I congratulate the Cathaoirleach on his recent appointment. I am delighted to be back in the Seanad. I was asked by the Leader to introduce a debate on European affairs and I jumped at the opportunity. Over a long period we have urged that the Seanad would assume a more relevant and proactive role in European affairs. I hope this opportunity for an exchange will be the first of many during the lifetime of this Seanad. Who knows, it might revitalise the Seanad and give a particular role to it for the future.
The topic I wish to address is the role of the European Union in enterprise, innovation and job creation. One could argue that is a broad topic but in the current context it is important to provide a focus in that regard. From my perspective it is important to explore some of the positive opportunities for the European Union to feed into not just this country's economic progress, although that is our primary interest in the Chamber, but also the economic progress of the European Union as a whole.
In the years and months since the global economic downturn there has been much talk about not wasting a good crisis and not turning away from a crisis. However, we have no choice but to face both the economic crisis we have been living with in this State and the crisis that has gripped the European Union.
Our economic future is inextricably tied to the European Union. It has to be. As a member of the Union we, and the companies that invest here, have access to a market of approximately 500 million people. That benefits us in the same way it benefits the other member states of the Union. Together, the 27 member states are a significant economic force. On our own we are rather insignificant, especially in the face of rising powers in Asia and South America, the so-called BRIC countries.
Ireland's future economic growth can only occur by creating an environment that allows the fostering of enterprise and innovation and, in turn, the creation of jobs. It is delusional to think that we can achieve any substantial level of growth or job creation while not part of a large market such as the European Union.
The Single Market is the most successful transnational economic project in global history. The point is worth repeating. At a recent ASEM conference which I attended on behalf of the Tánaiste in Budapest last week, the Australian Foreign Minister gave me some perspective on our current challenges in the European Union. As an outside observer of EU Finance Ministers, leaders and institutional representatives he was conscious of them constantly criticising themselves and saying they were not doing things well enough or achieving all they had set out to do. From his perspective as part of the broader Asian bloc, he said they would be doing extremely well if they could aspire to a fraction of the political and economic integration achieved by the European Union. They are envious of what we have achieved in the European Union. It is important to note that. The Single Market is the most significant, successful economic project in global history. It opened up an enormous European market, minimised internal trade barriers and led to growth, job creation and prosperity on the continent of Europe, not least in this country. Equally, it has provided exceptional choice and value for consumers — the citizens.
European governments must refocus their energies on this simple but invaluable process. The deepening and strengthening of the Single Market is the only logical way the eurozone can be reignited. The continued expansion of the Single Market to services makes sense as we export far more services than goods in the European Union. The Single Market currently falls short in this regard and there is immense potential to grow it. We need the political will to make it happen. The European Union must start acting collectively to make the knowledge economy a reality. There has been much rhetoric about the knowledge economy. We must make it a reality.
The Lisbon strategy for growth and innovation was a failure. The EU 2020 strategy, championed by Commissioner Geoghegan Quinn presents another opportunity, in effect, a second chance. We have the workforce and innovative skills to become world leaders in research and development. We must set realistic targets to achieve that goal. Public investment must happen by general agreement and targets must be adhered to, with sanctions for those who break commitments. That has been one of the failings in the Union, that we do not challenge each other and take each other on when we break the commitments to which we sign up. We in this country have been guilty of that on occasion no more than any other country.
Private investment should be incentivised by fulfilling foreign direct investment potential and creating market conditions for inward investment. That can happen through clever and competitive taxation mechanisms, which is important from our point of view, and keeping our cost base competitive. We can see how this country is gaining an advantage over our European partners by reducing our cost base. Initiatives such as the Single Market Act must act as a lever for more open trade and investment in Europe. Openness to investment is also what makes the Internal Market attractive to investors. EU investment rules should maintain the EU's attractiveness to outside investors and create synergies between multinationals and our SMEs which will help to improve overall capacity for entrepreneurship in general.
The EU Competitiveness Council has endorsed a new European integrated industrial policy for the globalisation era which puts competitiveness and sustainability centre stage. This policy forms part of the seven flagship policies launched under the European Union's new strategy for jobs and growth, Europe 2020. This is the second chance I mentioned. For those who may not be aware, the seven flagship policies are as follows: the digital agenda for Europe, the innovation union, youth on the move, resource-efficient Europe, an industrial policy for the globalisation era, an agenda for new skills and jobs, and the European platform against poverty. The strategy does not deal only with fiscal and economic issues but also with the social objectives of the Union, which are of critical importance.
The Government fully supports the core elements of the Europe 2020 strategy and its objectives to stimulate growth based on knowledge and innovation and a more sustainable and greener economy with high employment and social inclusion. That essentially sums it up. These objectives are also very much consistent with the Government's own strategies as set out in the programme for Government.
The industrial policy flagship sets out a strategy that aims to boost growth and jobs by maintaining and supporting a strong, diversified and competitive industrial base in Europe. The new approach also means examining the value chain through the entire process, from infrastructure and raw materials to after-sales service. With the globalisation of markets and the changing nature of both the manufacturing and services sectors, continued economic progress and growth will be driven by companies' continued innovation to successfully add greater value at every point in their value chain. This is something we cannot afford to forget, particularly in view of increasing competition from other regions of the world. Promoting the creation and growth of small and medium-sized enterprises is at the core of EU industrial policy. Moreover, the transition to a sustainable economy is recognised as an opportunity to be seized as a means of strengthening competitiveness.
Yesterday at the General Affairs Council in Luxembourg I, on behalf of the Government, agreed on further moves to remove excessive regulation for SMEs, especially micro-enterprises, and to further develop the Single Market. I also welcomed the strong focus on the Internal Market. The Council prepared specific draft economic conclusions to be presented to the Heads of State and Government at the European Council meeting later this week. This is a good news story. It has not always been possible to achieve agreement on focusing and prioritising a reduction in the regulation burden for SMEs. This is something, in fact, on which certain member states have an entirely different view from ours. There has been an added impetus because of the financial crisis, and this is something we can really embrace and welcome on behalf of Ireland.
For the EU to be able to compete globally, it must establish the best conditions for business. It must ensure its firms can engage in innovation and restructuring and can transform themselves quickly. It is important to facilitate timely and appropriate industrial restructuring and upgrading, thus ensuring the renewal of EU industrial sectors and the necessary upgrading of worker skills and opportunities. Supports such as the two Structural Funds, the European Regional Development Fund and the European Social Fund, as well as the Cohesion Fund, have contributed to regional competitiveness and employment objectives. The cohesion policy for 2007-2013 is explicitly linked to goals in Ireland's national reform programme under Europe 2020. This is something in which the Government is already actively engaged.
In addition to EU Structural Funds, Ireland receives significant funding from the European Agricultural Fund for Rural Development, the European Fisheries Fund and the seventh framework research and development programme, FP7. The Government has also secured funding from the European Globalisation Adjustment Fund for a package of measures to retrain and offer further entrepreneurial and educational opportunities to workers affected by, for example, the closures of Dell, Waterford Crystal and SR Technics. One of our number, Senator Colm Burke, who is formerly a Member of the European Parliament, was very active in that process, and he deserves great credit for lobbying on behalf of Ireland to secure some of that funding. A number of relevant State agencies such as FÁS, Enterprise Ireland and the county enterprise boards are involved in the distribution of these funds. These funds are a critical part of the lifeblood of our economy, especially at this difficult economic juncture, and they should not be ignored.
Ireland's ambition is to become a leader in innovation. Our goal is to develop an innovation-driven economy that maintains a competitive advantage and increases productivity. We have seen during this recession that companies that invested in research, development and innovation have held or increased market share and employment. That is an interesting statistic and one on which we have not really focused. It is clear that innovation is also a key issue for the future prosperity of the entire European Union. As we seek to continuously improve the effectiveness of our research and innovation systems, we need to learn from each other.
The European Commission, under the Europe 2020 flagship initiative known as the innovation union, has put entrepreneurs and SMEs at the heart of its innovation and research policy. Its aim is to remove the remaining barriers to bringing ideas to the market and promoting entrepreneurial mindsets among students and researchers. The task of Commissioner Geoghegan-Quinn's directorate-general is the achievement of a European research area and the creation of a genuine single market for knowledge, research and innovation. In my brief period in office, I have been extremely impressed with Commissioner Geoghegan-Quinn, who is extremely hard-working and has done a large amount to rebuild and repair our damaged reputation in the European Commission. She has brought energy and enthusiasm to her portfolio and I am proud that she is an Irish woman in such a significant position.
The Government attaches great importance to the completion of the European research area — that is, the single market for researchers — by 2014 and the creation of a genuine single market for knowledge, research and innovation, which is an integral part of the innovation union flagship initiative of the Europe 2020 strategy. All of this is under the remit of Commissioner Geoghegan-Quinn and she is working hard to make it happen by 2014.
The EU framework programme for research has always been an important element of the internationalisation of Irish research. FP7 offers Ireland's SMEs, multinationals and research institutions valuable opportunities to participate in high-calibre research collaborations with our European counterparts. With a budget of approximately €50 billion over the seven years from 2007 to 2013, FP7 is the most ambitious European research-funding programme to date in terms of scale and scope. Moreover, as economic conditions have deteriorated nationally and internationally, FP7 comes into its own as a non-Exchequer funding source.
Based on national investment in research, Ireland is participating in the framework programme from a far stronger position than ever before. To put in context how important FP7 is to the research community in Ireland, in the period from the commencement of FP7 in January 2007 to the end of 2010, more than 3,500 applicants from Irish-based organisations took part in proposal submissions requesting European funding. Of these proposals, 847 applicants were successful, receiving a total of €269 million. This represents an overall Irish success rate of 24.04%, which is greater than the European member state average of 22.47%. This is one small example of how Ireland has punched above its weight in securing funding from the European Union.
The competitive advantage created through research, development and innovation will be a key driver in our economic recovery. Companies that undertake research and development, for example, have shown a level of growth in trade and exports during the downturn that demonstrates the value of productive, high calibre research and innovation activity. Every day, these companies are winning and servicing global sales contracts across a range of modern growth industries.
The programme for Government has placed particular emphasis on developing applied research centres. The new Government has moved swiftly to announce the establishment of centres in cloud computing, manufacturing research and energy efficiency research. These centres will tap into that science base and ensure ideas are progressed into workable businesses so as to create the jobs of the future and get the economy growing again. The extent to which Ireland's enterprise base has retained its commitment to research, development and innovation investments in the face of the downturn is both welcome and bodes well for the future.
The importance of the small and medium-sized sector is well recognised by the Government. Small businesses are the backbone of the economy with some 250,000 such small businesses employing approximately 700,000 workers. It is important the Government creates the right environment for businesses to expand so that we will see job creation and retention. The jobs initiative, very much in line with measures contained in the European Commission's programme, Small Business Act for Europe, is designed to create and sustain jobs. Governments cannot and do not create jobs but they can create the conditions for business to thrive.
As a result, the Government has appointed a Minister of State with responsibility for small business, Deputy John Perry, who will be the voice of small business to the Government to reflect concerns and bring forward proposals to assist businesses. He has also been appointed as Ireland's SME envoy under the review of the Small Business Act for Europe and will play a constructive role with similarly appointed envoys from other member states. He recently attended the first meeting of SME envoys in Budapest under the auspices of the Hungarian EU Presidency.
European SMEs derive a much smaller percentage of their turnover from exports than competing economies such as the USA and China. Therefore, there needs to be a much stronger international orientation of European SMEs for them to compete globally. Ireland is performing better than most with major growth in exports. The largest increases have been to EU member states. For example, Irish exports to Germany increased by 47% last year. The internal EU market is much more accessible to our exporters than many of the countries we seem to be obsessed with focusing on such as China and those in Eurasia and South America.
In order for this necessary expansion in EU exports to occur, we will need a greater opening and deepening of the Internal Market, which has to become the natural reference point and basis for a wider global growth. Some issues impacting on SMEs which are also addressed in the Small Business Act for Europe were already announced on 10 May as part of the Government's job initiative. These include better access to credit with the design of a temporary, partial credit guarantee scheme. A targeted scheme will be in place by the autumn and will operate for one year. An initiative for a €100 million microfinance start-up fund will be introduced. The 15-day prompt payment arrangements across the wider public sector in Ireland for invoices received after 1 July 2011 will be extended. Departments have been paying within 15 days since June 2009. There will be a greater emphasis in making public procurement more accessible to small businesses. Changes will be made to PRSI to encourage employers to recruit new employees and sectorial wage agreements will be reviewed to improve competitiveness.
Access to finance for SMEs, especially in the light of the credit squeeze caused by the banking crisis, is very problematic. It is very important, therefore, in addition to measures in the jobs initiative, that we keep working on the construction of a Single Market for venture capital and that we continue to broaden access to other European financial instruments such as guarantee schemes.
In accordance with the Europe 2020 policies under the industrial policy flagship and the innovation union flagship, it is important to continue to develop strong areas such as standardisation. For that reason, I welcome the Commission's proposals to strengthen the system of standard-setting in Europe. I hope our businesses and business organisations can assist in this process.
It is also important to continue to develop at EU level public procurement initiatives for small business, an integrated EU venture capital market and the development of more competitive solutions, better regulation and tackling red tape and duplication. It would appear from the draft conclusions for this week's European Council that all member states are now committed to this agenda.
Following the launch of the jobs initiative, the Government's message is that Ireland is open for business like never before and this means being open to the world. This is the message being brought to our European partners and beyond by every Minister. It will also be the role of the several trade delegations representing the Government in the autumn under the auspices of the proposed new trade council.
Ireland's transformation from a poor to a wealthy country, with a high standard of living, has been largely down to the opportunities opened up to us through EU membership and particularly the Single Market. For Ireland to emerge from its current challenges, deeper co-operation and co-ordination with our European partners in the European Union and the eurozone is not simply in Ireland's best interests, it is the only sane and logical direction on our path to recovery.