Mr. Pierre Moscovici:

I thank the Chairman and honourable Deputies and Senators, it is a great pleasure for me to be here in Dublin and an honour for me to address the committee this afternoon. My pleasure is made all the greater by the atmosphere of hope and renewal that I sense in Ireland today after years of deep crisis and difficult, but necessary, reforms.

Let me begin with a few words on the broader European economic situation. As I said when presenting our spring economic forecast earlier this month, the European economy is now enjoying its brightest spring in several years. The upturn is being supported by both external factors and policy measures that are beginning to bear fruit. Growth in the EU is set to rise from 1.4% in 2014 to 1.8% this year and to accelerate further to 2.1% in 2016. Deficits are continuing to decline steadily and the debt to GDP ratio is forecast to begin falling, as of this year, for the first time in the last seven years. Unemployment, while still high, is now falling steadily and is set to continue doing so next year.

The outlook is more encouraging than it has been for a long time. At the same time it is clear that more needs to be done to ensure this recovery is durable and sustainable, delivering on investment and reforms and sticking to responsible fiscal policies is, in our view, key to obtaining the lasting jobs and growth Europe needs.

Ireland can be justly proud of the recovery the country is experiencing. The signs of Ireland’s turnaround are there for all to see. Ireland was the EU’s fastest growing economy in 2014 and is forecast to maintain that position in 2015 and 2016. Irish sovereign bond yields have declined markedly, with the yield on a ten year bond standing at approximately 1.2% in mid-May, with a spread over German bonds of 66 basis points. That is a very astounding result for a country that had lost market access in 2010. That is very impressive. The economy is growing strongly thanks to the recovery in domestic demand and, most importantly, unemployment has fallen steadily from almost 15% in 2012. It is expected to drop to 9% in 2016, now it is approximately 10%, well below the euro area average. These are performances of which the Irish people can be proud. Ireland’s strong economic rebound is truly remarkable and goes to show that adjustment and reforms do pay off when they are carefully designed and enjoy clear ownership by the authorities.

That is not to say the journey is over. It is too soon to say mission accomplie, mission accomplished. No one should lapse into complacency. There are legacies of the crisis that have not yet been fully addressed and continue to create challenges and risks for Ireland. These include the high public debt, the difficulties faced by many households and small and medium sized enterprises, SMEs, in paying their debts, which is also a problem for the financial sector in terms of non-performing loans and unemployment and skill issues have also to be addressed.

What does the Commission, which I represent, see as the key priorities for the Irish economy? There are four key priorities as our country specific recommendations, CSRs, which the brisk economic recovery now under way provides an ideal opportunity to address. First, Ireland needs to complete the job of addressing the legacy of the crisis. The crisis has had a devastating effect on public finances with debt reaching an unprecedented 123% of GDP in 2013. It also brought to light less obvious vulnerabilities, as Ireland moved towards the peak of the bubble in the last decade cyclically sensitive revenues were used to grow permanent Government expenditure at a rapid pace, further fuelling an overheating economy. Over the past few years Ireland has made major progress in strengthening its public finances and fiscal framework. It has delivered deficits below the ceiling set by the excessive deficit procedure for the past three years and is on track to achieve a timely correction of the excessive deficit in 2015 and thus to enter into the preventive arm of the stability and growth pact in 2016. Ireland has also introduced important innovations for the budgetary process with the Fiscal Responsibility Act 2012 and, most importantly, it has implemented fiscal rules that emulate those at EU level and Ireland like other countries, such as France, has introduced an independent fiscal council.

In spite of all this progress, public debt, which is still high and is forecast to be 107% of GDP in 2015, is a vulnerability that will require years of prudent management of the public finances to address. For this reason, the Commission, which takes the same line as the International Monetary Fund and OECD on this issue, continues to encourage Ireland to seize opportunities to accelerate deficit and debt reduction. While Ireland has also made progress in widening the tax base and making it less vulnerable to cyclical developments, more can be done on this important front.

Second, everything possible must be done to avoid the boom-bust cycles of the past. It is not inevitable that past experience of boom and bust should continue to characterise Ireland's economic cycle. Three key measures will help minimise the risks of boom and boost. The first of these is firm implementation of medium-term budgetary planning, including by limiting discretionary powers to change expenditure ceilings. The second is predicating budget laws and medium-term budgetary projections on prudent growth forecasts and progress towards the medium-term budgetary objective of balancing the budget in structural terms by 2018 and remaining in structural balance thereafter. Apart from fiscal policy, the critical factors behind the most recent episode of boom and bust in Ireland were, as members well know, the housing market, bank lending practices, regulatory failures as well as an insufficient governance and supervisory framework at the euro area level. Progress has been made in this respect, for example, in the establishment of the single supervisory mechanism, which should reduce the risks of boom-bust cycles.

The third priority must be to support sustainable growth and job creation. The economy has regained the competitiveness it lost during the past decade. Its rebalancing between the tradeable and non-tradeable sectors is also nearing completion, supported by the overall flexibility and adaptability of the economy. The Action Plan for Jobs and Pathways to Work strategies have contributed to Ireland’s recovery. However, the unemployment rate, especially youth and long-term unemployment, remains high. For this reason, there is a need for investment. Capacity constraints in some areas indicate a particularly urgent need for investment in the water sector, public transport, social housing and broadband. The health care sector is still in need of reform as well as investment because there is no contradiction between reforming and investing. The Commission has also highlighted, among its country-specific recommendations, the insufficient supply of affordable child care, which is an impediment to the participation of women in the labour market and increases the poverty risk of children.

The fourth priority is to address medium and long-term economic challenges. Demographic developments, in particular, the ageing of the population, will generate a number of pressure points that call for immediate action to avoid more difficult decisions down the road.

The number of senior citizens will grow very significantly over the next decades, which will raise the cost of health care, long-term care and pensions. While a number of reforms have been put in place already, we believe that additional steps are needed to ensure that the provision of public services is adequate and affordable.

In the area of health care, critical choices on the level of public provision of services will be made in the context of the move towards universal health insurance. We believe that at present Ireland spends a larger share of its GNP on health care than the EU average without however achieving better health indicators for its population and that is why we insist on some reforms in the area of pensions, education and training programmes.

Before I conclude these introductory remarks, let me say a few words about the Commission’s plans in the area of taxation. I am Commissioner for Economic and Financial Affairs, Taxation and Customs. I am aware that corporate taxation is one of the most sensitive areas of Ireland’s relations with the European Union, but I also believe that our goals in the area of taxation are ultimately the same. We agree on the need for fair taxation, which is essential for sustainable economic development and democratic legitimacy, especially in difficult economic times. We also agree that taxation must support growth and competitiveness, but by delivering stability, legal certainty and administrative ease that investors and businesses demand.

The Commission appreciates the steps that Ireland has already taken to steer its corporate system in this direction, such as the decisions to limit the double Irish and prevent stateless companies for tax purposes. However, in a Single Market the goals of fair and efficient taxation cannot be met through purely national action. The economies of our member states are too connected for that. That is why a common approach is essential to create a fairer, more efficient, growth-friendly corporate tax framework for the EU and that is at the heart of the Commission’s agenda for corporate taxation in the EU.

We are delivering fast. In March, I presented an ambitious tax transparency package, including a proposal for the automatic exchange of information on tax rulings and next month I will present an action plan, which will be discussed by the Commission tomorrow, for a fundamental review of the EU corporation tax framework. It will present EU solutions to the main corporate tax challenges that our member states face today with a view to deliver fairer taxation, more stable revenues and a better environment for businesses.

The action plan, as I said, is still being finalised so I cannot give too many details today, but I am sure members are already aware that it will include a new approach to the common consolidated corporate tax base, CCCTB, proposal. It is no secret to me that CCCTB is not Ireland’s favourite proposal but I would urge members to keep an open mind. We have listened carefully to expectations and concerns of member states on CCCTB and on corporate taxation in general and I assure members that our new approach will reflect that.

I firmly believe that CCCTB, with some adjustment that we are ready to make, can be a highly effective tool against tax avoidance while also improving the Single Market considerably for businesses to trade and invest across borders. It can also cement a coherent EU approach in applying the new international standard of which members are aware is called the banking electronic payment system, BEPS, led by the OECD, in a way that protects and reinforces our Single Market.

That is in all of our interests and so I will speed up on those points.

To conclude, let me say a few words on the country-specific recommendations that the Commission put forward a few days ago on 13 May. A big effort was made this year to streamline the European semester process. The number of recommendations was reduced for Ireland, as it was for all other member states. Last year, there were seven recommendations entering into strong detail, while this year, there are four recommendations addressed to Ireland and they focus on public finances and taxation, cost effectiveness in the delivery of health care, addressing the low work density of households and boosting access to affordable child care and, finally, completing financial market sector reforms. Labour market reforms, access to finance and the reduction of legal services costs are no longer subject to recommendation this year. This is because we decided to focus on a more limited number of key priorities. This does not mean that reforms in those areas are no longer important, as that is not the case and I wish to be clear about that. By design, these country-specific recommendations are of a relatively short-term nature. Their implementation nevertheless would help Ireland to address the challenges I highlighted today and to ensure that Ireland's economic spring stretches for many more seasons to come. Again, however, I insist, it is logical that my task regarding what has been done must not make the joint committee forget my main message today, which is there is a window of hope and renewal, that there are impressive achievements and that we simply wish to help the Irish people, the Irish Government and the Irish Parliament to consolidate. I thank members for their attention.