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

I thank the Chairman and the committee members for inviting me again to speak to them today in advance of the ECOFIN Council of Ministers meeting on Friday, 20 June in Luxembourg. The ECOFIN Council usually meets on two occasions a year in Luxembourg – in June and October. As members know, we have agreed, subject to scheduling arrangements, that I will attend the committee on a quarterly basis to update it and discuss developments occurring at the ECOFIN Council. My officials also provide written briefing on a monthly basis to the committee. This is a very useful and positive arrangement, and I look forward to our continued engagement today.
As we approach the middle of the year, this will be the last Council under the Greek Presidency. I would like to acknowledge the success of the Greek Presidency and the progress it has made. Our Italian counterparts will take over the Presidency role on 1 July, and I wish them every success with that undertaking.
In their invitation the members asked me to brief them on the items on Friday’s ECOFIN agenda. I understand the committee has already received the draft agenda for the June meeting and background material. A number of key issues are listed for discussion, and hopefully significant progress will be made at the meeting. The members specifically mentioned the country specific recommendations, known as the CSRs, which were published by the European Commission earlier this month. As members will be aware from the ECOFIN agenda, this is an item for the ECOFIN meeting so, as per usual, I will brief them on the matters to be discussed at the meeting as they appear on the agenda.
After outlining the key issues that are likely to arise at Friday’s meeting, I will be happy to take questions and observations from members. As ever, I would like to remind them that this is a draft agenda but changes can still be made 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 in order that there also can 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 Friday. Earlier that morning, as usual, we will have what is known as a breakfast meeting during which I expect the Commission will give a view on the economic situation in Europe. There also will be an opportunity for the Finance Ministers to contribute their views on general economic matters. The agenda is heavy in content as matters stand. It will begin by considering the legislative deliberations and this takes place in public session. Based on the draft of the agenda before the joint committee today, there are three items scheduled for discussion, namely, the draft general budget for 2015, the taxation of parent companies and subsidiaries and, under any other business, a discussion may take place on current legislative proposals and a state of play update on level 2 legislation concerning bank contributions under the directive on bank recovery and resolution and single resolution mechanism, BRRD-SRM.

On the issue of a draft general budget for 2015, this is an annual item. The Commission will present its proposal for the EU budget in 2015. Over the next few months, the Council and Parliament will take positions on this proposal and will come together in November to reach a compromise agreement. As per normal protocol arrangements, the incoming Italian Presidency will chair this item and this reflects the fact that the negotiations on this file with the European Parliament will be managed by Italy's Presidency. As for dealing with the taxation of parent companies and subsidiaries, this was originally introduced to avoid double taxation of companies in the Single Market. The focus of this amendment is to close certain loopholes in this directive. This proposal is fully consistent with the work of the OECD on base erosion and profit shifting, BEPS, and Ireland can support the Presidency compromise proposal. This file was also discussed at ECOFIN in May but agreement was not possible at that stage. Finally, under any other business, the Presidency will provide the usual summary on ongoing work on financial services dossiers and in respect of level 2 legislation concerning bank contributions under BRRD-SRM, a state of play will be provided. The Commission will brief the Council on the preparation of implementing legislation that will determine the contributions to be paid by banks to resolution funds established under the directive on bank recovery and resolution, BRRD, and the regulation on the single resolution mechanism, SRM.

Turning now to the non-legislative activities, based on the draft of the agenda before members today, there are four items scheduled for discussion. These are a report on the code of conduct with regard to business taxation; the contribution to the European Council meeting, namely, the European semester; the implementation of the Stability and Growth Pact and ECB-Commission convergence reports; and enlargement of the euro area. Beginning with the code of conduct, this item may be taken as an “A” point, which means it may be endorsed without discussion. The report, which deals with business taxation and in particular harmful tax competition, is a regular item at the end of each Presidency. This report has been prepared by the code of conduct group on business taxation.

I will now turn to the next item on the agenda, that is, the contribution to the European Council meeting on 26 and 27 June and the European semester, which members also highlighted in their invitation to me. As members may recall, when I spoke to the joint committee last February, we were dealing with two related important items under the annual semester process, namely, the annual growth survey and the alert mechanism report. The committee will be aware that the European semester process has been in operation since 2011 and is a regime for economic surveillance. As Ireland was in the EU-IMF programme until December 2013, it did not fully participate in the first three semester cycles. However, as we exited the EU-IMF programme in December, Ireland is now fully participating in the 2014 semester process, which is part of the normalisation of our position as a post-programme country. The annual semester process is part of the new economic governance regime of the EU that has been established to underpin sound public finances, sustainable and inclusive growth and the correction of macroeconomic imbalances across the European Union.

The European semester has two distinct phases, the first of which is horizontal and the second of which is more country-specific. Broad horizontal guidance was provided by the European Heads of State or Government at the European Council in March and then the process became more country-specific in orientation. For Ireland’s part, in April my Department submitted Ireland’s stability programme to the Commission and members will recall my appearance before this committee that same month to discuss it. The Department of the Taoiseach then submitted the national reform programme on structural reforms and measures to boost growth and jobs, also in April. The Commission then assessed all member states’ documents that were submitted and, following bilateral engagement with the member states, the Commission issued proposed country-specific recommendations, CSRs, on 2 June to 26 member states. Greece and Cyprus did not receive any CSRs due to the fact that they still are in EU-IMF programmes. The CSR proposals are intended to provide specific, tailored guidance to each recipient member state on how to achieve sound public finances, what structural reforms should be implemented to achieve smart sustainable growth and how to correct macroeconomic imbalances. The CSRs were directly examined and scrutinised by the relevant Departments with a written response to the Commission as per the CSR process. Member states' CSRs already have been discussed at a number of preparatory committees over the last two weeks with varying amounts of amendments being accepted by the Commission. The objective of Friday’s ECOFIN meeting is to approve the recommendations for member states. It is intended that these recommendations will be endorsed by the June European Council and finally adopted by Finance Ministers at the July ECOFIN Council.

In respect of Ireland’s country-specific recommendations, they are wide-ranging in nature and cover issues that cut across a number of different Departments. In view of this, the Department of the Taoiseach co-ordinates Ireland’s involvement in the semester process. However, the Department of Finance plays a central role for the following reasons. First, economic and financial issues remain of primary importance on the European agenda and second, the CSRs are adopted by Finance Ministers at the ECOFIN Council, following discussion and, in some cases, amendment by the ECOFIN preparatory committees. Ireland received seven country-specific recommendations covering the areas of the public finances and growth outlook, health care sector reform, labour market activation polices, labour market participation, SME initiatives, mortgage arrears and legal services reforms. A number of constructive bilateral meetings took place over the past number of months between Ireland and the Commission and the CSRs received were mainly as expected. The CSRs contain an assessment of our stability programme update, which as I mentioned was submitted in April, and the Commission has endorsed the Government’s fiscal strategy to reduce the deficit to below 3% in 2015. The Government remains committed to continue to make progress and we have the policies, set out in the Medium-Term Economic Strategy 2014-2020, to enable it to so do. The Government will set out budgetary policy for 2015 on budget day in October of this year.

As for the item on the agenda regarding implementation of the broad guidelines for the economic policies of member states, as I mentioned previously, the Commission issued CSRs for 26 member states on 2 June. These CSRs were subsequently examined at official level meetings and some changes were made to the texts. At this meeting, ECOFIN will be asked to approve a draft of the recommendations for the 26 member states and I note other relevant Councils also are discussing the CSRs. The European Council on 26 and 27 June will be asked to endorse the recommendations and ECOFIN then will be asked finally to adopt the recommendations at its July meeting. Turning to the implementation of the Stability and Growth Pact, following the deficit and debt notifications in April and the publication of the Spring forecast, the Commission will make recommendations for Council decisions closing excessive deficit procedures in six member states, namely, Austria, Belgium, the Czech Republic, Denmark, the Netherlands and Slovakia.

They will also assess measures taken by Croatia and Poland to correct their deficits.

The final item on the agenda, the ECB-Commission convergence reports and enlargement of the euro area, deals with Lithuania's fulfilment of the criteria to join the euro. The Council will be asked to adopt a recommendation on the adoption of the euro by Lithuania - only member states the currency of which is the euro are allowed to vote in this respect. The Council will also approve the text of a letter to be sent by its President to the European Council with a view to discussing the issue at its meeting on 26 and 27 June. After consultation with the ECB and the European Parliament, the Council could adopt the necessary legal Acts at a subsequent meeting.

As the agenda stands, there are no items under the heading of any other business.

I hope the committee has found useful this brief outline of ECOFIN's agenda, including the CSRs, and that it will serve as the basis for an engaging discussion. As we discuss all of these items, we are reminded of how important it is that we continue to engage with the EU institutions in a proactive and constructive way so as to ensure the European Union evolves and develops in a way that it beneficial to Ireland and the Union in general. I thank the committee for its attention. I will be happy to respond to questions or observations members may have.