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

I thank the Chairman and committee members for inviting me to speak to them in advance of the meeting of the Economic and Financial Affairs Council of Ministers, ECOFIN, next Tuesday, 18 February, in Brussels. Members will be aware that I have agreed, subject to scheduling arrangements, to attend the committee on a quarterly basis to update them and discuss developments at ECOFIN. In addition, my officials provide a written briefing on a monthly basis. This is a very useful and positive development and I look forward to this morning's engagement. Greece took over the Presidency in January and next week’s meeting will be the second of its Presidency. I understand the committee has already received the draft agenda and background material for the February meeting. A number of key issues are listed for discussion and it is hoped significant progress will be made at the meeting.

As the committee also asked if I would also provide a brief overview of proceedings at the January meeting, I will turn to that issue. The aforementioned meeting took place in Brussels on 28 January and the agenda was relatively light, which was to be expected. Generally, the first meeting under any Presidency is light because the previous Presidency would have made a big push to finish off items at the end of its term. As is customary at the beginning of a new Presidency term, the Greek Presidency presented its work programme on economic and financial matters. The Council took note of the Presidency's work programme and its key objectives of supporting economic growth and employment and restoring confidence in the financial sector. The Greek Presidency has set out a busy schedule for its six month term and I expect that in the early months it will focus on the files where it might be possible to reach agreement with the European Parliament before the Parliament’s term ends. The Greek Presidency is the final leg of our Presidency trio. It has chosen “Europe: our common quest” as its theme and I wish it all the very best in its term in office.

At the ECOFIN meeting in January there was also an update by the European Central Bank on the implementation of the single supervisory mechanism, SSM, for banks. The regulations establishing the SSM were adopted in October 2013 and it is scheduled to come into operation in November 2014. The SSM will cover the euro area, as well as non-eurozone member states that choose to participate. The ECB will have direct oversight of banks in these countries and work in close co-operation with national supervisory authorities. In preparation for taking over this task the ECB, in co-ordination with the European Banking Authority, will conduct an asset quality review and stress tests as part of its comprehensive assessment of the banks over which it will have direct oversight.

The January ECOFIN meeting also followed up on December’s European Council meeting and focused on implementation of the Compact for Growth and Jobs. The Compact for Growth and Jobs was agreed in June 2012 with the aim of boosting economic growth, investment and employment, as well as making Europe more competitive. While progress has been made in this area, efforts are ongoing to ensure it is fully exploited. With this mind, at the January ECOFIN meeting the European Commission and the European Investment Bank updated the Council on initiatives to restore normal lending to the economy.

In January the Council also adopted a decision regarding the existence of an excessive government deficit in Croatia and issued a recommendation to correct the deficit by 2016. That morning, as usual, Ministers held a breakfast meeting to review the economic situation. There was also an update on the state of play in the negotiations on an intergovernmental agreement on the single resolution fund for banks.

I will now turn to next Tuesday’s meeting. Members will see that there are important items to be discussed. I propose to outline the key issues likely to arise, after which I will be happy to take questions and observations from members. I remind them that this is a draft agenda and that there can still be changes between now and the meeting in terms of content and the order of the discussion. In addition, work is ongoing at the level of officials and there may be more substantial changes in terms of how the discussions will evolve. The formal ECOFIN meeting is scheduled to commence at 10 a.m. on Tuesday. Earlier that morning we will have a breakfast meeting during which I expect the Commission Vice President, Mr. Olli Rehn, to comment on the economic situation in Europe, as well as allowing Ministers an opportunity to consider economic matters more broadly.

According to the draft agenda, the first items to be considered are the legislative deliberations. These will, as normal, take place in public session. Based on the draft agenda, two items are scheduled for discussion, namely, savings taxation and the single resolution mechanism, SRM. The Presidency will also provide us with an update on the ongoing work on financial services dossiers. However, at this stage, we understand the savings taxation file may be taken off the agenda for next week’s meeting. This issue relates to EU rules regarding the tax treatment of interest income. We expect it will be discussed instead at the March meeting.

On the issue of a single resolution fund, I expect the Presidency to inform Ministers about the trilogue process under way with the European Parliament. The SRM is an essential step in creating the banking union and completing all aspects of banking union is urgent if we want to break the link between the sovereign and the banking sector. This is a priority issue for Ireland. While there is a divergence of opinion between the Council and the Parliament on issues such as scope, financing and governance, the Presidency will work to progress this issue, with a revised mandate, if necessary. In that context, Ministers will also have a special meeting in Brussels on Monday evening to discuss the intergovernmental agreement on the single resolution fund. Last December the Council agreed a general approach on a proposed single resolution board and a single fund for the resolution of banks. The compromise agreement consisted of a draft regulation on the SRM and a decision by the euro area member states committing them to negotiate by 1 March 2014 an intergovernmental agreement on the functioning of the single resolution fund. The intergovernmental agreement will facilitate the gradual mutualisation of the fund over a ten year period. Officials have been meeting to discuss these issues and I expect Ministers to be updated on these discussions. I also expect an effort to be made to make progress and resolve the outstanding issues at a political level. This is an important dossier and one we wish to progress to a satisfactory and timely outcome.

I refer to non-legislative activities. There are two related important items under the annual semester process - the annual growth survey and the alert mechanism report, AMR. The semester process allows for stronger economic governance and co-ordination at EU level. This is the fourth year that the process has been in operation but it is the first that Ireland will be fully integrated into the process, as we have now exited the EU-IMF programme. On an annual basis the EU semester begins with the publication by the Commission of its annual growth survey which member states take on board in their budgetary and economic plans. The Commission's assessment is that growth is beginning to return and that member states are making progress. The Commission has targeted the same five key priorities as published in last year’s survey: pursuing growth-friendly fiscal consolidation; restoring lending to the economy; promoting growth and competitiveness; tackling unemployment and the social consequences of the crisis; and modernising public administration.

The annual growth survey will feed into national economic and budgetary decisions and be reflected in our stability programme update and national reform programme, which all member states produce in April. The Commission then assesses the plans of member states and makes a series of country specific recommendations, CSRs, to each member state. The draft Council conclusions under consideration at this ECOFIN meeting have been prepared by officials. The conclusions endorse the findings of the annual growth survey and provide macroeconomic and fiscal guidance for member states.

The alert mechanism report, AMR, is also part of the annual semester process. The Commission checks member states’ performance through the AMR against a scoreboard of economic indicators to determine which require further investigation through an in-depth review. Draft ECOFIN conclusions on the AMR have been prepared at official level. At the time of drafting the report in November 2013 Ireland was still in the EU-IMF programme and, therefore, not included in the list of countries proposed for an in-depth review. However, now that Ireland has exited the programme, the conclusions consider that it should be integrated into the semester framework and propose that the Commission consider preparing such a review. A long discussion is not expected at ECOFIN on this item. This process will unfold in the coming months and Ireland will play a full part in the governance and semester process this year.

There will also be an exchange of views on preparations for the G20 meeting of finance Ministers and governors in Sydney later this month. The purpose of this discussion will be to endorse the EU terms of reference for the meeting which has been prepared by officials.

The final two items on the agenda are annual items related to the EU budget. One item is a "backwards" looking item and the other looks "forward". First up is the discharge procedure in respect of the implementation of the budget for 2012. "Discharge" is the technical term under the EU treaty given to the approval procedure for the implementation of the EU budget. At the meeting Ministers will be asked to agree to a Council recommendation which will then be forwarded to the European Parliament to grant discharge to the Commission for the manner in which funds were managed in 2012. In other words, it is the sign-off on the 2012 European budget.

The other EU budget item relates to the budget guidelines for 2015. This is also an annual item. The Council agrees a set of guiding principles for the Commission to take into account when preparing its draft proposal for next year's EU budget.

Under the heading of any other business the ECB will provide its first quarterly report on implementation of the SSM to which I referred.

We will cover a range of issues at the meeting, particularly related to banking matters and the EU semester process. These are important areas of interest to all citizens of Europe. It is important that we get it right and we will work with the Greek Presidency and our colleagues from other member states to ensure progress is made. I thank members for their attention and will be happy to respond to questions or observations they may have.