Check Against Delivery
I would like to thank the Irish Business and Employers Confederation (Ibec) for the invitation to speak today.
Ibec has been a strong pro-Europe voice in Irish life for many years and continues to play a strong and constructive role in our national economic dialogue. I have been privileged to attend your offices just up the road from my Department on many an occasions. It is just one of the current oddities that such a brief journey, through such a lovely part of Dublin, is now more safely replaced by virtual attendance.
I would also like to acknowledge my fellow speaker today, Margrethe Vestager from the European Commission. As Executive Vice President for a Europe Fit for the Digital Age, and someone whose work I deeply respect, she will bring a wealth of knowledge and experience to her remarks.
Where We Are
As I prepare for our national Budget, my focus has been understanding as deeply as I can the current circumstances of the Irish economy.
But here and now it seems appropriate to start not where we are but where we are not. For it is impossible to appreciate Ireland’s economic position today without understanding where we were just over ten years ago.
We were faced with a financial crisis of then unprecedented levels.
Due to all that had happened, Ireland was in desperate need of deep reform. We required reform of our financial model – funded by a credit bubble; our economic model – imbalanced towards construction; and our public finances – overly reliant on transaction taxes.
Many of the reforms cut deeply but we knew they were required to rebalance our economy towards more sustainable growth, restore our competitiveness, and better position our public finances for the challenges ahead. We took ownership of what needed to be done. And we delivered. As a Government, as a society, as a nation.
In turn, these changes have created the foundation for dealing with the challenges we face today.
Yet despite all that has gone right this time, I can stand here today and tell you there is always a need for reform. Why? Because change is constant, in Ireland and in Europe.
For the truth of reform is that it is neither a punishment for economic mismanagement nor a reward for competency – it is a concentrated response to change which is going to occur around you whether you like it or not.
The truth is the economies of yesterday were changing around us before Covid came along and the need for reform was ever present to face the climate crisis and the technological revolution we are living through.
Across the Eurozone and across Europe, in both a coordinated and sometimes uncoordinated fashion, we have been reforming, updating and adapting.
The pandemic fell upon us all with scarcely believable speed. And it is true that the initial support schemes were sometimes blunt instruments, tools of scale rather than strategy. But that was to be expected given the urgent need to support our citizens and to design, roll out and implement schemes, sometimes in a matter of days.
But we must now redouble our efforts to make sure our economic recovery programmes have reform and innovation at their hearts.
That they are not backward looking, pushing the reform agenda to one side, but that they help us deliver the economies of tomorrow. That they embody the coordinated, ambitious and effective reform agenda that our citizens and economies need to prepare us for future challenges and set the stage for ongoing sustainable prosperity.
How we choose the reform agendas we pursue is one of the most important questions we face.
There is no doubt that the green and digital transitions of Europe are amongst the most critical.
The question that must also be asked is how do we implement reforms?
I chaired my first Eurogroup as President in Berlin last month. Amidst the most extraordinary and detailed Covid precautions of our German hosts, it was refreshing to physically meet for the first time since the pandemic began.
A key topic of discussion was a note prepared by the Commission titled ‘The political economy of reforms’.
Perhaps if we were all together physically I would tell you there was a copy for everyone in the room but given the circumstances you will have to download it yourselves from the Commission website where it is publicly available.
This paper took a look at past examples of reform implementation, the lessons learned, what worked and what did not. Colleagues from across the euro zone shared examples of reform implementation – both ones that worked well and ones that worked less well.
The overwhelmingly consensus in that room was that the reforms ahead needed to be based on principles such as evidence-based policy design, extensive consultation with stakeholders and effective communications.
But, more than anything, they also needed political and community solidarity and consensus to succeed.
European Response to COVID19
I have spoken recently about the need to retain our sense of ambition and hope. In something as huge as our Union there is complexity at every turn. And perhaps sometimes our sense of ambition, of all that has been and can be achieved, can be diminished in a sense of powerlessness at all that remains to be done and the great challenges we face.
Our coordinated response to the Covid economic crisis illustrates the power of political will. The recently agreed MFF and Next Generation EU Fund were built on political consensus and cooperation.
The MFF will channel investment quickly to where it is needed most. It will reinforce the Single Market, intensify cooperation in areas such as health and crisis management and equip the Union with a long-term budget to drive green and digital transitions.
And Next Generation EU is a 750 billion euro fund to boost the financial firepower of the EU Budget with funds raised on the financial markets.
All of this is to deliver tangible measures to protect the lives and livelihoods of our citizens and to build the basis of reforms we need to build sustainable and growth orientated economies.
This first pandemic of the era of globalisation knows no borders and equally the EU response has known none either.
The aim is not to merely recover – it is to transform in the process. The reforms we deliver today, tomorrow and in the future must be transformative. And the economic crisis is not a reason or an excuse to slow these reforms – it is an ever greater call to action for their implementation.
What kind of transformation?
Margrethe will be going into detail of some of the areas that the Commission sees as priorities in the digital transformation of Europe. Perhaps my value add today can be to give the a few perspectives first as Minister for Finance of Ireland and then of the President of the Eurogroup.
I have spoken about the reforms that were required after the last crisis to recover our competitiveness and regain lost productivity. Indeed Ireland’s first National Digital Strategy was launched in 2013 following the crisis. But we have been keenly aware that our future economic dynamism and living standards will need to be built on continuing reforms that increase productivity and that deliver new high quality and sustainable jobs right across our economy.
Our medium term economic agenda, Future Jobs Ireland, keenly recognised this and set in motion a host of initiatives to guide the digital transformation of enterprise in Ireland.
We need to push forward with the digital transformation of our manufacturing sector. Ireland has a global reputation for excellence in manufacturing in pharmaceuticals and chemicals, food and drink, medical devices, computers and electronics and engineering.
Digital technologies have already begun to transform global manufacturing value chains, supply chains and business models, redefining sources of competitive advantage for both firms and national economies. We have a whole-of-government strategy to support this with Government Departments working together with agencies like IDA Ireland, Enterprise Ireland and Science Foundation Ireland to raise awareness and support, to provide guidance and to implement digital transformation strategies across the sector.
Even before this crisis we were keenly aware of the challenges that small and medium size enterprises (SMEs) in Ireland faced with declining productivity levels, infrastructural constraints, skills deficit and labour availability.
Since last year I have held regular meetings with individual businesses from across the economy and from all over the country with the aim of gaining a deeper understanding of the challenges they faced and the opportunities they saw for themselves.
The challenges and opportunities of the digitalisation of our economy always featured strongly. The pandemic has not slowed this – it has turbo charged it. We need support and to enable our SMEs to embrace the digital future, something this Government is passionate about doing.
As President of the Eurogroup, my goal is on facilitating the intense policy dialogue and co-ordination that will be required to implement the kind of economic and fiscal policies that will be needed across the Eurogroup to support recovery and long-term growth.
I have indicated previously that I was in the process of preparing a draft work program for my two and half year presidency which I will be sharing with my colleagues in the Eurogroup. This draft program has generated some media discussion in the last week and I am encouraged by the interest in what we hope to achieve over the next two and a half years.
As I have mentioned previously, Next Generation EU, including its emphasis on green and digital agendas, will be a key element in supporting Member States’ recovery.
But fostering consistency and coherence between national policies, the use of the new EU financing tools and euro area priorities will be an enormous challenge; one I believe the Eurogroup can and will play an important role in.
Co-ordination within the Eurogroup will help to prioritise policy actions that facilitate economic recovery and promote the structural reforms and investments that increase the resilience of the Economic and Monetary Union and the EU as a whole.
The Eurogroup can and will be an important force for effective and transformative reform.
We cannot discuss digital transformations and their impacts without mentioning the euro and its future direction. New technologies in banking and payments are giving rise to new services and business models by established financial institutions and new market entrants.
Fifty years ago, in 1970, Ireland began formal negotiations about membership of Europe. A very different Ireland, a very different Europe.
In a parliamentary debate on Ireland’s potential membership of the EEC that year, a newly elected TD, who would later become Minister for Foreign Affairs and later again Taoiseach (Garret Fitzgerald) noted:
“We are offered now an opportunity of not only influencing events by our voice but of actually playing a part in the decisions, in some cases helping to formulate the decisions, voting for decisions and throwing in our weight in favour of decisions that we wish to see being adopted, while in other cases inhibiting decisions that we believe to be contrary to the interests of the world and to the interests of this small peace loving country.”
Whilst no one could have seen then the enormous social, political and economic changes that would have transformed our world in the time since, that aspiration that Europe would empower every nation to influence the creation of policy across the European community is one I find very powerful.
Especially so because I believe it to be true.
The very raison d'être of European membership is embracing change and being at the forefront of political, social and economic development. And critically of feeling ownership of the reform policies that deliver that ongoing development.
The same is true of the Eurogroup.
This pandemic presents huge challenges to our communities, to our way of life and our livelihoods. But we will, we are, adapting.
The great challenges we face now are ensuring that our policies are not only responsive to our current challenges but that they enshrine and align to the kinds of reforms we need to deliver our future growth and prosperity. The digital transition being key.
But this transition will only be on the back of reforms that are enabled by broad ownership. And this will only come from political consensus and solidarity.