Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the Chairman and members for inviting me to address them in advance of the ECOFIN Council of Ministers which will take place next week. I will begin by providing an overview of the European and international dimensions to the work of the ECOFIN Council. As this will be the penultimate Council under the Cyprus Presidency, I take the opportunity to brief the committee on some of its key dossiers. I will also speak about the agenda for Tuesday's meeting, after which I will be happy to take questions and observations from members.

The work of the ECOFIN Council is heavily influenced by the work of the European Commission, the priorities of the rotating Presidency, the work of Heads of State and Government who meet regularly at European Council summits in Brussels, the ongoing volatile situation in the financial markets relating to the crisis in the eurozone and the work of the G20 and the IMF. Specifically in regard to ongoing international developments, the G20 met in Mexico earlier this week to consider a number of issues which we will discuss later in the week at the ECOFIN Council.

The G20 summit closed on Monday and the Mexican Presidency issued the usual communiqué setting out decisions taken.

With regard to the EU Presidency, the Cypriot Presidency still has one third of its term left to run and it is committed to making progress on a number of key dossiers, including the single supervisory mechanism under the banking union heading, and additional measures to strengthen economic governance, referred to as the two-pack. On the single supervisory mechanism, the Cypriot Presidency has stated it will do all in its power to secure agreement during its tenure. On the two-pack, it is also hopeful it will be able to respect the European Council invitation of 18 and 19 October 2012 and reach agreement with the European Parliament with a view to adoption by the end of 2012 at the latest.

The Cypriot Presidency has also successfully co-ordinated a review of the European semester and it will shortly submit a synthesis report to Council bringing together the deliberations over recent months of various Council formations. This will help inform the roadmap on the organisation of work for the 2013 European semester, which will be prepared by the incoming Irish Presidency.

Turning to next Tuesday's ECOFIN meeting, the Department has already supplied the committee with the latest draft agenda for the meeting, and I will highlight some of the key issues that will be discussed. At next week's Council meeting, Ministers will be updated on the progress in the trilogue discussions that are under way to achieve agreement on the two-pack. I expect the Council will be asked to give a mandate to the Presidency to continue negotiations with the European Parliament on the basis of a new set of compromise suggestions which will be put forward by the Presidency. It should be noted that the scrutiny sub-committee of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform will meet on 14 November. The sub-committee has invited officials from the Department to the meeting to discuss the two-pack, as well as the financial transaction tax and the common consolidated corporation tax base.

Returning to the upcoming Council meeting, the Commission will present an update on the status of the revised capital requirements rules. The proposal is at trilogue stage of negotiations, and it is likely the Commission will urge that these negotiations come to a conclusion. The need for stronger capital and liquidity standards for EU financial institutions is evident from the financial crisis and Ireland recognises this is a vital piece of legislation.

There will be a state of play report on the single supervisory mechanism, including an exchange of views. The latter will be on the basis of the Presidency report that will be prepared following an ad hocworking group on 5 and 6 November. Under the proposal, the ECB will take on the prudential supervision of credit institutions. A regulation amending voting procedures in the European Banking Authority is also proposed as part of these reforms. The objective is to ensure equitable treatment of euro area and non-euro-area member states within the single supervisory mechanism.

A state of play discussion on the financial transaction tax is scheduled for the meeting. At the June 2012 ECOFIN meeting, it became clear that agreement on the Commission's draft directive to introduce a financial transactions tax would not be reached at EU 27 level. Those countries that favour the tax are now trying to introduce it by way of enhanced co-operation, under which at least nine countries must participate. I understand that 11 countries - namely, Germany, France, Austria, Belgium, Portugal, Slovenia, Spain, Italy, Slovakia, Estonia and Greece - have written to this effect to the European Commission. On 23 October 2012 the Commission submitted its proposal for a Council decision to authorise enhanced co-operation in the area of a financial transaction tax. The Council will have to decide after consent by the European Parliament. A subsequent Commission proposal for a directive implementing enhanced co-operation in the area of a financial transaction tax should follow in due course.

The mandate for negotiation of amendments to the savings taxation agreements with third countries will be discussed at ECOFIN. There will be a proposal that the Council adopt relevant decisions authorising the opening of such negotiations, and we hope the proposal will be agreed. We will discuss in restricted session issues related to the implementation of the Stability and Growth Pact. In particular, the items discussed will pertain to Greece and may include recommendations for specific measures to be taken by Greece to address its excessive deficit.

The Presidency will inform the Council on the follow-up of the ECOFIN-related decisions taken by the European Council on 18 and 19 October. The October Council was dominated by discussion of economic issues, particularly the interim report on the future of the economic and monetary union, which identifies the single supervisory mechanism and the broader
banking union as essential building blocks to delivering genuine economic and monetary union. The Council will have an exchange of views on the outcomes of the annual meeting of the IMF and World Bank Group in Tokyo and the G20 finance Ministers' and central bank governors' meeting in Mexico, as well as a possible follow-up. The Council conclusions on climate finance - fast start finance - will be agreed in advance of the 18th conference of parties to the United Nations Framework Convention on Climate Change, UNFCCC, in Qatar from 26 November to 7 December 2012. The Environment Council adopted conclusions on the other aspects of the preparation for Doha on 25 October.

Draft Council conclusions on the annual EU statistics package will feature on the agenda. This may only be an "A" item on the Council agenda, which would allow for its approval without any major discussion. Ministers will have an exchange of views on state aid modernisation from which the Presidency will draw its own written conclusions. The Competitiveness Council will also deal with this issue on 10 December 2012 but is not considering adopting Council conclusions. It is expected that ECOFIN will subsequently adopt Council conclusions, taking into account the Presidency conclusions from the November ECOFIN discussion and the discussion at the December Competitiveness Council.

I would like to say a word on our own economic and budgetary situation. The Department's latest projections were set out in the 2012 stability programme update, which was published on 27 April. GDP growth returned last year and further modest growth is anticipated for this year, again coming from the external side. It is expected that somewhat more broadly balanced growth will develop next year and beyond. However, so far the exporting sectors are leading the recovery. This underscores the importance of restoring sustainable growth in the euro area, which is a key trading partner for Ireland. In this context, resolving the difficulties in the euro area will be vital. Furthermore, taking account of the Exchequer returns for the first ten months of this year, our budget is on track, and I am confident that fiscal targets will be achieved again this year. The Department will produce revised forecasts for 2012 and later years shortly. These will take account of domestic developments over recent months and the current outlook for the international economy. However, given the worsening of the external environment - particularly in key trading partners - it is clear that short-term growth prospects will be weaker than previously anticipated in the April stability programme update.

A considerable amount of progress has been achieved on the reform programme and enhanced governance measures in the EU as a whole and in the euro area. Europe 2020, the EU's growth strategy for the coming decade, is now well-embedded throughout the EU. This is also true of the EU semester, which has now become an important part of the annual work stream of the Commission and Council. The successful implementation of the 2013 semester will be a priority for Ireland's Presidency. The euro plus pact, which is now in place as part of the EU semester, has concrete goals aimed at fostering competitiveness and employment. The six-pack, which came into effect last December, will reform the Stability and Growth Pact by, among other things, ensuring better budgetary surveillance and focusing on prevention and correction of macro-economic imbalances. The two-pack will therefore be the key final piece of the reform strategy for the euro area.

The four presidents' paper on the economic and monetary union was released in June. The paper's four essential building blocks are proposals for an integrated financial framework, a budgetary framework, an economic policy framework and greater democratic legitimacy and accountability. An interim report by President Van Rompuy was presented to the October European Council.

A specific road map for the achievement of a genuine economic and monetary union will be presented at the European Council meeting on 13 and 14 December.

Moving forward, it is Ireland's view that the focus must be on delivering in all respects the commitments already agreed by the Heads of State and Government, including those of 29 June. Those commitments were vital in giving certainty to the markets and for Europe's credibility. During its Presidency next year Ireland will mark 40 years as a committed member of the European Union. We will take up the Presidency of the European Union on 1 January 2013 and will work in collaboration with the other members of our trio, Lithuania and Greece. Membership of the EU during the past 40 years has been good for Ireland in terms of attracting a considerable amount of foreign direct investment and in gaining access to a much bigger market for our exports. Equally, Ireland has been perceived by our European partners and successive members of European institutions as a diligent, pragmatic and constructive member of the Union. We have demonstrated this continuously during the past six occasions on which we held the Presidency of the European Union and have gained a reputation for holding efficient, business-like and pragmatic Presidencies. In 2004, Ireland presided over the enlargement of the European Union to 25 member states.

The Government believes that Ireland's future is intimately linked with continued membership of a strong and vibrant European Union and as a member of the euro area. It is the intention of the Government to continue to proactively engage with senior officials in the EU institutions and with our EU partners in the implementation of policies aimed at strengthening growth and stabilising turbulent financial markets. This is reflected in the main themes of our Presidency, which include promoting growth and restoring the EU's competitiveness.

I thank members for their attention. I am happy to respond to any questions from members.