“Real Recovery, Sustainable Jobs & Lasting Growth – Ireland’s story& Europe’s next steps”
Chancellor Merkel, Dr Lauk, Dr Winterkorn, ladies and gentlemen,
I am very happy to be back in Berlin today and am delighted to join you for this opening session of your economic conference.
Many of you here today are from Germany’s dynamic business community. I welcome this opportunity to speak to you as people who, quite simply, make things happen.
This audience today consists of job-creators, innovators, exporters across the world...each of you champions for the growth we all need.
This audience consists too of the political leadership which supports and facilitates the growth you generate. I just had a very good meeting with my good friend and colleague, Chancellor Merkel.
The difference you all make is felt not just here in Germany, but across the European economy and globally. Many of you already have winning business relationships with Ireland – and for those of you that do not, I hope that the story I will tell today about Ireland might inspire you to join forces with us too.
One immediate example I can give is Volkswagen, whose chairman I am happy to share the platform with this afternoon – his is currently the best-selling car brand in Ireland, while the Volkswagen Group has a number of value-adding investments there as well.
Late last week, we worked together at the European Council to finalise the leadership for the European Union for the coming years. Our nominee for Commission President, Jean-Claude Juncker, became the EPP candidate for this post when I hosted the Chancellor and other EPP colleagues in Dublin last March.
Even more importantly, the Union set its strategic priorities for the period ahead. I will come back to these later.
I arrived earlier this morning from Dublin and met other achievers in the Irish-German business scene here in Berlin.
This morning I opened a new store for Primark, an Irish company which now employs more than 6,000 people here in Germany and has big ambitions to grow further. They tell me that their company’s contribution to the German economy is in the region of €0.7 billion a year.
I went on to meet a cross-section of Irish and German companies at our Embassy just before coming here. All these companies, whether small or large, want to grow further and employ more people. I heard how Irish SMEs are valued by their German customers and that we can also learn a lot from Germany’s impressive Mittlestand as we are committed to grow and develop our SME sector further.
Already, therefore, Germany and Ireland have a real partnership, a win-win one between our two economies. Almost €11 billion in goods are exchanged between us annually, along with a further €11 billion in services. And we can do even better, with your help.
Our size and population may differ, but we have so much in common. Our GDP per capita figures are very very close. We are both resolutely open, export-driven economies. Our businesses are ambitious and dynamic. Our public administrations are pro-business. Our people are hard-working, productive, innovative and flexible.
And we have similar governments consisting of the two largest parties in parliament, working together in the interest of sustainable growth and job creation.
Against that background of common experience and interests, I want to first tell you the recent story of Ireland. Where we were, what we’ve done, where we are now and where we want to go next.
A country is not a business, but if one tries to draw parallels with the business world then Ireland’s story in the last number of years is a story of dramatic – if painful – turnaround.
A story of a serious economic disaster with massive consequences for the Irish people. A story which for a time could have had serious implications for the euro. And a story which ultimately involved the Irish people responding themselves decisively, quickly and through radical action and reform.
A turnaround which has been achieved very far, very fast since the darkest days of 2008-2010, but has some way to go yet in terms of genuinely securing lasting growth and job creation.
Our story is one of an economy which was in the right place 15 years ago, joining Germany and others in the group of Europe’s most dynamic economies through a mix of sound economics and encouragement of a diverse, entrepreneurial economy.
Then, at the beginning of the last decade, Ireland was like one of those very good businesses which unfortunately had very bad management.
With assistance from loose rules and loose financial regulation, both at home and abroad, the Irish management of the time looked for the easiest routes to profit in order to keep the accounts looking good. It allowed costs and spending to run out of control, all camouflaged by a debt-financed property bubble.
This unsustainable economic model was badly exposed in 2008 when the perfect storm hit.
Banks everywhere were hit hard but ours were hit hardest – the cost to the Irish public being €64 billion, an incredible 40% of our national economy and a massive addition to our national debt. In 2009, technically our deficit ran to 32% due to our bailing out our banks.
Consumer spending was wiped out and tax revenues collapsed overnight. Unemployment jumped from 4.4% to over 15% by 2011. At one point, 7000 jobs were lost every month – and bear in mind that we are a country with 1.9 million people in work. Demands on our social welfare system increased dramatically as a result of all of this.
So what did Ireland and its people do about this?
We could have sat back and waited for someone else to come and fix our problems. We could have simply defaulted, with all the negative consequences that it would have brought.
We could have sought to do the minimum and avoid real reforms, hoping growth elsewhere might do the heavy lifting for us.
But that’s not the way of the Irish people. We knew we had many strengths to build on. We wanted to fix this. And, as my government came to office in March 2011, we were determined to never again make those mistakes of 10-15 years ago.
We were determined to complete the EU-IMF programme on time and take back full control of our economy. We also changed and improved that programme with the co-operation and help of our EU partners.
Europe very much needed Ireland’s recovery too - we did not want anything to do with the real and serious threat to the euro itself that was there in 2010/11. We wanted to be part of the solution, not part of the problem.
Let me give you some numbers about Ireland’s turnaround story:
· In just seven years, a 19% adjustment to our economy will have been implemented through a mix of expenditure cuts and revenue raising.
· We’re about 95% of the way through that process, with just under €30 billion of adjustments carried out by 2014.
· There have been 270+ high-level policy actions across government and across the economy.
· Within these, over 1000 further actions have been aimed at job creation, helping businesses create jobs and people take jobs.
· A massive restructuring of our financial system, with a parallel overhaul of financial regulation and over €71 billion in deleveraging of our banks with strong capital ratios also put in place.
All of this has happened along with major reforms and efficiency drives in our public sector, which saw an average cut in pay of 15%. Supports to business and job creation have been streamlined and boosted too, with focus on both foreign direct investment and the expansion of home-grown enterprises.
We also now have a new Strategic Banking Corporation of Ireland to provide sustainable financial support for SMEs. I am delighted that KfW here in Germany is one of the backers of this very important and valuable policy vehicle.
Smaller, simpler and yet very important steps have been taken too. New and promising businesses now have a one-stop-shop online portal through which to seek government support for their good ideas.
The results of all this work so far?
· The Irish economy is now borrowing at 10-year rates of 2.3%, versus almost 15% just three years ago.
· Our sovereign ratings are being upgraded again.
· Growth is becoming meaningful again, with just over 2% expected in 2014 and 2.7% in 2015.
· Competitiveness has been comprehensively regained, particularly in terms of unit labour costs which will - uniquely - have improved by 20% relative to the eurozone average.
· And behind these numbers, the most important numbers of all – jobs.
· From a high of 15.1% unemployment, we have had 22 consecutive months of this rate declining and now we’re at 11.7%. From losing 7000 private sector jobs a month in 2011, we are now at 3500 job gains a month.
· And Ireland is seeing job creation which is at a higher pace than anywhere in the European Union.
Overall, on the macroeconomic side, we’re going to reach our target of 3% deficit next year and 0% in 2018. On the jobs side, we intend to effectively eliminate unemployment by 2020.
As I said earlier, Ireland and the Irish people have come a long long way in a short time.
Solidarity from our EU partners has been a very important boost to this progress and the government appreciates that.
Overall, am I satisfied at where Ireland is today? Yes. In fact, we’re ahead of our own targets on almost every measure.
But am I happy that this is enough? No. And I shouldn’t be. Instead, I have far more ambition yet for Ireland.
11.7% unemployment is far far too much despite the great improvement of the last two years. I will not rest on fighting for job creation until that figure is far, far lower - and that youth unemployment and long-term unemployment in particular both fall much further.
Telling the story of a country - just as when presenting on a company’s present and future prospects – must be credible and therefore must include the challenges just as much as the opportunities.
Countries are ultimately about the people and this has been a very painful period for the Irish people. To help bridge that gap between what government takes in and what it spends, they are paying a lot more now in taxes and charges. Their incomes have fallen too, in both the public and private sectors.
Private debt remains very high while public debt, though now stabilised and at its peak, remains too high at over 120% of GDP.
In short, Ireland’s recovery remains fragile.
The turnaround work continues, therefore, to reduce that remaining fragility. We’re determined to succeed even further. We have delivered so far for Ireland and for the eurozone in this recovery work of ours.
Where we do ask for assistance from our European partners, that assistance delivers for them in return.
Ensuring the sustainability of Ireland’s economy remains as important as ever - the Chancellor and I discussed this again this afternoon, including in relation to Ireland’s banking-related debt.
Ireland has also worked hard to secure sustainable growth across Europe. We have re-engaged with our European partners in the last three years, with our Presidency of the Council of the EU this time last year a particular focus.
We sought to bring our recovery experience to bear on Europe’s recovery agenda. Our Presidency was about actions, decisions, getting things done. In all, we secured about 200 different decisions including 80 of a legislative nature. These will make a difference, from the €960 billion budget for 2014-2020 to major decisions on Banking Union and the mandate for the EU-US trade negotiations.
For those of you involved in research and development, there is the new Horizon 2020 programme. For those of you in the food industry, there is the reformed Common Agricultural and Fisheries policies. For those of you in education, there is Erasmus Plus. And the list goes on.
We’re proud of our record with that Presidency but the fact is that it is now in the past. Ireland remains 100% engaged and focused on the future – the next five years and beyond.
Our approach within the European Union is not dissimilar to our approach at home. This is necessarily complex and yet not so – the Union is, just as national governments are, answerable to the people.
The EU is expected by people to act. The principles behind our collective actions in the EU are clear.
· It is better to have a job.
· It is better to have every facility to succeed if you’ve a good business idea, with minimum obstacles to trading.
· It is better to have credit supply from a reformed and functioning financial sector.
· It is better to have more effective public services at national and EU levels, funded as needed by sustainable revenue streams.
To deliver on these economic principles, it is much better to be bold and ambitious – more than we have been in the last five or ten years.
Together in the Union, we need to take decisions. Sometimes hard decisions. Sometimes hard-to-explain decisions.
Taking these decisions is a slow process, bringing understandable impatience. We have to balance this with the need for legitimate national and regional concerns to be heard and responded to, but we must still take those decisions in the end.
The European Union is not and cannot be the United States, but the fact remains that their economy has recovered faster and is growing more partly because they moved swiftly and decisively to fix their banking system, among other bold decisions.
In the Union, there remains a major drag in credit supply despite the far-reaching reforms we have already agreed together. We really need to work more and faster towards a Union where credit flows freely and inexpensively across borders, at similar or ideally identical rates.
Likewise, there is impatience which I share for bold international decisions such as an EU-US trade agreement, or TTIP as it’s known. There, for example, is a project Ireland and Germany can lead on in the time ahead.
We must persist and respond and get results. The theme of this conference uses the word “transition”. The transition I have in mind is one from crisis management to actions for real growth and lasting job creation.
The recent years have seen some very heavy lifting done. We now have the infrastructure to help prevent a similar crisis, including banking and fiscal rules. We are now working to make these succeed.
The challenge is this - how do we help evolve from the foundations we’ve laid to supporting growth in a way that avoids past bubbles?
As I have told you, Ireland has been working carefully on that at a national level. We have a more robust tax/revenue model. A focus on supporting strong sectors less susceptible to volatility. We will aim to manage economic cycles better...weather the next storm better, whenever it comes.
Ultimately, it does come back to our people. I want employment well up. I want people doing jobs that help businesses grow, secure cashflow, keep existing customers and gain new ones, in turn employing more people.
I want people having money in their pocket that they spend wisely. I want growth that in turn contributes appropriately to the state so in turn it can deliver education, healthcare and targeted business supports ....all in a virtuous circle.
Growth is a fine word and has been around a long time, in a lot of documents and strategy papers. But in comparison to the last decade, we now urgently need to put much more substance behind it at EU level.
So let’s take the big ideas where the groundwork is done and go ahead and deliver on them. What big ideas?
· Trade agreements – with the US and elsewhere;
· A true digital single market – Europe has to catch up with the world and lead it in e-commerce and next generation telecoms;
· Data protection – a modern regime which protects consumers and at the same time gives the confidence that helps business and employers;
· Food, tourism – two traditional industries with so much potential in a modernised form. Both have been key contributors to Ireland’s recovery;
· Energy, energy security and the linked debate we’ll have this year on climate issues;
· Less red tape and the relentless drive for better regulation;
· Credit supply, a critical issue to confront through our actions in the banking and financial sectors; and
· Innovation support – at domestic and EU levels.
Our job is to deliver these and let the people get on with making the most of them. People like yourselves. The guidelines agreed last week at the European Council should be the launchpad for the next five years.
Our aim has to be for a Union no longer divided between creditors and debtors, a status neither side likes to have. Minimising all potential divisions in the Union has to be a priority, and in that context I would also mention that we must work together to ensure that the United Kingdom stays in.
All of you here do business with the UK every day, I imagine. Ireland has a longstanding strategic relationship with the UK, not just as a neighbour but as a partner on so many issues. Given this close relationship, I will of course be a very active participant in that particular debate over the period ahead.
So, to you – to this audience here – I say simply that within the European Union, Ireland’s is a turnaround story that you should be a part of. If you’re already a part of it through partnerships with Irish companies or investments in Ireland, I encourage you to do more.
Whatever your position, I encourage you to contact the Irish government and those who represent us here in Germany – our Embassy and our investment, trade and tourism agencies.
Ireland has gone far and aims higher still. In many ways it’s a business turnaround at an advanced stage – we had a business plan and we stuck to it. We’re in transition now to the next phase of lasting growth and a jobs economy.
In this context and on the wider European stage, Irish-German bilateral links are of win-win kind, to say the least. May they grow and grow.
I wish you well with your conference.
Thank you.