Dr. Pat Ivory:

On behalf of IBEC I thank the Chairman and committee members for the invitation to address them and exchange views on the European Commission's interim review of the Europe 2020 strategy.

As stated in our address to the committee on 20 February 2014, the EU and the actions of its institutions are important to Irish business and our citizens. In the current economic context and in the context of the ongoing transition in the European institutions, this interim review process is a case in point. IBEC will respond formally to the Commission's consultation at the end of October and is working with its European business partners at EU level to submit input from European businesses. Later this year, IBEC will also publish a set of business priorities for the next Commission as part of its ongoing campaign, a European Union that works and an Ireland that works.

After the deepest crisis in decades and at the beginning of a new EU political cycle, there is an opportunity for the Union and national policy makers to step up their efforts to create the right environment to facilitate the delivery of growth, jobs and prosperity across the Union. The mid-term review of the Europe 2020 strategy is timely and important in reflecting on how this can be achieved. We believe the review must look at the strategy's relevance, targets and process.

I will turn first to the relevance of Europe 2020. Following on from the Lisbon strategy, the Europe 2020 strategy aims to provide a framework that facilitates smart, inclusive and sustainable growth. However, the economic context underpinning that framework has changed dramatically since its inception in 2010 and a review is timely. Europe continues to have much strength, but faces known demographic, socioeconomic and competitive pressures. The key challenges are unacceptable unemployment levels and sluggish economic growth, partly as a result of poor domestic demand, particularly in Europe. Therefore, the forecast set out in Europe 2020 requires recalibration to reflect the new economic context and the delivery of growth and jobs.

IBEC believes this can happen if policymakers create an environment in which business can continue to create jobs and increases its capacity to do so.

I will now turn to targets. The European Union and Ireland have made mixed progress in meeting five headline targets. Overall, the European Union is making broad progress in the areas of education, climate change and energy, but it is not on track in the areas of employment, research and development, and poverty reduction. The biggest challenge that both it and Ireland face is getting citizens back to work and tackling unacceptable unemployment levels.

The Europe 2020 strategy sets a target employment rate for 20 to 64 year olds of 75%. This equates to 16 million additional people in employment in the European Union. Some progress has been made, but it has not been even across Europe, with some regions continuing to record particularly high levels of youth unemployment. In Ireland's case, the number in employment was up 31,600 or 1.7% to the end of the second quarter of 2014. This employment growth remains among the strongest in the European Union and IBEC expects an annual year-on-year rate of 1.5% for the whole of 2014.

Another positive development this year is that firms in Ireland are becoming more confident in hiring full-time workers, in contrast to last year when spectacular employment growth rates were driven by part-time employment. IBEC forecasts the level of unemployment to fall to 10.9% in Ireland in 2014, down from 13% in 2013. Clearly, Ireland is making progress, but there is still a distance to travel to full recovery and achieving the employment targets set in the Europe 2020 strategy. Sensible European policies that support job creation will be critical in this regard. The relationship between targets and the flagship initiatives underpinning them has proved to be problematic in a number of areas and I would like to give a couple of examples. When progress is being made in meeting the climate change and energy targets, the overlapping targets create conflicting, implicit and explicit, price signals, resulting in cost inefficiencies in the achievement of the stated overall sustainability objective. Ongoing negotiations on an equitable and cost-effective 2030 climate change and energy framework are of crucial importance to Ireland. The CO2 emissions targets for 2020 are particularly problematic, with 13 of national targets forecast to be missed. There continue to be significant structural and affordability challenges, signalling the need for a careful review of the Europe 2020 strategy in this area.

The effectiveness of some of the strategy can also be called into question in other areas. On the issue of smart growth, Horizon 2020 is a positive research and development support framework, yet the funding ambition was reduced in negotiating the European Union's last multi-annual framework or budget. Many businesses still find engagement with these programmes to be complex. IBEC sees the budget of €80 billion secured for Horizon 2020 as a positive outcome of Ireland's recent EU Presidency and the efforts of Commissioner Geoghegan-Quinn. It is also the minimum amount required for the period 2014 to 2020, if the 2013 level of funding for projects included in framework programme 7, the European Institute of Innovation and Technology and the competitiveness and innovation ramework programme is to be continued.

One of the aims of the digital agenda flagship initiative was to underpin a single digital market. However, proposed legislation on data protection still needs to strike the right balance between privacy and enterprise. It is vital that data continue to be allowed to flow across borders if business is to achieve its full potential and citizens are to reap the full benefits of technology. Requirements for data to be stored locally would hamper business development and reduce choice for consumers. Getting the right balance will be vital if the European Union is to achieve its target for research and development to reach 3% of GDP. Progress in reaching this target is disappointing, with forecasts suggesting the 2020 target may be missed by as much as, or more than, 0.5%.

In education there are two parallel strategies that should complement each other. There is a stocktaking on the European framework for education and training - the ET2020 strategy in parallel with the Europe 2020 strategy mid-term review. Ireland has consistently been making progress in lowering the percentage of those who leave school early, recording a rate of 8.4% in 2013. That is close to our EU 2020 strategy target of 8% and well below the EU-28 average of 11.8%. In addition, Ireland's tertiary education attainment rate, at 52.6%, is the highest in Europe and well above the EU average of 36.9%. However, we need to carefully consider how well the education system prepares for work. Whereas there is a public consultation process for the review of the Europe 2020 strategy, the ET2020 strategy has a more targeted evaluation procedure. The ET2020 strategy stocktaking primarily involves relevant national authorities which are preparing national reports as inputs to the process. The opportunity for business and social partner involvement is considered limited. Moreover, the ET2020 strategy stocktaking should feed into the Europe 2020 strategy consultation process.

Better alignment of the needs of labour markets and the education and training systems should be the guiding principle in the next five years. Quantitative indicators of educational attainment are useful, but a qualitative approach to learning outcomes and employability should also be encouraged. Both the Commission and the Department of Social Protection link with poverty indicators the persistent levels of unemployment and the numbers of jobless households. The focus should, therefore, remain on creating an environment in which business can increase employment in Europe and Ireland. Inconsistencies must be avoided. In short, policy coherence in thinking and implementation is required.

I will now turn to the issue of governance. Ireland exited its EU-ECB-IMF programme in 2013 and took a full part in the European semester process, including receiving its first country specific recommendations from the European Commission in 2014. This was a new experience for us as a country. At national level, the European semester process is driven by the Government through its development of the Irish national reform programme, NRP. IBEC recommended specific actions in its submissions on the NRP, including reducing taxation on work, cutting red tape, encouraging labour market flexibility, encouraging entrepreneurship, improving access to finance and investing more in strategic infrastructure. IBEC believes the European semester process and the Europe 2020 strategy should continue to be linked with following the review. This change went some way towards addressing one of the weaknesses of the Lisbon strategy and is an improvement that should not be lost. IBEC has supported the increased governance of the Europe 2020 strategy as delivered through the European semester process and has also been involved at European level through Business Europe in monitoring the semester milestones.

The European semester process provides a helpful structure and discipline for reviewing national progress and maintaining a focus on assessment and the potential need for reform. Sufficient time to respond properly to consultations is also important if maximum potential is to be achieved. Ultimately, governments at national and EU level and business all want to create an environment that supports sustainable businesses that will continue to create jobs. IBEC's vision of an effective, outward looking, globally competitive European Union that works and a refocused and coherent EU 2020 strategy framework has the potential to deliver an environment in which business can create jobs and growth in the European Union and for its citizens. The framework should continue to be underpinned by monitoring the EU semester process. The European Union and its institutions matter to business and business matters to the Union. Effective EU decision-making to support growth and job creation will only be achieved by listening to and taking on board the views of businesses. IBEC strongly welcomes the European Commission President-designate's proposal to designate a vice president within the Commission with specific responsibility for the euro and social dialogue. We hope Mr. Dombrovskis, should he be confirmed in the role, will successfully complete his mission to strengthen the multilateral nature of the economic governing process and promotes social dialogue.

At national level, the process and depth of engagement with business and other stakeholders should also be improved. We welcome the opportunity to talk to the committee about these matters.

In consultation with its members, IBEC is developing clearly defined business priorities for the new Commission on the themes of promoting entrepreneurship, innovation and labour mobility, flexibility and skills, cutting red tape, completing the Single Market, investing in strategic infrastructure and expanding EU and global trade and investment.

I, again, thank the Chairman for giving me the opportunity to address the committee and the members in attendance. I am happy to participate in a discussion on the matters raised.