review or, if there was, it did not work. There was little or no consultation among member states, their administrations or their civil servants on whether the plan was proceeding in accordance with its original objectives.

I strongly believe there has been a lack of attention to the importance of the manufacturing sector and the importance of cost-competitiveness in that sector and the services sector throughout the European Union. We realise different countries are affected in different ways and we are one of the few island nations within the European Union. For that reason, we would like to think that at all times our colleagues and the Civil Service colleagues in the various member states would realise that different conditions apply in separate member states. We have a common objective but we must also realise that obstacles apply and burden some member states to a greater extent than others.

I cannot understand and am worried about the separation of the growth and stability guidelines from the 2020 strategy. That is one of the reasons the European economy got into difficulties. Various member states got into their own difficulties and there was non-observance in the spirit and letter of the Stability and Growth Pact guidelines by some small and large states. Once this disregard began to develop, there was a lack of confidence, and arising from that will come a suspicion, fear and lack of confidence in the future likelihood of delivery by various member states.

For example, there is the degree to which some countries had entered into negotiations with their labour force about holidays. I do not want to criticise a particular state. The working hours directive has an impact on various member states, some to a greater extent than others. Members have outlined the extent to which it is likely that the climate change and energy area is likely to see an impact on this country, given our present location. The climate change and energy area is a two-edged sword in that it can become an economic axe if we are not in a position to compete and do not put in place the modus operandi required. It is very important for European countries to move forward together. There will always be areas of slippage but they must be monitored, recognised and attended to before becoming a burden on the entire community.

The next issue falls within the remit of the Department of Finance. Having repeatedly raised the point, I have come to the conclusion that the value of the euro has not been determined apart from in the markets. The original intention was that there would be a strong euro. Recently, with low interest rates over a prolonged period there were alternatives in the market, such as commodities and property, that seemed to achieve a greater currency than the euro. Has any attempt been made to encourage an optimum strength for the euro against the dollar? That has an impact on this and most other European economies.

I apologise to my colleagues but we could go on forever about this subject. We must remember that as we proceed, the European Union cannot afford to fall short of targets in 2020 in the same way it did in adhering to the Lisbon strategy. It is very important that all the governments and Parliaments in the European Union, including the member state Parliaments and the civil service, recognise the importance of adherence to guidelines. If there is a shortfall in respect of particular guidelines, measures should be put in place to deal with them. I will revert to the witnesses, who may address any of the individual questions.

Mr. John Callinan

With the Chairman's permission, I will go through the various points raised and provide initial comment. I will ask colleagues to amplify the detail where appropriate. I thank the committee for the various comments, observations and questions raised. Apart from anything else, they perfectly illustrate the complexity of the issue and challenges involved. I will try to go through the points as they were raised and I apologise if that triggers some duplication.

Deputy Tuffy spoke about the importance of the European Social Fund, ESF, in the past in funding certain types of courses. Without being privy to the detail, which my colleagues could perhaps elaborate upon, it is still the case that elements of the approach will still be followed, including some of the measures taken by FÁS, much maligned as it may be. Such actions are particularly relevant in the current climate, as it has been mentioned that so many people are out of work, needing to be reskilled and have their expertise redeveloped.

The relationship between reduction of poverty and equality was mentioned, and this is part of the broader debate about how the area of poverty is measured and what is happening in the balance between picking headline numbers and more sophisticated means of measuring the effects of poverty. I will ask my colleagues to elaborate on that.

A number of interventions touched on the need for this strategy to learn from the shortcomings of the Lisbon strategy and be more effective. That in turn takes place in the context of the economic crisis, developments in the euro and the pressure alluded to by the Chairman for much tighter co-ordination and cross-surveillance. That is one of the key elements, both in the context of EU 2020 and more generally in the European agenda.

It is important to stress that there are two elements to this. It is for each individual country and national government to develop and implement the necessary policies. The EU 2020 strategy does not take that onus, responsibility or obligation away but the idea that we are dependent on each in monitoring and competitiveness, for example, is contained in the framework. That is one of the big lessons from the Lisbon strategy. That is not to say that success is guaranteed but the approach and commitment of the 27 governments and the EU institutions is based on recognising this necessity.

A number of members commented on the role of the Oireachtas in this regard, which is a valid point. This is not just related to the EU 2020 strategy but to the more general relationship between European policy, national policy, the national Parliament and the citizen. That is a live issue and I am aware of that within other fora in the Oireachtas, where the manner in which the Oireachtas engages in EU business and the connection with the citizen is being looked at. I do not mean this disrespectfully but some elements are, in the first instance, for the Oireachtas to consider. I do not envisage a difficulty with the notion of EU 2020 being something that the Oireachtas would continuously be interested in and concerned with.

The agriculture issue was raised and the point was made that with all the emphasis so strongly on the smart economy, innovation, research and development, we should not lose sight of manufacturing and other traditional sectors. That is recognised in the language of the strategy, even if the agriculture element was not. There is a recognition that a strong, competitive and diversified industrial base in Europe would include maintaining key elements of the traditional economy as much as it does moving on and trying to be more innovative, resource-efficient and so on. It is not a replacement but a process of improvement in that sector.

Senator Donohoe asked about innovation intensity. I apologise as EU documents tend to produce these nice phrases.

It sounds nice. I wish I had come up with it myself. However, I would like to know what it means.

Mr. John Callinan

The point is that there has been a strong focus on the input element — how much money has been spent on research and development — and, as was pointed out, that of itself does not guarantee the production of better research, products or innovation. The idea is that in addition to that measurement, we must try to find a way of measuring output. The innovation intensity, broadly, could mean everything from the range of new start-up activity to the number of patents applied for. It is jargon, but that is what it is seeking to measure on the output side.

Deputy Creighton rightly said the 75% employment target was very ambitious. It will require consistent effort on the part of all member states, including ourselves. The Deputy also asked how we could make sure that, this time around, we do not experience the challenges that were associated with the Lisbon treaty, and other members raised the same point. This is recognised, as I mentioned earlier, in the approach that is being taken to tighten up the monitoring, surveillance and reporting arrangements; however, the member states themselves, individually, are ultimately responsible for delivering on this. Intensified comparison across member states, as was suggested, will inevitably be a more prominent feature of the monitoring and reporting arrangements this time around.

A question was asked about the progress, both in the EU and in Ireland, towards reaching the target of spending 3% of GDP on research and development. I will ask my colleague to say a little more about that.

Deputy Costello asked about the roll-over effect of the Lisbon agenda. I accept that at one level there is a familiar approach, but there is a determined effort from the EU institutions and the member states to learn the lessons from the first time around. The Deputy is correct in saying that it fell a long way short of the headline objective of making Europe the most competitive region in the world. In terms of the overall approach to Europe 2020, as well as the specific elements of financial supervision and regulation, measures are on the way, as members know, although they are not all in place yet. Independently of Europe 2020, improvements are being negotiated on those issues.

Members asked about the different instruments that could be used to deal with climate change. Some of these have not yet been finally decided by Government. For example, somebody asked whether overseas development assistance money would be used. This is an issue on which the Government has yet to take a definitive decision. The Taoiseach has said on a number of occasions that the commitment from Ireland under the fast-start finance programme, which is being established between 2010 and 2012, would be €100 million over the three-year period. While the exact source of that funding is yet to be decided by Government, he has made clear it will involve new funding, although he has not said whether it will be 100% new.

Similarly, on the question of carbon credits, it is a matter of finding the most cost-effective and efficient way to produce, on a global level, the emission reductions that are sought. There is a view at EU level that the use of carbon credits is, within that overall framework, a legitimate instrument. How precisely each individual member state chooses to implement it is still to be determined, particularly in the case of Ireland.

The Chairman mentioned the committee's submission on the Europe 2020 strategy, which I welcome. With regard to the issue of agriculture, we are some of the way there. We were successful at the spring Council of Ministers in achieving a clear recognition of the importance of this issue. The task now is to make sure this carries through into the detail of the strategy.

A question was asked as to whether senior civil servants are in touch with their counterparts. The short answer is "Yes"; members would not expect me to say otherwise. The nature of that contact is multi-faceted, with both informal and bilateral contacts taking place as the need arises, but also through the structures, working groups and formations of the various councils. There is certainly extensive contact. As the EU enlarges, this becomes more challenging. In addition to the formal set-pieces, we ensure that we have good contacts with partners and allies. This is a hallmark of the way Ireland has tried to go about its business in Europe generally.

Whether that in itself is the best or most effective way to provide the review mechanism that was mentioned is probably open to question, because the type of mechanism that is being argued for both by people in this room and more generally requires, to some extent, a degree of formality. The need for early identification and action was mentioned, but there is also a need for it to be effective. This is where we must get the balance right in terms of the informal contacts that were mentioned. Inevitably, the necessity for a formal structure for monitoring reports and the actions being taken under them, which can identify possible shortcomings or missed targets at an early stage, will be an integral part of the formal structure and arrangements. The manufacturing sector was mentioned; I have already touched on this.

The separation of the Stability and Growth Pact and Europe 2020 was mentioned. The separation is with regard to the specific legal instruments involved. It goes almost without saying that there is enormous crossover between the management of the two issues and the specific elements that come up under them. As members know, within the economic governance agenda there is a whole range of activity, including a new task force that was set up at the request of the European Council in March, chaired by the new President of the European Council, whose remit is to consider this area — how the Stability and Growth Pact may need to be strengthened or made more effective, and how the issue of shared economic governance across Europe and shared co-ordination can be improved. This is something we will inevitably see more of. However, it is also a contentious issue, as has been evident even on the floor of the Dáil. Clearly, there is tension between managing issues of national sovereignty and autonomy and ensuring that the 27 member states are acting in concert with each other and with a degree of shared ownership and responsibility. My colleague from the Department of Finance may say a little more on that.

Members mentioned that the energy and climate change agenda was potentially a double-edged sword. In managing our obligations under this agenda, we are mindful of the competitiveness risks. Ultimately, emissions do not stop at borders. It is a question of a global response, and we need to ensure this happens in a way that does not unnecessarily affect our competitiveness. We do not want to shoot ourselves in the foot. That is not to say that, within the sector, efficiencies, better use of resources and greater emissions reductions cannot be achieved in a cost-efficient manner. At the same time, there is a growing recognition that this area offers new opportunities in terms of economic activity and employment. There are certainly opportunities — globally, but also specifically for Ireland — to obtain the advantage of being in the lead. Members are right to describe it as a double-edged sword, but we hope we will be able to stay on the right side.

I will ask my colleague from the Department of Finance to comment on the question about the optimal relative strengths of the euro and the dollar. The importance of identifying shortcomings early in the process and the need to stay in line was mentioned. This is an accepted element of the approach. If we were dealing with Europe 2020 in the absence of the economic crisis, there would in any case be an acceptance that this was necessary, based on what we have learned from the Lisbon strategy. In the light of the economic crisis and its fallout that is an absolute given as a starting point this time. I ask my colleague in the Department of Finance to pick up on a couple of the points raised.

Mr. Tony Gallagher

My first comment refers to Deputy Creighton's point about the need for a kind of scoreboard. She said naming and shaming was important. There is no doubt we need better indicators of how each member state is performing and these will be developed in the context of EU 2020 and they are being developed now. However, we want to be more positive than simply talking about naming and shaming. Every member state recognises that EU 2020 is an important project and all are committed to it. Therefore, although it is important that all other member states will see the progress that each makes in regard to its starting point, I believe that naming and shaming is not the focus of the process. We have to see where we started from, where we intend to go and whether we have achieved the progress we said we would.

I turn to the comments made in regard to the Stability and Growth Pact and EU 2020 and the separation of and integration between the two. I agree with the comments made by Mr. Callinan. Although the details are not yet agreed on this issue it is unlikely that a divergence will emerge this time because it is envisaged that the two processes, the stability convergence programmes and the national reform programmes, will move simultaneously and as they go along there will be interactions between both processes.

In regard to the optimal strength of the euro and the dollar, I refrain from commenting on exchange rate policy. However, the recent slippage in the value of the euro is making a positive contribution to our competitiveness.

Mr. John Callinan

I ask my colleague, Mr. Padraig O'Conaill, from the Department of Education and Skills, to comment on the target of 75% employment and the level of ambition in that regard.

Mr. Padraig O’Conaill

It is recognised by all member states that the 75% target is extremely ambitious. It is recognised also that member states are starting out from different levels and it is an aggregate target for all member states to reach 75%. Deputy Creighton mentioned that a co-ordinated EU-driven approach should be integrated across the EU in regard to certain sectors. The idea is that it must be recognised that each member state has a certain labour market make-up and it is not exactly the same in each state. However, sub-targets were mentioned in the EU 2020 document, particularly in regard to young persons, low-skilled workers and older persons. What is emerging from the debate at the moment in regard to sub-indicators and sub-targets is that what is wanted is for each member state to do its level best to reach the highest employment target it can. Each will have its own unique targets to concentrate on that will help it contribute to the overall 75% target.

In terms of where Ireland stands in its labour market policy, the priority cohorts we have recognised are the low-skilled people on the live register for more than one year, people who are aged under 35 and people who have worked in sectors that will not reach the levels they did in the boom time, namely, construction, manufacturing and retail. That is where we are focusing our funding.

There is another instrument worth mentioning in terms of what the EU is doing, namely, the European Globalisation Adjustment Fund, which is co-funded up to 65%. We have made applications in regard to Dell, Waterford Crystal and SR Technics and will be getting €14 million in 2010.

Does anybody else wish to speak?

Mr. John Callinan

I call on my colleague, Mr. Seamus McLoughlin.

We invited nine gentlemen to discuss a very important issue this morning. Through no fault of ours we kept them waiting. It is now 1.48 p.m. and only three members and the Chairman are present.

Three very astute members.

It is a terrible waste of the delegates' time, in all seriousness.

It is not because we will record——

If that is the importance members attach to this issue——

That is a fair point but the process——

A majority of this committee are members of the Government and there is a single member of that party present.

I accept that but it should be borne in mind no process takes place without being recorded. This committee is being recorded, for obvious purposes, and the record will be used so that the points raised by the members and made by the witnesses are well noted and can be brought to the attention of the appropriate authorities. I would be happy to remind members of the committee they have a certain duty. It was not possible for everybody to be here in time because of the situation in the House today but that is in the nature of things. These things happen in the European institutions as well, unfortunately.

Mr. Seamus McLoughlin

My point relates to a member who is present, Deputy Tuffy, who raised a very important point about the use of European funding to widen access of lower and middle income groups to college and introduce innovative courses in higher education. The Deputy said she felt Ireland should push for that approach to be adopted under EU 2020. At recent education council meetings, Ireland and member states in general have very much welcomed the increased prominence which has been accorded to the role of education and training in the EU 2020 strategy, as compared with its prominence in the Lisbon strategy. The education target included in the strategy is one of three headline targets, along with those for employment and poverty which were mentioned today, which directly concern social inclusion issues. Two of the seven flagship initiatives, youth on the move and new skills for new jobs, focus particularly on the education training side. The Commission has indicated that the youth on the move initiative, in particular, will involve streamlining and integrating a number of existing European programmes such as the lifelong learning programme, the youth in action programme, and Erasmus Mundus. These will be brought together and what is working well will not be changed. It is intended to reduce the administrative burden. Most crucially, the Commission proposes that more funding be allocated to an ambitious programme in this regard post 2013 and we have supported that and are pushing for it at European level. The Commission is to release a communication on the youth on the move initiative later this month and we will participate by commenting and giving our views on it.

I return to the Chairman's point about the extent to which we communicate with our colleagues in other administrations and with senior officials. Ireland has tried at all times to build to build a good network of links across a range of official committees in the education area in which we participate and has tried to ensure we form alliances to keep things practical and see delivery in terms of the social inclusion objectives and all those things that are important for this country.

I thank Mr. McLoughlin.

Mr. John Callinan

I call on my colleague from the Department of Community, Equality and Gaeltacht Affairs to comment on poverty and social inclusion issues.

Mr. Jim Walsh

On the link between poverty and inequality, inequality is clearly part of the concept of poverty. Poverty is a relative concept so failing the income and living standards is a key part of the definition. The main measure we have to capture that is the at risk of poverty rate which is clearly a relative concept. That is one of the official indicators at EU level. We also use it in Ireland as part of the consistent poverty measures and it is likely that it also will be part of the set of indicators agreed at European level. There are some other indicators such as the 80:20 indicator, the portion of income that goes to the top 20% as compared with the bottom 20%. These are used as well. I refer also to the Gini co-efficient which also measures inequality. There are several indicators but "at risk of poverty" is the headline indicator in this regard and is likely to remain central to the measurement of poverty.

Deputy Costello asked for an update on the poverty target. The figure originally put on the table was €20 million. That is still on the table and has not been taken off by the Commission. Work has been going on in the intervening period to examine the indicator or baseline against which one should set the target and there is a desire to extend the number of indicators from simply "at risk of poverty" to include material deprivation and other aspects of deprivation.

Much work has been carried out under the auspices of the social protection committee in this area. Its advice on the target is that there should be a numerical target which should be ambitious but realistic. The issue of a target will now be considered by EPSCO, Employment, Social Policy, Health and Consumers Affairs, Council of Ministers meeting on Monday at which the Minister, Deputy Ó Cuív, will present the Irish position. The figure of €20 million is still on the table and the target depends on whether that is agreed.

Deputy Costello also asked about the delivery mechanisms and what is different about the Lisbon strategy compared to EU 2020 strategy. There are significant differences in the poverty area. First, the Lisbon strategy never had a poverty target. It referred to a decisive impact on poverty but this was never given expression by a formal target. We now have or expect to have a poverty target. That is a qualitative difference from what went before. Second, one of the set of integrated guidelines is examining the issues of social inclusion and tackling poverty. This forms part of the reporting on the strategy of social inclusion and poverty. Third, we will have the European platform against poverty, an initiative at a European level to enhance and strengthen efforts across Europe to tackle poverty. That will make a significant difference as well. The targets and delivery mechanisms are being enhanced.

Several Deputies including the Chairman, referred to links to other member states and monitoring and reviews. These are a very important and central part of the open method of co-ordination on poverty and social inclusion. Several mechanisms exist in this regard such as the indicators sub-group of the social protection committee, which facilitates debate and discussion on appropriate ways to tackle and measure poverty and to monitor success. In addition, as part of the open method of co-ordination there is a programme of peer reviews as part of which member states are reviewed by other member states in particular policy areas. This is a rolling programme of peer reviews and all results are published and made available on the Commission's website.

Mr. John Callinan

I call for one final intervention from my colleague from the Department of Enterprise, Trade and Innovation in respect of research and innovation issues.

Mr. Tommy Murray

Unfortunately, Senator Donohoe is no longer present but he asked about the innovation intensity indicator. If I was able to inform the committee of this, then whatever about winning the Nobel prize for science and innovation, I would definitely be a candidate. The best brains in Europe are currently working on it and we are pleased to participate in these discussions in Europe. I will not keep the committee much longer but I wish to provide a little background on how we reached this position and the holy grail of the 3% target. That target was effectively scuppered as a result of the consequences of the economic recession. It is almost a case of winding the clock back and starting again to determine if we can do it this time around.

The new Commissioner for Research, Science and Innovation, Máire Geoghegan-Quinn, has set as a priority the need to speed up connections between innovation links along policy chains, manufacturing services, supply chains and so on. She has very succinctly and tellingly phrased this "From research to retail". This says it all and sets out exactly the mission of our Department and that of the Minister, Deputy Batt O'Keeffe, in respect of science, technology and innovation.

The Commission definitely plans to retain the 3% GDP target for research and development investment but also — this is where the innovation intensity indicator comes in — to complement it with more concrete output indicators. We should be able to measure exactly the added value of all of our investment in research and development in a more practical and outcome-focused way. What effect is the billions of euro invested in research and development having on jobs, society and the challenges facing us in the future? Devising such indicators is a difficult challenge but one on which we will work very hard and in which we will actively participate.

The policy requires moving beyond direct research and development financing and, as Mr. Callinan remarked earlier, the mobilisation of venture capital funds for SMEs and start-ups as well as an examination of how such initiatives are working. Other areas requiring examination include public procurement, promoting researcher mobility and other non-technological demand-side approaches to innovation. Recently, the Competitiveness Council endorsed this approach.

I refer to where we are with regard to the Lisbon target, a question raised by Deputy Creighton. Currently, investment in research and development in Ireland is approximately 1.7% of GNP compared with an EU average of 1.85% GDP. We are making progress towards that target but it should be recalled from where we have come to reach that percentage and how much we have improved our investment. An examination of the statistics suggests the improvement is quite phenomenal in terms of what we were spending five or ten years ago on investment in research and development. In fact, public spending on research and development trebled in the period from 2000 to 2008 and private investment in the same period doubled. Also, we have already achieved the European Commission ideal ratio of private to public spend, a ratio of 2:1. The public-private spending ratio in Ireland is now at the ideal level.

To sum up, we agree with and look forward to actively participating in whatever working groups, expert groups or joint working groups the Commission might set up to examine the development of other metrics for innovation intensity and the development of any such indicators. This will be crucial towards sustaining ongoing political support for that particular EU headline target.

I thank the delegation. The information it has made available to the committee is invaluable. It is especially important that the Parliament and the parliamentary committee system has access to such information. I emphasise the importance of obtaining it and making it available to Parliament, whoever is in government.

I have been a member of the Joint Committee on European Affairs for a long time and I have found in recent times we have been informed of matters at a European level which we should have known but did not. The monitoring of the Lisbon strategy is a classic example. It was clear to many observers that it was not going in the right direction for a long time. Steps could have been taken to correct this. If the flight of an aircraft goes off the plotted course, one must make changes. This was the case in respect of national Governments and the question of sovereignty raised by Mr. Callinan is a valid point.

There was a furore some weeks ago following international media comment to the effect that one could not have a cohesive European economic strategy without a common tax policy or harmonisation of taxes. That is rubbish and there is no basis for that position whatsoever. Any such suggestion is in breach of the Lisbon treaty. Let us consider the United States, where there is no common tax policy. There are varying taxation policies throughout the United States. The reason for that is also clear, it is because the economic situation in different states is different. In Hawaii, the Yukon and Alaska very different circumstances pertain and as a consequence there are different taxation systems. As I said earlier, we are an island nation. If a business or industry is located in Brussels, Luxembourg or central Europe it is in a better position to compete in an immediate and wider market than if it is located on an island.

Some of the agreements reached at the WTO in recent times have an impact. I also note the trend in which it is going. It is no harm to observe that while the strategy in general may be kept and practised that there may be deviations, knowingly, from that strategy which might, to some extent, undermine the general broad thrust of what the European Union is about.

On the naming and shaming which was referred to, it may not be a good idea but there must be some mechanism devised whereby it is indicated to individual member states that if they proceed to disregard certain economic fundamentals there are issues which are raised for them immediately. Otherwise, there will be no observance. Another issue is the question of the availability of a wide range of skills throughout Europe which are largely redundant because of the unemployment levels, which we also have in this country. For instance, SR Technics would a be classic case where there are huge number of people readily available in the market place with a high level of technical skills which are hugely important in rebuilding and creating an economic recovery.

The delegation is already aware of these issues. We all have such people in our constituencies and meet them on a fairly regular basis. They have one thing in common — it is funny that it should happen. They have indicated to us that they are willing to make their skills available and help out for whatever purpose in the rebuilding and recovery which is now necessary. I do not expect them to do it for nothing; nobody wants that and they would be fools if they did. They are available and need to be utilised.

Mr. John Callinan

I want to pick up on one or two things the Chairman mentioned. I concur with the assessment that a harmonised European tax system is not a necessary condition for good economic performance in Europe. This is one issue on which there is very broad agreement in politics and society in Ireland. I take the point made by the Chairman on the monitoring of the Lisbon strategy. As was mentioned by me and a number of colleagues, under the new approach one will see a much tighter emphasis on the early warning of situations where member states are judged to be deviating. One point on that, which is often lost sight of, is that we tend to be very defensive whenever we hear anything along such lines. This is a multilateral surveillance system where Ireland has an interest in what every other member state is doing as well. I will not go through the various other points in detail.

On behalf of my colleagues I thank the committee for the opportunity to appear before it today and speak to it on this topic. I hope it has been a useful session.

It has been and we thank the delegates for the time, energy and effort put into bringing this about. I thank the Department of the Taoiseach for its invaluable assistance, co-ordination and attendance.

In long and difficult court cases it is not unusual for the judge to excuse the members of the jury from serving on any future cases. The Chairman might propose something similar here.

In some cases the jury can remain out for a long time. We will not get into that now.

The joint committee went into private session at 2.05 p.m. and adjourned at 2.10 p.m. until 11.30 a.m on Thursday, 10 June 2010.
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