The European Council in Brussels tomorrow and Friday will be the first Council since Ireland successfully exited our international bailout. I will inform my European colleagues that this success was due to the sacrifices and perseverance of the Irish people.
As the first eurozone country to successfully exit a bailout it is an achievement not only for Ireland but for Europe.
It is also the final Council of the Lithuanian Presidency. Lithuania, together with Ireland and Greece, form the current Trio Presidency group. I would like to take this opportunity to congratulate Lithuania on a successful maiden Presidency, and also to wish Greece well with its impending Presidency.
This month the European Council has a very substantive agenda, with a number of very important issues to be discussed.
The main items on the agenda are:
· The Common Security and Defence Policy (CSDP)
· Economic and Social Policy, including implementation of the Compact for Growth and Jobs, SME financing and taxation
· Economic and Monetary Union (EMU), including Banking Union
· Migration flows
Leaders will also take note of progress reports on the implementation of the Internal Energy Market and on External Energy relations. We will revert to energy policy in the spring.
The European Council will also welcome the successful outcome of the recent WTO Ministerial Conference in Bali. In addition we will discuss the ongoing and very serious humanitarian situation in Syria. Minister Donohoe will provide more detail on this in his contribution.
I expect that the European Council might also look at recent developments in the Central African Republic and in relation to Ukraine and the Eastern Partnership.
My main priority for this Council meeting will be Banking Union. I welcome the fact that President Van Rompuy has also identified this as the top priority. As I have said here and elsewhere on many occasions, timely delivery of what we have already agreed in this area is a key credibility test for the Union. Finance Ministers are continuing to work on these issues and there are some indications of progress overnight from Brussels. A good and balanced agreement will be important for Europe and for Ireland.
On the Common Security Defence Policy, conclusions were agreed by Foreign and Defence Ministers in their meeting on 18-19 November. We will be seeking to maintain a strong focus on enhancing the effectiveness of CSDP tomorrow.
In his letter to Heads of State and Government, President Van Rompuy has set out what he sees as the key priority issues for the remainder of his term and that of the European Parliament. He emphasises the need to begin implementation of the Youth Employment Initiative and the SME Financing Initiative from 1 January next. I welcome the fact that we will have discussions on these at the European Council.
I fully share the President’s emphasis on the importance to the credibility of the Union of implementation of all of our commitments. Now more than ever as we prepare to ask people to vote for their representatives in the European Parliament elections, the public needs to see that we follow through and act on our commitments at European level.
Common Security and Defence Policy (CSDP)
The European Council will open with a discussion on the Common Security and Defence Policy or CSDP. This will be the first significant discussion of CSDP in five years, and will provide an opportunity for a serious strategic discussion on what the EU and Member States should do to maintain critical capabilities.
In December 2012, the European Council reiterated its commitment to enhancing the effectiveness of the CSDP as a tangible EU contribution to international crisis management. Leaders invited the High Representative, with the European External Action Service and the European Defence Agency, as well as the Commission, to develop further proposals and actions to strengthen CSDP.
We agreed to return to this issue at the December 2013 European Council on foot of the work undertaken in the interim by the Commission and the High Representative.
In July, the Commission published its Communication and High Representative Ashton published her final report in October. These contributed to the Conclusions agreed last month, which themselves inform the Draft Conclusions for the European Council.
As a strong and active supporter of CSDP, Ireland recognises the need to improve the effectiveness and visibility of EU action in this area. We currently participate in six civilian CSDP Missions and three military CSDP missions. We consider that it is important for a correct balance to be struck in the conclusions between civilian and military CSDP and we wish to see the Comprehensive Approach to crisis management duly reflected in the December European Council outcome. We have also sought to ensure that the crucial role of the UN and regional partners is highlighted.
The Minister of State will expand on this element of the European Council agenda in his contribution at the end of the debate.
Economic and Social Policy
The work we do to shape our economic and social policy could not be more urgent. This week we will conclude the preliminary phase of the European Semester for 2014 by welcoming the Annual Growth Survey and the Alert Mechanism Report presented by the Commission on 13 November. The challenge now facing Europe’s economy lies in sustaining a fragile recovery.
We fully support the Commission’s continued emphasis on five main priorities over the coming year:
· Pursuing differentiated, growth-friendly fiscal consolidation;
· Restoring lending to the economy;
· Promoting growth and competitiveness for today and tomorrow;
· Tackling unemployment and the social consequences of the crisis;
· Modernising public administration.
This is the fourth European Semester cycle, the third under the enhanced governance arrangements introduced by the six-pack, and the first under the further enhancements introduced by the two-pack. Ireland, of course, having successfully completed our EU-IMF programme will be participating in the 2014 European Semester.
Implementation of the Compact for Growth and Jobs
We will also review the Compact for Growth and Jobs which was agreed in June 2012. This represents an important reinforcement of political commitment to doing what is necessary to support recovery in the real economy. This is as important today as it was in June last year. The December European Council will take stock of progress under the Compact, in particular in relation to mobilising enhanced EIB lending capacity, implementing Youth Guarantees and finalising outstanding Single Market Act files.
The Compact for Growth and Jobs provides a clear framework for actions at three levels.
Firstly, actions to be taken at the level of Member States: This means renewed attention to the Europe 2020 Strategy and the enhanced economic governance arrangements underpinning the European Semester. The December European Council will, in light of the Annual Growth Survey and Alert Mechanism Report, identify the main areas for coordination of economic policies and reforms over the period ahead.
Second, the contribution of European policies to growth: This means keeping up strong momentum in the work taken forward by the Irish Presidency towards deepening the Single Market, expanding the Union’s external trade relations, and accelerating progress on Banking Union. The Compact also provided for a €10 billion increase in the paid-in capital of the European Investment Bank (EIB).
Third, EMU-related growth factors: This means further development of the work on the 'four essential building blocks' for strengthening the Economic and Monetary Union.
It is clear that Europe will have recovered from the current crisis only when its economies are growing again and creating jobs. The Compact sets out very clearly what we need to do to support this recovery. We must ensure that it is implemented.
Financing of the Economy
I expect there will be a particular focus in discussions on measures to underpin the financing of the economy. This follows the Investment Plan which the European Council agreed in June mobilising the €10 billion increase in the capital base of the European Investment Bank. This will support a 40% increase in lending capacity up to 2015, bringing annual EIB lending volumes to between €65 and €70 billion.
The report from the Commission and EIB that was presented in June indicated that the bank had already identified new lending opportunities of more than €150 billion in agreed priority areas: innovation and skills; SME access to finance; resource efficiency; and strategic infrastructures. These are projects that would be unlikely to proceed without EIB support.
The Investment Plan also develops important synergies between enhanced EIB lending capacity and the new EU budget settled by the Irish Presidency. Resources here will be combined to support a significantly expanded volume of new SME loans across the Union.
Work being led by Ministers Howlin and
Noonan will see almost €1.2 billion worth of EIB project signatures and loan approvals in Ireland in 2013. This represents an increase of just over one-fifth on 2012 levels, which were in turn up more than four-fifths on the previous year. We also see room for further progress here, building from the successful reopening in April of the Irish PPP market –for the first time since 2007– and restoring normal lending conditions across the economy generally.
The Council will also touch on the continuing work at European and national levels to tackle the scourge of youth unemployment. Work is continuing to ensure our initial Youth Guarantee implementation plan ready before the end of this year. This work is being led by the Department of Social Protection and supported by the OECD. Preparations are on track, aligned with the development of our ESF operational programme under the new MFF. Job creation is, of course, a vital pillar of our new medium term economic plan.
The December European Council will also aim to reinforce momentum under Single Market Acts I and II. In that regard, the EPSCO agreement last week on a general approach on Posted Workers is a welcome development.
The Competitiveness Council on 2-3 December identified three main strands that will lead to a better functioning of the internal market: the governance of the single market; the steps to be taken to unlock the full potential of the services sector; and the actions to promote the transition to electronic procurement.
Heads of State and Government are also expected to review actions undertaken since May in the area of taxation by ECOFIN and the Commission.
In May, the European Council highlighted the need for effective steps to fight tax evasion and fraud and called for rapid progress on a number of issues, including:
· extend the automatic exchange of information;
· the Action Plan on strengthening the fight against tax fraud and tax evasion;
· the Directives on the VAT quick reaction mechanism and on the VAT reverse charge mechanism.
The European Council also pointed out that these issues must be tackled at a global level and linked this work to ongoing work in the G8, G20 and, most importantly, the work already underway at the OECD.
The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes confirmed on 22 November that Ireland is one of eighteen out of fifty countries or jurisdictions, and one of six EU Member States, which are fully compliant with regard to practical implementation of the Forum’s information exchange standard.
At the October European Council, these issues were raised again in the context of the digital sector, and the Council welcomed the Commission’s establishment of an expert group on taxation of the digital economy. I am pleased to report that an Irish woman, Ms. Mary Walsh, has been appointed to the group. Ms. Walsh is a chartered accountant and served on our Commission on Taxation.
Ireland welcomes the establishment of the expert group and we hope it will be able to assist the EU in tackling this issue. It is clear that the digital economy has moved at a pace that international tax rules may not have fully kept pace with. An expert analysis of these new business models is needed to ascertain where the economic substance and value and income producing activities lie – and to consider to what extent international tax rules are still fit for purpose. This is already happening as part of the OECD BEPS Taskforce on the Digital Economy. Ireland supports this initiative and we believe the OECD is the most effective forum for this work.
Economic and Monetary Union (EMU)
For our discussion on the shared analysis of the European economy based on the 2014 Annual Growth Survey, and on Economic and Monetary Union, we will be joined by ECB President Draghi.
Clearly the establishment of a Banking Union is a major political priority and will be a landmark in the evolution of the Economic and Monetary Union. The first step in creating the Banking Union was taken with the recent adoption by the Council and the European Parliament of the Single Supervisory Mechanism (SSM). The SSM has now entered into force, and the ECB will take over its full tasks under the regulation, exercising direct supervisory responsibilities from November 2014.
As part of the transition to the SSM, a balance sheet assessment will be conducted, comprising a supervisory risk assessment, an asset quality review and subsequently a stress test. The purpose of this exercise is to ensure that banks are appropriately capitalised going forward. The ECB, before assuming its supervisory role in November 2014, will provide a single comprehensive disclosure of the results and any recommendations for supervisory measures to be undertaken by banks.
As part of the Troika programme, the Irish banks had to complete Asset Quality Reviews before the bail-out exit earlier this week. Earlier this month Bank of Ireland, Allied Irish Banks and Permanent TSB informed markets that, following the Asset Quality Reviews, they all were well capitalised and passed minimum capital requirements.
The agreement reached between the Presidency and the Parliament last week on the Bank Recovery and Resolution Directive is another very welcome step in putting together the Banking Union. There has also been progress on the Deposit Guarantee Scheme.
Ministers of Finance are meeting in Brussels today with a view to reaching agreement on the Single Resolution Mechanism (SRM). There as some positive signs emerging this morning from these discussions. These include agreement that a common backstop will be developed during the transition period of the SRM, and that the banking sector will ultimately be liable for repayment. This is fundamental and welcome. Work is continuing on governance arrangements, including voting rights for the Single Resolution Board (SRB). Again, we will continue to press for our concerns here to be addressed.
This is a complex and sensitive task. Each and every Member State has a vested interest in seeing a good and balanced outcome, and I know that Minister Noonan and his ECOFIN colleagues are working very hard to find the right way forward.
Ireland supports a broad scope for the SRM, and creation of a single fund which should also have a credible EU level backstop. The combination of a single fund and the backstop will assist in achieving the objective established by the Heads of State and Government of breaking the link between the sovereign and the banking sector, and as I mentioned indications overnight from Brussels are positive here. After all, that is the point of the exercise, and, moreover, it is what we have committed to do.
Partnerships for Growth, Jobs and Competitiveness
At the October European Council, Heads of State and Government agreed that work would be taken forward to strengthen economic policy coordination, on the main features of a proposal to introduce contractual arrangements and associated solidarity mechanisms.
While there has been a lot of work done, and good progress at official level since October, significant divergences of opinion remain in relation to these proposals.
This is a serious business, if we are to commit Member States to any new binding arrangements. We want to ensure that we get this right, and we should not rush to make decisions, if there is a need to elaborate further the nature, process and the impact of any such contracts.
In my view any new contractual arrangements should operate within the framework of the existing European Semester process. There are already a number of economic governance instruments in operation since the adoption of the ‘six pack’ and ‘two pack’ and we should approach this entire debate from the perspective of adding value to the existing framework, where appropriate, and avoiding duplication. Further discussion and clarification is required on central issues such as the nature of the proposed contractual arrangements – i.e. whether they would be mandatory or voluntary –the source of funding for the proposed solidarity mechanism, how we can encourage participation, and indeed, to which policy areas the contracts might eventually apply.
The precise roles of the Member States, the Council and the Commission in the process also need to be defined. As a supporter of the Community method, Ireland welcomes the proposal that the Commission would monitor compliance by recipient Member States with the contractual obligations. However we will need clarity as to the respective roles of the Commission and Council. Overall, I would still like to see more detail on these proposals, before we make any hard and fast decisions. Other Member States, many other Member States, share this view. I believe that we will return to this matter again in 2014.
Following the drowning tragedy off the Italian island of Lampedusa on 3 October, in which several hundred African migrants lost their lives, the Justice and Home Affairs Council in October invited the Commission to establish a Task Force to identify priority actions with a view to preventing the recurrence of such tragedies in the future. I have personally
discussed the tragedy with PM Letta of Italy recently, and have committed to support all efforts at the European Council to address the awful circumstances which have led to such a shocking outcome.
Ireland participated in the meetings of the Task Force on the Mediterranean, as did all Member States, and we support the conclusions of the Task Force report. We agree that the best approach to this multifaceted problem is to focus on prevention and engagement with countries of origin.
The December European Council will have its traditional annual discussion on enlargement, reviewing progress over the past year and looking ahead to the prospects for next year, on the basis of the European Commission’s progress reports and discussions in the General Affairs Council. Enlargement remains one of the EU’s most successful policies, fostering peace and security in the wider European region.
Overall, we look forward to an ambitious EU enlargement strategy for 2014. The Minister of State will provide further detail on this element of the European Council agenda in his contribution.
The attention of the Heads of State and Governments will also be drawn to work on Energy. This is a key area of all of our economies in Europe, which we will address in more detail in the spring.
Central African Republic
The European Council may discuss recent developments in the Central African Republic.
We have seen in recent weeks an alarming breakdown in law and order and basic social structures in the country and a worrying increase in inter-communal violence and gross violations of human rights.
The EU’s primary focus on the security front at the moment is centred on providing support to the African Union and French efforts. We will continue to monitor the situation over the coming weeks to see if and how the range of crisis management tools at the EU’s disposal, which includes CSDP, can be of further assistance.
Finally, the European Council will consider The Vilnius Eastern Partnership Summit on 28- 29 November, and the current situation in Ukraine. I have been following the unfolding events in Ukraine with growing concern and in particular the actions by the Ukrainian police to break up the peaceful protest of citizens in Kyiv. The rights to freedom of expression and freedom of assembly are enshrined in the European Convention on Human Rights and are fundamental in any society. I strongly believe that these rights should be fully respected by the Ukrainian authorities. I call again on the authorities to exercise restraint, respect peaceful protest and ensure that all avenues of dialogue are kept open.
UN Climate Change Conference
I understand that President Tusk will update leaders on the outcome of the UN Climate Change Conference, COP-19, held in Warsaw last month.
As I said at the outset, we have a very full agenda and I look forward to very productive discussions in the days ahead.
I will of course return to the House on the outcome of the European Council when we reconvene in the New Year.
In the meantime, I would like to wish all Deputies and staff a very happy Christmas!