Dáil Éireann Debate, Tuesday - 2 July 2013
68. Deputy Michael Moynihan asked the Minister for Finance the actions he believes ECOFIN Ministers can take to provide a Europe economic stimulus; the reason this has not happened to date; and if he will make a statement on the matter. [31920/13]
Amharc ar fhreagraA number of initiatives are being implemented at EU level to boost growth. The cumulative impact of all these measures will be positive in terms of supporting economic activity in the EU at this difficult juncture. For instance, Heads of State or Government in the EU agreed on a compact for growth and jobs in June last year. This involves action by both member states themselves and at EU level to boost growth, investment and employment.
Measures to be implemented at national level include the full implementation of the country-specific recommendations from the European semester for those member states included in the process, including the pursuit of differentiated and growth-friendly fiscal consolidation, the restoration of normal lending to the economy and the promotion of competitiveness. At EU level, policies to promote growth include a renewed emphasis on deepening the Single Market and reducing the regulatory burden. In addition, an important measure is the mobilisation of funding to boost European growth. Funds will be made available inter alia via EU Structural Funds and European Investment Bank lending. Considerable progress has been made at euro area level to put the single currency on a more solid footing. For instance, the establishment of the European Stability Mechanism and the ECB's announcement of outright monetary transactions have helped restore confidence, while the enhanced system of governance will have a positive impact on economic activity.
I now turn to my role as President of the ECOFIN council. As the Deputy will be aware, Ireland has just completed its Presidency of the Council of the European Union. The theme for the Irish Presidency was stability, jobs and growth. In my role as President of the ECOFIN Council for the Irish Presidency I have overseen a number of actions aimed at improving the European economic environment.
Significant progress was made on the financial services agenda including agreement in Council or with the Parliament on a range of dossiers. Significant progress was made on the banking union agenda with agreement on the single supervisory mechanism and the capital requirements directive, and political agreement at ECOFIN on banking recovery and resolution. There was also significant achievement in other aspects of financial sector regulation including political agreement in the Council on the markets in financial instruments directive and regulation, the market abuse regulation and the transparency directive and agreement on the mortgage credit directive. Agreement was also secured on an amending budget for the European Union. This was a key element in the overall delivery of a political agreement on the multi-annual financial framework between Council and Parliament. There was major progress in the area of taxation with a particular focus on addressing transparency and fraud. The EU economic governance process, the European semester, was successfully managed and agreement achieved on the remaining legislative element of the economic governance process, the two pack.
Additional information not given on the floor of the House
In addition to six formal Councils, a very successful informal ECOFIN was held in Dublin which had a focus on growth and SME funding. At the informal ECOFIN Ministers discussed financing options for long-term economic growth on the basis of the Commission's Green Paper on long-term financing which was presented by Commissioner Michel Barnier. A Presidency issues note was also used to guide ministerial discussion on the topic of non-bank financing for growth and jobs. This has led to further work at European level with a report expected in late 2013. There was also an expert-led discussion between Ministers at lunch on the topic of future growth in Europe.
In February the European Council agreed a budgetary package for the period from 2014 to 2020 for policies focusing on competitiveness, jobs and growth across a broad range of sectors. Recently the Irish Presidency reached political agreement with the European Parliament and the European Commission on a new multi-annual financial framework which unlocks €960 billion in investment across the entire European Union.
As the Minister indicated there were successes during the six-month Presidency, in particular with regard to his stewardship of ECOFIN and he is to be commended on this. Although there are issues with regard to some of the details, it would be remiss of me not to acknowledge this.
The question I tabled is particularly relevant in the context of the very weak economic data we had last week. Unfortunately the country is back in recession, ostensibly because of weakening external demand and the situation in the eurozone and other developed economies. Much of what we hear from European summits and ECOFIN meetings in terms of growth-friendly statements and policies is impenetrable to people and it is very difficult to translate what has been decided to what is actually happening on the ground.
The Minister referred to the country-specific recommendations from the European semester and gave some examples of issues relating to Ireland such as credit, regulation and the role of the European Investment Bank, and there has been some progress on this. There is a crisis in the eurozone in particular, with more than 12% unemployment as confirmed yesterday, 26 million people out of work and record levels of youth unemployment. It seems the triple A-rated countries which have been fiscally very prudent are all engaged in fiscal consolidation as well as countries such as us which must do so.
The lack of co-ordination of fiscal and economic policy throughout Europe has resulted in the scenario we are dealing with now whereby external economic demand, in particular among our main trading partners, is weakening at a time when we depend on an export-led recovery. It is more threatened than it has been previously. Will the Minister give practical examples on the ground of the knock-on effects and the implementation of decisions in Europe and ECOFIN and how they translate to Ireland and how they can help our economic growth?
Among the practical examples which would help Ireland is first of all the commitment to complete the single market. It is approximately 80% complete and for the remaining 20% the financial services sector particularly is inhibited by different rules and regulations in different member states. The fact that Ireland in this Presidency cleared 11 finance folios, most of them in the financial services area, frees up the possibility of the Internal Market working better in financial services. We have a very strong financial services industry in Ireland not only in Dublin, but now moving into other parts of the country too. That is one specific measure that will help.
A decision approximately a year ago in which €10 billion extra in capital was put into the European Investment Bank, EIB, will help too because that €10 billion can leverage approximately €180 billion and the EIB is gearing up to lend far more extensively than it did in the past. We hope to get our share of that. Already the commitments to Ireland for 2013 are approximately twice what we got in 2012. It is concentrating specifically on lending to SMEs and co-financing PPPs, which will match what we talked about previously. In the multi-financial budget there are dedicated funds for youth unemployment and there is a commitment that if a young person is out of work for four months, he or she gets training or education. That is a very advanced scheme and I hope it can be applied quickly in Ireland.
I thank the Minister for his reply. There is a job of work to be done in marketing the potential role of the European Investment Bank in Ireland, particularly with SMEs. In my experience, SMEs' level of awareness of the EIB is quite weak. When I come across them and point out the various initiatives and sources of funding available, many of them are not aware of them, despite the efforts of various business representative bodies. If the potential of the EIB is now being leveraged in Ireland at a time when the banks are under continued financial stress in respect of their own lending capacity, we need increasingly to look to sources such as the EIB. Will the Government consider building up the level of awareness and the marketing of those potential sources?
There has been much talk and one would be forgiven for thinking that Europe is going to come to our rescue with a huge stimulus package. It is being presented that way. The Minister mentioned the MFF, the budget agreed in Europe last week, and while the figures for the billions that will be invested over that seven year period are great, if one peels off the layers one finds that the budget is reduced. It is an austerity budget. It is a budget that has been cut. If one looks more closely, one sees a 25% cut in the research and innovation fund, an 11% cut to rural development programmes, a 14% cut in health and consumer protection funding and a 9% cut in the Cohesion Fund. Germany is honest. It does not want to stimulate Europe. We need to be honest as well because many myths are being peddled. The budget the Minister said is part of a stimulus is actually a reduction in terms of the money that will be available with inflation added. Some individual measures are to be welcomed no doubt, but an austerity budget was signed off last week.
On Deputy Michael McGrath's point, the European Investment Bank is engaged in quite a lot of activity, for example, a bundle of schools is being completed, co-financed with the EIB. European Investment Bank money is also funding the separation of traffic at Newlands Cross and the continuation of the road to Wexford. It is assessing the project for the health centres at the moment. That will also be co-financed. In addition, both AIB and Bank of Ireland have received EIB funds for re-lending purposes to SMEs, approximately €200 million or €250 million in respect of each bank. It is beginning to become very significant.
On the issues raised by Deputy Pearse Doherty, we will get assistance from Europe but we will have to do most of the heavy lifting ourselves. Our future is in our own hands. I do not believe in stimulus packages in Germany along the lines of investing in infrastructure. What we really want is for it to loosen its budgetary targets a little and the German workers at this stage, like those elsewhere, would appreciate a pay increase.
It is this kind of stimulation that the large creditor countries could pursue to benefit the euro. They could ease up on their budgetary controls and put more spending power into their economies. However, this is not at one remove through infrastructural investment. It is directly.
