Oireachtas Joint and Select Committees

Thursday, 24 January 2013

Joint Oireachtas Committee on European Union Affairs

General Affairs Council: Discussion with Tánaiste and Minister for Foreign Affairs and Trade

10:30 am

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

I remind members to turn off their mobile telephones. On behalf of the joint committee I welcome the Tánaiste and Minister for Foreign Affairs and Trade. The Tánaiste will be attending the General Affairs Council on 4 February and will outline to the committee the issues that will be addressed at that meeting. He will also reflect on the outcome of the December General Affairs Council, which I understand focused on enlargement.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

I am pleased to have the opportunity to brief the committee ahead of the next General Affairs Council, which will take place in Brussels on Monday, 4 February. This is the first General Affairs Council of the Irish Presidency and I will have the honour of chairing the meeting. The Minister of State at the Department of Foreign Affairs and Trade, Deputy Creighton, will represent Ireland. The agenda is still being finalised but discussion is expected to cover the cohesion policy legislative package, our Presidency work programme and preparations for the European Councils on 7-8 February and 14-15 March. Following the meeting President Van Rompuy will join Ministers at lunch to discuss the European Council later in the week.

Before outlining February's business, I would like to update the committee on discussions at the final General Affairs Council of 2012, which took place on 11 December, as I did not have a chance to do so in the immediate aftermath. I represented Ireland alongside the Minister of State, Deputy Creighton. The main focus of discussion was on preparation for the meeting of the European Council which took place on 13-14 December and, in particular, on how to strengthen economic and monetary union. President Van Rompuy presented his report at the ministerial lunch. The ensuing debate, along with discussion at the December European Council, led to President Van Rompuy being asked to consult widely in order to bring forward a specific and time bound roadmap for strengthening EMU in June. His deliberations will be focused on four particular questions that he has been asked to explore: ex-ante co-ordination of major economic reforms; the social dimension of EMU, including social dialogue; contracts between governments and EU institutions; and solidarity mechanisms.

The General Affairs Council also held a substantial discussion on enlargement, with conclusions providing a framework for the work that lies ahead, including during our Presidency. They open up the possibility of important decisions on the western Balkans during our term. This includes possible accession negotiations for Serbia and the Former Yugoslav Republic of Macedonia, the granting of candidate status to Albania and the opening of stabilisation and association negotiations with Kosovo. While occupying the Presidency, Ireland will lead the Council's assessment on enlargement. A delicate balance will need to be struck in this regard between allowing time for progress to be registered and reported, and for discussion and agreement so as to enable decisions to be taken at the June Council. The timetable is ambitious but we work assiduously to secure progress on the accession paths of all the countries of the western Balkans. On Croatia, we will oversee consideration of the Commission's final monitoring report, which I am confident will deem it ready for accession. I look forward to welcoming Croatia as the 28th member state of the Union on 1 July. We will also strive to make progress on Iceland, although we recognise that the decision on the Icelandic side to slow down negotiations ahead of the elections on 27 April will have an impact. Nonetheless we would hope to open two chapters and close a further three during our term. On Turkey, we hope to open at least one chapter, if that proves possible.

On other issues, no agreement was reached at the December Council on the proposed increase in the number of judges in the General Court of the European Court of Justice. We are considering how this issue can be progressed during our Presidency. As members of the committee will be aware, the kernel of this issue is how to ensure balanced representation of larger and smaller member states. The Commission also made a presentation on the annual growth survey, which was a key input to the European semester process, and this will be considered further with the ultimate goal of agreeing guidance on the preparation of stability and convergence and national reform programmes at the March European Council. At the meeting, I delivered two presentations on our Presidency objectives. The first outlined our roadmap for the European semester 2013, setting out a practical response to the key recommendations from the Cypriot Presidency from the 2012 exercise. Our objective will be to ensure that all relevant Council formations work in a co-ordinated and consistent manner towards a thorough preparation of the March and June European Councils. Alongside colleagues from Lithuania and Greece I also introduced our joint trio programme for the next 18 months. The trio concept seeks to promote longer term and more cohesive planning between groups of Presidencies. I am pleased to report that the General Affairs Council endorsed our trio programme, which ties in directly with Ireland's national focus on promoting initiatives that deliver stability, jobs and growth. Finally, I also took the opportunity at the meeting to express my appreciation of the Cypriot Presidency, which did an excellent job.

The first item on the agenda for February's General Affairs Council is a reminder of the past work by Cyprus.

As negotiations are being advanced on the framing of the Union’s future budget, the legislative framework for this vital part of it is being prepared in parallel.

As with previous tránches of this work, we intend to seek agreement on a partial general approach for two additional blocks of the legislative package, subject to the proviso that "nothing is agreed until everything is agreed". We cannot finalise the package until the MFF is agreed but we intend to make as much progress as possible. The blocks to be presented on this occasion are "Transitional and Final Provisions" and "European Groupings of Territorial Co-operation". It is possible that these may be agreed in the coming week at official level, in which case there would be no need for discussion by Ministers.

As this will be the first General Affairs Council of our Presidency, I will present our Presidency work programme. I hope that all members will have had time to study the programme, which was published on 9 January and which sets out in detail the three priorities that underpin it: stability, jobs and growth. Sustainable economic growth and employment creation require strong and stable foundations. We will aim to take forward proposals for banking union with the urgency they deserve. We will work for progress in deepening the Single Market and we will advance an ambitious agenda for trade. We will aim for effective and efficient oversight of the European Semester process in order that it results in meaningful and concrete recommendations to member states on the reforms they need to undertake to prepare their economies for the challenges of the future. We will work to secure the European Parliament’s consent for any agreement on the MFF and we will put our shoulder to the wheel to take forward the extensive legislative programme that flows from it. CAP, CFP, Horizon 2020 and cohesion all underpin growth and jobs across the Union.

Ireland will also push for a comprehensive approach to youth unemployment, starting with the youth employment package. There will be a renewed emphasis on new opportunities - the digital Single Market and the digital agenda - to deliver benefits for EU business and consumers and to sharpen Europe’s global competitiveness. The Presidency will also advance the agenda on development, humanitarian issues, and the post-2015 Millennium Development Goals.

The main task for the General Affairs Council on 4 February will be to prepare the European Council meeting that will take place three days later at which President Van Rompuy has said he hopes to reach agreement on the MFF. Following the further consultations he has had since the November summit, he feels a deal is within reach, and he informs us he will do his utmost to broker one. While the atmosphere in November was constructive and progress was made then and since, it would be naïve not to acknowledge that the task will be a difficult one. Gaps may have narrowed but they, nonetheless, remain wide. It will be important for all leaders to approach these discussions in a flexible manner, open to compromise, if agreement is to be achieved. The Taoiseach and I have made it very clear to President Van Rompuy, including in our meeting with him during his visit to Dublin on 9 January, that we stand ready to be of whatever support to him that we can. It is important that we reach an early agreement in order that we can all direct our energies to the work that needs to be done to secure economic recovery and growth.

While no formal discussion is planned for the GAC, it is likely to be discussed at the working lunch with President Van Rompuy at which he may set out his intentions regarding the handling of the negotiations at the European Council. After a deal is reached by the European Council, it will fall to us, as holders of the Presidency, to seek the formal consent of the European Parliament for the MFF regulation and the accompanying agreement between the Council, Commission and Parliament. We are conscious that the Parliament has strong views and cannot be taken for granted. We have had intensive consultations to prepare the ground and these will intensify if a deal is done at the European Council.

The February European Council will also discuss the EU's external trade agenda. President Van Rompuy shares our view that this has enormous potential as an engine for growth and jobs. It is expected that the Commission will deliver a progress report on trade, growth and jobs to serve as a reference in the discussion. This report has not yet been circulated and may not be available at the GAC. In the meantime, I can affirm that advancing the EU's external trade agenda is a priority of the Irish Presidency. Our aim is to prioritise bilateral trade agreements with key partners and we will, in particular, seek to make as much progress as possible towards an EU-US trade agreement during our Presidency.

The Council will also discuss the ongoing fallout from the Arab Spring. Debate on Syria will be informed by the January Foreign Affairs Council, which is expected to cover the overall situation on the ground, EU sanctions, and recognition of the Syrian National Coalition. It may also discuss the EU’s overall strategy and support to countries of the region following the Arab Spring.

The GAC will also consider the annotated draft agenda for the European Council scheduled for 14-15 March. The agenda is not available but discussion is expected to focus on the European Semester.

I appreciate the attention of the Committee and I look forward to hearing the committee's comments. I will be happy to respond to your points or queries.

10:40 am

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

Before I ask others to contribute, I welcome the remarks made by the Tánaiste. I am particularly glad to hear about the discussions on enlargement and the Balkans region. He will be aware that the committee has had a long-standing interest in the region and a delegation visited last autumn. We met Valentin Inzko who is the EU High Representative for Bosnia and Herzegovina in Sarajevo and he will attend the COSAC plenary session on enlargement to address us on the issues faced by the Balkans and Bosnia, in particular.

The Tánaiste also mentioned the other countries. Has he thoughts on the issues related to Montenegro? Earlier this week I met Aleksandar Andrija Pejović who is the chief negotiator on accession to the Union on behalf of Montenegro. The Montenegrins are keen for liaison between national parliaments such as ours and their parliament to develop to ensure that as they move through the opening and closing of chapters, they get as much help as possible from countries such as Ireland. Perhaps the Tánaiste will take this on board.

I welcome his comments on Turkey and the hope that we will open a chapter in this regard during our Presidency. We have waited too long for the accession of Turkey and, therefore, I welcome the movement in that direction.

I refer to the MFF and the development budget. Yesterday's newspapers reported that the Tánaiste met Mr. Bill Gates and he was quoted as being concerned about the development aid budget. What is the position on the development aid negotiations?

Photo of Kathryn ReillyKathryn Reilly (Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I welcome the Tánaiste. Last night, it was reported that the unified patent court agreement reached by the Council will require a referendum. Can he confirm whether that will be the case and can he outline the implications for the State's patent legislative procedures? Has a date been considered for this potential referendum?

With regard to the priorities for our Presidency, youth unemployment is high on the agenda and the Tánaiste referred to the youth employment package. One of the issues is whether members states will match their rhetoric on this issue with additional investment in direct or indirect supports aimed at getting young people back into work, training and education. What discussions has he had with his European counterparts on the issue of additional investment in measures to target job creation for young people?

A banking union is also high on the agenda. There have been mixed messages in recent weeks on the ongoing negotiations with the ECB on the promissory note and with our European partners on the use of the European Stability Mechanism, ESM, for the pillar banks. Earlier, the chairman of the European affairs committee in Germany said he had concerns about the promissory note discussions and the ECB overstretching its mandate. The Tánaiste and the Taoiseach have been talking up the prospect of a deal whereas the Minister for Finance has been more circumspect and has highlighted the obstacles that need to be removed. Media commentary suggests a deal is further away than speculated. As part of the four presidents report last year, we are strongly urging the need for delivery on breaking the link between banks and sovereigns in the coming period. What is the Tánaiste's assessment of the state of play on both the promissory note negotiations and the legal bank debt issue? What will be the consequences of a failure to secure a deal on one or both of these issues for our re-entry into sovereign bond markets?

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I welcome the Tánaiste and his officials and I wish him well in his role as president of the GAC over the coming months.

Some of the issues have already been dealt with so I will stick to those that have not. On the banking union, the June summit that decided to take the sovereign out, if there is a need for future funding of pillar banks. Arising from that it was made clear that unless the necessary provisions to provide for banking union were put in place, we would not progress to avail of the benefits of that. What is the status of the banking union process? When is it likely to conclude so that the obvious potential benefits might flow?

We have dealt with the MFF. On CAP, the Tánaiste rightly said that issues such banking union and Common Agricultural Policy will form part of an improvement in growth, jobs and stability, which are the key priorities of Ireland's Presidency. I ask him do give more detail on the status of the CAP negotiations. The speech by the British Prime Minister, Mr. David Cameron, MP, indicating that he intends to hold a referendum in a number of years creates considerable uncertainty around the whole European project. While I do not expect the Tánaiste to get into the affairs of another member state, given our dependence on trade with the UK I ask him to comment on the potential implications for Ireland during the hiatus between now and 2015, which will clearly bring a level of uncertainty.

10:50 am

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

The Chairman asked about enlargement. This week there was an informal meeting of European affairs Ministers which was attended by the candidate countries. The prospective candidate countries, Albania, Bosnia and Herzegovina, and Kosovo, had a meeting with the Presidency and the Commission. That clearly demonstrates the role Ireland intends to play in engaging with not just candidate countries, but also with the other countries. Bosnia and Herzegovina needs to do some work in order to meet the conditions that would enable it to apply for membership, including the alignment of its constitutional provisions with the rulings of the European Court of Human Rights. I am hopeful that there will be progress in these areas.

The Chairman asked specifically about Montenegro. We must recognise that negotiations are at an early stage and therefore it is important for us to be modest in our ambitions. We hope to open one or two negotiation chapters with Montenegro. I commend the Cypriot Presidency on opening the first negotiation chapter in December. The country has some work to do on rule of law and anti-corruption issues. Consideration of Montenegro's progress on these issues will take place during our Presidency.

The Chairman asked about the state of negotiations on the MFF and the development budget. Yesterday I met Mr. Bill Gates of the Bill & Melinda Gates Foundation. We co-operate with that foundation in respect of our development work. It does tremendous work in many dimensions. The European Union is, of course, the biggest contributor to development aid with more than 55% in total so understandably he was interested in the state of negotiations on the MFF and was obviously conscious of Ireland's Presidency role in those negotiations. I gave him an assessment of that. As members of the committee know, agreement was not concluded in November. President Van Rompuy has had negotiations with Heads of State and Government in the intervening time. He hopes to be in a position to present new proposals to the European Council meeting in February. The original proposals on development on heading 4 from the Commission provided for a very substantial increase in the budget. The proposals from President Van Rompuy still represent an increase in the budget of approximately 8%. There will also be a separate European development fund and a separate budget for emergency humanitarian aid. Clearly we will need to await further proposals because the pressure from some member states has been downward on the budget proposals. Ireland has a very strong and proud record in development aid and strongly supports the role of the European Union in aid programmes in countries that need them.

Senator Reilly asked about the unified patent court. We will sign the agreement probably in February along with other member states. It is likely to require a referendum. We have not yet made any decision on when this might take place. We will address that matter once the agreement has been signed.

The Senator asked specifically about youth unemployment. We have made the theme of our Presidency stability, jobs and growth, which is clearly aligned with our national priority. The level of youth unemployment in Europe is unacceptably high. In this country approximately one out of four young people between the ages of 16 and 25 who are in the labour market are unable to get a job. The figure is more than 30% across the European Union and higher than 50% in some member states. It is urgent that the European Union and member states address the issue of youth unemployment and provide employment opportunities. Some of those employment opportunities may not be standard and may be new. Individual states and the European Union as a whole will need to think outside the box about how we address the issue of youth unemployment in the short term.

We need to come at it in a number of ways. There are the measures we are taking to generate economic growth and employment in Europe generally. That means, for example, completion of the Single Market measures - we have a long list of legislative measures we need to put through the European Parliament. There is the issue of the digital Single Market, which has a direct relevance particularly to young people and the potential for the creation of employment. We want to see the trade discussions advanced. There is potential for the GDP of the European economy to grow by approximately 2% if we were able to conclude those trade agreements.

That said, other specific measures need to be introduced to address youth unemployment. The European Commission produced the youth employment package in December. That included proposals for a Council recommendation on a youth guarantee. The aim there is to ensure that young people who are not working or studying receive an offer of employment, continued education, or an apprenticeship or traineeship which will equip them for employment. Our Presidency intends to make significant progress on this proposal with a view to adopting a Council recommendation at the February EPSCO Council meeting. Youth unemployment will also be the main focus of the informal meeting of employment and social affairs Ministers which will take place in Dublin in February.

With regard to the issue of banking union and the bank debt, which was raised by Senator Reilly and Deputy Dooley, there are a number of dimensions. First there is the decision made in June, which was a game changer and involved the critical decision about the separation of bank debt and sovereign debt and the road map established to do that. At the time, some thought this would not be followed through but it has been followed through and was reaffirmed at the October Council meeting. Firm decisions were made in December about the timetable for putting in place the single supervisory mechanism which is the instrument required for the ESM to be in a position to recapitalise banks directly. Work is proceeding with the European Parliament on the legislation for the single supervisory mechanism. There are two separate elements of it - guaranteeing deposits and bank resolution. Again, work is progressing in bringing forward proposals in respect of those issues. The objective is that the single supervisory mechanism will be in place by early 2014 and we are on target to do that.

There are two separate issues. They include the agreement concluded this week on the lengthening of the maturities of the money available to us under the EFSF and the EFSM mechanisms, which is very good news for Ireland. Again, that has a very positive benefit for Ireland. The technical work on that will proceed at official level. The objective is to have that concluded by the end of March. Separate to all of that are the discussions we are having with the ECB in respect of the promissory note. Again, we must remember where the promissory note came from. It is a consequence of the decision to provide a blanket guarantee for the banks back in 2008, the subsequent nationalisation of Anglo Irish Bank, the establishment of the IBRC and the agreement by the last Government to commit paying €3.1 billion of taxpayers' money each year to what is in effect a dead bank. We did not make that payment that last year but found a way of exchanging it for a long-term bond. We committed to having negotiations with the ECB to find a resolution and conclusion to the promissory note issue by the end of March 2013. Those discussions are at a critical stage. The end of March is not too far away and we are very conscious of the time limitations on us for a conclusion of those discussions. I am optimistic we will have a satisfactory outcome to them.

In respect of entry to the bond markets, members will have seen that we have had a very good re-entry into these markets. Members will have seen the successful sale of Irish paper in the first week of January at an interest rate below that of the bailout funding. Last week saw the sale of about €0.5 billion short-term bonds at a very low interest rate. When one contrasts that with where we were two years ago and even a year ago when many people argued that we would not be able to get back into the markets again and would need a second bailout, one can see we have made significant progress. In order for that progress and momentum to continue, we need the issue of the promissory note to be dealt with very soon.

Deputy Dooley also asked about the reform of the Common Agricultural Policy. Those negotiations are progressing. Given our Presidency, we have a firm ambition to conclude them by the end of June 2013. Of course, they cannot be finalised as far as figures are concerned until there is an multi-annual financial framework, MFF, agreed. The Minister for Agriculture, Food and the Marine has been making great progress on that work.

11:00 am

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Could I-----

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

We will come back to it later. The Tánaiste has 15 minutes left. Four people are indicating to speak so I will ask them to limit their contributions to two minutes to allow the Tánaiste to respond. The people who signalled are Deputies Durkan, Byrne, Kyne and Mathews.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I congratulate the Tánaiste on progress to date in respect of a series of European matters. In particular, we should acknowledge the progress made by the Government on the confidence that has been restored to the extent that we were able to re-enter the international bond markets in a confident fashion in the past few weeks. I am not just saying this because the Tánaiste is here. This augurs well for the future and certainly recognises the tremendous effort made by a series of Ministers, the Tánaiste and the Taoiseach in their various capacities and we should recognise that.

The Tánaiste's point about confidence resulting in growth, stability and youth employment is well made. The emphasis on youth employment is particularly important at this time from the point of each member state and the EU as an entity. We must support and pursue vigorously the objectives set out by the Tánaiste and the EU.

I strongly support the greater emphasis on enlargement which has come about for a variety of reasons, particularly in the western Balkans and the need to include all possible applicant countries so as to ensure that nobody feels they are left out or that a longer term approach to achieving their objectives is being applied to them. From the point of view of an applicant state, it is most important that it is recognises that if it follows the acquis communautaire and the EU guidelines on human rights and the need to observe strictly the regime on human rights, it expects its efforts will receive recognition.

My last point concerns the UK, around which much discussion will take place and which will probably be the subject matter for discussion in the meeting next week. I suggest this could be a positive thing in a peculiar way. We have all carefully read Mr. Cameron's speech. He seemed to suggest that the EU should focus on certain aspects of its structures. He did not seem to close the door indefinitely. It presents an ideal opportunity for all member states to identify the extent to which Euroscepticism has eroded the European vision over the past number of years. It presents a unique opportunity to address that issue in a very clear and positive way which will be beneficial for the UK and the other member states.

Photo of Eric ByrneEric Byrne (Dublin South Central, Labour)
Link to this: Individually | In context | Oireachtas source

The Tánaiste is more than welcome to the meeting. I remind him that this committee dealt with the Committee of the Affairs of the European Union from the Bundestag. We made impassioned requests for its understanding and support for this country in the next while, particularly in respect of the financial implications of the banking situation. Hopefully, we convinced it to be more enlightened and supportive of us.

This is an extremely challenging and exciting time for Ireland to take up the EU Presidency. While the role is very demanding, it represents a phenomenally progressive potential for Ireland Inc.

I welcome that Croatia has come on board completely. It is interesting to look at the Serbs and at what is happening in Kosovo. Hopefully things will evolve progressively in that region. I am particularly interested in Albania, which was one of the most closed societies in the world formerly, second to North Korea. It has now progressed to the stage where it can take part in the accession process. We will monitor through the OSCE this year's elections in Albania to ensure that they meet the criteria laid down. My one worry is Bosnia and Herzegovina. There remains a protracted difficulty in that region. It is very sad that they have not moved at the pace of their neighbours. I wish the Tánaiste well in working on that.

I congratulate the Tánaiste for noting the most important issues of stability, jobs and growth in the European Union. The youth employment package is of tremendous importance. It is of perhaps greater importance to partners of ours in Europe. We have a highly educated workforce with 80% of citizens obtaining a third level education, which gives them superior job prospects to those of people in Spain, which has perhaps 50% youth unemployment. Sovereignty and how we handle debt and promissory notes are important. The Tánaiste covered that.

Stability was the first issue the Tánaiste mentioned. I presume he meant the stability of Europe. I am amazed and shocked at the damage to his own case Prime Minister David Cameron has done regarding his proposals for a referendum. Perhaps the Department of Foreign Affairs will have time to examine the ramifications for Ireland as a divided, partitioned country. The Northern counties are in the sterling area but we are happily in the European Union together. If the United Kingdom pulled out, it would create a border not only with the sterling area, but with the European Union.

To conclude, I wish Ireland Inc. well during the Presidency.

11:10 am

Photo of Seán KyneSeán Kyne (Galway West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I welcome the Tánaiste and wish him well during the six months of the Presidency. I welcome the EU-USA trade agreement. What discussions have taken place on that and at what level? I am sure the St. Patrick's Day visit to Washington will be used to further them. I share concerns expressed on Prime Minister David Cameron's comments and the debate he intends to have within his government and party. Does the Tánaiste share concerns that this will increase the likelihood of the Prime Minister taking a hardball attitude towards the MFF and CAP budgets to demonstrate that he can stay in the EU while also saving money for British taxpayers?

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the Tánaiste for attending and wish him energy and fortitude for the Presidency of the EU. It is time to remind all member states of the primary principle of closer union which underpinned the establishment of the EU. Every member state knew that when it joined, including Great Britain. It is funny that there should now be some emotional or mental doubt about the closer union they knew would be committed to when they joined.

I am delighted to hear that progress is being made by applicant and accession countries. The creation of the EU represents the best, largest and most wonderful achievement of mankind in modern times. There has been no war since 1945 other than those taking place outside the territory of the EU. The heart and soul of the EU project is that it is a community. This represents the fundamental cornerstone politically and philosophically of our Presidency.

However, there are also the nuts and bolts finance issues to consider. The facts show that there is a remission in the parlous state of the world financial system and eurozone. Bank balance sheets remain hugely buckled and doubtful. Provisioning is understated. The fact that Basel III has been pushed out to 2019 is an expression of the doubt that exists. The off-balance sheet liabilities of institutions are huge. Deutsche Bank has a €2.2 trillion balance sheet. These nettles must be grasped courageously and firmly. It must be asked if the financial markets system has failed when 26 million people are unemployed in the EU, which is unacceptable. In the United States of America, the unemployment rate hovers around 9%, which is also unacceptable. Notwithstanding the foregoing, the gap with the incomes of the few who control the greater percentage of wealth is widening. We must go back to the drawing board and address the basics with radical and courageous thought.

That is the general picture, but I turn to the particular case of Ireland where at least €65 billion in private banking system losses have been channelled via financial engineering to become the sovereign debt of the State. It is unsustainable by any measure when added to the huge national levels of household and private commercial debt. We were told 18 months ago that technical papers were being drawn up which is why I do not buy statements to the committee to the same effect now. There is recognition in principle that it is an odious debt which remains locked into our banking system comprising the dead banks in the IBRC and the survivor - I would not call them pillar - banks. The system is unable to deal with the enlarging mortgage crisis. As the Governor of the Central Bank admitted last week, the mortgage crisis is interlocked with the capital resources of the banks. As we now see, they will have to start writing down and recalibrating mortgage and business loans, which will require more capital. That capital should come from------

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

The Deputy must conclude. The Tánaiste has to leave. Thank you.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

Deputy Bernard Durkan and Deputy Eric Byrne referred to enlargement. Our approach is not to leave anybody out or behind. Ireland supports enlargement, but the process must be credible and conditional on accession and prospective candidate countries fulfilling the conditions for membership of the European Union. Individual countries know what they have to do. We will encourage them in that direction.

Deputy Bernard Durkan, Deputy Eric Byrne, Deputy Seán Kyne and Deputy Timmy Dooley raised the UK issue. I have read Prime Minister David Cameron's speech. The first thing to be said is that it was framed in terms of keeping the United Kingdom in the European Union.

He has set out a timeframe through the next general election in Britain and on to what he proposes as an in-out referendum sometime in the life of the next Parliament. That is a matter for the United Kingdom and the British people to discuss and debate and to arrive at a conclusion about what their relationship should be with the European Union. It raises significant strategic issues for us which revolve around our relationship with the Union. It is important that there should be no doubt that irrespective of whatever debate takes place in the United Kingdom this country's relationship with the Union remains unchanged. We see our place as part and parcel of the European Union and at its heart. We have a unique, strong, neighbourly, friendly and very important economic relationship with the United Kingdom. That relationship will also stay intact. Irrespective of what happens in this debate, as far as Ireland is concerned we remain at the heart of Europe and close to the United Kingdom and we will work on that basis.

In respect of the European Union-US trade agreement raised by Deputy Kyne, a high-level group will present its report shortly. We are anxious to progress this. We need a mandate for the negotiation of the trade agreement. Let us not be under any illusion that this will not be difficult. When one gets down to the nuts and bolts of negotiating a trade agreement with any country huge issues arise across a range of industries and interests and so on that must be addressed but we have to get off the starting blocks. If a mandate is not given and the issue is not progressed before St. Patrick’s Day we will use the opportunity presented on that occasion when the Taoiseach will meet President Obama and I hope to meet the Secretary of State, John Kerry, to progress the issue.

In response to Deputy Mathews, it is important that we appreciate how far we have come. Two years ago this country was teetering on the edge of an economic abyss. We were about to go over the edge. People were talking in terms of the State not being able to pay its way. Nobody would lend to us and we need to borrow to keep our essential services such as schools and hospitals going, to make social welfare payments and pay pensions. That is the unfortunate circumstance of our economic situation and collapse.

11:20 am

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is being corrected now. We are almost in primary surplus. We are nearly there.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

At that time, as the Deputy will recall, people were wondering whether we would require a second bailout, and whether we would survive. Only a year ago people were talking about whether the euro would survive. When faced with a crisis we have two options.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

What about the principle of private losses being imposed on a nation?

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

I and my party opposed the blanket guarantee of the banks in 2008. We have inherited the consequences of that decision and the consequences of some of the bad decisions made after that. We have a choice in these situations. We can either be overwhelmed by the crisis that we face or we can come up with the cleverest analysis of it but that does not get us anywhere. What gets us somewhere is facing into the crisis, starting to deal with and trying to resolve it. We have made progress in several dimensions in resolving that. We have made progress in the renegotiation of the terms of the bailout arrangement.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I acknowledge all of that. The point is that the Minister should keep insisting expressly and precisely the size of the requirement to restabilise and recalibrate our indigenous economy by way of creditor inclusion in the refinancing of Ireland through the banks.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

We are in no doubt about the scale of the problem.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I asked-----

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

The Deputy should hang on a second-----

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

Remarks at this committee should be made through the Chair.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

Cleverality-----

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is not cleverality-----

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

It is, with respect.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Excuse me, it is not.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

Cleverality does not solve this problem. What solves it is that first, we conclude an agreement with the ECB in respect of the promissory note. That is the pragmatic thing-----

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is resisting after forcing us into a situation of-----

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

Please let me respond to the questions that you raised. That is the pragmatic thing that has to be done.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Correct.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

Second, we must pursue the implementation of the decisions made in June to separate bank and sovereign debt and to put in place the banking union, and the single supervisory mechanism that goes with it. That is the pragmatic, practical work we are doing that our presidency of the European Council enables us to pursue.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It can agree the principle but it has not-----

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

The Deputy should let me respond to his questions.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

Deputy Mathews, with respect----

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

We are having a conversation.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

This is our committee and we have a certain way of dealing with things. The Deputy must respect that.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

That in turn needs to be backed up by what then needs to be done at a practical level to grow the European economy. That means getting investment. The stability that we have now managed to achieve provides the platform on which that investment can be made and the jobs created. That means, during the course of our presidency, driving ahead with the measures on the single market, the digital market, the trade issues, the employment initiatives, the education and training initiatives that need to be taken to address the needs of people who are out of work. A point was made earlier about the growth of Euroscepticism in Europe. That is very real.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I opened my remarks by saying that the closer Union is imperative for us all. Mutual-----

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

I thank the Deputy. He has made his point.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

The imperative for us now is to address the real needs of young people in Europe who are out of work. That will address euroscepticism. Irrespective of where a young person is out of work, whether in Glasgow, Galway or Genoa what matters to that person is getting a job. The question young people are asking, and their parents and families are asking them, is to what extent is the European Union and what we do in it addressing that problem. We address that problem by advancing in a pragmatic, practical, energetic and focused way the measures that are required in order to grow the European economy. It comprises 500 million people, the biggest concentration of purchasing power on the globe. It has enormous potential. We have to drive ahead with what is needed to grow its economy, generate employment, deal with the consequences of the banking crisis that we have inherited and to take people forward out of the crisis and beyond the recession. What we do domestically and in respect of our Presidency of the European Union are absolutely aligned.

This is the same agenda and it is about doing what is necessary to promote stability, jobs, growth-----

11:30 am

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Does the Tánaiste agree that the financial markets failed us?

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

Of course they did but what is the point in crying over it? We must deal with the issue.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

That is what I said.

Photo of Eamon GilmoreEamon Gilmore (Tánaiste; Minister, Department of Foreign Affairs and Trade; Dún Laoghaire, Labour)
Link to this: Individually | In context | Oireachtas source

We must solve the problem.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context | Oireachtas source

There are 6,000 banks that need recapitalisation.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
Link to this: Individually | In context | Oireachtas source

On behalf of the committee, I thank the Tánaiste for his attendance and engagement. We wish him well for the meeting on 4 February and we look forward to hearing from him when he returns. Perhaps he will come before us and tell us how he got on.

The joint committee adjourned at 1.10 p.m. until 2 p.m. on Thursday, 21 February 2013.