Check Against Delivery
On Friday last, in lieu of the regular June European Council meeting, I participated in a video conference of heads of State and govt.
The main focus of our discussion was the Commission’s proposal for an EU-wide recovery instrument, known as ‘Next Generation EU’, and the EU’s seven-year budget for 2021-2027, the Multiannual Financial Framework, or MFF for short.
As a package, these are policies to enable our economies and societies to recover from the unprecedented challenges of the crisis caused by COVID-19, as well as to drive the digital and green transformation of our economies.
We also received a report from the President of the European Council, Charles Michel, and President of the European Commission, Ursula von der Leyen, on the High Level Conference with UK Prime Minister, Boris Johnson, which took place on the 15th of June.
In addition, Chancellor Merkel provided an update on the implementation of the Minsk Peace Agreements and the situation in eastern Ukraine, and also the occupied territories in Crimea.
The House may also be interested to know that on Thursday last, the 18th of June, I joined the video conference of the Eastern Partnership Summit, which brings EU leaders together with our counterparts from six countries to our east: Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.
The meeting underpinned the strategic importance of this relationship.
In her wrap up remarks today, Minister McEntee will provide further detail on that summit and on developments in eastern Ukraine.
Proposed budgetary and recovery fund package
Friday’s video conference opened with a presentation by President of the European Parliament, David Sassoli MEP, who expressed the European Parliament’s support for an ambitious recovery fund.
We were also briefed by President of the European Central Bank, Christine Lagarde, who provided us with an overview of the economic situation in the EU. Her assessment was stark. The damage caused by the COVID-19 crisis to the European economy has been considerable and will be lasting. Her assessment is that it will take until late in 2022 for the European economy to restore to pre-crisis levels.
The worst effects on our labour markets may be yet to come and are likely to affect young people and those in the private sector disproportionately.
At our last meeting in person in February, the European Council was unable to reach consensus on the proposal for the MFF then on the table. At that time, the enormous consequences of COVID-19 for Europe were not yet known.
However, in the months that have followed, the scale of the challenge we are facing collectively has become more apparent. So, on the 23rd of April, we agreed to task the European Commission to make a proposal for an ambitious recovery fund equal to the scale of the challenge, as well as a revised proposal for the MFF.
Following that request, on the 27th of May the European Commission published a package for economic regeneration. This included a revised proposal for a European recovery instrument – to be called “Next Generation EU” - to run over the period 2021-2024, and a revised proposal for the MFF.
The total package is worth €1.85 trillion in 2018 prices – that’s broken down as €1.1 trillion for the MFF and €750 billion for “Next Generation EU”.
The Commission proposed that the recovery instrument be funded through one-off borrowing on the financial markets, on behalf of the Commission, as an exceptional response to the unprecedented circumstances we now face. This would be achieved by temporarily lifting the own resources ceiling to 2% of EU Gross National Income. This additional funding would then be channelled through EU programmes and repaid over a long period of time, starting in 2028 and running through until 2058.
Our discussion on Friday was the first opportunity for Leaders to exchange views on these very substantial proposals.
I had already set out my views in a telephone conversation with European Council President, Charles Michel, earlier in the week.
On both occasions, I emphasised that we welcomed the broad thrust of the proposals and the Government’s support for an ambitious EU response that demonstrates our solidarity with those regions and sectors most affected by the pandemic.
I also emphasised the scale of the impact that the crisis has had on Ireland – on our economy and employment levels – and the need for this to be properly reflected in the assessment of needs and the related allocation key for any new funds. In my view, this is the metric against which grants and loans should be allocated, the extent to which a country has been impacted by Covid, not its past economic performance, or its ability to bounce back from a crisis.
On the MFF, I reiterated that we were open to contributing more to the new budget, but only if this protects our interests as a country, especially on CAP.
The issues which were important for Ireland before the crisis – CAP, cohesion climate, the single market, research and innovation – are even more important now as the country seeks to recover from an unprecedented and sudden shock to the system.
We must also use this opportunity to set Europe on the right path for the future: building a greener, fairer, more resilient, digital and sustainable Union.
As everyone in the House will agree, the CAP is an important, long-standing and well-functioning policy, and a vital support to our rural communities, rural economy and farm families. Wider than that, for decades it has also assured all Europeans of a secure and affordable food supply, something we should not take for granted, and something not taken for granted in other parts of the world.
Despite the increased allocation for rural development under the recovery proposal, and the increased allocation in the CAP in the revised MFF, I said that what was now on the table was not acceptable to Ireland and does not meet the test of ensuring adequate funding into the future.
Our farmers are experiencing considerable difficulties in exports with prices collapsing as a result of COVID, global disruption to trade routes, Brexit, and increased competition from third countries.
As we increasingly talk about Europe’s resilience, we need to underpin a strong agri-food sector, providing Europe with food security, and helping us achieve our climate goals. A strong and properly funded CAP is needed if we are to achieve this and we can settle for nothing less.
I also said that Brexit will affect Ireland disproportionately, so whatever is the outcome in the on-going negotiations we will be affected more than other countries are. So, any recovery instrument should be designed to respond to that also.
It is now apparent that at the end of the year, the UK will leave the period of transition now in place and will begin to trade with the EU as a third country.
While I very much hope this will be on the basis of a comprehensive Free Trade Agreement, it will still mean a disimprovement in trading conditions for Irish exporters.
Were the UK to leave the transition without a trade deal in place, the consequences would be especially severe in Ireland, which is the most exposed Member State.
From last week’s discussions I believe that Leaders are committed to reaching an agreement – ideally next month – but significant differences exist and it will not be an easy task to find consensus.
There are some areas of convergence: we agree that there should be an exceptional response at EU level to the Covid crisis; that this should be financed through the European Commission’s borrowing; that funding should by temporary and targeted at sectors and regions most affected; and that the next MFF should contribute to the reform and transformation of our economies and societies.
Thinking is not yet aligned, however, on the following issues: whether the recovery package should provide only for loans, or for a mix of grants and loans; whether it should deal only with the direct impact of COVID or also pre-existing disadvantages and imbalances; whether conditions should attach to the fund and, if so, which ones; and how much should be in the fund, and how quickly loans should be repaid.
These will not be issues easily resolved in July. Nonetheless, we all expressed a willingness to work together in an intensified way to try to reach a conclusion at a meeting-in-person next month.
In the coming weeks, President Michel will engage in consultations with all Member States before tabling a revised proposal ahead of a meeting in mid-July.
While the primary focus of the meeting was the MFF and the Next Generation EU, Presidents von der Leyen and Michel provided a readout of the High Level Conference on Brexit that took place with Prime Minister Johnson on 15 June.
At the High Level Conference, they took stock of the limited progress made to date in the future Partnership negotiations and in a joint statement afterwards, both sides agreed to intensify negotiations with a view to building new momentum. Both sides also confirmed their commitment to the full and timely implementation of the Withdrawal Agreement including the protocol on Ireland and Northern Ireland.
I thanked Presidents von der Leyen and Michel, and also the Union’s negotiator, Michel Barnier and his team, for their continued skilled and measured handling of these negotiations.
I believe that a deal with the UK is still possible and hope that the intensified engagements in the months ahead will reveal the landing zone for agreement.
I was among several Leaders to acknowledge the importance of early and comprehensive contingency planning given the possibility of No Trade Deal on the future relationship being reached. Any deal will entail significant disruption to our supply chains, business models, market access and also to the cost of doing business with the UK. And we need to be wise to that. It will also impact on our fishermen and seafood industry.
I also took the opportunity to thank all Leaders for their friendship and for their solidarity with me as Taoiseach and with Ireland as a country over the past three years, in particular in relation to Brexit, and I wished them well in the difficult and challenging days ahead.