Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank the Chairman very much for the opportunity to discuss the Commission's proposed CSRs. These all touch on issues that will be at the heart of the Irish policy agenda over the coming months and years. It is, therefore, welcome to have this early opportunity to look at the June European Council and the decisions beyond.

Before going into the detail and nature of this process and examining our views on the recommendations, I will address why it is of benefit to Ireland to participate in the European Semester before examining how it will work and what will happen in the coming weeks and beyond. I will then offer a few perspectives on each CSR and the Government's priorities in respect of them. I refer to why there is a semester and why it is in the national interest to participate in it. The semester is fundamentally about advancing our own national interests.

It is about us taking steps that are necessary and working together with our society to put in place measures that will support the competitiveness of the Irish economy and support the ability of individuals and families to do well. It is about ensuring we have the ability in our society to generate the wealth in the future that will deliver a higher standard of living for all the people we represent.

Alongside that, we have seen the consequences of bad policy and decisions elsewhere and the impact they have had in other countries. Fundamentally, we have seen how decisions elsewhere can have consequences at home in Ireland. They can have ramifications that extend well beyond national boundaries. That is why we have the European semester. It is to help and support us in making decisions that we believe are important for getting more jobs into Ireland, for making it a fairer country and for ensuring there is more wealth in the future to support families and their standard of living. By doing this through a semester, it creates an environment in which other countries can do the same. All of these decisions are made together to move Europe forward in its entirety.

We should also be clear that everything within the country-specific recommendations is entirely consistent with policy decisions and outlooks that we have firmly established at home. I refer to the plans in regard to the medium-term economic strategy which look at the objectives the Government has from a budgetary point of view, at our deficit, at the difference between tax and spending and at the targets in regard to our debt, how many jobs we want in our country and how we want our economy to grow in the future. The policy content of other plans, such as the Action Plan for Jobs and Pathways to Work, is absolutely consistent with being inside the European semester. I refer to the recommendations which have emerged from the European semester through the country-specific recommendations.

As I said, the main focus of this process is on the underlying performance of the Irish economy. This means, first and foremost, adapting our public policies and our public services to ensure we respond effectively to the challenges and opportunities of an increasingly knowledge-intensive and increasingly interconnected global economy. It means identifying the steps that can be taken over the next 12 to 18 months to deliver growth that is sustainable and inclusive and consistent with what Europe is trying to do overall through its 2020 strategy, on which I will touch in a moment. It means, in particular for Ireland, keeping at the very top of our political agenda our collective response to addressing what clearly remains continued high and unacceptable levels of unemployment. That is the reason behind the semester, the reason we are participating in it and the reason it is being done in a way that involves all countries playing a role.

I will now look at the process. The Commission's country-specific recommendations package was produced on 2 June and it brings us into the closing phase of the semester process for 2014. It is about developing and implementing jointly agreed measures to support growth and jobs. In essence, it means that in many policy areas, we agree particular priorities at EU level and we implement them at national level.

This process brings together the different strands of the European Union's stronger post-crisis economic governance arrangements. There are two key phases in this regard. First, we agree on our shared challenges through the annual growth survey. The committee will remember that there were five main priorities here and they were endorsed at the December and March European Councils - in other words, at the meeting of Heads of State and Government. These five priorities are: pursuing differentiated - in other words, plans specific to different countries - growth-friendly budgetary changes; restoring lending to our economies; promoting growth and competitiveness for today and tomorrow; tackling unemployment and the social consequences of the unemployment crisis; and modernising public administration.

Second, and following from this, we agree specific orientations for each member state, tailored in the light of the priorities I mentioned to reflect the national circumstances of each country. These country-specific recommendations are prepared by the Commission for agreement by the Council and endorsement by the June European Council. They then fall to be taken forward by the member states through the national budget and policy cycles in the second half of the year.

The crisis has taught us important lessons about the interdependence of the economic and budgetary policies pursued across the member states. In other words, what happens in one country can affect what in all member states. We all know this is particularly true given our sharing of a single currency. We enjoy a shared dividend or a benefit when our different economies are performing well and responding successfully to globalisation - in other words, the changes that link all of our different economies together. We have a shared interest in safeguarding against the emergence of avoidable and shared instabilities. That is why we developed the stronger economic governance arrangements now in place, including the so-called two-pack which was agreed under the Irish Presidency and why the European semester process is anchored in policy co-ordination at EU level in the first half of the year, supporting stronger mutual surveillance, peer review and shared learning. It is a forward-looking process that aligns preparations for the national budgets with agreed economic and social policy objectives.

I will move on to the overall country-specific recommendations package and speak briefly on each one. The Commission presented its country-specific recommendations package on 2 June. This followed a number of specific inputs by the Government, on which I made a presentation at a previous committee meeting. They included the national reform programme under the Europe 2020 strategy which relates back to the five priorities to which I alluded earlier and the stability programme updates under the enhanced Stability and Growth Pact. That plan looks at all the different targets and strategies in regard to budgetary objectives, such as deficits and debt levels, and the level of employment we seek to deliver in the future.

The Commission's package is also informed by the 17 in-depth reviews produced on 5 March - one for each of the 16 member states identified in the alert mechanism report as being at risk for macro-economic imbalances and one for Ireland following our exit in December from the EU-IMF programme. The Commission has presented country-specific recommendations proposals for 26 member states. The other two - Greece and Cyprus - remain under specific adjustment programmes. Ireland is a full participant in this year's arrangements. The CSRs will now be settled within the Council over the coming weeks. Ministers in the areas of employment protection and social policy will agree their country-specific recommendations on 19 June and on 20 June, ECOFIN Ministers will finalise the country-specific recommendations on budgetary and economic policies.

On 24 June the General Affairs Council, at which I will represent Ireland, will approve an integrated set of final country-specific recommendations, CSRs, which will then be endorsed by the Heads of State and Government at their meeting on 26 and 27 June. These will be reflected in a final Council recommendation to be adopted by Finance Ministers in early July. Preparatory work by the relevant Council committees began last week and is now well under way.

There are seven country-specific recommendations for Ireland. These are in the areas of stabilising the public finances, health care spending, labour market policies, social inclusion, access to finance, non-performing loans in the financial sector and legal services. Before turning to each of them, it is fair to say that there are no particular surprises for Ireland. Following many troika reviews, many of the key issues are well rehearsed. We have raised some minor technical and drafting issues with the Commission which cover its assessment and the CSRs themselves. These fall for consideration through the Council committee work that got under way last week.

On the whole, we see the CSRs as broadly sensible policy directions that will underpin the positive trajectory we have re-established for the Irish economy following a very difficult and protracted recession. Last year marked Ireland's first year of net employment growth since 2007 and 2014 will see a return to net employment growth for the EU as a whole. A strong momentum for this recovery into 2015 and beyond will now be reinforced by the CSR package to be endorsed by the European Council at the end of this month.

I will now speak about each recommendation. The first CSR focuses on the further work necessary to restore balance to our public finances, responsibility for which rests with the Ministers for Finance and Public Expenditure and Reform. Notwithstanding the very significant fiscal or budgetary adjustments of approximately €30 billion already undertaken, the Department of Finance's official forecast is for an Exchequer deficit of 4.8% this year. The Government is committed to reducing this deficit below 3% of GDP in 2015, consistent with exiting the excessive deficit procedure, the mechanism for monitoring deficit levels in various national economies. The amount of further consolidation necessary will be determined in the context of the October budget, informed by the latest forecasts and endorsed by Irish Fiscal Advisory Council. We have raised a drafting issue with the Commission with regard to this CSR. We do not agree that expenditure ceilings require further enforcement. We have amended the Constitution to ratify the stability treaty and have already legislated for relevant expenditure ceilings.

The second CSR refers to health spending and is focused on cost-effectiveness in the health sector as part of our overall management of public finances. Lead responsibility rests with the Ministers for Health and Public Expenditure and Reform. The direction set is fully consistent with the reform programme, Future Health, produced in 2012. It should also be seen in the context of the significantly increased demand on services associated with the crisis. This includes 500,000 more medical card holders since 2008, an increase of more than one quarter. We envisage further savings on pharmaceutical spending this year. We are developing a business case for procuring a new integrated financial management system and aim to roll out individual health identifiers in early 2015. We have also raised a wording issue here, as the January target specified for the health identifiers in the draft CSR is not realistic. We expect to agree a suitable amendment.