I am pleased to have the opportunity to brief the House on what was a very significant meeting for Europe and for Ireland.
On 7 June, I wrote to all other Heads of State and Government to set out Ireland's position on the crisis in the Eurozone and to outline my two key objectives for this Summit:
• reaching agreement on a growth pact for Europe; and
• reaching agreement on a European response to the banking crisis that broke the link between banking and sovereign debt.
I am pleased to report that significant progress was made on both fronts.
The European Council agreed a Compact on Growth and Jobs; and the Euro Summit agreed a number of important steps aimed at addressing the immediate crisis in the euro area, including the imperative need to break the vicious circle between banks and sovereigns.
President Van Rompuy presented his report “Towards a Genuine Economic and Monetary Union”, laying the groundwork for a strong and credible currency into the future.
It was a significant meeting with significant results of particular consequence for Ireland.
Euro Area Summit Statement
Having had extensive discussions involving all 27 Heads of State and Government on the crisis facing Europe and the steps necessary to return Europe to growth and job creation, those leaders representing the 17 Euro area Member States continued their discussions on the immediate steps to restore stability to the currency.
The backdrop to our meeting was a difficult and complex one, and the issues facing us were sensitive and potentially divisive. Our discussion was long and frank.
As I have said, my goal was to ensure that the link between banking and sovereign debt was broken decisively.
I also made it very clear, at the meeting and beforehand, that any outcome that did not respect the equality of Member States in the solutions being developed would not be acceptable to Ireland.
In the end, we made a clear statement that breaking the vicious circle between banks and sovereign is “imperative”. This is a significant shift in position, the importance of which should not be underestimated.
I particularly welcome the fact that the principal that the ESM should be enabled to directly recapitalise banks has been agreed. This is a major shift in policy, one which I publicly called for at a conference on the Eurozone crisis in Dublin Castle on 20 April and on numerous occasions since.
The interaction between banking and sovereign debt has been right at the heart of the crisis and has presented a significant obstacle to confidence in the markets. I have long believed that it would not be possible for Europe to move beyond crisis and towards recovery for as long as banking debt and sovereign debt remained intertwined. We have now agreed to separate them.
For Ireland, this vital step represents an important breakthrough that can help us to recover and to return to the markets.
In deciding to sever the link, we also identified how and when it should be done.
The Commission will shortly present proposals for a single supervisory mechanism and the Council has been asked to consider these urgently by the end of 2012. When a single supervisory mechanism, involving the ECB, is in place, the ESM will be enabled to recapitalise banks directly. In each case, this would involve appropriate conditionality, formalised in a Memorandum of Understanding.
It has been abundantly clear that the markets will not accept as credible any arrangements for capitalising banks that place further strain on the position of sovereigns already under pressure. The recent agreement for Spain, for example, has simply not succeeded in bringing the relief that was sought. We now have the real prospect of a different approach with the capacity to deliver very different results.
In our discussions, I made it very clear to colleagues that I could not accept a situation where Ireland would be penalised by having taken the steps necessary to secure its banks – both in the interests of our own economy, but also in the wider European interest.
Where new possibilities were being offered to others, Ireland had to stand to benefit also. Equality is a key principle.
This was reflected in the text which was adopted and which contains a concrete undertaking to “examine the situation of the Irish financial sector with the view of further improving the sustainability” of our Programme. In working this through, it is made clear that “similar cases will be treated equally”.
This outcome reflects the intensive efforts the Government has made since taking office to explain the situation regarding Ireland’s legacy bank debt to partners, and to seek their support in engineering an outcome that can reduce the excessive burden on Irish tax payers.
That support has now been made explicitly clear and the work to make it real will now begin, starting at the meeting of the Eurogroup next Monday, where Finance Ministers will consider how to implement what was agreed last week.
The Government will be working intensively to ensure the best possible outcome for Ireland, delivered as quickly as possible.
We have stated our intention to exit our Programme and to return to the markets as quickly as possible.
Our European partners now have an opportunity to assist us in achieving that goal in a concrete and meaningful way. Europe needs a success. With their support, we can deliver it.
On Spain, the Euro Summit urged that the Memorandum of Understanding establishing financial support for its banks should be concluded rapidly. Addressing another market concern in a practical way, it was further agreed that while initial funding will be from the EFSF, when the ESM comes on-stream, this will be transferred across without gaining seniority.
We also restated our commitment to using the instruments available to the EFSF and ESM in a flexible and efficient way to stabilise markets for Member States that are respecting their commitments to reform but that remain under pressure in the markets. This was seen as being of particular importance for Italy.
This will be done through the agreement of a Memorandum of Understanding with the country in question, and the ECB has agreed to act as the agent for the EFSF and ESM in making bond purchases under this arrangement. Of course, there is much detail to be filled in and no time to be lost.
The Eurogroup of Finance Ministers has been asked to implement what was agreed by 9 July. This will be an important meeting, including for Ireland.
Compact for Growth and Jobs
- Boosting Investment for Growth
As the House will be aware, the Government has long argued the need for a growth agenda for Europe. The Compact adopted by the European Council last week contains an ambitious programme of work to be taken forward at European and national level.
It will deliver an immediate stimulus, with a €120 billion investment package, or 1% of Europe’s income, mobilised for fast-acting growth measures.
It was agreed that we should increase the EIB’s paid-in capital by €10 billion with the aim of strengthening its capital base as well as increasing its overall lending capacity by €60 billion, unlocking up to €180 billion of additional investment.
It was also agreed that the Project Bond pilot should be launched immediately, bringing investment of up to €4.5 billion for pilot projects, and following evaluation, that the volume of such financial instruments could be developed further in the future.
In both instances – the EIB and Project Bonds- I insisted that eligibility be extended to cover all Member States, particularly those like Ireland, who bore the brunt of the economical crisis. The text of the Council Resolutions was amended to reflect this.
We will now work intensively with the institutions concerned to identify suitable projects in Ireland and I look forward to discussing this with the President of the EIB, Werner Hoyer, when he visits Dublin on Friday.
It was also agreed that those Member States with unspent Structural Funds available could use these to share EIB loan risk and to provide loan guarantees for growth-related projects.
As the House will be aware, Ireland has allocated all of its funding for this round.
- Deepening the Single Market
We also agreed that a deeper Single Market, in which remaining barriers are removed, will be a key factor in promoting growth and jobs, in particular in digital and network industries.
The Commission will bring forward its further growth-enhancing proposals under the Single Market Act in the autumn. These will not only be an important input, they will also help to shape the agenda for the Irish Presidency in the first half of next year.
We called for early agreement on important measures on public procurement, e-signature, and the recognition of professional qualifications.
We also welcomed the Commission’s proposals to improve Single Market governance to ensure better implementation and enforcement. This
is something I have called for – our performance in turning high-level commitments into action on the ground has to be stepped up. The Commission will now make an annual report on this as part of the European Semester process.
Particular stress was placed on the potential of the Digital Single Market, with priority to be given to measures aimed at promoting cross-border online trade, including a transition to e-invoicing, e-identification and other e-services. We also agreed that the roll-out of high-speed internet and the modernisation of Europe’s copyright regime are crucial.
There was also a shared view on the importance of external trade as a driver of growth. Free Trade Agreements with Singapore and Canada are to be finalised by the end of the year; and momentum is to be injected into negotiations with India. We also agreed that work should continue towards deepening our trading relationship with Japan.
The EU-US High-Level Working Group on Jobs and Growth will bring forward its recommendations later this year and made a commitment to working towards launching negotiations on a comprehensive transatlantic trade and investment agreement in 2013. This is something that I will be pressing strongly during the Irish Presidency.
- Tackling Unemployment
Tackling unemployment and addressing the social consequences of the crisis was also a key focus.
We agreed to step up, in particular, efforts to increase youth employment, with the objective that within a few months of leaving school, young people should receive a good quality offer of employment, continued education, an apprenticeship, or a traineeship, which can be supported by the ESF.
Ensuring that Member States have more ambitious and precise National Job Plans –like that adopted by the Government - will be an important element of next year’s European Semester process. Again, this is something that Ireland will drive forward as Presidency.
Towards a Genuine Economic and Monetary Union
President Van Rompuy presented his report “Towards a Genuine Economic and Monetary Union” to the European Council.
As I outlined to the House last week it identifies four ‘building blocks’:
• an integrated financial framework, or banking union as it has been called;
• an integrated budgetary framework with commensurate steps towards common debt issuance;
• an integrated economic policy framework; and
• strengthened democratic legitimacy and accountability.
The President was invited to develop these ideas, in close cooperation with the Presidents of the Commission, ECB and Eurogroup, and to come forward with a specific and time-bound roadmap for the achievement of a genuine economic and monetary union.
In this, he will examine what can be done within the existing Treaties and what proposed measures would require Treaty change.
He will bring forward an interim report in October and a final submission before the end of the year.
It is clear that this work involves consideration of many difficult and sensitive issues. Ireland has a very strong national interest in a strong and stable currency, in a strong and coherent Union. That is what the discussion is about, and I look forward to playing a full and active part in it.
Other Issues
Finally, the European Council also addressed a number of other important issues.
On the Union’s future budget – the Multi-annual Financial Framework – we welcomed the progress made under the Danish Presidency, which provides a basis for the final stage of the negotiations during the Cypriot Presidency now underway. We reiterated our aim to bring these to a conclusion by the end the year.
We also endorsed the welcome decision to open accession negotiations with Macedonia.
We welcomed progress on a number of important JHA files.
We called on Member States to implement the recommendations of the European Nuclear Safety Regulators’ Group in a timely way.
We also strongly condemned the brutal violence and massacre of civilians in Syria.
Ceann Comhairle, this was an important meeting for Ireland and for Europe at which decisions of particular significance were taken. The task of implementing them in good faith now lies ahead. I can assure the House that the Government will leave no stone unturned in seeking advantage and the best possible deal for Ireland.
Adoption of the Compact for Growth and Jobs was also very welcome, but we now need to see it give effect. This will be an important priority for the Irish Presidency, now less than six months away.
We have shown many times in the past that Ireland can make a difference and make its mark at European level, in a way that reflects well on this country and its people.
That will continue to be our goal in the important work ahead.