I welcome the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Eamon Gilmore. When we contacted him, he promptly agreed to come before the joint committee at the earliest possible opportunity. He will brief us on the status of the negotiations on the draft international agreement on a reinforced economic Union. We know the negotiations are proceeding quickly, which is the reason we are meeting today. All members are welcome to make a contribution.
Draft International Agreement on a Reinforced Economic Union: Discussion
I thank the Vice Chairman and committee members for the invitation to come before them. I am joined by Ms Geraldine Byrne Nason, second secretary with responsibility for European affairs matters; Mr. Michael McGrath, Department of Finance; and Mr. James Kingston, Department of Foreign Affairs and Trade.
I am delighted to have the opportunity to brief the Joint Committee on European Union Affairs on the negotiations on a draft treaty on stability, co-ordination and governance in the Economic and Monetary Union. I am firmly of the view that it is critically important that the Houses of the Oireachtas and the joint committee be fully involved and engaged in the significant developments under way at European level. We committed to doing this in the programme for Government and are delivering on that commitment. This engagement is important at all times but never more than now, at a time when the European Union is continuing to grapple with economic and financial crises the likes of which have not been seen for generations. We need to ensure we work together constructively in times of challenge. I welcome the opportunity to do so today.
This level of engagement with the Oireachtas is a new departure; it is what the Government has done in the last ten months and will continue to pursue in the four years ahead. My being here to discuss ongoing negotiations is building on the new approach adopted. The practice of having statements in Dáil Éireann ahead of each European Council meeting, as well as following such meetings, has opened up a healthy debate on EU matters. Similarly, we have given a firm commitment in the programme for Government that Ministers will appear before the relevant Oireachtas Committees prior to travelling to Brussels for meetings of the Council of Ministers when decisions are being taken. We want our democratically elected representatives of the people to be fully informed and engaged on EU matters. This committee is central to that effort. During previous Dáil sessions it led the way. The practice will continue that I or the Minister of State with responsibility for European affairs will meet the committee prior to each meeting of the General Affairs Council. These exchanges have proved, certainly for the Government, to be extremely useful and provided a forum for a wide-ranging exchange of views on issues on the agenda for the General Affairs Council and European Council. The Minister of State, Deputy Lucinda Creighton, will engage with the committee next Thursday ahead of this month's meeting of the General Affairs Council.
Before I set out the detail of the ongoing negotiations on the draft treaty, I want, first, to lay one myth to rest. We are not, as some have cynically suggested, negotiating to avoid the holding of a referendum. Such an approach would be seriously wrong-headed. This is a distraction from the real and important issues at play. Such an approach would do a grave disservice to Ireland's interests and our partners in the common currency.
The Government's negotiating goals are clear. We want an outcome that is good for Ireland and the eurozone. We recognise the need for strong rules and the means to enforce them. We want an outcome that is in Ireland's best interests as a country working towards economic recovery. In this case, although it is a truism, what is good for Europe should be good for Ireland. What is more, I have total confidence in the people. The joint committee can be absolutely assured that the only deal to which the Government will sign up is one that will be good for Ireland. If we are advised that we must put it to the people in order to ratify it, that is what we will do. The people are absolutely capable of weighing such a deal carefully and, having listened to the arguments, reaching the right decision. It is as simple as that.
This treaty is not an end in itself. It is a key element in a larger package of actions designed to respond to the sovereign debt crisis. We have already accepted the wide range of measures with our European Union partners to respond to this crisis. In terms of severity and duration, this crisis is unparalleled since the establishment of the Union. The response has also been unparalleled, even if not always perfect.
It is clear that the difficulties in the eurozone are by no means a periphery issue. Over the past week that point has regrettably become clearer than ever with the downgrading by one of the ratings agencies of a large number of EU sovereigns, including several that could not be seen as anything but core European countries. These are most regrettable developments which, given our inter-connectedness within the Union and especially in the euro area, have the potential to impact negatively upon all of us.
Since the onset of the sovereign debt crisis almost two years ago, the European Union and the euro area have taken significant steps to address the crisis, particularly through radical changes in economic governance structures. Over that period, we have created the European Financial Stability Facility, EFSF, from which Ireland has drawn since the agreement of our EU-IMF programme at the end of 2010. We have established a permanent successor to the EFSF in the form of the European Stability Mechanism, ESM, which will now enter into force from the middle of this year.
Last October's euro summit also agreed a range of measures to strengthen budgetary surveillance and co-ordination of economic policies as well as an extended governance structure for the euro area. At the end of last year the six-pack of legislative measures, designed to strengthen the Stability and Growth Pact, entered into force. The Commission has now submitted a further set of EU legislative proposals to provide for the monitoring and assessment of draft budgetary plans. The two-pack will also address the correction of excessive deficits in euro area member states and the strengthening of economic and budgetary surveillance of member states in the grip of, or threatened with, serious difficulties in their financial stability.
The second round of the European semester process was launched at the end of last November. The new semester process has helped ensure structural reforms, identified in member states' national reform programmes under the EU's Europe 2020 strategy, stay on track and are co-ordinated including with the Stability and Growth Pact. Further, each of the 23 member states participating in the Euro Plus Pact, including all euro countries, have made commitments under the pact, with the objective of improving the quality of economic policy co-ordination.
In short, a great deal had already been done at European level prior to the latest meeting of the European Council on 8 and 9 December last. It is important that we neither under-estimate nor under-sell this extensive range of measures which the European Union has taken in recent years to bring stability and to strengthen our common economic policy co-ordination and surveillance. Some of these measures are only now coming on stream and will need time to have their full impact felt.
While considerable progress had been made in taking the steps necessary to restore stability to the Union, and to the euro area in particular, it became clear by the end of last year that further and decisive measures were required. These are needed to restore confidence and to convince the financial markets, and the public, that the euro Governments are determined to defend and protect our common currency, come what may.
Last month's meeting of European leaders made important political commitments aimed at strengthening budgetary discipline and in building stabilisation tools and firewalls. Progress in both areas is critically important to Ireland. It is positively in Ireland's interest that all euro area member states implement, in full and on time, the commitments into which they have entered. That is what we are already doing under the terms of our EU-IMF programme. It is in our interest that all member states would do the same. Such an approach, focused on rigorous implementation and surveillance, ought to lend considerable credibility which will contribute to the return of stability to our common currency. That is in Ireland's best interests.
Leaders agreed last month on the need to further strengthen economic policy co-ordination within the euro area by way of a new fiscal compact through an intergovernmental agreement. It was not possible to establish a basis on which all 27 EU member states could participate. The Government has made no secret of the fact that we would have wished to proceed at the level of all 27 EU member states, thus facilitating the inclusion of the new agreement within the EU treaties. Regrettably, on this occasion, that was not possible.
All EU member states are represented at the intensive ongoing negotiations on a draft treaty which will give legal effect to the agreement reached among leaders last month. The UK is attending these proceedings as an observer and is contributing constructively, which I welcome. It is important to appreciate that these current negotiations are taking place in a spirit of co-operation and compromise while, naturally, respecting member states' vital national interests.
An initial draft of the new treaty was made available in mid-December. The first meeting of the negotiators at senior official level from each member state took place in Brussels during Christmas week. A further series of meetings of the negotiators has taken place each week since the beginning of the new year.
Ireland is represented at these meetings by a team of our top-level senior officials drawn from the Department of the Taoiseach and the Department of Finance as well as from the Department of Foreign Affairs and Trade, including through our permanent representation to the EU in Brussels.
The Government has been engaged in these negotiations intensively and proactively, in Brussels and in EU capitals, to ensure our key points are appreciated by partners and addressed adequately. We have put forward our views on the various iterations of the draft text, in writing and orally, including on the various detailed elements of the draft text. The latest draft arrived in Dublin just last night. I intend to make it available to the committee. Our primary objective in these negotiations is to ensure an outcome that strengthens the stability of the euro area. Such an outcome is in the interest of Ireland and all EU member states.
At the heart of the negotiation of this treaty is a proposal to ensure that Governments never again freely disregard their budgetary and fiscal responsibilities and run up huge debts and deficits. The debt brake, the legal implications of disregarding good discipline and the means to ensure balance are the key ideas in this treaty.
Throughout this process the Government and its team of high-level officials has been highly active in engaging with EU counterparts. We have sought to build support and understanding for our positions and to cultivate alliances with partners across a range of specific issues which matter to us. These issues include that Ireland's status as a programme country need to be properly reflected; we need an appropriate basis for incorporating a debt brake at national level and a workable application of structural balances methodology. We want to ensure that as much of the contents of this treaty as possible is put on a clear EU legislative footing. The draft treaty makes the not unreasonable link between ratification of this new treaty and future access to funding under the ESM. We have been working to ensure it is understood that this provision would not apply to existing programmes.
The agreement reached last month by leaders draws together a range of measures which have already been legislated for at EU level, particularly through the six-pack of legislative measures on European economic governance which significantly strengthens the Stability and Growth Pact. However, there are several important innovations which were agreed in December and are now the subject of detailed negotiations.
Legally the debt rule provision will be put on a firm footing at European and national level. The Commission and the European Court of Justice will have roles in ensuring national rules are fully fit for purpose.
With regard to automaticity, while it is true that the rules of the Stability and Growth Pact have been in place since the Maastricht treaty and have been breached on a significant number of occasions, from now on each member state will be required to have a mechanism in its national law that is triggered automatically if a member state is in breach and that maps a path for it to get back on track.
Third, it is proposed that countries in the euro area that are in the excessive deficit procedure, EDP, will now have to enter a partnership programme with the Council and the Commission to ensure that they undertake the structural reforms necessary to get back on track in a sustainable way. This translates into more-effective monitoring in future.
Ireland strongly supports the European way of doing business - the so-called Community method. We have made no secret of our strong wish to see the provisions of the new treaty tied as closely as possible to existing Union structures and would wish to see the contents incorporated, at the earliest possible opportunity, into the legal framework of the European Union. We believe that such an approach would serve to lend additional clarity. We welcome inclusion in the current draft treaty of provision for a review after a period with a view to incorporating the substance of the new treaty into the EU's legal framework.
It is hoped that significant progress towards an agreement will have been made ahead of the informal meeting of the European Council, scheduled to take place in Brussels on 30 January. A further text has just been received overnight and we will analyse that. It is intended that Finance Ministers will discuss the matter when they meet in Brussels at the beginning of next week and President Van Rompuy will brief Ministers attending the General Affairs Council on 27 January.
As I have already said, the Government will continue to work to ensure that Ireland's interests are reflected so that we are in a position to ratify the treaty when agreed. This includes putting it to the people in a referendum if necessary. We will await the advice of the Attorney General in that regard.
It is important to be clear on one matter. It is only when a final text is available that it will be possible to reach a view on what will be required. The test will be whether the proposed treaty is compatible with the Constitution. As the Government has confirmed on many occasions previously, the Attorney General will study the legal implications carefully, and will advise on what steps will be necessary to enable Ireland to ratify. Until then it is not possible to be definitive. The committee can be assured that whatever path towards ratification is required, the Oireachtas will be fully involved in the process.
The Government is acutely aware that none of the various measures, either taken to date or, indeed, envisaged in the new draft intergovernmental treaty, is an end in itself. The measures represent instead a means to an end, which sees growth return sustainably to Europe and with that the creation of real job opportunities so that the vast potential of people across Europe can again be fully and meaningfully engaged in our societies through decent and valued work. That is what this Government is all about: the creation of sustainable jobs and growth. That is our guiding and primary objective.
There is broad consensus - among the major international organisations and domestic forecasters - that the Irish economy returned to growth in 2011 and is expected to record positive growth again this year before, hopefully, accelerating in subsequent years. While we are in an EU-IMF programme with specific deficit targets to be met on an annual basis, and despite the obvious limitations on the fiscal side, the Government successfully renegotiated the programme with the troika, which enabled the launch of the jobs initiative. This initiative targets our limited resources on measures that offer the greatest potential for expansion and employment creation in the domestic economy. Moreover, later this month my colleague, the Minister for Jobs, Enterprise and Innovation, will publish the action plan on jobs, which will accentuate the work done to date and place employment growth emphatically at the front of the Government's agenda.
I believe that there is now a real appreciation at European level that addressing the need for sustainable jobs and growth is critical. To this end, last month's European Council highlighted the need to adopt measures swiftly with most potential to boost growth and jobs across Europe. These measures will build on the Union's Europe 2020 Strategy for jobs and growth across the EU over the coming decade. This will be a focus for discussions at the informal meeting of the European Council on 30 January, at which the Taoiseach will again be strongly supporting efforts to promote growth and create jobs. We will be working with like-minded countries to ensure an outcome which boosts our SMEs, improves conditions for access to credit, investment in research and development, and bolsters key parts of the Single Market which matter to Ireland, such as the digital aspects. For Europe to recover it needs sustainable jobs and growth, but for that to happen it also needs economic and financial stability, particularly within the euro area and that is what the draft intergovernmental treaty is intended to facilitate. They are both urgent tasks.
I look forward to hearing the comments and contributions of the Members and I would be happy to respond to any queries which Members have on the process.
As in other meetings, I will call members, in the order that I have seen them offer, in groups of three. I will kick off with Deputies Dooley and Durkan and Senator Reilly.
I join the Vice Chairman in welcoming the Tánaiste. I welcome the fact that he is here with us today and that he is providing us with the draft copy of the treaty. It is somewhat regrettable that there have been five or six drafts. It has been floating around in various different forms since 10 January. However, I welcome the fact that the Tánaiste is now clearly in a position to engage with us on it.
The importance of involving the Parliament in all aspects of this discussion is vital to ensure that we do not allow this debate to fall into the hands of the anti-EU individuals in this country, who have sought to undermine the work the Tánaiste does and, indeed, who feed into the general cynicism. The Tánaiste and the Government need to assert themselves much more in this debate at home. I have every confidence that they are doing so behind the closed doors in Europe, which must be done too, but there is a need to broaden the debate here. They need to engage actively so that citizens understand what the red-line issues are for the country and for the Government, in particular, as it goes through the various different drafts, so that there is a broader and clearer understanding of the complexities that need to be faced up to. With general and public debate, that does not happen. As the Tánaiste identified, it is not about statements in the Dáil. It requires a much more active engagement.
As he will be aware, the previous Government, through the establishment of a sub-committee chaired by then Senator Paschal Donohue, did an excellent job in addressing the fallout from the failure of the first Lisbon referendum. It brought before the committee a string of interested parties from the various different aspects of Irish society so that a broader understanding could be established of how the Lisbon treaty impacted on the various sectors. I would ask the Tánaiste to reconsider his refusal to do that on this occasion. There is clearly time. There is an indication that the treaty, while it must be agreed, need not come into force until the end of the year and there is an opportunity for Parliament to play a role in engaging actively with the citizens of the State. It is vital that we do not allow EU scepticism to continue to develop at such pace in a way which is not good for Ireland and, certainly, not good for Europe. On broad Government statements such as that it will do what is good by Ireland and by Europe in its negotiation, while I know from where it is coming and that the Government is doing that, citizens need more information. They need to be more engaged and more involved in that process.
I would make a couple of points on the draft, which I have had an opportunity to flick through. The latest draft seems to elevate to intergovernmental treaty level the so-called "Six Pack" agreements of autumn last. That is fine. It creates a new right for eurozone countries to take each other to the ECJ, but only at the end of a lengthy excessive deficit procedure. It establishes the principle that eurozone countries will seek to use enhanced co-operation to deepen economic integration.
The treaty also pushes the idea that Europe will now comprise two radically different entities. Ireland has always opposed the use of enhanced co-operation as it implies that such co-operation will include all eurozone members, not merely those who agreed. Article 11, in particular, contains provisions that are not credible. It states that it will ensure that all major economic policy reforms that they plan to undertake will be discussed ex ante and, where appropriate, co-ordinated among themselves. For example, does this mean France and Germany will consult us before they announce changes to their pensions system? I do not think so and one has only to consider the approach they took on the Tobin tax, which clearly illustrates that would not be the case.
Will the Minister consider my party's request to allow for broader debate and the enhanced use of the committee to engage with citizens in a manner that would be beneficial to him, the Government and the county as a whole?
I congratulate the Minister, the Taoiseach, their ministerial colleagues and respective officials for the work undertaken in difficult circumstances on this issue. One of the important elements emanating from the debate is the need to restore confidence in the ability of the system to address the issues that are converging. There has, correctly, been a debate about the banking system and the fiscal management throughout Europe and there has been a tendency in this country to isolate ourselves and pretend we are not part of that. Fortunately or unfortunately, depending on one's point of view, we are for a variety of reasons. We also have another difficulty as a result of the economic problems we created ourselves in the sense that much of the wealth generated during the Celtic tiger era resulted from property price inflation. This is not a political point or an accusation against anybody. It is a serious threat and a challenge to the people.
The Minister has identified the major issue, which is the possibility of avoiding a referendum. Nobody will gain by avoiding a referendum and there should not be an expectation that anybody should do that. I ask that every step be taken to ensure that if doubt exists and there is a need for a referral to the Supreme Court, it should be made as quickly as possible. It would be hugely important to clear up any doubt about whether a referendum will be required based on the information. This is not the final draft and when the time comes, all doubt needs to be eliminated in order that we are certain that the constitutionality of the requirement for a referendum is cleared up initially and there is no ongoing debate about that.
In recent times, I have been surprised by various commentators who seem to almost have a death wish that the system would collapse and implode and the ceiling would fall in on Europe and its respective economies. It is not in anybody's interest to promote that view. We need to put on the national jersey based on realistic grounds and that cannot be done unless the procedures being undertaken are put in place to create a foundation. We hear a great deal of criticism about the failure of the emergence of a jobs initiative or stimulus package. One must have a sound basis for a stimulus package. Attempts have been made by European economies and the US to recover as best they can but no country has worked its way out of the woods yet nor is that likely to happen unless a firm basis is found. The way the Government and its European colleagues are going about it is a step in the right direction.
Reference has been made to member states expecting that they have a greater responsibility to dominate than others but that is understandable. Some made great sacrifices while Ireland was going through the Celtic tiger era and they probably feel aggrieved that others did not do the same as them and have regard for the need for economically prudent policies. At this stage, it is in the interest not only of Ireland but of all member states to ensure the economic programmes agreed are observed to the letter and in the spirit in which they are intended. We had the Stability and Growth Pact in the past. It was treated almost as a menu or agenda that countries could select from but that was not the intention. When this treaty emerges, it will only be successful if all the contracting parties adhere to it to the letter. While some people are gleeful that, for instance, the Greeks are in difficulty and might default, that is not in the interest of eurozone members or the remaining EU member states. That would represent a crack in the system that we cannot afford. It is in everybody's interest that we all move forward together, commit to the programme in place, recognise one another's position and that some are more vulnerable than others and provision be made in the clear knowledge that we move forward together or we do not move forward at all.
I refer to red herring issues, which are raised from time to time. Those giving voice to them believe that certain issues are fundamental to any future agreement but they are not. Some fiscal and economic issues are fundamental and they are a serious concern at the moment but, for instance, Ireland's corporation tax rate is not fundamental, nor could it be, to any EU agreement or treaty. However, a number of member states are not at the centre of Europe. They are experiencing economic issues that do not affect other countries. The people of an island nation, for example, cannot get on a train and travel to the centre of Europe as a matter of course whereas the citizens of other member states can and do and, therefore, they have an economic advantage. In the US and elsewhere, reference has been made in the past to the fact that peripheral areas need particular attention and that needs to be incorporated into future agreements.
I welcome the Minister. In his opening remarks, he mentioned that some people are cynically suggesting that the Government is trying to negotiate to avoid a referendum. This is his opportunity to set the record straight on the negotiations, given we have been drip fed information in some respects.
The third and fourth drafts of the intergovernmental treaty make the requirement to put the balanced budget rule into constitutional law preferable rather than obligatory, as per the first and second drafts. Will the Minister confirm whether the insertion of the word "preferable" was at the request of the Government? If not, did he support its inclusion in the text? If the answer to either question is positive, can he explain in a comprehensive way to the committee and to the people why the Government would support what could be viewed as a strategy to deprive the electorate of its democratic right to a referendum on this important issue?
In the same vein, the Minister referenced article 16 of the draft text, which envisages the treaty becoming EU law within five years. It is not clear how that will happen. He said there would be a review to subsume it into the EU legal framework. Given it is being engineered so that it would not have to be put to the public in a referendum and if the agreement envisages, as per article 16, that the treaty will become part of EU law, how will that affect Article 29.4 of our Constitution? Has he sought legal opinion on this?
With respect to the balanced budget rule, will the Minister explain where the 0.5% budget deficit ceiling came from; the basis on which that figure rather than the Stability and Growth Pact ceiling of 3% of GDP was chosen; whether the Government has carried out an impact assessment of the consequences for the economy of trying this new and draconian ceiling, given Standard & Poor's last week said it considered the agreement to be a one-sided approach by emphasising fiscal austerity without a strong and consistent programme to raise the growth potential of the economies in the eurozone; and his understanding of when this target will have to be reached if the treaty is ratified?
With respect to the other element of the balanced budget rule, namely, the requirement for states which have breached the 60% debt to GDP ratio to reduce that debt by 5% annually, will the Minister indicate when this rule would apply to Ireland if the treaty were ratified? Given that the EU-IMF austerity programme assumes we will have a debt to GDP ratio of 120% by 2015 is it the Government's intention to comply with the 5% annual reduction from 2015 onwards given that 5% in Irish terms is more than a €7 billion adjustment annually? It is important that we seek some clarity on this.
I thank the Senator. I will now call on the Minister, and the people I have seen signalling to me to speak after him are Mr. Proinsias De Rossa, MEP, Ms Nessa Childers, MEP, and Senator Leyden. I will go to that group-----
Sorry, I indicated immediately after Mr. Proinsias De Rossa, MEP.
I did not see you but I will get everybody in if I can.
I thank Deputies Dooley and Durkan and Senator Reilly for their comments and questions. I will pick up on the issues mentioned by Deputy Dooley with regard to information and engagement. As the Deputy knows, the more recent elements of the process arose from the December summit meeting. Prior to that meeting the Taoiseach gave a presentation in the House and following it there was another discussion in the House, as is normally the case, in which the contents of the political agreement reached in December were discussed.
The first draft of the proposed treaty was published by President Van Rompuy and it was circulated to member states in December. It has been in the public domain since then. As I indicated, the latest draft, which was made available to us yesterday evening, will be made available to the committee. We expect discussion on the draft at meetings of the Finance Ministers on Monday and Tuesday next week. We expect a draft will go to the informal meeting of Heads of State and Government on 30 January. There will then be a discussion and there will not be a final version of the treaty until that discussion has been completed. Committee members will appreciate we cannot anticipate what may or may not arise at that stage.
The Government is anxious that the fullest engagement take place with the Oireachtas and the public about what is being discussed. We need to put this in context because very often discussion on European treaties and agreements can appear to be very technical, vague and removed from the real lives of people. There are two types of questions I am asked about this. One type often arises from within the political system itself or from those who comment on it, and it is on whether we need a referendum and on the content and detail of the discussion.
The other type of question I receive from the public, and it is about the euro and the economy. We need to return to the reality of the concern about the euro and the European economy. People are understandably concerned about the value of the euro in their pocket or savings, how it will impact on their ability to trade and export and what impact the uncertainty surrounding the euro has on decisions being made by investors to locate jobs here or elsewhere in Europe.
This is the reality of what this is about. What we are attempting to achieve is an agreement that will stabilise the euro, strengthen the rules surrounding it and ensure they are enforced. All of the focus has been on political agreement on the euro and the treaty. Let us not forget there was also political agreement in December that the discussion in Europe needs to move on to the creation of jobs, growing the European economy and ensuring people have a future. I hope and expect this will be part of the discussion on 30 January also.
In respect of Article 11, all of the articles in the agreement apply to all countries, big or small. Deputy Durkan spoke about the issue of the necessity to restore confidence and I very much agree with this. It must be part of what we are doing.
With regard to the issues raised by Senator Reilly, I want to make it very clear that the approach being taken by the Government on the agreement is not about a referendum. Whether a referendum is required is not an issue of opinion or preference. A referendum will either be required or not, and this will be determined by the final text and content of the agreement. As I stated earlier, it is not possible to make a definitive conclusion on this until the process is complete and we have a final text.
Can I-----
I will let everybody in.
I just want to ask-----
No.
-----a question on whether the Government supports-----
No, Senator, I want to let the Minister finish.
I have watched recordings-----
Excuse me-----
-----of various committees in the House and there is a free exchange of questions permitted by chairpersons-----
And as Deputy Mac Lochlainn is well aware-----
Will you not allow this today?
-----because he has participated in many meetings I have chaired, I will let everybody in but I want to do everybody the courtesy-----
No, I am asking whether as the Chair-----
-----of allowing them to conclude their contribution.
-----you will allow a free exchange as we always have in the House on issues.
Absolutely, and I made it clear from the start of the meeting-----
So they will have to wait half an hour to get a response?
Deputy Mac Lochlainn, I made very clear from the start of the meeting that I will let everybody in but I want to allow everybody the courtesy of finishing their contribution. I would appreciate-----
So you are going to chair it differently then.
-----from all members, which has been observed to this point, deference to allow everybody to speak and make their point and conclude. I will apply this to all members, including the Minister and anybody else who wishes to speak.
What time-----
As you well know-----
On a point of order-----
I am going to go back to the Minister to allow him to conclude.
I have asked for a point of order. My first question on the point of order is what time is the meeting scheduled to conclude.
When everybody has had a chance to speak.
So as long as is required to allow everybody a chance to speak.
I will let everybody in.
You will let the meeting continue and every question will be allowed to be asked prior to the meeting concludes.
That is not a point of order but as a matter of courtesy I will answer the question anyway. I will allow the meeting to continue until everybody has had a chance to make a point. Is Deputy Mac Lochlainn clear on this?
Ok. So we will have a chance to ask every question we want to the Minister before the meeting is over.
I will let everybody put their point to the Minister.
That is fair enough.
Is that clear to you?
I am grand now, yes. It is a different form of chairing meetings but I will go along with it.
Actually, Deputy Mac Lochlainn, you are well aware that it is not. You are well aware that every meeting I have chaired-----
I watch "Oireachtas Report"-----
-----I have allowed everybody to come in-----
-----regularly and I see exchanges between speakers and Deputies. So your style is different from that of everybody else.
You are well aware, as somebody who has attended many meetings I have chaired, that I have allowed everybody in. I want to allow everybody the courtesy of finishing their point. What you are engaged in is grandstanding. As you are well aware, this is how I chair every meeting.
No. Am I wrong in this? Am I wrong to say that on "Oireachtas Report" in the evening one sees a free exchange of questions and answers between the witness before a committee and committee members?
Deputy Mac Lochlainn, I am afraid I have not had a chance to watch "Oireachtas Report" but I have chaired many meetings which you have attended and you know-----
One or two.
-----that I let everybody speak. This will continue to be the case. I allowed Senator Reilly to continue uninterrupted and I will allow the Minister to do the same. If Deputy Mac Lochlainn does not want to participate in the meeting on this basis, and I believe he does, we will have to stop. I will now go back to the Minister.
As I stated, the Government's approach to these discussions has been on the basis of what needs to be done to address the difficulties in the euro, the eurozone and the European economy and in this context to secure the best deal for Ireland. It is very much a case of the best deal as far as Europe and the euro are concerned which will also benefit us because it is in our interest and, in this context, the best deal in the country's national interest.
With regard to whether the debt brake goes in the Constitution or legislation, various countries have various constitutional arrangements and what is understood as "the Constitution" varies. In some countries, such as Ireland, the Constitution is the property of the people and can be changed only by way of referendum. In other countries the constitution can be changed in parliament. Some countries have particular arrangements for changing their constitution such as a two thirds majority. We are dealing with member states with various constitutional arrangements and understanding of what a constitution is, and we would all insist upon doing this and it is quite right. Therefore, it was our view that a blanket requirement for the debt brake to be reflected in constitutions would not necessarily apply evenly. This is a view shared by other member states, many of which have differing constitutional arrangements.
As is known, we intend to introduce to the Houses fiscal responsibility legislation in the early part of the year. In practical terms this will give effect to the objectives and terms of what will end up in the agreement in so far as we know it. In any event, the intention we have with regard to the fiscal responsibility legislation will meet this requirement. In line with this, Ireland in common with a number of other member states sought to have the term "preferably" included in the text. This arose from discussions in which it was pointed out that from our point of view and as far as we are concerned the Constitution is not the appropriate place for the type of strong legislative measures that will be included in the fiscal responsibility legislation. The way in which it is implemented will vary from country to country.
Senator Reilly also asked about the assessment that was carried out with regard to the 0.5%. The targeting and appropriate structural balance has been a feature of the European fiscal framework for a number of years as it stands. To help ensure sustainable economic and budgetary policies, the structural balance is an appropriate tool as it provides greater clarity on the underlying budgetary position by adjusting the headline fiscal position for short-term movements in the economic cycle. The statement by euro area Heads of Government and State recognises the important role it plays and European leaders are placing greater emphasis on this tool. Its application is reflected in the budgetary policies adopted by each member state and it is in this context that any economic assessment arises. With regard to current economic and budgetary policies, the Government's priority is to deliver on the programme commitments which also help maintain the public finances on a sustainable path over the medium and longer term. The 0.5% target has been already included in the stability and growth pact.
Senator Reilly also raised the issue of Article 16 which refers to the five-year period. This simply means that within five years the steps set out in Article 48 on the Treaty on European Union to convene an intergovernmental conference will be initiated. Any agreement to incorporate the treaty into European law will require the unanimous agreement of all 27 member states. Once the text of any EU amendment is agreed, the advice of the Attorney General will be sought, as is the case with all EU treaties, as to whether the text of the treaty complies with the Constitution and therefore whether a referendum is required.
I thank the Tánaiste. I will now call on Proinsias De Rossa, MEP, Senator Mac Lochlainn - excuse me, Deputy Mac Lochlainn-----
You can call me anything you want.
Pádraig - I will let Pádraig in next.
I am not too fussed about titles.
After Deputy Mac Lochlainn I will call Ms Nessa Childers, MEP, and Senator Leyden.
Mr. Proinsias De Rossa, MEP
I thank the Chairman for the opportunity to speak at this meeting. I thank the Minister for the open way in which he is addressing the questions being put to him because it is important that we get a sense of what is going on in the background as well as the text that is before us. It can be argued, and it is commonly understood, that to a large extent many member states feel this treaty is a distraction and not essential given the terms of the EU treaties we have at present. Nevertheless, we have it because certain other member states insist on it to agree to other provisions. We must deal with the reality of being where we are and therefore we must address this issue.
I draw attention to the fact that this is not a European Union treaty. It is a treaty of EU member states which are members of the euro, but it is a parallel treaty. Therefore, it is an international treaty that is being negotiated and to which we must have regard, because in five years' time, whatever the outcome of this treaty, we will be asked to incorporate it into the European Union treaties. It is an important step.
Will the Minister clarify whether there are two potential referendum possibilities? One is on the treaty as a whole and various dimensions of it which may impact on the Constitution. With regard to the second possibility, I have mixed up my notes on this and will return to the matter.
There is much concern in the European Parliament about how the community method will be applied in ensuring democratic accountability in the decisions being made. It is unfortunate we are dealing with an international treaty rather than an EU treaty because of the actions the United Kingdom took in stepping aside from the process. We must ensure democratic accountability not only in the way in which the treaty is developed, negotiated and put in place but also in the decisions flowing from it.
What role will the national parliaments and the European Parliament have in the implementation of decisions? An article refers to the role of the budgetary committees of the European Parliament and the national parliaments. I am not sure this provision will satisfy the European Parliament because it would be counted as one vote out of whatever number of member states sign up to it, whether this is 17, 18 or 21. The European Parliament represents 500 million citizens of the European Union. This needs to be addressed with care.
With regard to Article 3 and 0.5% of general government deficit, concern has been raised about the discrepancy between this and the 1% in the six-pack. The European Parliament, with the Council and the Commission, negotiated the six-pack whereby after tough negotiations we agreed on a 1% figure. Given that this treaty seems to make that more stringent by applying a 0.5% figure, I would like to have clarity on that issue. It may be a highly technical reply and the Minister may have to come back to at a later stage but it needs to be addressed.
The point I wish to raise on the Constitution regards the compliance with the obligation to transpose the balanced budget rule into national legal systems. That is the second issue. There is the general issue of whether there are other elements of this treaty that might or might not require a referendum but there is also the specific issue of this particular rule, whether that is one that can be addressed by the Dáil. We should not get overly excited about the potential or otherwise for a referendum. What is key is that we ensure the euro survives, that Ireland survives as a member of the European Union, that we can persuade our colleagues in the EU that we need investment and jobs and that austerity or budget discipline on its own is not the answer to the crisis, either for the euro or the economy as a whole. We must continue to emphasise that. The current Administration has been making those points at the European level and here.
We should avoid apocalyptic scenarios. We are not doing ourselves or the European Union any good by declaring that this treaty means the end of the world. It is not. It is an international treaty which at the end of the day we can decide whether to join and take the consequences.
I note in the preamble to the latest draft circulated today a strengthening of the paragraph on the European Stability Mechanism and the fact that any state that wishes to avail of it must have signed up to this treaty. I note, in particular, in capital letters, in that paragraph the word pointing out, as if that were necessary, that the granting of assistance in the framework of new programmes under the European Stability Mechanism will be conditional as of 1 March 2013, on the ratification of this treaty by the contracting party concerned. Does it worry the Minister that this amounts to potential bullying of those states that are in difficulty, including Ireland, and will he acknowledge that this is legally questionable? It must be remembered that the European Stability Mechanism is enshrined in the existing treaties and is part of EU law. Therefore, how can the Minister apply this new treaty, which is not part of EU law, to conditionality around the ESM?
In regard to the 0.5% target deficit ceiling, the need to get to a debt-GDP ratio of 60% as soon as possible, and the reductions necessary for states to get to that target, does the Minister accept that this amounts to draconian austerity and that it will place an even tougher burden on Ireland if we sign up to it? Will he outline to the committee how signing up to those conditions would help Ireland reduce the unsustainable level of debt, generate resources to invest in job creation and assist the return to the market and particularly his thoughts on jobs and growth? For example, we know that the Government will spend 150 times more this year on paying off bank debt, which is not the debt of Irish people but private banking debt. That is more than will be spent on the needs of the long term unemployed and programmes to intervene and help them find jobs. That is a stark statistic.
On the question of the increased role for the European Commission and the European Court of Justice, particularly the democratic decision-making powers of Government, the treaty lacks any real outline of the Minister's understanding or the member states or those who are negotiating this, how the jurisdiction of the ACG and the new powers of the Commission will operate? I have here an interesting part of the declaration from a dominant European group, signed by the Christian Democrats, Social Democrats, Liberals and Greens stating that they insist on the primacy of EU law and point out that it reserves the right to use all political and legal instruments at its disposal to defend EU law in the role. Are we getting into a legal minefield in respect of this arrangement?
On the issue of the 0.5% deficit ceiling - this draconian austerity measure - and the need to get to a debt GDP ratio of 60% as soon as possible, considering that under the troika deal Ireland will reach 120% debt to GDP ratio very soon, what are the Minister's views on the fact that as a Labour Party Minister he will be signing up to right wing measures that do not tally with his party's stated principles and objectives? If he signs up to this measure on behalf of the people, he will likely have to preside over further austerity budgets up to the end of the term of Government, not just to the end of the period of the troika. As it will not be a case of reaching a deficit of 3% of GDP by 2015 but 0.5%, and the Government is locked in to that target, how does the Minister propose to deal with that issue?
My final question is on the issue of the word "preferably". Will the Minister explain to the committee and the people the reason for the insertion of the word "preferably". For clarification purposes I will refer to Article 3.2. The first draft read that we shall transpose this new balanced budget rule or golden austerity rule or draconian austerity - or whatever one wants to call it - into national legal systems at constitutional or equivalent levels. The words "shall transpose" are now changed to "preferably constitutional or equivalent level". How can the Minister possibly say that the Irish Government, accepting that change of terminology, is defending the right of the people to have a referendum and a say in this issue?
I have read all the various journals on this issue and all the media outlets and everybody's view is that clearly this would weaken the requirement to have a referendum in Ireland. How can the Minister possibly say that our negotiators, accepting the word "preferably" in the latest draft - it is repeated in draft 4 - would defend the right of the Irish people to have a say on what are hugely important matters? If one disagrees with the Government's policies one can vote them out - that is the beauty of democracy. To enshrine these policies in a such a firm way in laws and committing ourselves to them and to accessing the ESM are major issues not only for this but future governments and future generations. Agreement to the insertion of the word "preferably" will not strengthen and defend the right of the Irish people to a referendum.
Ms Nessa Childers, MEP
I am grateful for the opportunity to put some questions to the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Gilmore. The Tánaiste is aware from my letter to him last week of my concerns about this treaty. I agree with much of what has been said by Prionsias de Rossa and will try not to duplicate what he said.
Like many other MEPs, I believe the European Parliament has been side-lined to some degree in this agreement. The Tánaiste spoke of his support for the community method. However, I do not believe that is the role of Parliament. The three MEPs present today represent almost three quarters of the Irish population. The latest draft of this agreement states that the President of the European Parliament may be invited to be heard at a summit. I am not sure that Article 13 in regard to the budget committees will satisfy the needs of the European Parliament to represent our constituents.
The socialists and democrats have said that if this does not satisfy the European Parliament, they will use every legal means at their disposal to stop it. How does the Tánaiste feel about that? How does he feel about the community method not being paramount and about intergovernmental methods being used? On the six pack, why is that not enough? The socialist group voted against all but one of the reports because most of them ignored macro-economic indicators other than those to do with finances. Why do we need this when we have the six pack?
As pointed out by Mr. de Rossa, there is a difference between the figures in the six pack and treaty in respect of debt. I would like to hear the Tánaiste's views on this and on how as a member of the socialists' and democrats' group we are going to square this circle.
I will now revert to the Tánaiste and will then take questions from Senator Leyden and Deputy Wallace. I will then put my questions, following which I will allow everyone in again to put their final questions. As I stated earlier, it is my intention to allow everyone to contribute.
It is important to recall first that we are dealing here with a draft of a treaty which is still very much a work in progress. This is not the finalised draft. There is always a balance to be struck. I emphasised earlier that we want to have open discussion and engagement, which is the reason for this exchange in the middle of the negotiations. There is always a danger of negotiations being conducted in public. I have long personal experience of negotiations. Public discourse of what is being negotiated is very often not helpful. This is public business on behalf of the people. However, members should accept that what we are dealing with is still very much a work in progress and they should not treat it as though it is the final agreement.
Let us not lose sight of what we are trying to achieve. We have an economic crisis in Europe and a financial difficulty, which I described earlier as unprecedented. There is a collective need to stabilise the euro. This is needed in any event in the interests of people within the euro area and the wider European economy. It is also needed if we are to get investment in Europe and create jobs and growth in the European economy. As a country, we have a particular interest in this given the financial programme situation in which we find ourselves and our serious deficit, which must be addressed.
Deputy MacLochlainn raised the issue of conditions. The Deputy knows that if he gets a loan from any bank or person there will be conditions attached to it. We have to borrow. That is the situation in which the country finds itself. If the Deputy wants to make the case that this country can run its financial and other affairs without borrowing, he should then explain to the public what having to live as a country on €34 billion income from taxation will be like. It will mean huge cuts, bordering 40%, in pay, welfare payments and social programmes. That is the reality. It is all very well to say that we are being bullied in terms of the conditions being imposed in respect of our borrowing requirement. Whether it is the State, a business or an individual borrowing money - Deputy Wallace knows all about this - the same conditions apply. We must, as a Government, negotiate on behalf of the country the best possible and most sustainable forms of conditions in respect of our borrowings. That is the reason, for example, the text of the draft circulated includes the statement that a timeframe for convergence will be proposed by the Commission, taking into consideration countries' specific sustainability risks. In other words, they will be tailor-made to look at the situations that apply in individual countries. There has been much talk about the 0.5% budget deficit. The terms of our programme will, if this draft agreement is eventually agreed, supersede it. We will be required to comply with the terms of the programme we have already agreed. It is already well known that we have deficit reduction targets which we must meet over a specific period.
The Government and I are in agreement with Mr. De Rossa that the economic difficulties being experienced by Europe will not be resolved by the treaty alone. That is quite clear. We have always said that there must be a growth and jobs strategy pursued within and by Europe in order for Europe, and Ireland, to get out the current economic difficulties it is in. Mr. De Rossa and Ms Childers raised the issue of the community method. Ireland is one of the staunchest defenders of the community method. As I said, I very much regret that this treaty is not embedded in a process of EU treaty negotiations, but it was not possible to get the agreement of all 27 member states. However, we have worked actively to anchor as much as possible of the treaty in the EU treaties and legislation. By and large, considerable progress has been made in this regard, which is reflected in the draft before us today. Obviously, those elements will be subject to scrutiny and accountability by the European Parliament and the European Union institutions. There is a role - reference is made to this in the draft treaty - for the European Parliament. There are references to it in the drafts of the treaty and the role for the European Parliament in article 13 in particular. It refers to the role of the national parliaments of the European Union and European parliaments. There are procedures set down for the convening of chairs of the budget committees of both the European parliaments and the national parliaments and the European committees of the national parliaments as part of that process.
There was a point made by Deputy Mac Lochlainn in respect of the European Stability Mechanism, ESM. The ESM treaty, of course, is not part of European Union law but is an intergovernmental treaty, as is the current treaty. With regard to compatibility with European Union law, the text indicates that the negotiators, with the advice of the Council's legal service, have drafted the treaty with the aim of ensuring it is compatible with European Union law. That is referred to specifically in the text.
There was also a question on legal doubts concerning the treaty. The ultimate test of legality is in the courts, either here in respect of our constitutional provisions or in the European Court of Justice with regard to compatibility with European law. The negotiators have worked to ensure that the provisions of the draft treaty comply with European Union law. The issue of constitutionality has been raised and I said earlier that it is impossible to give a definitive view on that until there is a final text agreed. It can be examined for compatibility. The question or test that must be considered by the Attorney General is whether the intergovernmental treaty complies with our Constitution; it is not a question of whether a referendum is required.
With respect, that is not what I asked. I asked very clearly how the Tánaiste can argue that the insertion of the word "preferably" strengthens and defends the right of the Irish people to a referendum. That is the question I asked.
This again comes back to the objective. It is not about whether we have a referendum but to get agreement in Europe that will stabilise the euro. We are trying to achieve an agreement to stabilise the euro in a way that is most beneficial to this country and our economy. I know the Deputy wants a referendum, which is a political point and perfectly------
The people have a right to a referendum.
We must get back to the objective. There is a crisis in the euro and the European economy. People are losing their jobs and businesses are at risk. The European economy must compete in a wider global economy and we have seen as recently as last week the way in which, for example, ratings agencies responded to various countries, including some which caused a considerable amount of surprise. There is a political obligation on the European leadership to deal with that crisis in the euro.
Does the Tánaiste believe a treaty will resolve the issue?
I have allowed the Deputy to comment but I should be conscious that Deputy Wallace has not contributed yet.
This is about making sure we get stability in the euro and that the European economy can grow. We must get investment in Europe and this country and we must create jobs. Frankly, that is a more urgent and important political priority for this Government and European leaders than the Deputy's political priority, which is, by hell or high water, to get into-----
No, the Constitution is not my decision.
------a referendum for political advantage.
One of the Government's primary responsibilities is to defend our Constitution.
We must have order. Does the Tánaiste have other comments?
I have covered pretty much everything. If there is something in particular that has not been covered, people can come back to me.
I will allow everybody to make additional points at the end.
I accept that this is a work in progress and will not assume that we know the nature of the final agreement. I accept there will be no easy choices. There is an element of Bart Simpson in that the Government is damned if it does and damned if it does not. Many people in Ireland do not necessarily agree with the European approach, or perhaps I should say the Merkel-Sarkozy approach. It was interesting to hear Standard & Poor's indicate in downgrading nine countries last week that fiscal austerity alone risks becoming self-defeating.
In 2007 and 2008, China ran into difficulties and was not immune to the global economic crash but through ownership of its banks, it was able to control investment and increase lending. The country also controlled large state companies. That is one of the reasons China's economy has grown 10% every year since while those in the West have stagnated. This so-called austerity programme would certainly please Ms Merkel and the Germans, who are in a strong position, and they have been fond of seeing austerity in others. It is not fair to say that this austerity will bring the growth and jobs that we crave.
I realise that every five years or so we engage with citizens, giving them a say in the type of Government they want. Honestly, I feel there must be more citizen engagement, not just every five years but all the time. I am not saying that either of these choices is easy. I accept that debts must be repaid. If it costs more to run the State than we can raise through revenue, we must do something about that. I did not object to €3.8 billion being taken in the last budget, although I objected to the lack of fairness in it, which is a different aspect. People realise we must run our business in a sensible fashion to make things work. We must make adjustments to pay our way but the element of unfairness is what bothers people the most, and that is coming from us paying for failed financial institutions, asking the ordinary taxpayer to continue to take on the burden of these failed banks. That is grossly unfair.
I would like to think if I was in Government, in this case I would get a mandate from the people. I would like to see a referendum in that regard, and if the people approve, that would be fine and the Government would have a wonderful mandate to work on that issue. Not giving the people a say on such a serious issue is unfair.
I welcome the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Eamon Gilmore, and his officials. I have tremendous confidence in the negotiating team and commend the members on their work to date on the draft treaty on stability, co-ordination and governance in the economic and monetary union. It is about the stability of the euro, which is in our national interest. It is vital that we protect the euro. In fact, this draft treaty should have been in place as an actual treaty before we joined the euro. However, that is hindsight and we cannot change things now. I also welcome the ambassadors and their embassy staff who are present. They are attending this meeting because of the significance of the Tánaiste's presence and the fact that he is taking the time to brief members of the committee in a fair and open manner.
The draft treaty is concise. In fact, it is one of shortest documents I have seen dealing with a very important issue, which is a good thing. The language is quite clear; it is not something that people will not understand. The key point, as far I am concerned, is that there is no reference to corporation tax and the protection of our 12.5% rate. It is not in this treaty. I know the Minister will ensure there is no negotiation relating to the 12.5% rate of corporation tax. It is absolutely in the national interest that we retain it. As a former Minister of State with responsibility for trade and marketing, in all negotiations abroad on behalf of the IDA I gave a solemn commitment to foreign industries for inward investment that the 12.5% rate would remain, irrespective of what Government came into office. It has been retained by this Government as it has been in the past, and it will be retained by future Governments for so long as we can maintain that position. Will the Minister confirm that is the position and that it is not part of the negotiations in this treaty?
The transaction taxes for financial services centres are also not in the treaty. There is no reference to them, good, bad or indifferent. Regrettably, the British Prime Minister has opted out of this at present but, hopefully, he will be brought back into the centre. The fact that he was trying to protect the city of London was not really a great reason for using the veto. If a transaction tax is to be introduced, it must be with the agreement of the 27 countries of the European Union, to ensure a level playing pitch. One cannot give London a preference over Dublin, Frankfurt or Paris. Perhaps the Minister would clarify that this tax is not part of the treaty and that the treaty is among the 17 euro and monetary union members.
In the meantime, it is not a good idea to accept further members of the eurozone until this matter is resolved and settled in the next five years. To extend the eurozone to other countries with fairly weak economic backgrounds would not be in the interest of the euro.
As far as a referendum is concerned, the Attorney General will advise the Government and we must respect her advice about the Constitution in a fair and unbiased manner. I accept the Tánaiste's remark that if there must be a referendum, so be it. The election on 25 February last was, in a sense, a referendum on where the country is going. However, expectations were raised which have not been realised with regard to burning bondholders, so if there is a referendum now, it will be based on commitments given in the heat of the election campaign and there would be a very heated debate. It would go beyond the draft treaty and get involved in the question of burning the bondholders, the former Anglo Irish Bank and the banks that betrayed this country.
Again, I thank the Tánaiste for attending. I wish him, the Government and our negotiators every success in arriving at a treaty that is in the best interests of this country.
I have let all members contribute so I will put a few questions too. After the Tánaiste has responded to them, members who have other questions will be able to put them.
I wish to raise three points on foot of the Tánaiste's contribution and those of my colleagues. First, with regard to whether some of these measures should be incorporated within the Constitution, my view is that the Irish Constitution is about enshrining the basic rights of individuals and the role of our Government. The Constitution is the right place for stating that freedom of assembly and freedom of expression shall be recognised and protected, that the ability to own property will be protected, and for laying out what government can and cannot do.
I strongly question whether the Constitution is the place to state the exact detail of the debt levels a government should maintain. That might be appropriate for other countries that have a different view of their constitution and its role within their jurisdictions, but we take a different view on what the Constitution should do. I very much welcome the introduction of the word "preferably". If a new Government comes into office at some point in the future and if it decides to have a different fiscal and budgetary policy, that should be its right. The Constitution should respect the will of the people. There should not be something in the Constitution to provide that its action and its ability to do that become unconstitutional. The introduction of the word "preferably" recognises the fact that there are certain things that should be in our Constitution but that other things are determined by a government elected by the people.
My second point relates to Article 3.3 of the draft compact. It states that the annual structural balance of the general government refers to the annual cyclically adjusted balance, net of one-off and temporary measures, and that exceptional circumstances refers to the case of an unusual event outside the control of the contracting party concerned, which has a major impact as to the financial position of the general government, or to periods of severe economic downturn as defined in the revised Stability and Growth Pact. Therefore, if in the future a government needs to borrow in recognition of an economic downturn or in recognition of events that are beyond its control, that fact is recognised in the draft treaty. It gives a government the latitude to do that, if the government finds itself in an economic downturn or must deal with unusual events, for example, the price of oil increasing or unrest across the world. The ability of the government to borrow in recognition of that is enshrined in the treaty.
Third, I invite the Minister to reflect on the point that what we have here is a jigsaw. A number of different things must fall into place. This compact alone is not the full solution to the difficulties Europe is facing. It is part of the solution and unless it falls into place, it will be very difficult to put the other parts of the jigsaw in place. I refer to what has happened so far this year. At the end of last year many commentators were saying it would be very difficult for Italy, Spain and other countries to sell debt to the financial markets at rates they could afford. However, the opposite has happened. Every country that has gone to the market has sold its debt at a rate that is approximately half of what it was last year. The reason that is important is that if other countries can do it, it is more likely that we will be able to do it, and it is more likely that confidence will return to the eurozone to deal with the challenges it faces. The speed with which this matter is being dealt with is an ingredient in that happening, and an ingredient in the medium and long-term resolution of the debt crisis we are in at present.
We would appreciate the Tánaiste's response to the points raised. If colleagues wish to make further points afterwards, they will be allowed to do so.
I will intervene again after the Tánaiste has spoken.
Of course. I have made it clear that everybody will be allowed to contribute.
First, I will link some of the comments and questions. Deputy Wallace made the point, for example, that an austerity programme alone does not resolve our economic difficulties. That is very true. It is actually reflected in the text of the draft treaty before us. The second indent in the opening page of the draft treaty talks about desiring to promote conditions for stronger economic growth in the European Union. This is not just an exercise in budgetary or fiscal discipline. It must go hand in hand with measures to get the economy to grow again and to create jobs.
The Vice Chairman described it very well as a jigsaw. It is not only a European jigsaw but it is also a jigsaw in terms of our domestic economic situation. We must do a number of things hand in hand and we are making progress on some of them. For example, if one looks at figures published this week, as a country, we have the largest trade surplus ever. Our exports are doing really well. That is something on which the Government has placed a particular emphasis. We export 80% of everything we produce. It is hugely important to us that those exports increase and expand. That is part of it.
Earlier this year, for example, we saw figures from the IDA on the very successful year it had in 2011. Attracting inward investment is a hugely important part of our job to get the economy to grow again. We introduced a budget which will not increase income tax in 2012 for the 1.8 million workers in the country. It will not reduce the basic rates of payment for the 1 million people in receipt of social welfare payments. It will take the 330,000 people on the lowest levels pay out of the universal social charge. All of that is designed to encourage confidence in the domestic economy and to get it moving again. The range of measures in the budget are aimed a stimulating economic activity.
It is all part of what we have done, for example, in regard to the recapitalisation of banks. That will come in significantly less than the figure projected last year because of the measures taken and the efforts made to get private investment, for example, in Bank of Ireland and burden sharing with subordinated bondholders. All of that was part of the package.
However, while all of that is happening, we have the huge difficulty with the euro which must be addressed. If one talks to people in business, those concerned about the security of their job or those who are unemployed and want to see new jobs created, they will tell one that one of the factors impacting on our prospects for economic progress and growth is the situation with the euro. That must be addressed and that is why this proposal is now being worked on. As I said, it is not a stand-alone measure for austerity.
In terms of the targets and measures, what is required of us as a country under the terms of this treaty is nothing additional. We are already in a programme where we must comply with certain disciplines, reach certain targets and so on. None of those is expanded or made more onerous or stronger under the terms of this agreement. The targets referred to, the 0.5% and the 60% debt to GDP ratio, are already in place. They are already part of the Stability and Growth Pact arrangements. The targets we must meet are those in our programme. They have been set down, that is, getting our deficit down to 3% by 2015.
In the course of the negotiations, we and other member states have worked to arrive at a text which deals with the problem effectively, which is the most important thing. However, it must also deal with it in a way with which we can comply and live. That is why, for example, there are a number of references which are country-specific and which refer to the particular circumstances of individual countries. I referred to one earlier and the Vice Chairman referred to another one in regard to article 3, all of which is about ensuring that where there are exceptional circumstances, they are recognised in the terms of the agreement.
Senator Terry Leyden asked me to confirm that there is no reference to corporation tax or no requirement under the terms of this agreement for us to change our position on corporation tax. I can confirm that is the case. I can also confirm that it is the country's very firm policy to retain the 12.5% rate of corporation tax. Similarly, there is no provision in this treaty in regard to the transaction tax, which is under discussion in the context of the European budget and in other discussions. It is not contained in this provision.
Our Constitution does a particular job for us. It is our bunreacht, the basic set of principles which underpin our State, how it is organised and the basis on which legislation is formulated. Other states have different constitutional arrangements and the constitution means something different in other states.
It is our view that the provisions which must be introduced to give effect to this treaty and which we would, in any event, have to introduce to underpin our requirements under the programme, such as the fiscal responsibility Bill, are not measures which should be in our Constitution, which is a relatively short document setting out basic principles. I do not understand the logic or thinking of those who seem to be arguing that our negotiators should somehow negotiate more onerous terms for this country in respect of our Constitution rather than less onerous ones. I have described the text as a work in progress but our negotiators have negotiated terms which are less onerous than what was in the original draft and for which some members appear to wish. That said, it is important to state that the objective of this inter-governmental treaty is to ensure robust rules apply and which are not open to being changed willy-nilly.
Again, to come back to the purpose of all of this, it is about ensuring stability in the euro area. Part of the problem we have inherited, among all of the other things, is that the rules originally written for the Stability and Growth Pact and when the euro was formed and some of which developed subsequently were not being implemented. It is our view as a government that they should be implemented and enforced evenly across all of the member states involved. That is why, for example, providing a role, in terms of their implementation, for the independent European Court of Justice and the European Commission is appropriate.
What we are dealing with here is draft five of the text. It is work which has gone on for a very long period. Incidentally, I pay tribute to the work of our officials who have been engaged in very intensive negotiations on this since the first draft appeared prior to Christmas. They worked over the Christmas and new year period on this. As I said, we are still dealing with draft five. This will be discussed by the Finance Ministers next week and it will, in any event, have to go to the summit meeting on 30 January. Of course, it may be changed again at the summit meeting. There will be a discussion. When we get the final text, a view can then be formed on whether it complies with our Constitution.
I will allow one final round of questions and a final contribution from the Tánaiste. I will call Proinsias de Rossa, MEP, Deputy Mac Lochlainn, Senator Leyden and Deputy Durkan.
Mr. Proinsias de Rossa, MEP
I thank the Vice Chairman for the time he is giving us. This is my last meeting here as an MEP, so I appreciate the opportunity to make a few points.
Could I say to Deputy Doherty-----
Deputy Mac Lochlainn.
Mr. Proinsias de Rossa, MEP
Sorry-----
Deputy Mac Lochlainn.
Mr. Proinsias de Rossa, MEP
I am sorry about that.
I did not think I would have to intervene on that point.
Mr. Proinsias de Rossa, MEP
In any event, I have two points to make to Deputy Mac Lochlainn. The people's right to a referendum is founded in the Constitution and not in any international agreement and it cannot be interfered with by any international agreement, no matter what the wording is. If the constitutional interpretation is such that the people are entitled to a referendum, they will have one, right or wrong or whatever one's view on it is. That is the reality. It cannot be denied by an international agreement.
I am not criticising Deputy Mac Lochlainn for trying to put my party leader on the spot but I would ask him to bear in mind that his party is in government in Northern Ireland where it is implementing policies which must make him very uncomfortable.
It is an entirely different situation. I will respond in a second.
Mr. Proinsias de Rossa, MEP
Let me finish my point.
We have debates about sovereignty in the North too.
Mr. Proinsias de Rossa, MEP
I am not denying that. I am simply making the point to the Deputy that it must be very uncomfortable for the party but fair play to it, it is doing it in the interests of the people of Northern Ireland and the Republic. Let us be cautious about how we try to up-end people because we can shoot ourselves in the foot if we are not very careful, and that is not in the interests of the people of Northern Ireland or the Republic. We must be fair and face realities.
The crisis we face will, within five years, bring forward reforms of the treaties which probably would not have taken place for at least another 20 years. A decade ago, I was a member of the Convention on the Future of Europe at which we sought to introduce these kinds of reforms. They were resisted by virtually every member state at that convention. They said they were not necessary because we had the Stability and Growth Pact and this, that and the other. The crisis has now brought this forward and we must deal with it. We are in a crisis. It is not some esoteric constitutional crisis; it is an economic crisis which is affecting the livelihoods, savings and security of every citizen of the European Union, including every citizen of this island never mind just this Republic, so we must address it seriously and take whatever steps must be taken.
However, we must ensure the integration which takes place is democratic. I have long argued that sharing sovereignty is essential for Europe. We see what is happening in some member states where the far right is beginning to raise its head. It is trying to drag us back into the 1930s. It is extremely important that in taking the steps we are taking, which are about the economic crisis, we ensure we do not end up with a political crisis in Europe where we have the centrifugal forces of the far right and xenophobic nationalism pulling us apart. We must avoid that. One way to do that is to ensure we settle the economic crisis but in a way where the decisions are democratically accountable. That is essential if we are going to hold the Union together. I appeal to the Tánaiste to bear that in mind in the negotiations.
In concentrating on areas about which we are concerned, we will tend to ignore the areas which are positive in this draft. It is not the final draft and we should not make decisions for or against it until we see the final draft. For instance, there is a provision that the social partners should be involved. That is a very important. There is also a provision which makes it absolutely clear that this agreement does not in any way affect the conditions that apply to countries like Ireland which are already in programmes. It will not affect the terms on which we are addressing our problems in tandem with the troika. That is an extremely important provision in the treaty.
There has been comment about the financial transaction tax and concerns about the impact it will have on the International Financial Services Centre and so on. I know there is a debate around that. However, there is a need for a serious debate about how the financial services sector makes a tax contribution to running the Irish economy and the European economy in general. I do not care what we call it, whether a financial tax, a Tobin tax, a value added tax, a turnover tax or whatever. There is no tax on the transactions which the financial services are engaged in and it is important we seek to ensure there is. To a large extent, they have caused this crisis by their irresponsibility and I believe there is a need for a tax on them. When that happens is a matter for negotiation within Europe and at European level. We obviously must have regard to ensuring we defend jobs in Ireland and so forth. However, there is another dimension to this debate which is extremely important.
My long serving colleague, Deputy Ó Caoláin, reported to me that in the past nine months, the Labour Party has mentioned the North of Ireland perhaps twice or three times more than it did in the previous 14 years. Of course, its new found interest is this distraction in regard to the Tory cuts in the North. My party, Sinn Féin, is fighting for fiscal sovereignty for the people of the North of Ireland. This State has given it away. In this emerging proposition, we propose to give away more of the fiscal sovereignty of the people. I hope that is a good legacy for Proinsias de Rossa to defend as he approaches his retirement.
Mr. Proinsias de Rossa, MEP
Sharing sovereignty is not giving it away.
Allow Deputy Mac Lochlainn to continue.
That is just to clarify the newfound interest in the affairs of the North of Ireland.
The Constitution protects the rights of citizens, human rights and so on but it also defends the sovereignty of the people and their right to have a say over their affairs. That is the reason the Crotty case was successful and subsequent treaties have been put before the people in line with that judgment, which is quite unique and very precious within Europe. It is also the reason my party insists that this proposition will copper-fasten very considerable draconian austerity. Article 3.2 states that within one year of the entry into force of this treaty, through what is termed "provisions of binding force and permanent character". Perhaps I have a different understanding of the word "permanent". That has not been negotiated. What has been negotiated is the word "preferably". Permanent austerity measures will be enshrined into legislation. I find it remarkable how one can spin the whole thing around the issue of "preferably". These are profound issues which should be put forward to the Irish people. They involve a transfer of fiscal sovereignty from the people to institutions, namely, the European Commission and the European Court of Justice, which are not elected by the people or, arguably, not elected by anybody in Europe, without reference to the people. That is the point.
What is the Tánaiste's interpretation of the word "permanent" that remains there? Is the Tánaiste saying the European Stability Mechanism is not governed by European law? Is he saying this new intergovernmental treaty, which cannot be subject to EU law because existing treaties and laws do that already and one does not have the full consent of all signatories to that treaty, would be able to apply criteria on a separate treaty, which governs the European Stability Mechanism?
I wish Proinsias De Rossa, MEP, my former ministerial colleague, who was Minister for Social Welfare, every good fortune in his retirement. We recognise the contribution he has made to Irish politics over a long number of years. He richly deserves a happy and successful retirement that will lead him on to greater things.
In the past number of years, we have had a tendency to revolve around the "what ifs" of events. Of course, everything would be better if we were not in this tough and tight sport. I stated previously that I do not attribute political blame to anybody at this stage. It is irrelevant. We are in that position now. Two or three years ago when the situation first became evident, a great deal of effort was spent on discussing the decision of the then Government. I thought the decision was not correct. It may well have been wrong, but the train had left the station at that stage. It was already late - ten years too late.
I used to run a small business many years ago. I cannot understand why it is not accepted that if a business gets into difficulty because it has overstretched itself, then austerity automatically ensues. If one does not make the decision, somebody else will make it for one. That is the same rule that applies in a household, a country, a continent or an entity such as the European Union.
In Ireland, we have two problems, one had an international dimension and the other one was of our own making. Unfortunately the combination of those two factors is so serious that we must take a deep breath and resolve to deal with the issues. The only thing that should not happen, and I know it will not happen, is that we make sacrifices and others in the eurozone or outside it undermine those sacrifices by virtue of not observing the detail of what we set up. That is the lesson from the past ten or 15 years. If we need to learn it again, then we will pay a significantly high price.
We need to recognise also that this crisis cannot be compared with anything we have known in our lifetime. The only comparable crisis is the worldwide crisis of the 1930s. Reference has been made to China. We are not comparing like with like when we compare ourselves to what they did in China. We should not forget that many businesses from the western hemisphere relocated to China in the past ten to 15 years to avail of the benefits of lower wage costs and all that goes with it. It did not work out. We know that. The mobile telephones we use are made in China. Companies shifted their production in order to get the short-term gain of lower wages from one economic hemisphere to another. I have nothing against the Chinese, and more power to them.
We cannot go around forever avoiding the issues and that is what we have done for ten years and this is what the European Union has done in the same way. If we continue, with one more trick like that, we will have the type of scene unfold before us to which the Tánaiste has referred.
Some of us did calculations on various outcomes. Let us suppose that these bondholders, which everybody wants to burn, were burnt, what consequences would that have for us? We cannot even imagine the depth of the resulting chasm. It would result in a 40% cut in our standard of living, in wages and salaries, in the public sector, in hospital, educational and all of the services provided by the State. Let us remember - and some commentators do not seem to understand this - that if one decides selectively to burn bonds, because one does not like the owner of those bonds, it has a ripple effect and consequences when one returns to the marketplace. There are serious consequences if one pretends that one can get away with the nonsense of burning the bondholders. It will not happen. I will not go into further detail as I see from the Vice Chairman's expression that he is coaxing me to draw my remarks to a conclusion.
I would be grateful if the Deputy would do so.
The United Kingdom and Northern Ireland are equally affected and they have had to go to their borrowers. To suggest otherwise is nonsense.
I wish Proinsias De Rossa, MEP, well as he stands down from public life after a very interesting career. I hope he writes a book and I am sure the Tánaiste would like to read all the different events that took place in his life from a very young age. In the words of a very well-know former Taoiseach, Proinsias De Rossa has done the State "some service" - to quote from Shakespeare.
Will the Tánaiste clarify the situation on the treaty on stability, co-ordination and governance in the economic and monetary union? Reference to the rate of corporation tax is not included in the treaty but the propaganda is that it would eliminate our corporation tax rate of 12.5%. I am clear that is not in the treaty. Will the Tánaiste also refer to the situation in regard to financial services because in the event of a referendum, one can be assured that these issues will be raised.
Let me again state that if a tax was imposed on financial service it could be negotiated if there was a level playing pitch, but if London opts out, it would put pressure on our situation. That is an issue that can be negotiated and discussed but that is separate from the 12.5% corporation tax rate. I understand that other countries wish to join the 17 eurozone states but my point is that the eurozone should not be extended until these tax matters are resolved.
I agree totally with article 12(4), but if we give the European Parliament a veto over policies, we would be in a very small minority position.
The Tánaiste mentioned that our export figures are very good. He is correct in stating that, which is very important, but would he not acknowledge that our domestic figures are very poor? The domestic economy has a greater impact of the lives of the people of Ireland than export figures. What worries me most about Europe is that the European Union and its politicians are no longer in control but the banks and the markets are its masters. It is not the fault of anybody but it is a significant problem and we must bear this in mind at all times.
We have had a long discussion, which in the main was very good. I join colleagues in paying tribute to Proinsias De Rossa, MEP, who is attending his last committee meeting. It is very significant that he has given some very good advice at this sitting of the joint committee. In the context in which we find ourselves, we need more European integration. As he pointed out, that integration needs to be democratic. His remarks tie in with Deputy Wallace's last comment, in which he outlined the challenges that face political leaders and the democratic system in Europe. We need to use our democratic and political institutions to address the economic challenges that face us. That is why political leaders will be around a table on 30 January. That is why those negotiating on behalf of democratically elected Governments of countries have been around the table in recent weeks.
We can approach this in a number of ways. We can start picking a word here and a word there. We can declare the apocalypse. I have no doubt that regardless of the words that are or might be contained in this draft agreement, Deputy Mac Lochlainn's party will oppose it. Sinn Féin has opposed every European treaty and every major development of the EU since its foundation. It will oppose this agreement, the next one and the one after that, in all probability. That is where Sinn Féin is at. That is a political choice.
Could the Tánaiste answer the question?
I respect that. I see where Sinn Féin is coming from.
I want to make a number of things clear. If this draft agreement were to come into effect tomorrow morning, it would impose nothing on the State, the Government or the people of this country that is additional to what has already been agreed under the EU-IMF programme, or additional to the obligations we have to meet under the Stability and Growth Pact. As a number of members have said, this treaty is one of the measures that have to be taken in Europe to address the crisis we face. The Chairman described it as a jigsaw. The agreement of measures that will allow the European economy to grow, enable jobs to be created and ensure there is a future for all of our people is a critical part of what has to be done.
I was also asked about democratic accountability for the various provisions in the draft agreement. I am sure we will have another opportunity to expand on them more fully. As has been mentioned, provision is being made for the involvement of the European Parliament and national parliaments. There will be enhanced roles for national budgetary committees - in the case of Ireland, the Joint Committee on Finance, Public Expenditure and Reform. This committee will have a role in the future. Reference has been made to the fact that the social partners will also have an enhanced role.
I was asked whether a referendum will be required. In the first instance, that will be determined by the final text. Consideration will have to be given to whether the international agreement we propose to enter into is compatible with our Constitution. As some speakers have said, the provisions of our Constitution will determine that. Advice in that regard will be issued by the Attorney General.
When we discuss these issues, it is inevitable and right that we look at them through the prism of our own national interests and economic circumstances. We have a shared economy and a shared currency. This country has a long tradition and proud record of keeping its word and its bond when it enters into international agreements. That is why the Government has made it clear that when we borrow money, we repay it. When we make agreements with other EU member states, we honour the conditions and terms we are obliged to meet. We expect other countries to do the same. We are in a difficult place, both here and generally in Europe. We will have to work our way out of it. Governments are responsible for providing the leadership for that. A great deal of work has been done to reach agreement on the steps that need to be taken to make progress in the European economy, bring stability to the euro and enable European and national economies to grow.
Deputy Wallace concluded by welcoming the figures that highlight the growth in our exports and by referring to the difficulties in the domestic economy. I do not think we can consider them as separate entities. They depend on each other. People working in the domestic economy provide services to companies that invest here and companies that are exporting. There is a connection between what we are doing on the export side and what we are doing to ensure the domestic economy grows and jobs are created. Issues like the stability of the euro and the position and global competitiveness of the European economy are relevant in that context. This agreement is part of a jigsaw, as the Chairman described it, which has to be put together to ensure a permanent solution to Europe's economic and financial difficulties is put in place and delivers the required results.
I expect to appear before this committee on a number of occasions before this exercise has been completed. I am glad to have had an opportunity to address it today. I will conclude by emphasising that the document we have been discussing today is the latest draft - it is not necessarily the final version.
Two of my questions were not answered. I asked the Tánaiste to clarify aspects of the European Stability Mechanism. I also asked him to define what the word "permanent" means to him.
As I said, it is a question of honouring our obligations. I referred to that. Although the European Stability Mechanism treaty is not formally part of EU law, it is compatible with it.
I have allowed everybody to contribute. This has been a long meeting. It was important to give everybody an opportunity to ask questions. I thank the Tánaiste and other members for their contributions. I would like to join members in paying tribute to Proinsias de Rossa, MEP, who has done fantastic work on this committee and its predecessor. I wish him the best of happiness in his retirement. I thank him for all of his work.
The joint committee went into private session at 12.50 p.m. and adjourned at 1 p.m. until 11.30 a.m. on Thursday, 26 January, 2012.