European Council: Statements

Minister of State at the Department of Foreign Affairs (Deputy Dick Roche)

There were four main items on the European Council agenda for 28 and 29 October 2010. The first was the report of the task force chaired by Mr. Van Rompuy, President of the European Council, the second was preparations for the G20 meeting which takes place in Seoul later this month, the third was preparations for the Cancún conference on climate change and the fourth was preparation for a number of forthcoming summits, including those with the United States, Russia and Ukraine.

In March this year the European Council asked its President, Mr. Herman Van Rompuy, to establish a task force of the member states, in co-operation with the Commission and the European Central Bank, to examine options to strengthen the Union's framework for economic governance and to bring forward recommendations before the end of 2010. As Senators know, events caught up with this original proposition and in April, in the face of extreme pressure from the international markets, Greece was forced to ask the EU for support. This led to the creation of an ad hoc rescue package based on bilateral loans from other eurozone member states, in which Ireland played its part. In May, the European stabilisation mechanism, aimed at preserving financial stability, was put in place for a period of three years up to mid-2013. This was achieved through the establishment of the European financial stability facility through which euro area member states agreed to provide pro rata guarantees in respect of funding raised to support member states which find themselves in difficulties caused by exceptional circumstances beyond their control.

The task force produced its final report on 21 October. It is to be commended on the speed with which it carried out its task. The report made recommendations aimed at strengthening fiscal discipline in the Union, introducing new macroeconomic surveillance arrangements and setting the principles for a robust crisis management framework. The package of measures proposed by the task force includes a number of key elements. The report proposes a strengthened Stability and Growth Pact and the introduction of greater financial discipline with an enhanced focus on public debt as well as deficits. While the report found that the current framework remains broadly valid, it felt that it needs to be applied in a better and more consistent way. In particular, there is a need for a greater focus on debt and fiscal sustainability.

On sanctions, which were the subject of particular and detailed consideration, the task force has sought to strike the right balance. It proposes to enlarge the spectrum of sanctions available and to apply them earlier and on a more semi-automatic basis than is currently the case, with the new arrangements, in the first instance, applying to euro area member states only. The task force report also recommends the introduction of a new macroeconomic surveillance framework, including an excessive imbalances procedure which will operate alongside the Stability and Growth Pact. Under this new arrangement, an annual assessment of macroeconomic imbalances and vulnerabilities will be undertaken. In especially serious cases, where prompt corrective action is not taken, euro area member states will ultimately face sanctions.

The report also notes the agreement of the European Council earlier this year that economic policy co-ordination be deepened and strengthened through the institution of a "European Semester", a new timetable designed to enable the EU dimension to be better reflected when countries prepare budget and economic reform programmes. The task force also recommended that national budgetary frameworks should be strengthened to underpin compliance with the Stability and Growth Pact. Last week's European Council endorsed the task force report and called for a fast-track approach to its implementation. The task force has set summer 2011 as a target timeframe for agreement between the Council and the European Parliament.

As Members will be aware, the task force acknowledged that the arrangements put in place earlier this year were a good line of defence for the next three years. It went on, however, to state that, in the medium term, it believed that there is a need to establish a credible, permanent crisis mechanism. The Franco-German declarations at Deauville gave additional emphasis to this point on the eve of the European Council. A permanent framework to replace the arrangements that run out in 2013 must stand on a firm legal foundation. As the Taoiseach said in the Dáil, this is not just a matter for one or two member states to decide.

As a result of the work of the task force, the Union now has an opportunity to reflect on appropriate arrangements for the future, building on the experience gained by the European financial stability facility and the need for the more considered approach required as a permanent mechanism. Recognising this, the European Council has asked President Van Rompuy to undertake consultations with member states, including on the question of limited treaty change required to that effect. It has agreed to revert to this matter in December with a view to taking the final decision, both on the outline of a crisis mechanism and on a limited treaty amendment, in order that any change can be ratified by mid-2013 at the latest. In the light of speculation as to what this might mean for Ireland, it is important to note that what is in mind is a very targeted and limited exercise. When President Van Rompuy has completed his consultations, he will bring forward a detailed proposal setting out what is required. Until he does that, it is pointless to speculate what steps are needed in this country to ratify the new arrangements.

Ahead of the summit, France and Germany, with perhaps one or two supporters, have suggested that the treaties should be amended to provide for the suspension of the voting rights of a member state persistently in breach of its obligations. This proposition was received with very little enthusiasm. The President of the European Council intends, as a subsequent and completely separate exercise, to examine the matter in further consultation with the member states. No timeframe or deadline has been set for this.

Following a presentation by the President of the European Parliament, Jerzy Buzek, there was a discussion on the Union's future budget. The European Council did not have an opportunity to discuss the matter in detail as the Lisbon treaty mechanism for agreeing the budget between the Council and the Parliament is under way. The view among most member states was that it would not be timely to have that kind of detailed discussion on the budget within the Council. The conclusions stressed that it is essential that the European Union budget and the forthcoming multi-annual financial framework reflect the reality that most member states now face, namely, the need to take significant steps to make their deficit and debt levels more sustainable.

As has been reported, at the end of the Council, the Heads of State or Government of 12 member states cosigned a letter to the President of the European Council and the current Belgian Presidency stating that they were not prepared to accept that the EU budget for 2011 could increase by any more than the 2.91% already proposed by the Council earlier this year. Given the fact that Council and Parliament negotiations are continuing, Ireland did not participate in this initiative.

The European Council also discussed a number of issues, including preparations for the forthcoming G20 summit in Seoul later this month, the Cancún conference on climate change and summits with third countries, including the United States, Russia, Ukraine, India and Africa. Given the time pressure, the discussion and preparation for the G20 summit was very truncated. The issues were extensively discussed during the General Affairs Council and Foreign Affairs Council beforehand, and the European Council adopted conclusions on them. The European Union will be represented at Seoul by President Van Rompuy and President Barroso. The European Council discussion was intended to assist them in getting a sense of the issues the Union should defend as a matter of priority in Seoul. While Ireland is not a member of the G20, the EU participation provides us with a useful window on its deliberations.

The European Council conclusions highlighted the need for the G20 to send an ambitious signal concerning the concrete and timely implementation of measures agreed in the framework for strong, sustainable and balanced growth. The conclusions also underlined the continued need to keep markets open, to inject momentum into the Doha trade negotiations and to avoid all forms of economic protectionism.

The European Council finalised the European Union's position for the forthcoming Cancún conference on climate change — we all hoped it would be rather less of a train wreck than what happened in the case of Copenhagen — and confirmed the willingness of the Union to consider a second commitment period, beyond the Kyoto Protocol, provided that other developed countries commit themselves to comparable emissions reductions and that more advanced developing countries contribute adequately, according to their responsibilities and respective capacities. Discussion of this issue was very limited at the European Council as there was broad agreement on the draft conclusions. The coming weeks will see a number of international meetings which will provide an opportunity for the European Union to promote its policy priorities. The October European Council agreed the key political messages for the European Union in advance of these events.

The summit with the US will take place in Lisbon on 20 November. The European Council agreed that this was a critical time for the transatlantic relationship. European Union leaders underlined the importance of presenting clear and coherent messages to the United States and the necessity for the summit to produce concrete outcomes which could be taken forward jointly. Discussions at the summit will focus on three key areas, the global economy, climate change and energy, and security and development. On the global economy, the European Union will push for a key role to be given to the Transatlantic Economic Council in driving forward an agenda focused on jobs, growth and innovation.

The European Council noted that the summit with the Ukraine will be a useful opportunity to engage the new administration on the reform process and to consider the issue of visa liberalisation, on which a number of member states have expressed strong reservations. European Union leaders also agreed that the summit with Russia would focus on progress on the partnership for modernisation initiative which was announced at the last summit in Rostov-on-Don. President Medvedev has made modernisation his central theme and has identified the European Union as Russia's natural partner for providing external support and inspiration to his reformist agenda. I believe this is one of the areas at which the European Union needs to look. It needs to look east as well as west and should see Russia as a partner and near neighbour with whom we must co-operate and develop more fruitful relationships.

The European Council meeting was a significant one. It set out the way forward for our internal economic governance, while also preparing for our engagement with the outside worlds. We look forward to the December European Council and I look forward to questions from Members of the Seanad.

Senator Paschal Donohoe

I welcome the Minister of State to the House and thank him for his update on the conclusions and decisions from the European Council meeting. I want to register a concern about a number of the decisions and conclusions that came out of this European Council meeting. In doing that, I am deeply mindful of the fact that if it was not for the support the European Union has given our country over recent months and throughout the year, we would be in a more difficult place than we are currently. What is in our economic self-interest is also in the economic self-interest of the eurozone and, therefore, of most of the European Union. Our future prosperity and economic security and their maintenance are as much in our interest as they are in the interest of our European neighbours. With that in mind, it is incumbent on people who are deeply interested in what is happening in Europe and how it will affect Ireland to state their concerns.

There are three different areas in which the conclusions of last week must be cause for concern for Ireland and for where we find ourselves at this time. I want to focus on the declaration of conclusions produced after the European Council meeting, in particular, the second conclusion which relates to the setting up of a permanent crisis mechanism to safeguard the financial stability of the eurozone.

It contains a certain sentence which will further affect the difficulties the country is currently experiencing:

The European Council welcomes the intention of the Commission to undertake, in close consultation with the President of the European Council, preparatory work on the general features of a future new mechanism, [including] the role of the private sector, the role of the IMF and the very strong conditionality under which such programmes should operate.

This wording has had the effect of further spooking the people we need to invest in Ireland. It indicates the European Union will over the next several months put in place a mechanism to manage countries which cannot cope with their level of national debt. A consequence of this mechanism could be that private investors and bondholders in such a country in question take a hit. This is a concern for a country such as ours that is so deeply dependent on the support of the capital markets. Those who would invest in Ireland are not clear whether this would affect the current bonds they hold or future bonds they may acquire.

One consequence of this European Council meeting will be to make the current difficulties we have in raising capital even more fraught. One only has to look at the briefing notes and media comments by fund managers and investment analysts to see the evidence of this concern. In today's Financial Times, for example, the head of fixed-income research at a large bank stated:

The German move ... has reminded investors that there is not a never-ending pot of money for state bail-outs. If the weaker eurozone countries cannot turn round their economies, then investors may have to pay up.

This has further increased the anxiety and worries people have about their willingness to invest in what are now termed peripheral states. It is in Ireland's interest that the discussions and process of establishing this mechanism are done promptly. The last thing Ireland needs when it returns to the capital markets in January is any anxiety being further heightened by decisions made at European Council level regarding the hit financial investors could take if an economy finds itself unable to deal with its level of debt.

The European Council meeting made proposals for strengthening the Stability and Growth Pact. My interest in this area stems from producing a report for the Joint Committee on European Affairs on this before the summer recess and which was published in July. The Council proposed sanctions against eurozone member states can be triggered if a state's deficit goes ahead of the 3% level of national income, if an economy's gross debt, as a percentage of national income, exceeds 60% at any point, or if the conduct of a member state's fiscal policy presents a threat to macroeconomic stability. A specific example was given by the European Commission in a document that preceded this meeting that grounds for sanction could be if a country's public expenditure growth exceeded its predicted future national income growth. The Council proposed changing the mechanism by which these sanctions could be triggered to default. This means that if the European Council wants to levy a sanction against a member state, it must vote for the sanction not to happen as opposed to the sanction happening. This was referred to as a semi-automatic trigger.

In my report, I pointed to two difficulties that would arise from these changes. First, how willing would the European Council be to vote for significant sanctions against a member state? Second, was the sanction agenda going too far given how alert the bond markets are to any budgetary issues a member state may have? My concerns about the political feasibility of these sanctions materialised in last week's meeting when France and Germany decided not to implement the proposal from the task force on economic governance. The new agenda being wheeled out by the European Council President, Mr. Van Rompuy, and the Commission suffered its first blow. Both countries said they wanted more of a role for political discretion regarding the application of sanctions. We have seen the role played by political discretion in the application of sanctions in that no country has ever been sanctioned before.

My second concern is whether the increase in the number of sanctions proposed will actually sow the seeds for the failure of the proposed new Stability and Growth Pact mechanism, just as the last one failed. While regrettable, it is easy to see the European Council and Commission deciding to sanction, say, Ireland or Greece. Would it be willing, however, to sanction Italy, Spain or Germany? How will the sanction agenda really work? Is it credible when it is asked whether it will be applied to medium and large-sized economies? The European architecture has only to decide not to apply these sanctions on one occasion and the credibility of the entire mechanism is completely undermined yet again.

We are now operating in an environment in which the bond markets, having been asleep for the past ten years, are now hyper alert. If any single member state shows signs of budget difficulties or a lack of fiscal sustainability, the bond markets will levy the sanctions. They are doing this to Ireland, telling us they do not have confidence to lend to us at a rate of interest we are willing to pay.

Would the European member states not be better off combining a more narrow sanction agenda — but one that has a greater chance of being implemented — with the fact that the financial markets are already daily sanctioning member states if they perceive them not to be fiscally prudent or have problems that would undermine their future economies and their ability to meet their obligations as eurozone members?

I have touched on two economic areas, one of which concerns whether what happened last week has inadvertently deepened the difficulty in which we find ourselves. My other point was to raise concerns about the credibility of proposals under the Stability and Growth Pact. I question whether the sanction agenda has gone too far and whether a narrower but better applied agenda might be the way to go. My view is that is what will come to pass.

My third concern is about an issue at the heart of Ireland's standing within Europe. So many of the small to medium member states' economies have played a role in trying to provide a counterpoint to the Franco-German alliance. The latter alliance has also played a role in powering Europe forward. When we get to the Council table, however, our credibility has been undermined by the economic difficulty we find ourselves in at the moment.

The Minister of State referred to a Franco-German statement preceding the European Council meeting, which placed further emphasis on the decisions and conclusions made at the Council. My concern is that the Council decisions and conclusions reflected what the larger member states want. The ability of other member states to put their own viewpoints forward is under great pressure because of the economic difficulties they are in, including ourselves.

A consequence of what occurred last week has been to make our own challenges even greater. We must be willing to speak up and make these points. It is in our economic interests to continue to participate in the eurozone in a credible manner, which the financial markets are willing to support. That is also in the interests of the European Union generally and of the eurozone.

I look forward to the Minister of State's response to the concerns I have raised.

Senator Terry Leyden

I welcome the Minister of State, Deputy Roche, and compliment him on his work in the European Union. He is one of the most experienced senior Ministers in the European Union. I have seen him attending many key meetings.

I am pleased to have an opportunity to discuss the recent European Council meeting. Such meetings are incredibly important both for our country and the future well-being of the European Union, which has been consistently positive for Ireland. Last week in the Dáil, the Taoiseach provided us with a detailed account of what happened at the last Council meeting. There has been some discussion in Ireland following this meeting regarding certain possible new procedures that are being discussed at EU Council level. In particular, people are rightly interested in how Ireland, as a proud member of the EU, can work with our colleagues to ensure the fiscal and macroeconomic mistakes of the past can never recur. It is not a question of attributing blame, but the fact that we are in the eurozone and that interest rates were so low certainly fuelled the building boom here. There is no doubt about that. It has been extraordinarily useful for our exports, but it was abused by many during that period, which brought about the current difficult situation.

A task force headed up by President Van Rompuy, and including my colleague the Minister for Finance, Deputy Brian Lenihan, was asked to examine options to strengthen the Union's framework for economic governance. This task force has completed its deliberations and forwarded its report at the end of October. The main outcomes of this task force were the need to strengthen fiscal discipline in the Union, introducing new macroeconomic surveillance arrangements and setting the principles for a robust crisis management framework. The package of measures proposed by the task force includes a number of key elements. The report proposes a strengthened Stability and Growth Pact, introducing greater financial discipline with an enhanced focus on public debt as well as deficits.

The proposal to reprimand countries by removing voting rights would be very much against the principles of the EU. I do not think it could be countenanced within any of the EU treaties passed by member states.

I am glad the task force has proposed that the Stability and Growth Pact be applied in a better and more consistent way. For too long, larger economies in Europe were able to bypass the SGP rules and procedures, while countries such as Ireland were forced to stick rigidly to the rules and sanctions.

Earlier this year, the European Union and the IMF had to step in to help Greece. An emergency package of measures was agreed over a very short period. We played a role in this regard. It is wise and prudent for the EU to examine this issue in greater detail and to develop a credible, permanent crisis resolution framework for the eurozone. This is essential if the euro is to survive and meet the challenges of the next decade.

As with all changes of this nature, there is concern about the transfer of competencies from the Oireachtas to the European Union. With this in mind, I was heartened to hear the Taoiseach state that he does not envisage any transfer of competencies as part of this new framework and that the required changes will be brought about through the simplified revision procedures. These are exactly the situations that the Lisbon treaty was designed to deal with.

It would be unwise to reopen the debate in light of the new Tory-Liberal Democrat Government in the UK. They may decide that there should be a referendum on any further treaties. The Minister of State may provide the House with his views, having met with his opposite numbers in Britain. This may be an opportunity to open debate in Britain, where there are quite a number of eurosceptics among the Conservatives.

The Minister of State recently attended meetings of the Council of Foreign Ministers and the General Affairs Council. Those meetings dealt with international issues and I know the priority was the fiscal situation, and rightly so. The latter subject concentrated the minds of the Taoiseach and his Ministers.

We should, however, continue to take a deep interest in international affairs. I was concerned, as indeed the world is, about the Israeli Government's decision to approve the construction of 1,200 settlements in east Jerusalem. These will be for Israeli settlers and the construction plans are totally contrary to international law and international agreements. Those plans will not allow the peace talks to proceed, which is a serious development. It has the capacity to destroy the fragile Middle East peace process. The European Union must continue to address this. We are providing enormous resources to the emerging Palestinian state. Ireland has played a proud role in this regard. The late Brian Lenihan Snr was the first Foreign Minister in Europe to recognise the Palestinian people's right to self determination. We have a proud record in that regard and our voice must be heard constantly on this matter.

Turkish membership of the EU requires special consideration, particularly in light of the division of Cyprus and the occupation of northern Cyprus by the Turkish military. The division in that region is of deep concern in Cyprus. It is difficult to believe that Famagusta in Cyprus is a ghost city. No efforts have been made at reconciliation in this regard. As a result of the problems we are facing, perhaps these issues are not being given the priority they deserve.

The Minister for Foreign Affairs and the Minister of State have briefed us on the normalisation of relations with Cuba. This is welcome. The removal of sanctions was welcomed by the Joint Committee on European Affairs. I refer to the improvements made under President Raúl Castro who is a more accommodating leader. A European will have influence with the United States of America to have the sanctions reduced.

The Doha Round of the world trade talks seems to be gone from the agenda. Liberalisation of trade is in the interests of Ireland, particularly in respect of intellectual property rights and other exports. This matter should be given priority.

We are going through a difficult period and there is a case to be made for adopting a united approach in the budget on 7 December. I welcome the attendance of Commissioner Rehn and others who have taken tremendous interest in the affairs of the country. They have had useful discussions with the Government and the leaders and members of the Opposition parties. The approach adopted is very refreshing. What happens in regard to elections is another day's work, but in the national interest we must take a united approach, as a budget must be approved on 7 December. As a Deputy and Minister of State in the 1980s, I recall the positive role played by the Opposition at that time. It was unfortunate that an election was called following a Private Members' motion, which should not have happened. Mr. Alan Dukes had given a commitment on supporting the position of the Government, which I had commended. I remind people of the decision he made in the national interest. The main Opposition party will rise to the occasion and postpone elections until we can stabilise the economy. We can have elections in due course. We should show Ireland can bring forward a budget for 2011.

I thank the Minister of State for attending the Chamber. This is the first time I can recall a discussion on the European Council. This is welcome. I also welcome the fact that the Minister for Foreign Affairs and the Minister of State briefed the Joint Committee on European Affairs before attending the Council meeting. This is a new innovation and a useful exercise which is in keeping with the principle of the Lisbon treaty — the adoption of a more democratic approach. Long may this continue.

Senator Feargal Quinn

I welcome the Minister of State and endorse the point made by the Senator Leyden on the attendance of the Minister of State. The attendance of the Minister for Foreign Affairs and the Minister of State at the meeting of the Joint Committee on European Affairs is a very useful development. The report by the Minister of State on the meeting that took place on 28 and 29 October gives us an insight we would not normally have.

The European Council agreed to tighten the Stability and Growth Pact which promises to impose much harder sanctions on countries that fail to abide by the rules. In addition, the European Council followed the advice of the task force to establish a system aimed at reducing macroeconomic imbalances produced by a lack of convergence of economic policies within the eurozone. These decisions and recommendations were inspired largely by the view that the source of the debt crisis in the eurozone was the misbehaviour of national governments. However, this is not the full story. Paul de Grauwe, professor of economics at the Catholic university of Louvain in Belgium, argues that although EU governments bear responsibility for their debt problems, this is only half of the story because the financial crisis was triggered by unsustainable increases in private debt. Morgan Kelly's article in The Irish Times yesterday covered this point well. Professor de Grauwe says the narrative that national governments are to blame fails to take into account the fact that the financial crisis erupted because of unsustainable increases in private debt of both households and financial institutions which forced many governments to pick up the pieces. Blaming national governments for the macroeconomic divergences within the eurozone fails to take into account that the divergences have little to do with what governments did or failed to do. Ultimately, only monetary authorities can control bank credit levels. Governments can do relatively little about them. Thus, the responsibility of the European monetary authorities in the development of unsustainable private debt levels is stronger than that of national governments. Reforms of governance systems in the eurozone should, therefore, not only focus on the responsibilities of national governments which are serious but also on those of the European monetary authorities and, in particular, the ECB. This is a point often forgotten in the argument. We must remember that the European monetary authorities also failed and that people must take some responsibility for the levels of private debt racked up. We are learning about the mortgage crisis that will hit us. That is why I support a strengthening of EU monitoring of economic policies.

As to a potential change to the Lisbon treaty which is high on the agenda and for which a referendum may be needed in Ireland to give effect to these changes in the financial sector, there are indications that a number of governments are getting cold feet, a point on which the Minister of State touched. Let us look, for instance, at the fact that the Polish Prime Minister, Donald Tusk, said last Thursday that the political deal struck at last week's summit was not the final word on the matter. Bearing in mind that Poland is one of the biggest EU member states, the sixth largest by population, Mr. Tusk said:

A potential change to the Lisbon Treaty must be justified 100 per cent and must not serve the interests of just one, two or five EU nations, because such a change would simply not be accepted. A deal reached in Brussels isn't enough. The member states must then go on to accept it.

As regards the bilateral deal on an EU treaty change struck at the summit between Chancellor Angela Merkel and French President, Nicolas Sarkozy, Italian Foreign Minister, Franco Frattini, said the other EU member states had been excluded from the real decision making. I would like to hear the views of the Minister of State on this point. He said there was little enthusiasm for it. Mr. Frattini said in an interview with the Financial Times, “Pre-cooked decisions put on the table to be taken or left by others are not acceptable for other countries like Italy and other big players.” These statements suggest there is a backtracking on an EU treaty change by member states and give an indication as to the room for manoeuvre that remains.

The European Commission recently presented a number of options to fuel the Union's future budget, including an EU value-added tax, a tax on air transport or a share of new financial, corporate or energy taxes. As I stated last week, when a family or a business has a challenge because their expenditure is greater than their income, most of them say they must cut back on their expenditure. We do not automatically say, we have to get more income. It would be a lovely way to do it but for most of us, whether we are dealing with a family or running a business, when we find our expenditure is higher than our income, we cut back on our expenditure. The suggestion is that the European Commission is saying we must balance the budget and that we must consider more taxes such as a tax on air transport and new financial, corporate or energy taxes. It was reported last week that Chancellor Angela Merkel was "against the introduction of [such] a European tax". This is perhaps another positive development for Ireland, although I am not sure we can always rely on everything we hear. Sometimes we just hear what we want to hear.

Germany has been advocating a more permanent financial crisis mechanism which incorporates a sovereign debt restructuring procedure in order that the private sector also foots part of the bill for future bailouts. It was interesting to hear last Thursday that the European Central Bank president, Jean Claude Trichet, said that such a mechanism would serve to unsettle markets such as our own.

On a related note, Portugal is among the countries suffering a similar debt crisis to our own. It is now gaining help from the Chinese to tackle it. Hu Jintao, the President of China, said that China and Portugal had agreed to work towards doubling their bilateral trade within five years and balancing commercial flows which are currently highly favourable to China. Chinese and Portuguese officials were scheduled to sign a number of bilateral commercial deals. The Portuguese Government has welcomed a commitment by China to give "positive and favourable consideration" — an interesting choice of words — to purchasing Portuguese Government bonds. Carlos Costa Pina, Portugal's Secretary of State for Treasury and Finance, said:

Considering the fundamentals of the Portuguese economy, the yields on our Government bonds are much higher than they would be in normal market conditions. It's not surprising that Chinese investors want to buy our debt or increase their positions.

China has previously bought Spanish Government bonds and has made a similar offer to buy Greek Government debt when Athens resumes issuing bonds.

The deal between China and Portugal seems to be a very interesting development. One could ask whether this country should be courting the Chinese. The Minister of State, Deputy Roche, might give a view on that. Perhaps we should be considering all avenues to get out of the crisis. The question arises as to whether we should even be worried about China given that the most powerful country of all, the United States, is now built on Chinese money. Those questions are worth asking. I would like to hear if anyone has a view on what the answers should be.

There was an interesting article in The Wall Street Journal on the situation in this country. Mr. Oliver O’Connor wrote about Ireland’s strengths. He concluded by writing:

This is a playable hand. The financial engineering required to restore the Irish budget to health is doable [a nice word], and is being done. Now, it's over to the political engineering, whose highest achievement would be to let the Irish people do what they do best: adjust and thrive.

They are healthy, strong words. Mr. John Bruton also got it right when he wrote yesterday: "The speculators who are betting that Ireland won't pay its sovereign debts on time, and who are thereby driving up the spread on Irish bonds, will be proven wrong and will lose money."

We had an interesting debate on consensus on the Order of Business. I referred to a quote from a British statesman of some years ago who said that the duty of the Opposition is to oppose. I have never quite understood that. It seems to me that the duty of the Opposition is to help develop a correct society and govern correctly. Let us see more of what Mr. John Bruton said and have a positive, can-do attitude. We should not look for personal bailouts, but in conjunction with the help of the European Union, we can come out of this on the other side which will make us much stronger as a country. I have no doubt we can achieve that.

It was interesting to hear what the Minister of State, Deputy Roche, said today. I am interested in the report of the Council meeting. Like Senator Leyden, I hope we will have more such debates in the future and be kept up to date on what takes place at Council meetings immediately following them and in such a manner that it enables all of us to play an active role. I am pleased the Minister of State is playing such a role. He has always shown an active interest in Europe. Between the Minister of State and the Minister, Deputy Martin, we are close to what is happening there. We will keep our eyes on it. So much is happening that we are in danger of being distracted from our own worries rather than concentrating on what is best for us by watching what is happening in the rest of Europe.

Senator Ann Ormonde

I welcome the Minister of State, Deputy Roche, and the opportunity to participate in the debate on the recent European Council meeting which I believe re-affirmed the key role the European Union is taking in responding to some of the greatest challenges we face, be they economic, environmental or international.

I congratulate the Taoiseach and the Minister of State, on the roles they played at the meeting. I thank the Minister of State for coming to the House to provide an update on the discussions in Brussels. I note the endorsement by the European Council of the recommendations of the Van Rompuy task force which has been examining issues relating to economic governance at European Union level. The recommendations are an important framework for Europe as its member states respond to the current economic challenges. They will lead to stronger fiscal discipline within the Union and ensure we have a robust crisis management framework. Such a move is good news for all member states.

Ireland, by its own choice, is part of an economic and monetary union which brings great benefits to our country. It has helped us weather previous economic storms and placed us in a better position to respond to developments in international markets. As we all know, however, membership of any grouping not only brings benefits, it also brings responsibilities. As we move to reduce our budget deficit, we do so mindful of the international commitments we have entered into. The preparations for the four-year plan underline the Government's determination to honour those commitments.

I share the view of the Taoiseach that the findings of the task force represent a significant improvement in economic governance and are to be welcomed. While this item may have dominated the headlines, I also note that a number of other very important issues were discussed by European leaders. The transatlantic trade relationship is key to our recovery. Therefore, the forthcoming EU-US summit in Lisbon later this month comes at a critical time in that relationship. I welcome the decision of the European leaders to enter into the summit with clear and coherent messages and with a belief that the Lisbon discussions must produce concrete proposals that will benefit people on both sides of the Atlantic.

I note that discussions will focus on three main areas as outlined by the Minister of State: the global economy, climate change and energy security. I welcome in particular thedecision of the European Union to push for a renewed focus on the Transatlantic Economic Council. It is planned that the council would drive forward an agenda focused on jobs, growth and innovation. We in this country are fortunate to enjoy the fruits of strong transatlantic trade. Many US companies use Ireland and its talented workforce as the headquarters for their European, Middle Eastern and, in some cases, Asian operations. Small, specialised Irish companies continue to make headway in securing key contracts from Manhattan to Silicon Valley. IDA Ireland, Enterprise Ireland, our embassies and consulates deserve full credit for spearheading our economic links. Any move which makes that link even stronger is to be welcomed.

Europe has always taken a lead in protecting the environment. The Council meeting finalised the European Union's position for the forthcoming Cancún conference on climate change. The Union is willing to consider a second commitment period under the Kyoto Protocol. It is now up to others to follow Europe's lead. The Council meeting was used to prepare the EU position for the G20 summit later this month in Seoul. While Ireland is not a member of the G20, the attendance of President Van Rompuy and Commission President Barroso gives us a useful window through which to monitor discussions at the summit and an opportunity to influence proposals. At a time of international challenges, it is clear the EU continues to ensure that Ireland and its partners are in the best possible position to meet them head on. I welcome the Council's focus on these most pressing of issues.

I thank the Minister of State for his report to the Seanad and for always keeping us up to date concerning European affairs and issues relating to our links with Europe. If we are ever to discuss reform of the Seanad, this is the road to take. The Seanad could not only play a considerable role in keeping up to date on European issues, but in creating a link between our MEPs and the Chamber where discussions in the European Council and the European Parliament are concerned. Seanad reform should be moving in this direction. I appreciate that the Minister of State has always used the Seanad to get his message across in terms of European affairs and it should be acknowledged in the Chamber.

Senator Alex White

I welcome the opportunity to debate last week's European Council meeting. It was only a matter of time before the emergence of issues regarding the proposal on a mechanism, whether it is called a supervisory mechanism or something else, for budgetary policy across the Union. It took no prescience on the part of any Senator to know that the proposal was being flagged as long as six months ago, certainly during our discussion on the agreement of the stabilisation mechanism in May. The supervision and stabilisation of budgetary policy across the Union were always going to emerge. That proposal has now been made.

Some commentators, including The Economist, seem to believe this all arises from a fear of judges, a fear that can be found in this jurisdiction currently, but particularly the German Government’s fear of its constitutional court, what that court might do and what decisions it might make in terms of the constitutionality, pursuant to German law, of the €750 billion temporary rescue fund agreed in early summer. There seems to be a continuing uncertainty regarding the attitude the court is likely to take when the issue is fully open before it. I do not know whether the Minister of State judges the strong position taken by the Germans last week as relating to that Government’s apprehension about the court’s decision on such funds. The argument is that such funds are ultra vires or even contrary to those provisions of the treaties which stand against bailouts. There is a case to be made for the fund in question not falling foul of the treaties, but there is some residual uncertainty regarding the question.

The question is whether what was agreed last week will be a sufficiently durable halfway house that will introduce a robust mechanism, one which will work and which people can see has some value, or a wholesale revision of the treaties. The latter would have implications, not least of all in this country in terms of the question of reopening and amending the treaties or introducing new treaties. The Government would need to decide how extensive those proposals would be. Last week, the Taoiseach stated that whatever changes would be intendant on these proposals would be relatively minor and would not require an amendment. He could not be definitive, although he seemed to be suggesting that we did not need to view the issue in those terms. We all must remain somewhat sceptical in this regard. It is not that I disbelieve the Taoiseach. Rather, it is not possible to be definitive until we see the precise proposal.

From last week, the bottom line is that there is nothing particularly decisive that the Seanad must debate, other than that an issue which has been opened is potentially difficult for the entirety of the EU. It is the opposite side of the coin as regards being in the euro and the Stability and Growth Pact. We have seen their considerable benefits, not least by way of the significant amounts of credit that flowed into the country over a period of eight to ten years. It is easier to come to the conclusion in retrospect that it was never going to be the case that this situation would continue without any impact on the financial stability of the currency.

Unfortunately from our point of view, recent days and weeks have placed us at the vanguard, although not quite of the defence of the euro. Where there is a challenge or risk to the euro or a questioning of its stability as a currency, Ireland is at the heart of the debate. No one takes any pleasure in this and everyone, the Government in particular, is concentrating on what restorative measures can be taken in the short term.

It is not something that is particular to this country, although matters are especially bad in Ireland. For example, take the excessive deficit procedure. I am not sure how accurate the list before me is, but practically every country in the eurozone is in the excessive deficit procedure. Not a single country is not. I do not say this to minimise our problems, as we are in the most acute situation. Our deficit is huge and the impact of getting to 3% by 2014 will be more severe than in any other country. I understand that three countries have the 2014 deadline, namely Ireland, Greece and the UK. The UK is not in the eurozone, but it appears on this list, so I presume the decision in that respect is that the UK must make its corrections by 2014-15. However, each of the other countries finds itself on the list to a greater or lesser extent.

We were never going to be able to avoid the moment in which the Union would need to debate how to put in place the rest of the package of a unified currency. One could not just have a flow of credit and all of the pursuant bounties without there being some controls at the other end. A considerable challenge for the Government is ensuring that countries like Ireland are treated fairly and in a way that does not require us to take budgetary steps that are so severe as to choke off the possibility of any resumption in real growth. The Government must make this judgment call. The Government side will probably say I am in a position to be able to second-guess that. There is a judgment to be made, even in regard to the budget, as to whether €6 billion is a figure we can withstand in terms of the survival of our economy. It is not an exaggeration to put it in those terms. The proof of the matter, as I reminded the House on the Order of Business, is that only two short weeks ago, on 22 October, it was reported in newspapers that the clear view of the Department of Finance was that €4.5 billion was the correct figure. Some individuals have called for an adjustment of the order of €7 billion. Others have gone even higher. I take it the Government chose the figure of €6 billion because it judged that was as far as it was possible to go without causing long-term damage to the growth prospects of the economy. Some of us differ on that figure and believe it is beyond the level at which we can sustain matters. These are the kinds of debates we must have in this country, as we must realise the terrible impact that cutbacks in services, in particular, will have on ordinary people. I am confident that when these issues are debated at the macro-European level, where the talk is of adjustments for countries and economies, periods of four years and many billions of euro, the politicians at that level will remind themselves what they are really talking about, namely, the lives of individual citizens, the effects of these macro decisions and the often very adverse impact they have on people's lives. That is where the debate must take place.

As to the way what was agreed last week at the European Council will play out, we simply cannot say. It is important we note the meeting took place and this process is in place. I hope the Minister of State, Deputy Roche, will take the opportunity to return to the House when there is more certainty about the direction the process is taking and the kind of impact it is likely to have on us and others and that we can have a more definitive discussion about the position at that stage.

Senator Mark Dearey

The Minister of State is welcome. I wish to address two items that were dealt with at the European Council meeting last week, namely, preparations for the climate summit in Cancún and the establishment of a robust and credible permanent crisis mechanism. I shall take the latter item first.

It is clear the day such a mechanism will be required has been in the offing for a long time. The notion of a single currency across a divergent range of economies within the European Union always suggested that, ultimately, some kind of regulatory, disciplinary mechanism would be required. The delicate balance that will be needed between governance of the eurozone and a kind of creeping government of Europe is an important line we need to tread and stay on. It would be against the wishes of the citizenry of Europe to have this mechanism, which as circumstances clearly demonstrated is essential, become a vanguard for a more extensive kind of government of Europe through financial mechanisms. That is not what the citizenry of Europe want and it would lead to a greater sense of the democratic deficit we often speak about when we speak about European politics.

This mechanism is needed. I look at some of the pro-cyclical policies that stoked the boom and wonder whether a mechanism such as has been suggested would have spotted the property bubble. I suspect it would have. Would it have had the power to curtail some of our pro-cyclical policymaking? I suspect it would have. Would it ultimately have taken some of the excess out of the asset bubble we all experienced? I suspect it would have. For these reasons it is important it should implemented. The question is how it can. The advice received by the Joint Committee on European Affairs is that there is always the possibility — Senator White was correct about this — that changes to the Lisbon treaty might require a constitutional referendum. I welcome the Taoiseach's view, expressed last week, that such changes probably could be limited so as not to impact on the Constitution. A constitutional referendum following so closely on the heels of the Lisbon treaty referendum is not desirable and would not be welcome. That belief would apply on any side of the House. A referendum would give oxygen to a range of opinion which was invalidated by the last Lisbon treaty referendum despite its victory in an earlier round. We do not need to open up again that range of often spurious debate.

Regarding the kinds of changes required, I understand the President of the European Council, Herman Van Rompuy, will do a round of European nations to discuss individual needs and get a feel for the kinds of limited treaty changes that would be acceptable throughout Europe. In that situation, I hope Ireland will stress how undesirable it would be to have changes that might require a referendum. That is my cautionary word about the changes envisaged but it is not to diminish in any way my sense of the need for a robust, fixed and permanent mechanism to replace the temporary mechanism that was established during the emergency situation of the Greek debt crisis. We need a broader range of parameters for what would trigger an intervention. The Growth and Stability Pact is based on an annual deficit of 3%. It is necessary that public debt should also be taken into account to a greater extent annually and that this in itself would trigger the alarm bells within the mechanism in order that we would not merely have a target of a deficit of 3% of GDP but the overall public debt would become a metric by which this new mechanism could be triggered.

On the preparations for the Cancún meeting and the follow-on conference of the parties, COP, from the Copenhagen event last year, expectations are being seriously dampened down regarding the prospect of a breakthrough on a global climate deal. Europe has indicated its willingness to participate in a new scheme beyond the Kyoto agreement which comes to an end in 2012. I welcome that. Talk of moving to a 30% reduction in carbon emissions is not being highlighted this time. I do not know whether the Minister of State agrees with me that, to an extent, Europe left the other nations behind in Copenhagen and the United States, South Africa, India and Brazil effectively had their own meeting towards the latter end of the Copenhagen meeting. Europe, the most progressive voice in addressing the global catastrophe that may occur if we do not deal with the prospect of runaway climate change, was left outside the door. It is no exaggeration to say that, as an institution, Europe was wrong-footed and humiliated on that occasion. I hope I do not overstate the matter but that is how it seemed to me as a close observer of what took place in Copenhagen last December.

There seems to be a more cautious approach now, in some respects, but I hope it will keep Europe in the room this time and will allow other nations to see themselves as equals in negotiations. I hope this approach, by aiming slightly lower, may achieve more than the Copenhagen summit.

I am not happy that we are aiming lower, as the situation is as critical as it could possibly be. I am still of the view that climate change abatement needs to happen through an 80% reduction in CO2 emissions by 2050, and I am not going to diverge from what the Intergovernmental Panel on Climate Change has been saying. Despite some criticism and scandals its scientific view is essentially intact and robust. We need to affirm the reality that the targets need to be met if we are not to trigger runaway climate change.

For the Mexico meeting, it is really important that the European Council gets its tactics right. In discussing the three key areas, the global economy, climate change and energy security and development, we must take the opportunity that the climate and economic crises present to create economic models that are not about increasing productivity and output on the basis of increasing carbon. The decoupling of growth and carbon emissions is often spoken about, and this is obviously something that must be achieved, rather than being talked about. I believe it can be achieved, in particular through energy capture, storage and efficiency in tandem with a new type of knowledge economy based on clean energy, along with a manufacturing economy based on a much smarter level of input. There should be a farming mechanism too that respects the limits of nature to provide for all of us on this planet.

The conference faces a massive agenda and I am very interested to hear the Minister of State's sense of what the Council believes Europe's role as a positive influence can be. China, in particular, is a country which even in the last 12 months has changed with extreme and impressive rapidity. I suppose that is as a result of being a one-party state, where things can be done quickly. Democracy is a precious flower but not always the fastest growing one. China presents a real cultural problem, as regards independent verification, for instance, which was a major issue at Copenhagen and could not be dealt with there because China was just not dealing on it.

The cultural problem for the United States was to the effect that President Obama could only go as fast as the oil lobby in Congress would allow him to. He has even bigger problems this time in that regard. What are the limitations since last year and what are the opportunities that did not exist last year? My sense, from a distance, is that China may be more receptive and better positioned to take a meaningful role in the next round following the Kyoto Protocol.

Senator Maurice Cummins

Ba mhaith liom fáilte a chur roimh an Aire Stáit. I thank him for his attendance here and at General Affairs and External Relations Council, GAERC, meetings for quite some time.

We are where we are is a cliché used quite often concerning the current state of the economy. It is used by Government to try and absolve itself from the reckless and cavalier policies it adopted and which have brought us to where we are. I have heard Government spokespersons and some commentators say no party had warned about the pitfalls that lay ahead and that generally we went along with Government economic policy, but nothing could be further from the truth.

In 2007, Deputy Richard Bruton, then Fine Gael spokesman on finance, when replying to the budget, stated:

This is the latest in a series of budgets whose pattern is set by the huge spending spree. Government spending has grown 50% faster than the rate of growth in the national income. Government has doubled its dependence on a construction boom which now contributes 25% of its revenue. You cannot possibly build indefinite spending growth on the back of a building boom, no more than you can build long-term economic prosperity on the back of a building boom.

What a pity Deputy Bruton's words were not listened to or reported sufficiently to jolt people back to reality at the time, but the powers that be, Government, bankers, property developers and the newspapers that raked in the money from property advertisements, all, with few exceptions, would hear of no critical comment. They thought the party would go on forever.

The European Council's task force of member states was set up to address the mismanagement of public finances in Ireland and other member states. It examined options to strengthen the framework of the Union for economic governance and to bring forward formal recommendations before the end of this year. The task force produced its final report in October and made several recommendations aimed at strengthening fiscal discipline in the Union, introducing new macroeconomic surveillance arrangements and setting in place the principles for an active crisis management framework.

The European Council, through President Van Rompuy, endorsed the recommendations of the high level task force on economic governance, which introduce greater financial discipline with an enhanced focus on public debt as well as deficits and fiscal sustainability. The question as to whether we will need a referendum has been addressed by quite a number of speakers this afternoon. I wonder whether the use of the simple revision procedure, in view of the limited nature of what is required, may be sufficient. This is obviously a matter for greater scrutiny and I believe President Von Rompuy will report on this further at the December meeting. There is certainly anxiety among several European member states about any change to the treaty so soon after its ratification last year.

The recommendations of the task force chart a course for greater financial stability in the eurozone. An item which has been mentioned in this House on many occasions, mainly by Senator Norris, is the whole question of rating agencies. I hope, like my colleague in the other House, Deputy Seán Barrett, that the EU can establish its own independent credit rating agency. It is ludicrous that agencies that were giving junk bonds a AAA rating are still allowed to make judgments on sovereign states. Surely the EU should have some opinion on those rating agencies which seem to be a law unto themselves.

The Minister of State mentioned the Doha development round and the greater liberalisation of world trade. The cornerstone of this must be fair trade, in agriculture in particular, where Irish beef producers must be allowed compete on a level playing pitch. If a level playing pitch is available to Irish beef producers then I am confident the quality of the product will hold its own against any other country.

The word "consensus" seems to have become the buzzword in recent weeks. The Minister of State can be assured that my party will not be found wanting when it comes to the national interest, but consensus is a two-way process, and we will not be lectured by some Government spokespersons on the issue. I am confident that, working with our EU partners, we can come out of our current difficulties. Without the solidarity of our EU colleagues and the implementation of the recommendations of the task force of the European Council, our prospects will diminish, in my opinion.

I look forward to the Minister of State returning to this House at a later stage where we can have further deliberations on the European Council's meeting in December.

Senator Paschal Mooney

I welcome the Minister of State, Deputy Roche, to the House. It is especially appropriate the Minister of State is here today because, as indicated by Senator Cummins in the earlier part of his contribution, he has been at the forefront of various economic summits and Council meetings and brings a vast array of experience and expertise to this subject.

I am sure the Minister of State has by now a sense of the core of Members' contributions which have centred around the task force on economic governance. I am sure, however — the Minister of State dealt with this — what is of great significance is not so much what was agreed at the Council meeting but what happened afterwards on the margins between Germany and France and, in particular, the public statements by Chancellor Merkel and the German finance Minister which immediately created uncertainty in the bond markets to the point that as we speak today bond rates have increased from 6.25%, which was unacceptably high, to an unprecedented 8%. It is interesting to note that the same German finance Minister refutes in the media today any suggestion that he or his Government are responsible for this spike in the bond rates. I have no wish to tangle with our German friends. Perhaps the Minister of State might set out what he believes are the reasons the bond rates spiked so dramatically in the immediate aftermath of the statements made, which were so vague as to spark this uncertainty.

Ireland does not have to go to the bond markets until next May or June. Some economic commentators have suggested in recent days that it does not matter right now how high the bond rates go because we are not entering the bond market. Spain and Portugal will enter the bond markets next month, however, and the figures in this regard will be an indication of sentiments in terms of where they are at. It is right and proper that this House should focus on the task force on governance. I urge the President of the Council, Mr. Van Rompuy, to have his conclusions reached as quickly as possible. In fairness, this was the agreed position of all the Heads of State.

The other aspect of the discussions relates to the financial stability of the euro area a whole. A question that also arose is whether countries which break the agreement should be denied the right to vote or to have any involvement in the decision making process, which Ireland has robustly opposed. The Minister of State might state his view on the thinking is in this regard.

On the Seoul G20 summit and the conclusions of the Council that the world economy is recovering from the crisis, which is positive, the conclusions, as agreed by European Union leaders, state that the summit must send an ambitious signal of the concrete and timely implementation of measures agreed in the framework for strong, sustainable and balanced growth, notably concerning fiscal consolidation plans, financial regulatory reform, social cohesion, job creation and the need for further structural reforms, which is high flowing language with which, obviously, we all agree.

In the past week, however, and this appears to have been somewhat underreported, the Germans and British have set up a small committee headed up by, among others, Mr. Peter Sutherland, former Attorney General and a man of significant weight in the global financial community, to investigate the real possibility that owing to currency fluctuations and the worldwide economic crisis, an element of protectionism is arising in some of the major trading partners. This would be a disaster for Ireland which is an open trading economy. We must sell 85% of what we produce. The fundamental reason for high unemployment rates in this country is a lack of world confidence and the failure of people to buy our products, despite phenomenal growth in our exports, which is a tribute to those involved in this area. This House should put on record the gratitude and appreciation of the political establishment and public of the obvious hard work and entrepreneurship shown by those involved in the export area that they have managed to maintain a strong trajectory of growth to the point whereby we, unlike Portugal, Italy, Spain and Greece have a balance of payments surplus. It must stand for something in the world today that Ireland is not to be cast in the same category as those countries.

The fact that Mr. Sutherland and another gentleman from the UK, whose name I cannot recall, are being tasked with establishing whether there is increasing protectionism in this area shows just how fragile world trade is right now, even among the bigger countries. Perhaps the Minister of State, without dwelling too much on the subject, might state his view on this matter. As I said, it would be disastrous for Ireland were there to be a trend worldwide, in particular among our major trading partners, towards increasing protectionism. I would be concerned in the main about the United States and China.

Another conclusion of the Council meeting, briefly referred to but discussed in detail at the September Council was that "the High Representative is invited to develop ideas on how EU/NATO cooperation in crisis management, in accordance with the United Nations Charter and with the relevant United Nations Security Council resolutions, could be further strengthened". When this was first indicated and put into the public domain, the usual naysayers came out of the woodwork stating that Ireland's neutrality was again under threat. If one were to believe this constant refrain that dates back to the Maastricht treaty of 1992, we would have been at this stage involved in several world wars, with hundreds of thousands of Irish boys and girls having been signed up to some type of phantom European army. The Minister of State, whom I am aware has been strong on this area over the various Lisbon treaty debates, might confirm that we are not in any way compromised by this Council recommendation to strengthen relations between the EU and NATO which, to me, is somewhat surprising. From my own limited experience on the Council of Europe and reports with which I was involved at the time, indications were that relations between the EU and NATO were strained.

In the context of the summits with China and the Republic of Korea and the Asia-Europe meeting which will take place later this year, the conclusions state: "Concrete steps should be taken and priority areas of cooperation between Europe and Asia ... cooperation on regional issues such as Iran and North Korea". I am disappointed there is no reference to Burma where a farce of an election was held in recent days. Ireland has a proud record of supporting the ordinary people of Burma in their fight for democracy and equality, in particular the plight of Aung San Suu Kyi. The Minister of State might comment on whether the issue of Burma will be raised at the summit and if Ireland will use its good office, because of its track record in this regard, to ensure it is discussed.

Another conclusion is that "The upcoming reflection on the implementation of the European Neighbourhood Policy will provide an opportunity to deepen relations with the Union's eastern neighbours", in particular in regard to the forthcoming summit with Russia. This is an important and significant development. Russia is by far one of the largest trading partners within Europe. Given its history and status and that Ireland has been a good friend of Russia, which friendship has been reciprocated, the Minister of State may have an opinion to offer in this regard.

Another conclusion is: "The EU, in partnership with African countries, will continue to pursue the objectives of economic development, good governance, transparency and accountability in the context of the joint EU/Africa Strategy." Again, Ireland has a role to play here because of our development aid programme. Mr. John O'Shea of GOAL recently articulated concern, as expressed by others working in this area, about the increasing dominance of China which is not adopting the type of human rights dimension that we in Ireland have, namely, ensuring whatever support aid we give to these countries carries at least that particular dimension to it. China does not appear to be concerned about to whom it gives its money, be it the most corrupt of dictators or the most corrupt of countries. It is simply interested in getting its feet into Africa.

We need some hope in this area. We need to know that the European Union is grappling with and is capable of coming up with a solution that will help not alone this country but peripheral countries of the EU. We must be given confidence that in terms what is happening in the world today, Ireland, collectively with its European Union partners, can come up with the solutions and achieve the task they have set themselves, and that they do so sooner rather than later.

Senator Liam Twomey

I have just come from the Institute of International and European Affairs, IIEA, which was packed to the rafters with people who had come to listen to the European Commissioner for Economic and Monetary Affairs, Mr. Olli Rehn. I am sure the Minister of State, Deputy Roche, is well aware that when European Commissioners came to the IIEA to make speeches or give lectures on previous occasions, the crowd could often be small and the room certainly was not packed to the rafters. What has Mr. Olli Rehn got that many other European Commissioners do not have that attracts such a fantastic crowd? That reflects on where we are now.

Many of the issues to which the Minister of State referred, including European stabilisation mechanisms, the changes to the European Government and the report of Mr. Van Rompuy, are for the future but we are very much in the present as far as the European Union is concerned. What has landed us in this serious position? There is a complete loss of confidence in the Government on the part of the people. There is a sense that we have been abandoned by international investors, and that is the reason interest rates on Irish bonds are exceeding 8%. The Government is too unstable to guarantee the passage of the budget, not to mind the four-year plan, and that is creating serious concern. Why is Mr. Rehn coming here? Is he here because the Minister for Finance, Deputy Brian Lenihan, is shirking his responsibilities in carrying through this measure or is the European Union exasperated with the carry-on of this Government in recent weeks?

I discussed this matter when we had an economic debate in this House during which I focused on an article in The Irish Times of 29 September by Mr. Olli Rehn in which he was asked a series of questions by a reporter from The Irish Times. That was a game-changing event. One would have to ask whether it was because the European Union was tired of the Government continually not giving the proper facts and figures to the people that it began to exert more control over what was happening in the Irish economy. If that is the case it is regrettable because up to 29 September the Government was still talking about a €3 billion adjustment in the budget in a few weeks from now and that somehow everything was fine in the Irish economy. That article by Mr. Olli Rehn was an eye-opener for many of us because he was saying there will be a need for serious adjustments in the budget and serious consideration for a four-year plan. What the European Union recognised was that this Government not only had a major crisis to deal with but that it had exacerbated that crisis in the past two years by some of the policy decisions it took in regard to banking and the overall running of the economy. It was failing to make the next necessary adjustments, the very measures the Minister spoke about, namely, controlling the Government deficit. It was subsequent to that article in The Irish Times that we were all asked to meet the officials in the Department of Finance and to meet Mr. Olli Rehn.

I would like to know who invited Mr. Olli Rehn to come here. The Minister said this morning that the Opposition invited Mr. Rehn to Ireland. I was not aware of Fine Gael requesting to meet Mr. Rehn. We were simply informed he was coming.

A serious issue arises in this regard, and it concerns our relationship with Europe. We must maintain that partnership with Europe and ensure the impression is not given that Europe is paternalistic towards Ireland or that Europe is coming here to tell the errant child what to do. The Minister might say that is nonsensical and that those of us in the political system and in the establishment who understand the relationship between Europe and Ireland know that is not the case, but the public could quickly come to the conclusion that Europe will dictate terms in a way that does not reflect a partnership role if we are not careful about the way we approach the problems we face right now. As a nation we have a strange relationship with Europe. We rejected the first Nice treaty referendum but changed our minds on the second. Much of that was based on the fact that we saw the gathering economic dark clouds over this country. We realise, to some degree, that we are dependent on Europe and that Europe has a strong role in our economy in more ways than one, but there is a growing concern that we must ensure the way we handle this relationship in the coming months and years gives the people cause for hope and confidence in Europe. That is very important.

In my meeting with Commissioner Rehn he emphasised that he is not here to dictate terms to the people but instead wants to work with them, but there is a sense that this Government does not know what is going on or what it is doing in regard to our economy. Further concerns have been expressed, and the Minister of State, Deputy Roche, would be well aware of them. One of the striking comments Commissioner Rehn made when he met us was that prior to coming to Ireland he had a meeting with the President of the European Central Bank, Mr. Trichet. The reason for that is that they continue to be concerned about the fragility of the Irish banking system, and the European Central Bank is the holder of the majority of Ireland's sovereign debt. I have no doubt Commissioner Almunia will be taking a further look at many of the problems in the Irish banking system. We need to have that debate in these Chambers and we need to be fully abreast of what is happening and what is going on between our Government and Europe to allow the people continue to believe they are part of a partnership with Europe, notwithstanding all the gross mistakes made by this Government in recent months.

There is a need to restore lost confidence in the economy. There is a need for a four-year plan to give some sort of confidence to the bond markets, although I do not know if that will work. Europe may have to play a stronger role in our economy next year. We must continue to provide incentives for the jobs market because it is only when we have a growth package and generate jobs in our economy that we will get out of this mess we are in, and we must prioritise any measures in the forthcoming budget that will have the minimum effect on economic growth because €6 billion, if that is the Government's final figure, will have a significant impact on both GDP and the potential for growth next year.

Ministers must be open with the people about what is happening right now between Europe and this Government. As I said, it is not about the relationship between the State and the European Union but the relationship between the people and the European Union. For the majority of that time it has been a partnership arrangement and we must ensure that continues and that the perception of the people is that Europe is good for this country.

We face serious economic issues. If we think they are serious now they will become more serious after Christmas and there is a significant need for the Government to be honest about its responsibilities in terms of causing this mess, how it will get us out of this mess and the way we handle our relationship with Europe in the years to come.

Minister of State at the Department of Foreign Affairs (Deputy Dick Roche)

I thank Members for their contributions. I have taken more notes than what was in the original script and therefore I will go through the various points.

Senator Donohoe made a positive contribution. He mentioned his concern about the reference to the private sector and the knock-on impact of that. I do not wish to strike a discordant note but the previous contribution raised the question of some nefarious or sinister reason Olli Rehn came here. I enjoy the friendship of Commissioner Rehn who is a member of my own political group and whom I have known for many years. He is here, like other Commissioners, because it has been decided — properly — that Commissioners should get out of the Berlaymont and go out into the street to talk to as many people as possible in member states. With all due respect to the last contributor, it does us little good to suggest there might be something negative about his coming here. I see it as amazingly positive, as I do the upcoming visit of Commissioner Geoghegan-Quinn. The Commissioner with responsibility for development aid has also been here. Actually, seven Commissioners are due to visit the country for the very good reason that the Commission President, Mr. Barroso, has said he wants them to be in contact with and listening to people, something with which I agree.

To return to a point made by Senator Donohoe, I remember an old expression, "Careless talk costs lives". He was making the point that words wrongly spoken — perhaps innocently — could have all sorts of effects. He went on, skilfully, to discuss the not unreasonable suggestion made by the German Chancellor, Ms Merkel. She had constitutional concerns about her own court, which fed into a political debate in Germany about a constitutional court case, of which we all had to be conscious. The point the Senator was making was that the concept of the private sector carrying part of the cost, mentioned in the pronouncement by Chancellor Merkel, was dangerous and that the pronouncement had led to a change in sentiment. The Senator is right. There has been a hardening of sentiment in the bond markets in recent weeks because there has been much speculation about what these phrases meant and what this would mean in the long term in terms of the wording produced in Italy in December and subsequently the actual permanent mechanism.

Chancellor Merkel was not actually the first person to suggest the private sector should carry some of the cost of the meltdown in financial markets. It was a view commonly taken in the political establishment in this country. Many in the debate here talked about inflicting pain on this or that group. I am not saying I necessarily disagree; I am simply making the point that we are living in times in which it is extraordinarily important that people are conscious that certain comment can have a negative impact — spooking the market, as Senator Donohoe described it, through careless phraseology.

The Senator is not alone in his concerns in this regard; the President of the European Central Bank, Mr. Trichet, made the point that speculation was far from helpful in the current situation and cautioned against it. Other commentators, not just in this House but also elsewhere, have been critical of the actions of Ms Merkel and Mr. Sarkozy. Again, we need balance in this regard. If Chancellor Merkel believed there was a danger that a constitutional court could move in a particular direction, it would do none of us any good if she did not deal with this. What all of this illustrates to me is the need for a much more focused and constructive debate on all issues relating to the European Union, a debate that would get away from the extreme notion that somebody is out to get us.

Senator Donohoe also talked about the concerns expressed regarding the issue of automaticity which was at the heart of some of the concerns on the French side. I have no doubt whatsoever that there would not have been much enthusiastic support for automatic Commission involvement and this contributed to the Deauville declaration.

The view is that the sanctions should require a political trigger. The Senator has raised the question of at whom the mechanism is aimed. Those countries that are anxious that this be established must be aware that it will apply to all 27 countries. We cannot have two classes of state within the European Union. We are in complex territory, but when we are talking about issues such as automatic mechanisms and specific sanctions, we must be aware that if they are ever introduced, they will be introduced only with the agreement of all 27 member states and only if they are applicable to all 27.

The Senator referred to the Deauville declaration and said he was concerned that it had had a major and formative impact on the European Council conclusions. There is no doubt it did have an impact on the conclusions. However, if one considered what the Van Rompuy report was working towards and the conclusions drafted before the European Council, one would have to say the Deauville declaration did not result in a sea change, although the significant issues raised were the focus of much attention and, it must be said, some irritation at the Council. The most important point about the declaration was the suggestion from the chancellors about sanctions which included the potential loss of voting rights for member states. This, it seems, is an extremely non-communautaire discussion to have. However, as I said, there was absolutely no enthusiasm for it. It was discussed at the dinner for the foreign affairs Council on the previous Sunday, at the foreign affairs Council on the Monday, at the general affairs Council on the Monday and during the course of the European Council and there was no enthusiasm for it.

Senator Leyden asked whether the ready availability of funding to Ireland as a member of the eurozone was at the core of Ireland's building bubble. There is no doubt that the availability of cash contributed to the bubble; I remember commenting on this more than once. However, we have to take the blame ourselves. To blame the availability of funding for the bubble is similar to a drunk man blaming the availability of the output of a brewery for his drunken state. We did what we did and have to accept this.

The Senator said, rightly, that the economic position took centre stage, not only at the European Council but also at the discussions of the General Affairs and Foreign Affairs Council. He mentioned the prospect of EU membership for Turkey which was not on the agenda this time. It is important to indicate that Ireland's view of Turkish membership has always been clear: there are objective criteria which have applied from the Copenhagen meeting onwards for membership of the European Union and if Turkey fulfils these criteria, it is as open to negotiating membership as any other state.

The Senator also mentioned development in Cuba. This issue was not discussed at the European Council, but it was discussed at the General Affairs and Foreign Affairs Council in the absence of the Spanish Foreign Affairs Minister, Mr. Moratinos, who had been to the fore in promoting it. There has been a change in that he has been replaced. However, it was interesting that his replacement, Ms Jiménez, made it clear that she shared his enthusiasm to make progress in this regard.

I agree with Senator Leyden's comments on the budget and Mr. Alan Dukes. During the year I have commented about former Deputy Dukes who stepped up to the plate when the national interest demanded it and who did not receive fair recognition for it.

I also thank the Senator and others for their kind words about me and the Minister, Deputy Martin.

Senator Terry Leyden

Well deserved.

Deputy Dick Roche

The Minister has given good leadership and his personal tragedy has touched us all. He is an excellent Minister and has been anxious to develop relationships with the Oireachtas, as am I. It is a concern that we share.

Senator Quinn always makes a sparkling contribution. He discussed the impact of the growth in private debt on the current crisis and, of course, is correct. There has not been enough discussion of that aspect. He correctly made the point that it was not an issue of public or state debt that had brought Lehman Brothers down but private greed.

The Senator mentioned the comments of the Polish Prime Minister and the Italian Foreign Minister who expressed concerns about what had happened in Deauville and described it as being unacceptable to other big players. It is not acceptable to any player, big, small or medium in size. The European Union is a community of member states and we are all equal. I recall this issue coming to the fore during a discussion at the European Convention when I had to remind the president of the convention that all member states were equal under the Treaty of Rome, regardless of whether they were big or small. The Senator is right in pointing out that there are 27 member states, not just two. That is not to say we disregard any member state and if Chancellor Merkel has a particular concern about the constitutional position or what the constitutional court might find, we would be foolhardy to ignore her concerns. We must listen to them with respect and make certain we do not paint her as the villain of the piece because she is not. She wants to ensure we will not have difficulties in the future.

Senator Quinn also mentioned the advent of China in terms of the Greek and Portuguese initiatives, both of which are very interesting. I am not sure what the position would be if they were to come here.

One of the high points of the debate was the Senator saying that our problem could be solved if we believed in ourselves. He is right in saying we will have the right outcome because we have strengths. He made the point that we had many strengths that we did not recognise. Other countries have demographic issues that we do not have. We have a young, vibrant and well educated population and a very flexible workforce. That is not a position in which other member states or other major developed states find themselves. Even with the downturn, there are more people at work than 20 years ago. We have a very good story to tell on our balance of payments. We also have good news on our exports. As the Senator said, we have started to reconstruct our competitiveness. Many of our fellow EU member states have real issues with their competitiveness. When I was in Denmark recently, I was shocked to discover the position in which it found itself. The biggest single impediment to our future progress as a nation is our occasional self-doubts. Samuel Johnson said: "The Irish are a fair people; they never speak well of one another." Perhaps we should.

Senator Ormonde rightly mentioned the importance attached to Ireland playing a full role in the European Union. This is not some supplicant nation but a full member of the Union. We are respected and well regarded and should never paint ourselves into a secondary position.

Senator Alex White rightly said it was only a matter of time before a permanent mechanism, a common-sense set of provisions, emerged. It will be the contents that will count. I have made the point that we expect the German Government to respect our constitutional concerns and we must return the compliment. The Senator did not question the Taoiseach's view on the wording that will be brought forward in December but was merely reflecting it. Like the Taoiseach, he makes the very valid point that we cannot be definitive until we see the final wording. Within the existing treaty structure it is possible to find words that will meet current requirements and not require a major treaty change. If we are to commit ourselves to a major treaty change it will become a problem not just for Ireland but for all 27 member states. If we were to undertake a major root and branch rewriting of any section of the Lisbon treaty, it would require a convention which would pose difficulties for each and every member state. When discussing this matter, it is important to keep to the fore the Crotty judgment which found that a referendum was not necessary when the treaty proposals "do not alter the essential scope or objectives of the Communities". It is possible to frame words in the current context without in any way altering the scope or objectives of the treaties.

The Senator asked whether we were right to commit ourselves to a figure of €6 billion. The reality is that we are spending €5 for every €3 we take in in taxes. In the next year or so we will need to borrow up to €20 billion simply to pay for services currently provided. We are all sufficiently adult to accept that this is not a realistic position to maintain. What disturbs me in a debate that is taking place outside the Houses is the suggestion that we might be as well off to let the IMF come in. A very good article in The Sunday Business Post reminded readers what had happened in Latvia when the IMF came in. The IMF forced a cut, the equivalent of 10% of GDP, and we are talking about a figure of 3.7% and saying how horrific it is. It cut almost half of the public service agencies and closed almost half of the hospitals. Thousands of public servants were let go and the unemployment level grew to in excess of 20%. Those who are enthusiasts of the IMF coming in and doing the job we, as the elected Government and elected representatives on all sides of the political divide, should do are not in touch with reality. Even Greece, following the EU bailout and with the assistance of the IMF, will face a bigger cut next year than we will. While it is not a pleasant place to be, anybody who suggests going the IMF route would somehow be an easier option is not in touch with reality.

Senator Dearey was concerned about the mechanism being portrayed as an extension of an EU democratic deficit, on which he is right. There are people who, no matter what is suggested, will portray the European Union as, in some way, posing a sinister threat to all we hold dear. In reality, as we all know, nothing could be further from the truth. Members should contemplate where we would be if it were not for the support we have received from the Union.

The Senator asked whether a referendum would be required. I have already dealt with that issue. There is more than adequate room within the treaty structures to use the more flexible mechanism to achieve the changes necessary.

The Senator asked about draft conclusions reached at Cancún, which are important. The Commission President, Mr. Barroso, recently wrote to President Van Rumpuy and the Heads of State and Government calling on them to agree a position that demonstrated global leadership on the topic. That was at the core of his letter. What happened in Copenhagen last year was nothing short of a farce. It was not that the European Union was not represented there; rather it was that we were not speaking with a single voice, which is not good. The Union has a high moral position in this, on which we need to focus. We also need to be realistic. The Union cannot carry the burden unless other developed and developing states step up to the plate.

While I do not agree with Senator Cummins's opening remarks, I have sat in the Dáil for a long time and never recall anyone arguing very strongly for reduced spending in any budget no matter what Deputy Bruton's overall conclusions were in the end. I recall a series of resolutions calling for very good things that would have required the expenditure of more money. It would be uncool of me to ask if Deputy Bruton did such sterling work, why did Fine Gael move him, but I will not go down that route because it would be unkind.

The Senator mentioned that the simple mechanism used within the treaty should be sufficient. I agree. One of the things we need to do in the European Union is to stop speaking in superlatives and start looking at how we might make incremental improvements. The idea that we should always go for the big bang, the big explosion and the grand gesture is, frankly, foolish because one never achieves them. There is a pilgrimage in a small town in Luxembourg, Echternach, in which the pilgrims march two steps forward and one step back. That is how the European Union reaches its objectives. It takes small steps forward and another step back. However, it happens by being radical in small ways rather than opting for the grand show.

I agree with the point the Senator made about beef and the Doha Round of negotiations. I had the pleasure of making the point personally to a very irate Minister for Foreign Affairs from one of the larger countries in South America who accused me, and I would be delighted to take the blame, of being solely responsible for stopping Brazilian beef being imported into this country. My response at the time was the same as the Senator's, that as soon as the beef produced by Brazil has full traceability and meets all the requirements of both animal and human health, there will be no problem. There is no way we should allow a good and clean food industry to be spancelled with unfair competition.

Deputy Barrett and I have had long and pleasant discussions about ratings agencies. It is great to have someone other than ourselves to criticise. The Senator is quite correct that there is something perverse about ratings agencies which were giving junk bonds AAA ratings on the eve of the collapse of Lehman Brothers calling the shots for sovereign debt. It is important the European Union produces a response to that because it is abnormal. We know that ratings agencies, some of which are regularly quoted in our media, faced criminal charges because they were on both sides of cases, and there are very serious cases coming down the line relating to them. The Commission is working on proposals regarding ratings agencies. There is a necessity for an objective rating that is beyond question.

Senator Mooney was concerned about the background noises from the Deauville summit. He is correct that the removal of voting rights is not a particularly communautaire suggestion. It is being kicked into the long grass. After he does all the other things he must do, President Van Rompuy must also examine this proposition. I would not hold my breath waiting for anything to come forward on it. The Senator is correct that the High Representative has been tasked with examining the relationship between NATO and the European Union. That does not in any way undermine or attack Ireland’s neutrality. Burma was not on the agenda although I share the Senator’s view on what has happened there. It is worth recalling that the Seanad was the first House of any parliamentary assembly to pass a resolution on the continuing undemocratic incarceration of Aung San Suu Kyi. A resolution was passed in this Chamber before the matter became an issue in other parliaments.

I agree about the need to keep Ireland engaged in the summits with third countries. Even though we are not part of the G20, it is important we pay attention to it. I wish to caution against a danger on our part. I had a word with a member of Senator Cummins's party who was talking about Ministers swanning around Europe. It is terribly important we continue to engage. The fact that we happen to face difficulties is not an excuse for disengaging. If there was ever a time when Ireland's interest required us to be fully engaged, this is it. I was also talking to a former leader of the Fine Gael Party, Dr. Garret FitzGerald, a man for whom I have huge personal respect. He made this very point, that this is a time when we should not pull into our shells. We should reach out and sell the Irish story. Yes, there have been issues for which we can all take some blame, but we also have a good story to tell.

I do not agree that there was anything sinister about the visit of Commissioner Olli Rehn. I am not sure Senator Twomey wished to say that but the words he used appeared to suggest it. Commissioner Olli Rehn was here for the good and proper reason, that the President of the European Commission has indicated that he wants the Commissioners to be out and about in member states. There was a democratic deficit in Europe and Members will recall that the Irish Presidency of the EU emphasised the need for communicating in Europe. One of the ways to do that is to get men and women out of the Berlaymont and on the ground. It was very beneficial that Commissioner Rehn met the Opposition and the social partners. It helps to contextualise the decisions we must make.

I am not clear about the point Senator Twomey was making but I am sure he was not dismissing the benefits of having a Commissioner here. Perhaps he was highlighting the fact that there is a danger that some people in Ireland will misuse such visits. That is a reality. The old Irish expression, ní neart go cur le chéile, applies. If we can harness the pro-Irish sentiment and respect for this nation that exists within the Commission, I believe we will do well from it. No country in Europe is as over-represented at senior positions within the bureaucracy of the Commission, so there is a good understanding of Ireland's position. It is good that the Commissioners visit this country, and a series of Commissioners is due to visit soon. There is nothing either nefarious or sinister in that, and I am sure Senator Twomey did not wish to suggest it. It is very positive and I am sure the main Opposition party also regards it as positive.

Seanad Éireann díospóireacht -
Tuesday, 9 Nov 2010