Joint Committee on European Union Affairs díospóireacht -
Wednesday, 4 Nov 2015

European Economic and Monetary Union: Discussion

Chairman

Today, we are to conclude our consideration of the five presidents' report, Completing Europe's Economic and Monetary Union. We are joined by two very distinguished guests, Mr. Michael Tutty and Mr. Alan Dukes, from the Institute of International and European Affairs, IIEA. They are both very welcome. The IIEA has published its views on the report and today our witnesses will explain the institute's reaction to it. We are very interested in hearing what they have to say.

I remind members of the long-standing parliamentary practice to the effect that they should not criticise or make charges against an individual or entity either by name or in such a way as to make him, her or it identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are asked to respect the parliamentary practice to the effect that they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

I invite Mr. Tutty to speak on behalf of the IIEA, after which we will have a chance to question both witnesses.

Mr. Michael Tutty

The Institute of International and European Affairs, IIEA, set up an economic governance group in 2013 to monitor the significant policy developments that were taking place at European level. Nine reports prepared by group members have already been published on the IIEA website. The group made a submission in February 2015 to the European Commission and the Department of the Taoiseach on the analytical note Preparing for Next Steps on Better Economic Governance in the Euro Area. This analytical note was a precursor to the five presidents’ report we are discussing today. The group prepared and published its comments on the five presidents’ report and these have been circulated to the committee. This opening presentation just summarises the main points in our comments.

Overall, the IIEA economic governance group supports the need to advance the process of economic and monetary union. In our opinion, the five presidents’ report is too short on detailed proposals to form any view on how the process may develop in practice, although the Commission published some additional documents on 21 October 2015 setting out some more details. We are concerned about the lack of urgency displayed in the report and strongly believe that faster progress in reforming economic governance in the eurozone is needed. The report envisages little of real substance for stage 1 to mid-2017, just building on the existing instruments. Stage 2 has no deadline, apart from 2025 for the completion of the final stage. A White Paper is promised from the Commission to explore further the legal, economic and political preconditions of the proposals but that is not due until spring 2017, which is a long way off.

The report considers four different types of union, namely, economic, financial, fiscal and political. I will deal briefly with each. On economic union, the report correctly points to the inevitability of more sovereignty being shared over time through common institutions but it defers any such developments to the second stage. The IIEA economic governance group recommends that work be carried out on this aspect of the report in parallel with the first stage, rather than asking where we go next only when the first stage is completed.

We welcome the proposal for a euro area system of competitiveness authorities to inform national policymakers and social partners on the impact on competitiveness of various policy proposals and developments. This would build on the national competitiveness authority that we have had for some time and should give it added impetus. We also welcome the strengthening of the macroeconomic imbalance procedure, particularly the call for adequate reforms in countries accumulating large and sustained current account surpluses. Germany has so far ignored all efforts to get it to take action in this area. In terms of the revamp of the European semester, we welcome the suggestion that the focus initially be on the euro area as a whole and then on the country-specific discussions.

On financial union, significant progress has already been made. We look forward, in particular, to the Commission proposals for a European deposit insurance scheme, due by the end of 2015, and to the development of a capital markets union.

On fiscal union, the report proposes the setting up of an advisory European fiscal board along the lines of the national fiscal advisory councils. This has already been implemented through a Commission decision of 21 October 2015. We see this as useful if it concentrates on the overall stance of fiscal policy but we would be concerned if it were to become involved in assessing the position of each individual country, thus duplicating the work of the national councils. I have had a keen interest in this since my recent appointment to the Irish Fiscal Advisory Council. The setting up of a euro area treasury where collective decision making would take place is suggested as a long-term possibility. The five presidents’ report states member states should “continue to decide on taxation and the allocation of budgetary expenditures according to national preferences and political choices”. It does not spell out what decisions will need to be taken collectively. This is an area where early discussion would be desirable since progress will undoubtedly take a lot of time to evolve.

On political union, in respect of which the phrase “democratic accountability, legitimacy and institutional strengthening” is used, the report seeks to improve the interaction with national parliaments. While the Irish Parliament has been paying increased attention to the European semester process and the country-specific recommendations, this is still at a fairly superficial level and needs to be developed into a more in-depth process. We support the suggestion that national parliaments exercise their right to summon a Commissioner for a presentation on draft budgetary plans and that they should be closely involved in the adoption of reform and stability programmes. Consolidation of the external representation of the euro has been an ongoing issue, particularly for the IMF, with individual countries being unwilling to give up their separate representation. It is time to make progress in this area.

These are the main points in our submission. We will be happy to address any issues the committee may wish to raise with us.

Chairman

The committee has debated many of these points in the past. I share many of the delegates' concerns. I was interested to hear Mr. Tutty's point on the proposed European fiscal board. He would be concerned if it were to become involved in assessing the position of each individual country as this would be duplicating the work of the national councils. That is true to a degree but such a board could be helpful. I will give two examples of where this could be the case. First, if there is a difference of opinion between the national fiscal advisory board and the government of a country, as with the interpretation of the structural deficit, it would be useful to have a European fiscal board that would act as an outside expert. Second, not every national fiscal advisory board across Europe is independent of its government. Hungary is a case in point. Having an independent body with a Europe-wide remit could give added moral authority that would help to put pressure on national governments to keep their budgets in check. I regard the proposed board as another piece of ammunition that we could have to ensure countries stay on the straight and narrow when setting their fiscal goals.

Mr. Tutty stated that the interaction of national parliaments with the new European semester project can be a little superficial at times. It is a developing process. It is a new phenomenon for us and we have tried to take on board its requirements as much as possible.

However, all of us here are improving year on year and that is happening across Europe in respect of how the semester is implemented. I am interested in the witnesses' specific ideas as to what we, as a national parliament, could do better to help the semester develop. I will leave those two questions there.

Deputy Seán Kyne

I welcome Mr. Dukes and Mr. Tutty. I thank Mr. Tutty for his contribution and for the reports that have been published. In his comments on the five presidents' report, which he edited, he stated "Any delay in introducing the necessary reforms may leave the EMU at risk of future economic and financial difficulties", which is clearly evident. Will anything be as bad as what we have come through? Does he think this is a good start and not the final solution to ensuring an avoidance of the level of financial crisis as experienced in recent years? As for the European semester, he referred to "a limited number of priorities, and in particular the suggestion that the focus initially should be on the euro area as a whole". Since Ireland has left the bailout and has been subject to the European semester process and the country-specific recommendations, I personally do not believe they have been too arduous although perhaps some would disagree. What is the view of the IIEA across Europe regarding country-specific recommendations? Do they represent a burden on certain countries or is it because Ireland had the experience of the troika being here and the country-specific recommendations in Ireland are, if one likes, a continuation of the troika process? President Juncker stated, as part of the launch of the five presidents' report, "I want Europe to be dedicated to being triple-A on social issues, as much as it is to being triple A in the financial and economic sense." How do the witnesses think this can be achieved? Will it be through the country-specific recommendations as well or is there another way in which this can be approached?

Deputy Bernard J. Durkan

I welcome our guests and, in particular, I welcome my former constituency colleague, former Deputy and former Minister, Mr. Alan Dukes. It is good to see him before the committee again and to see him being consistent in the pursuit of the European concept. Both he and Mr. Tutty equally have considerable mileage established in this area and they both are to be congratulated. On the European semester, I was one of those who suggested it in the first instance on the basis that it was not feasible to wait five or ten years before assessing the effectiveness of a particular strategy such as the Lisbon Agenda and so on. My question is simply whether the witnesses think the semester is sufficiently forensically investigative and whether it monitors sufficiently the progress of Europe in the intervening period. In other words, is it better than the previous position?

In addition, it has been referred to many times but I could not let the occasion pass without mentioning my own pet hate, which is my belief that Europe can never really be Europe united unless there is a single currency right across Europe. While I do not expect our guests to make a fundamental conclusion in this regard, I strongly believe that had the United States a multiplicity of currencies over the past ten or 15 years, it would no longer exist. Unfortunately, Europe continues to pretend it can exist with a multiplicity of currencies. It is beneficial to some countries within a situation in which they live next door to a particular currency. Such countries can live off that and can get benefits from it. While they also can encounter negative consequences, the point at issue simply is that achieving economic and monetary union will never happen until there is a single currency. I do not know how feasible that might be and I invite our guests to comment in this regard.

The witnesses may wish to comment on a difficult point, which is the extent to which they expect Europe to progress economically, in the fiscal sense and the political sense in the future, given that a number of countries have expressed views that would appear to be at variance with the European concept. The issue of Brexit is one that will have implications for all of Europe and for the United Kingdom. It could have really serious implications for Ireland, as well as for other European countries. My final point concerns those who state the economic crisis was as a result of austerity, that is, those who suggest that austerity was the cause of the problem. The guests may wish to answer on that point but I believe that was not the case. I believe the cause of the problem was bad management, bad fiscal policy, bad economic policies and failure to take corrective action on time. To what extent do the witnesses think these issues now have been addressed?

Deputy Eric Byrne

First, I wish to praise the IIEA on the work it has done and is continuing to do, as well as to welcome the witnesses before the joint committee. I have one query on the contribution the institute made on the analytical note, which was made prior to the five presidents' report. Were all comparable bodies in Europe like the IIEA asked to make a submission or was that simply coincidental or accidental? From the submission the IIEA made, do the witnesses believe that many of the points raised by the institute were incorporated into the five presidents' report?

On the question of the semester, Mr. Tutty stated it is "still at a fairly superficial level and needs to be developed into a more in-depth process". I do not know a great deal about it except it was debated prominently here this year because one country-specific recommendation was that the State should try to address the long-term poverty in which lone parents find themselves and that a disproportionate number of people are trapped in poverty resulting from lone parenting. That has budgetary implications and the Government committed itself to implementing the recommendation. In the context of how these recommendations were formulated, I believe only three were produced this year whereas last year there may have been seven, eight or nine country-specific recommendations. Can the witnesses explain whether they are happy with the formula which is at play and which presents us, as parliamentarians, and the Government in general with country-specific recommendations? Is it fair? Is it analytical or is it fairly superficial or whatever in their eyes?

Senator Kathryn Reilly

I have a brief question on the fiscal union. In the presentation, Mr. Tutty referred to the suggestion that was made on the "euro area treasury where collective decision making would take place" and he noted the report does not spell out what decisions would need to be taken collectively and this is an area in which early discussion be desirable. Where do the witnesses envisage this discussion starting or perhaps proceeding? In what areas do they think collective decision making inevitably would end up taking place?

Chairman

Who wishes to start off?

Mr. Alan Dukes

If I may, I tend to concentrate on the issues relating to the semester, in part because I wrote one of the papers we published some time ago about the semester. There obviously is a great deal of interest in it among members of the joint committee. The first point to make is the Commission has itself suggested, in the announcement of 21 October and other documentation it published around then, that it is looking again at the semester process to ascertain what might be learnt from experience thus far and how it might be improved. I will set this out in a schematic way and members will see how this relates to the semester process. In November of each year, the Commission publishes its annual growth survey. That goes through a process that leads to certain orientations being taken by the European Council, which in turn are taken into account by the Commission, which then, around April, produces country specific recommendations.

The view that we have taken in the institute is that national parliaments should use that process to negotiate a way to achieve the kinds of objectives set out at both national and EU levels for economic policy and to influence the shaping of a budget. That would mean the following things in broad terms. This month the Commission will produce its annual growth survey, which looks to the year ahead and a period after that. It then proposes to reinforce the process it has with the European Parliament to discuss this annual growth survey, including the European Parliamentary Week, when the Commission would engage in a fairly detailed discussion with the European Parliament about the prospects for the year ahead and after that. That process leads to the production of the country specific recommendations.

The Commission itself - it has not really explained this in great detail - has made the point in its most recent documentation that it believes it should probably specify a smaller number of objectives for the country specific recommendations. The purpose of that would be to take out the key strategic points and not to get too involved in detail because, of course, budgets are set out by national governments and the Commission is aware of the sensitivities around that. It seems to us that it is at the point where country specific recommendations are published after that process - the European Union level process first and then the national level - that national parliaments have the opportunity to get involved in designing economic and fiscal policy for the following year and preparing what comes out after that. There is a period after the publication of the country specific recommendations when there is an engagement between the Commission and national governments and there is the possibility for engagement between national parliaments and their governments and national parliaments and the Commission. The Commission has made the point that it wants to look again at the mechanisms or possibilities for direct interaction between the Commission and national parliaments about the substance of what the Commission has proposed in the country specific recommendations. That, it seems to us, is the key part of the process for national parliaments to get involved in budget-building.

Under the semester process the national governments produce what is described as a draft budget in October of a given year. That is then put to the national parliaments and the Commission has a certain amount of time to comment on it afterwards. It has not happened yet - I do not say "yet" in any ominous way - that the Commission has said anything very disobliging about a national budget after it went to a national parliament but the structure of the system is that if the Commission believes that the national budget departs in any substantial way from the overall objectives, it can speak to the national governments again and there is at least the theoretical possibility that some parts of budgetary strategy or emphasis might be changed. The point we were concerned to make is that the semester process itself gives new opportunities for national parliaments and the European Parliament to get involved in the budget-building process. The Commission is aware of that and is setting out to encourage national parliaments to do that in a more energetic way.

Since the semester process was instituted, the Houses of the Oireachtas has been involved, to an extent that it had not been before, in that kind of process. As a citizen and as an observer of these matters, I would like to see the Houses of the Oireachtas using that process to a greater extent than it does. If I may say - this is an opinion that goes back a long time with me - it seems not to be very useful from a practical point of view for national parliaments and parties in national parliaments to produce budget plans a week or two before the actual budget rather than several months before the budget is finally fixed. I can speak from personal experience - I am not letting out any secrets - that by the time one gets to a week or two before the actual budget day, there has been a fair amount of discussion internally in Government about what goes into the budget and a whole series of accommodations have been reached, some of them difficult, some of them delicate, some obvious and some not so obvious. It is pretty futile that if another party or another group outside the Government comes up with a really good idea, it will have to be an extremely good one to disturb the balance of what has been achieved in Government, whereas if the process has been going on in a more detailed and upfront way since April, there is a better opportunity for people to have an influence and for ideas to be manufactured.

We must not lose sight of the fact that, although, as in all these things, the expression of it in the documents is not the most gripping - it is very turgid in fact - the process and the conditions the Commission sets around the budgetary process make very explicit reference to a number of qualitative objectives in the budget in terms of social impact and impact on things like employment. If there is greater engagement between the Commission and national parliaments, there is automatically more room to draw attention to the social impacts of budgetary and fiscal policies than might be the case if such interaction did not take place. All of this, in my view, pleads for a much more active involvement of national parliaments. It is pretty clear from the way the documents have been written that the Commission is serious about that and an early engagement between the Commission and national parliaments could be very useful. The process itself leads to the possibility of a situation where there is almost a negotiation of a budget over a period in the political system. This is something I have always felt was very useful and it happens in some member states. We have long gone past the point where - this is an observation from outside - everybody wonders what is going to be in the budget until the Minister for Finance actually announces it. It is fair to say that budgets in recent years have produced very few surprises, in terms of people knowing largely what will be in them.

Chairman

More leaks than Irish Water.

Mr. Alan Dukes

I could not possibly comment on that because the Chairman might have to pull me up on it.

Deputy Durkan asked whether the process was sufficiently investigative and forensic. It has not been up to now but it seems to me that the structure that is there allows it to be, if the participants set out to do that. There were a number of other comments and I will leave it to Mr. Tutty to comment on them, except one final issue.

Deputy Durkan suggested that austerity did not cause the problems but was a result of all the problems we have had. On whether the policy that has been followed was ideal, I believe it was far from ideal. Although this is outside the context of the documents we are discussing, if we follow the logic of the steps outlined by the Commission, which we in the institute have said are too slow and unclear, a feature of the crisis we have been through is that the action that has been taken and the results we have had from it have not in any way reflected the underlying financial strength of the euro system. I believe a great many of the issues and a significant part of the austerity that has been visited upon us are as a result of the fact that we have not used the collective strength of the euro area system to best advantage.

Chairman

Is Mr. Dukes referring to "we" as the Irish or the European area?

Mr. Alan Dukes

I am speaking about the eurozone. Partly because it has not had the instruments but also because it has not had the will, it has not used the collective strength of the eurozone system to resolve the problem. Part of the IIEA's impatience with the system is that the course set out so far seems too lengthy.

Chairman

Could Mr. Dukes expand on that? When he says the European system has not been used as it could have been used, is he referring to the European Central Bank, the eurobond or what? What could have been done that was not done?

Mr. Alan Dukes

There are several strands to it, including the two the Chairman has mentioned. One is the European Central Bank did not get involved in quantitative easing until quite a late stage in the process. If we compare the sequence of the reaction to crisis by the United States and the eurozone, the eurozone lagged by quite a period of time. The second point is politically more sensitive. If we had used the strength of the eurozone as a funding mechanism to resolve the issues for member states that were in dire financial trouble, we could have made faster progress. However, clearly the political will was not there to have any substantial degree of mutualisation of borrowing or financial capacity early enough in the process. Even today, there is substantial resistance to the idea of mutualisation of borrowing capacity or debt to any extent. As long as that continues to be the case, the eurozone will be trying to deal with difficult issues with the equivalent of one hand tied behind its back.

Chairman

The five presidents' report does not mention mutualisation at all.

Mr. Alan Dukes

No.

Chairman

Mr. Dukes makes no explicit mention of the Germans, although in the presentation we had a discussion on whether the Germans could be more relaxed. Indeed, a country specific recommendation was that they should be more relaxed in their budgetary stance. Does Mr. Dukes see things changing in Berlin any time soon? Also, how does he think we as a nation, combined with our European colleagues, can help put pressure on such areas?

Mr. Alan Dukes

Mr. Tutty said quite explicitly that so far Germany has resisted all attempts to have a symmetric approach on the advantages it has had as opposed to the disadvantages others of us have had.

Deputy Bernard J. Durkan

Germany has a history in that area. It does not have fond memories of similar issues in the not so distant past. That may be one of the reasons it has been reluctant to go as far as we would like it to go on this issue. For example, Angela Merkel has been demonised to a huge extent by some groups and institutions right across Europe - wrongly so, I believe. If Germany made a serious mistake and the eurozone and European concept imploded, the fickle finger of fortune would point at Germany. That is one of the reasons it has been reluctant to get involved in quantitative easing and all of that. It has history in that regard.

Mr. Alan Dukes

At the same time, the causes and origins of the problem we have had since 2007 have been very different from the causes and origins of the memory Deputy Durkan refers to.

Mr. Michael Tutty

Germany has been running a huge current account surplus and that is why it is being condemned by the Commission and the rest of us. It is because it is breaching the guidelines set out in the macroeconomic imbalance procedure, which is not even symmetrical. It has gone above the upper limit in place at a time when it is over-achieving on its medium term objective on the budget and when all in Germany and elsewhere say they need more capital investment but Germany is not willing to do that. I suspect that at the time when Ireland and others were running large deficits, Germany was unwilling to show solidarity until we got our houses in order and that maybe in the future it will be more accommodating. It will not say then it is doing it to bail out these other countries but is doing it to help at European level.

On the European semester, it has developed well over the past few years and there are mechanisms in place to prevent what happened leading up to the recession from happening again. The macroeconomic imbalance procedure I mentioned is looking at wider issues than just the fiscal deficits or surpluses. Therefore, there will be more early warnings of things going wrong. This is a good system, although it must be developed more towards common mechanisms, solidarity and, perhaps, interstate transfers. All of that will come later. The five presidents' report dropped any references to transfers or solidarity but these will arise again in stage two when looking at euro area treasuries and such things. Obviously, the five presidents felt the member states were not ready for this yet and there was not the political will to go down that road. Therefore, they are saying we should try to develop what we have first and then, in stage two, we can get down to doing things better. We feel they should be a bit more ambitious in terms of getting the discussion going, even if we know proposals will not be implemented until later.

The semester process is working well and the country specific recommendations have been refined and narrowed down to a smaller number. There used to be a large number of recommendations and the Commission did not return to ask what had been done. Recommendations were made but nobody followed up later to see whether they had been implemented. This is now happening and we now have to report on how we are implementing the country specific recommendations. If we have not implemented them, we will be shown publicly not to have done so, whereas previously nothing happened.

These country specific recommendations are discussed with the member states beforehand and do not just come out of the blue. It is not that the Commission in Brussels thinks that Ireland, for example, needs to do something on its health services. In the discussions with the member states, it tries to identify the most important issues and to put forward what each country should be doing. The French always seem to be the ones to jump up and down when the country specific recommendations are issued and to say that we cannot have the Commission dictating to us what we do with our pension system, for example. However, they usually turn around and do something anyway. Last year, France's pension system was the issue highlighted.

The French had plans on the table already to do things but did not want to be seen to be dictated to from Brussels.

The whole European semester is starting to work well and can give a route map towards taking further initiatives such as the euro area treasury. Senator Reilly asked where would that go. I quoted from the five presidents' report, which indicates that it would not determine a country's individual taxes or expenditures. That will still be a matter for national preferences. It is about what overall deficit or surplus the European Union should be looking for and how that be distributed among the member states. It is about looking at the sort of fiscal position Ireland, France and so on should have, all adding up to a good European one, but then leaving it to the member states individually to determine the specifics of expenditure or taxation. Going beyond that, it is hoped that in the future there would be some solidarity mechanisms in place, not so much for transfers but to deal with shocks in individual states that are not in others. That can be developed over time once we get more confidence in the member states. It will not be simply transfers from Germany to those dreadful southerners, Ireland or other states which cannot control their situation.

The Chairman spoke about the Irish Fiscal Advisory Council and whether it would be appropriate to have a second opinion. My own view is that when we have what is almost an appeals body, the first body gets ignored because something will always be appealed to the appeals body. I have never been happy with an independent body being subject to an appeals mechanism to someone else who might say they do not agree with what the Irish Fiscal Advisory Council says. I would see the European board being available to see whether grave errors are being made in individual countries that are not being picked up by the fiscal advisory boards but not one that routinely draws up the same sort of reports as the Irish Fiscal Advisory Council or the other equivalents and tries to second guess them. It should stay more at a European level, perhaps looking at whether gross errors are being made in others but not duplicating the work the individual authorities are doing.

Deputy Eric Byrne asked which proposals in our submission on the analytical note had been taken on board. We have a little section at the end of our comments on the five presidents' report which looks at elements from our comments on the analytical note as to what was taken on board. I will not read them all out but they did take on board some of the suggestions. I do not believe our comments were totally original. There were elements in the analytical note that we favour and which have followed on through into the five presidents' report but the main items dropped were the solidarity type mechanisms that do not appear at all in the five presidents' report. It became much less radical than the analytical note had been, presumably on the basis that they did not think the member states were ready to go down more radical lines. Our main comment would be that they should get moving on drawing up these more radical proposals now and not wait for a White Paper in the spring of 2017, which would then start generating discussion. We need the discussion leading up to that White Paper so that it will reflect all the work being done in the meanwhile and not just that worked on within the Commission.

Mr. Alan Dukes

It struck me and some of the colleagues at the IIEA that the five presidents' report was the first occasion on which there was an explicit reference to a euro area fiscal stance. That seems to me to be a substantial mindset change that could have implications for the future.

Chairman

Indeed, and following up on that and on Mr. Tutty's last point about the timescales, this has implications for the renegotiation strategy the British Government is undertaking with regard to its membership. Does Mr. Tutty believe more detailed proposals potentially could derail his attempts to keep the United Kingdom within the EU? Does he believe it might be seen as unhelpful and that this might be one of the reasons we are not seeing the detail on these proposals?

Mr. Michael Tutty

It may well be but we cannot put everything on hold while the British look into their hearts and see whether they want to stay. We will see soon what exactly David Cameron and the British Government will put down on paper as their proposals but much of what is happening can happen within the euro area and not affect those outside the euro.

I think it was Deputy Durkan who suggested that everyone should be in the euro. It would be desirable if everyone was but the British are the main outliers. They are so hung up on having their own currency that they do not want to come in and no one will be able to force them to do so. The difficulties within the euro area in recent times would not have strengthened the case for persuading them to come in so it may be a long way down the road before that would be conceivable. I do not believe we can put everything on hold just because it might upset the British. If we need it to get economic and monetary union working well for the rest of us we should at least push ahead with having discussions on it.

Mr. Alan Dukes

Also, it is fair to say that a good deal of thought and effort has already gone into structures and processes that are designed to take account of the interests of the "outs", as they are called, so that what the "ins" do does not adversely affect the "outs". It is likely there will continue to be a substantial number of "outs" for some time to come, not only because of internal difficulties in the eurozone but because some of the states that are not yet members of the eurozone, and some of them that do not or would not yet qualify, are not likely to qualify for some time to come, therefore, the issue may not arise for some of them for some years.

Deputy Seán Kyne

Mr. Tutty stated that the country specific recommendations do not fall down from the sky but are negotiated with the countries, which is the right and proper process. Is it country led or Commission led? Can a country that does not want to reform start pushing other issues to which it is more favourably disposed rather than allowing the Commission to tell it what it should be doing?

Mr. Michael Tutty

I do not believe the Commission would be put off by a member state. If the Commission believes this is a serious issue in respect of which progress is required, it would come up with recommendations. Ultimately, it is the Commission that puts forward the country specific recommendations. These are then adopted by the Council. I do not believe there has ever been a case where the Council declined to adopt what was put forward by the Commission. It is welcome that they are discussed because it would be crazy if the Commission, off its own bat, came up with a set of recommendations that the member states did not believe were justified. At the same time, I agree with the Deputy that it would be a bad move if the Commission only put forward what the member states were happy with.

For example, when the Commission suggested a reform of the French pension system the French Government said it was a terrible idea and the Commission should not ask them to do so. There is some tension but I would be most unhappy if the Commission would not put forward proposals just because a member state did not want to do something at this particular moment.

Mr. Alan Dukes

That kind of discussion underlines the usefulness of having an interaction between the Commission and national Parliaments early in the process, either before or after the country specific recommendations but certainly before policies have gelled and began to take shape in budgetary proposals.

Deputy Seán Kyne

A Government may not want to pursue something but the Opposition could debate the matter in parliament and the Commission could take up the matter.

Chairman

We are all heartened by the start made by First Vice-President Timmermans on communications between national parliaments. It is a noted improvement on the situation with the previous Commission. On that positive note, I thank both witnesses for coming here today and for their helpful comments. Today's meeting is our last one on the Five Presidents' report. We will make a political contribution that is based on our meetings and we will make sure that all of our guests receive a copy of it in the coming weeks.

I remind members that we will meet members of the Scottish Parliament at lunchtime tomorrow to discuss the impact of Brexit and our next formal meeting will be next Thursday at 2 p.m.

The joint committee adjourned at 2.32 p.m. until 2 p.m. on Thursday, 12 November 2015.