The meeting of the European Council on Thursday and Friday of this week will be an important one with a full and significant agenda.
The main item for discussion will be economic policy matters, including the contents of a ‘Compact for Growth and Jobs’ and an examination of President Van Rompuy’s report on how to strengthen Economic and Monetary Union.
We will also discuss the future budget for the Union –the Multi-Annual Financial Framework.
Under enlargement, we will consider the question of the opening of negotiations with Montenegro. We will address a number of matters in the JHA area. We will welcome work done on nuclear stress tests on foot of our request made in December 2011. We will also discuss foreign policy matters, including the situation in Syria.
Economic Matters
As the House will be aware, the European Council has met with increasing frequency since the economic crisis broke in Europe.
In all of these meetings, we have sought to move Europe beyond crisis and into a phase of stabilisation, recovery and growth.
Our approach has not always been as balanced, ambitious or as surefooted as it should have been. The crisis has continued, and it is clear, including from recent events, that we have yet to convince the markets that Europe is a stable and safe place in which to invest. As a Union, our growth prospects remain low, and too many of our people, especially young people, are without jobs.
But, as I have told this House previously, recent meetings of the European Council, especially those in January, March and at the end of May, have been much more firmly focused on how we can put in place concrete measures to engineer recovery, generate growth and support job creation.
That again is the focus of our work later this week, and I will be looking for progress to be made on all fronts. I will be looking for concrete steps to help us:
stabilise the current situation;
get investment flowing in the real economy to encourage growth and jobs;
prioritise policies, including in the single market and on trade, that have real growth potential in the short and medium term; and
lay the groundwork for a more stable and deeper Economic and Monetary Union.
Our discussions on economic matters will centre around three elements: the Conclusions we will adopt; a ‘Compact on Growth and Jobs’; and the report we will receive from President Van Rompuy on the building blocks needed to strengthen economic union.
The European Council will take the final formal step in this year’s European Semester in endorsing the country-specific recommendations addressed to each Member State. These will now be reflected in upcoming decisions on budgets, structural reforms and employment policies.
As a country receiving financial assistance, the recommendation to Ireland is to continue to implement the terms of our EU/IMF Programme, as we have been doing to date.
Importantly, the meeting will adopt a "Compact for Growth and Jobs". This is a very welcome departure.
As the House will be very aware, the Government has long argued that such a Pact is urgently needed, not just in its own terms, but as a vitally important balance to the ‘fiscal pact’ we adopted through the new Treaty.
We need reform and discipline, but we also need an equally firm focus on growth and job creation.
The Compact contains measures with the capacity to make a meaningful impact over the short and medium term.
Boosting Investment
Most immediately, it proposes initiatives with the potential to deliver a boost to growth by injecting increased investment into the real economy.
It proposes an increase of €10 billion to the EIB’s capital, an amount that can be converted, with leverage, into €60 billion extra in lending, supporting an additional €180 billion in investment.
It also urges that we press forward with the pilot phase of project bonds; that we focus structural fund spending on growth-oriented projects; and that we bring the European Investment Fund into play.
All of these steps will make a positive difference, but they will not achieve the real results we are looking for if they are not fully accessible to countries where investment is needed most urgently. I will therefore continue to make the case for the maximum flexibility and creativity so that investment can be targeted where it should be.
Recognition in the draft text that the EIB’s increased lending should be "spread across the whole European Union, including in the most vulnerable countries" is to be welcomed.
Deepening the Single Market
The Compact also calls for deepening of the Single Market, in particular in digital and network industries.
As the House will be aware, the Commission is already advancing work on the first 12 measures under the Single Market Act and it will bring forward its proposals for the next phase in the autumn.
This will be a key input into the work of our Presidency in the first half of next year.
As I have said many times, the digital agenda is particularly promising, and I expect that next week’s meeting will call for swift progress on measures aimed at further developing online trade, including e-invoicing, e-identification and other electronic services. We will also note the crucial importance of rolling out high-speed internet, modernisation of Europe’s copyright regime and the facilitation of licensing.
I also hope that it will be possible to reach final agreement on the Patent, a file that has been open for so long it has become something of a symbol of Europe’s capacity to act.
Trade as a driver for Growth
The Compact highlights trade as an important driver of growth.
In particular, it calls for efforts to be geared towards the removal of trade barriers, better market access, appropriate investment conditions,the protection of intellectual property, and the opening up of public procurement markets.
As an open trading economy, this focus is very welcome.
A priority will be concluding work on Free Trade Agreements with Singapore and Canada by the end of the year; with negotiations with India to be given new momentum. It calls for a deepening of the EU’s trade relations with Japan and it looks forward to the possible launch of negotiations on a comprehensive trade and investment agreement in 2013. This is something that we will certainly be working towards energetically.
The Compact also makes reference to the potential of tax policy to make a contribution to fiscal consolidation and growth. While I firmly support efforts at European level to improve the fight against tax fraud and evasion – and I look forward to the Commission’s Action Plan on this – the Government’s position on CCCTB is very well known and will not be changing. I know I have the support of the House on that.
I would be misleading the House if I did not acknowledge that not all Member States have yet agreed to all elements of the Compact, including the additional funding for the EIB. Some believe that the EIB should first make better use of the resources already available to it. There are also concerns about protecting the Bank’s ‘AAA’ rating. These are sometimes overdone in my view. A top-class credit rating is important, but maintaining it cannot be allowed to become an end in itself. It is, rather, a means to an end.
President Van Rompuy’s Report
President Van Rompuy has now tabled the report on strengthening economic union that we commissioned from him when we met at the end of May.
His paper reflects consultations he has had in the intervening period with Presidents Barroso, Draghi and Juncker - and he briefed Ministers at the General Affairs Council on its contents at their meeting earlier today.
The report is a very welcome contribution to what will be an important debate. But it is worth noting at the start, it is not, nor does it pretend to be, an address to the immediate crisis we face.
It is an agenda and a roadmap towards a stronger economic union that will work our way through over the months and years to come.
It should not distract us from the urgent steps that also need to be taken to stabilise the markets. In this regard, I believe the time has come to allow the ESM to fund banks directly, taking pressure off Europe’s vulnerable sovereigns.
President Van Rompuy’s report contains four key elements:
An integrated financial framework - or banking union as it has been called;
A more integrated budgetary framework with commensurate steps towards mutual debt issuance;
An integrated economic policy framework; and
Ensuring the necessary democratic legitimacy and accountability .
There is a great deal in the report, and I recommend that people read it. It will take a great deal of careful study and consideration, but I would offer the following first, initial, reactions.
I welcome the recognition that we need to move towards more integrated financial arrangements, or banking union. It is something that I have long advocated. We need integrated banking supervision and common deposit insurance and resolution mechanisms.
It will take a great deal of work to advance these ideas, but I would like to see an outcome where risk is shared to the greatest extent possible and where the burden of saving banks is removed from taxpayers.
We have already gone a considerable distance towards greater fiscal integration, including through the six-pack and the Fiscal Treaty. President Van Rompuy is proposing a further tightening, consistent with democratic legitimacy.
We will have to see the detail of what might be involved, but it is very important that he explicitly links progress in this regards with progress towards the future issuance of common debt.
The Government has argued for this. The ultimate goal is eurobonds, but there are steps that can be taken in the interim, some of which President Van Rompuy points towards in his report.
If we move forward, it has to be on both fronts, in step together.
I also support the idea of greater economic coordination, especially between euro area countries. In this, President Van Rompuy is suggesting that we build on what already exists in the Euro Plus Pact. Again, this is welcome.
The fourth essential element of the Report is the need to ensure democratic legitimacy and accountability in advancing this work. This is an indispensable element. We cannot move forward if the people are not with us. We know this better than most in Ireland.
The meeting this week will offer Member States an opportunity to offer their reactions to what President Van Rompuy is proposing. I expect that it will mandate further work and that the President will be asked to make an interim report when we meet in October, with a final report in December.
I very much look forward to engaging with my colleagues on this.
It is also important that this House is kept fully engaged and informed in the period ahead. I will, of course, return to brief the House on my return.
Meeting of the Euro Summit
Of course, as I have said, working on this medium to long term agenda must be supplemented by efforts to get to grips with the immediate crisis we continue to face.
The Heads of Eurozone countries will meet over lunch on Friday when I expect that some of the most immediately urgent issues will arise.
In a context in which market pressure has continued to mount on a number of Member States – especially on Spain and Italy - I expect that we will need to discuss whether there are steps to be taken to better manage bond spreads. A number of proposals involving the EFSF, the ESM and the ECB have been floated in this regard.
I do not believe that this will be an easy discussion, but it is an essential one and it cannot be shirked.
Other Issues
This week’s meeting of the European Council will also take stock of the progress that has been made on negotiating the Union’s budget for the period 2014-2020, the MFF.
The Danish Presidency has made good headway and has set out possible options in a ‘draft negotiating box’ that it will now hand forward to the Cypriot Presidency. I expect that the European Council will express its hope that agreement can be found among Member States by the end of the year, an ambition I strongly support.
There is acceptance that the new budget must make a strong contribution to jobs and growth. The Government sees agriculture and agri-business as a very important part of this picture, and I will be making a strong case in support of the CAP.
To conclude, Ceann Comhairle,
It is important that this week’s meeting comes forward with a comprehensive and credible package that can address the immediate crisis and that can set us on the right path for the future.
I look forward to playing a full and active part in discussions at the meeting, and to reporting back to the House on my return.