Oireachtas Joint and Select Committees

Thursday, 17 October 2013

Joint Oireachtas Committee on European Union Affairs

Forthcoming General Affairs Council: Discussion with Minister of State

2:00 pm

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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Before we begin, I remind everybody to turn off his or her mobile phones because they affect the broadcasting of the meeting. Apologies have been received from the Chairman, Deputy Dominic Hannigan, and Deputy Seán Crowe.

I welcome the Minister of State, Deputy Paschal Donohoe, who has special responsibility for European affairs for this special meeting ahead of the General Affairs Council meeting which is due to take place next week, on 22 October. As members will be aware, the meeting is expected to prepare the ground for the October European Council meeting which will have a particular focus on the digital single market. It is also expected to discuss the European semester. As our colleagues will be aware, Ireland has been involved in that process, with our budget being announced earlier this week. It will be interesting to see how we feed into the discussions in the European Union and hear about progress in other member states. Another issue to be discussed is Ireland's eagerly anticipated exit from the bailout programme in December. The enlargement negotiations with Turkey are also to be discussed.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I congratulate the Vice Chairman on his appointment.

I am delighted to have this opportunity to brief members on the forthcoming General Affairs Council meeting which will take place in Luxembourg next Tuesday. I will also use it to provide them with a brief update on some of the visits I have made and the work in which I have been involved since I last attended the committee.

Before looking ahead to the General Affairs Council meeting, I will give a brief report on the meeting of the Council that took place on 30 September. When I was here last, we discussed members' considerations and views. Given the issues that were raised, it is appropriate to provide an update of what happened at the meeting and the current state of play.

As members will recall, the main issue at the time related to the cohesion policy legislative package. Negotiations were ongoing with the European Parliament and they are still taking place. At the meeting member states strongly stressed the importance of preserving the agreements on the multi-annual financial framework reached during the Irish Presidency and the need for early agreement. However, some limited room for flexibility was indicated in an effort to seek agreement with the European Parliament.

Ministers also held an initial discussion on the agenda items for the European Council meeting on 24 and 25 October. These topics will be explored more fully at the meeting next week. My colleague, Mr. David Lidington, MP, UK Minister of State, will briefly update the General Affairs Council on the ongoing balances of competences review which the British Government is undertaking.

I will represent Ireland at next week's General Affairs Council meeting. One of the duties of the Council is to prepare for the European Council meetings that take place at the same time. Therefore, the main item on our agenda will be the preparations for the European Council meeting that will take place at the end of next week. My first comment on the European Council agenda is that it is very similar to the provisional agenda announced by President Van Rompuy some time ago. This is very welcome as it at least a sign of returned stability. Not long ago, each European Council meeting was inevitably taken over by the crisis of the day, with less time being devoted to discussions to develop long-term plans for the European Union and to make sure we put in place the right framework to ensure the crisis we were in was better dealt with and prevented in the future. That relative stability I have mentioned, albeit still fragile, has recently freed the European Union from crisis management and allows us to keep the focus where it should be, on policies that will deliver jobs and growth. In line with the priorities of the Irish Presidency earlier this year, the European Council will look at the high potential digital sector, youth employment and what can be done to help SMEs. The work to complete the stabilisation of Europe's economies also continues, with a discussion on Economic and Monetary Union. For Ireland, the completion of banking union is a fundamental priority in which momentum must be fully maintained. I will come back to that issue.

Next week's General Affairs Council meeting will, as on previous occasions, consider a draft set of European Council conclusions. The President of the European Council, Herman van Rompuy, will join GAC Ministers for this discussion. Among the conclusions is the link between the digital sector and youth employment, with young people the main beneficiaries of the growth we can achieve in that area. As a major centre for both home-grown and foreign digital sector companies, Ireland is perfectly positioned to contribute to this debate on the digital sector, as we did in the hosting of the digital assembly in June. It is fitting that we meet today just ahead of the Dublin web summit, now a major global gathering of technology leaders and innovators. On that note, I will briefly go through the European Council agenda, starting with the digital economy, innovation and services.

The key focus of the European Council will be the political debate on the digital economy, innovation and services. We support strongly this. It also aligns well with our own strengthening domestic policy focus on entrepreneurship and skills development. With Europe facing unacceptably high levels of unemployment, the reality is that most new jobs are created by fast growing young firms. That is why we see it as entirely appropriate that the European Council keep at the very top of its agenda the issue of creating the right conditions for supporting these new growth areas. The compact for growth and jobs provides the key backdrop for this discussion. It sets a clear goal of having a well functioning digital single market by 2015.

The European Commission estimates that the digital economy is growing at seven times the rate of the rest of the economy, but its potential is being held back by a patchy pan-European policy framework. That is why we placed such a strong emphasis on this area during our Presidency in the first half of the year. This included important progress on the collective rights management, e-identification, data protection, cyber-security and web accessibility files, as well as completing the European Network and Information Security Agency and public sector information legislation. As I mentioned, we also hosted a very successful digital agenda assembly in Dublin Castle in June. It was addressed by the Taoiseach and it was the first time the event had been held outside Brussels. I expect the workshop outputs from the digital agenda assembly to feed into European Council's preparations, particularly in identifying key bottlenecks and the next steps we need to take. There is clearly much more that we need to do to make sure our market rules keep pace with the 21st century reality. This includes further progress in the copyright and data protection areas, taking a forward-looking and growth-oriented perspective. We need to recognise clearly the role of coherent market rules in supporting trust and confidence in digital growth areas. We must also be careful to avoid new administrative requirements that would impose disproportionate burdens on the job creating engine of the economy.

A further priority concern is unlocking necessary investment in next-generation broadband infrastructure, where fragmented market rules remain a problem. I expect that discussion will be informed by the "Connected Continent" proposals for a single telecommunications market presented in early September. President Barroso identified this as the most ambitious telecommunications market reform in 26 years, contrasting the internal market in goods with the 28 national markets in telecommunications and digital services. The proposals aim for simplified rules for market operators; removing roaming charges and international call premiums; stronger protection for an open Internet, or net neutrality; harmonized consumer rights; co-ordinated 4G spectrum assignment; and more certainty for investors on pricing policies. Ireland has conveyed its broad support for the Commission's proposals, while also highlighting particular sensitivities for smaller and peripheral member states.

We see the skills agenda as a hugely important focus in realising the full potential of the digital economy. The reality is that there are already signs of growing skills shortages in this sector, with some estimates suggesting over one quarter of employers across Europe find it difficult to fill jobs. At a time of unacceptably high unemployment, we clearly need to do more to align the supply of skills with the needs of the labour market of today and tomorrow. Progress can build from the grand coalition for digital jobs launched during our Presidency in March which identified a potential 900,000 unfilled ICT vacancies in Europe by 2015. Discussion on innovation policy will be informed by the Competitiveness Council meeting that took place at the end of September. It is clear from that discussion that European business research and development continue to lag behind main competitors; the European research area is still too fragmented; there is further room for convergence of innovation and research performance across member states; and Europe's new firms are growing more slowly than in the United States and failing to join the ranks of the world's largest firms. A more structured approach is also needed for public sector innovation. This is an area of particular interest to Ireland, having secured political agreement on the new Horizon 2020 package under our Presidency in June.

Tackling youth unemployment continues to be an enormously important priority of the European Union and Ireland. The European Council will review progress on implementing the investment plan agreed in June and towards having the youth employment initiative fully operational from the beginning of 2014. This was an area in which significant progress was made under the Irish Presidency.

There will also be initial political reactions to the Commission's proposals on regulatory fitness, as presented at the beginning of this month.

I wish to address the issue of Economic and Monetary Union. With a view to further discussions in December, the European Council will return to the theme of Economic and Monetary Union. In particular, the Council will assess progress in the completion of elements of banking union. It will also have initial discussions on other aspects of EMU, including economic policy co-ordination and the social dimension. The European Commission has just published its own communication on the social dimension of the European Union. A system for the supervision of cross-border banks in the form of the single supervisory mechanism was agreed under the Irish Presidency. This mechanism will enter into force in early November and the ECB will take over full responsibility 12 months later.

The rules governing how banks are to be resolved, framed in the bank recovery and resolution directive were successfully concluded at the Council under the Irish Presidency and negotiations continue with the European Parliament to reach a final compromise. In parallel, the current Lithuanian Presidency is also in discussions with the Parliament on the recast of the deposit guarantee scheme.

Our Lithuanian colleagues are seeking to reach agreement with Parliament on both the BRRD and the DCS by the end of the year.

A further element of the banking union is the Commission proposal for the single resolution mechanism which will apply the BRRD rule book to banks in SSM participating member states. That refers to countries inside the operation of a fully functioning banking union, to ensure clarity in dealing with the resolution of banks in any kind of difficulty. When I say "any kind of difficulty", I mean banks in very severe difficulty and the need to ensure that there is a clear framework on how to manage and deal with the cost of resolving that difficulty. Given that the June European Council concluded that negotiations in Council on the SRM should be completed by the end of the year, the Lithuanian Presidency established a high-level working group to examine the proposal. Colleagues in the Department of Finance are actively involved in this working group and while there are a number of complex issues to be addressed in the negotiations, I am hopeful that the Council can meet the deadline established by the Heads of State and Government.

The Lithuanian Presidency will brief the European Council on the state of play of preparations for the Eastern Partnership Summit, to take place in Vilnius from 28 to 29 November. The main business of the summit will be the initialling of association agreements with Moldova and Georgia and potentially the signing of the association agreement with Ukraine. The European Council may also consider additional foreign policy matters.

Following the session on the European Council, the General Affairs Council will have its first discussion on next year's European semester process, as the Vice Chairman mentioned. This will be informed by a synthesis report from the Lithuanian Presidency on lessons learned in 2013 and on any further procedural improvements that might be possible. The Presidency's synthesis report will be finalised, taking account of discussions this week at various Council formations. The committee will recall that the effective management of the European semester 2013 was an important focus for the Irish Presidency. This has provided a strong basis for exploring further ways in which the involvement of national parliaments in particular might be reinforced over the period ahead. We look forward in Ireland to full participation in the European semester 2014, following successful completion of our EU-IMF programme in December.

The General Affairs Council will adopt Council conclusions on the value and the added value of macro-regional strategies. These conclusions arise from, and are a response to, Commission communications in June of this year, which assessed the added value of macro-regional strategies through reviewing the implementation of existing macro-regional strategies for the Baltic Sea region and the Danube region. Although Ireland is not a participant in either of the existing strategies we very much support the concept and the added value such strategies can bring and can endorse the draft Council conclusions.

As colleagues will recall, we were very pleased during the Irish Presidency to have been able to inject a new momentum into the EU's accession negotiations with Turkey. We secured agreement in June on the opening of a new chapter, chapter 22 on regional policy. Due to some concerns about the situation in Turkey at the time, member states agreed that they would decide the date of the inter-governmental conference formally to open the chapter, later in the year, once the European Commission had published its annual progress report. The Commission's report was published yesterday.

I very much hope that the General Affairs Council will be able, next week, to confirm the date for formally opening this new chapter in negotiations with Turkey. I hope that the inter-governmental conference will then be able to take place shortly afterwards.

Having worked hard during our Presidency to reinvigorate Turkey's accession process and to get agreement among member states to open a new chapter for the first time in three years, we would like to see the process through to completion. I believe strongly that maintaining Turkey's EU perspective is vitally important to encouraging reforms in that country. Having opened this new chapter, I hope we can build on the momentum developed under the Irish Presidency to make further progress in Turkey's accession negotiations as well as deepening our overall relations with our strategic partner. That concludes my comments on the General Affairs Council.

I want to inform members too that since I last met them I have also had the opportunity to visit several member states to hold discussions with them on where things stand for our country, important policy priorities and how we can work together to deliver them. I also spent yesterday visiting the Northern Ireland Assembly to talk about the work taking place here in the Oireachtas and in Government on Europe and to have an exchange of views on that and other matters. The main part of that meeting comprised my giving evidence to the Committee for the Office of the First Minister and Deputy First Minister, which I did yesterday afternoon.

I thank the committee for giving me this opportunity to address it. I have taken a fair amount of time to do so, simply because there is a lot going on and I want to use this as an opportunity to ensure that the committee is up to speed on this and that I have an opportunity to hear its views.

2:10 pm

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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I thank the Minister of State. Although he has been in office only a short time he is certainly up to speed. He is very welcome here this afternoon.

I will open the meeting to questions or contributions from colleagues. I call Senator Terry Leyden.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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I congratulate Deputy Murphy on his appointment some weeks ago as Vice Chairman of this committee, a role he took over from the new Minister of State at the Department of Foreign Affairs and Trade, Deputy Donohoe. I welcome the Minister of State and his staff from the Departments of Foreign Affairs and Trade and the Taoiseach, representatives of many of the embassies of the 28 member states in Ireland, and members of the media, who are very important to convey the message of the Minister of State's work. The Minister of State has outlined in a very constructive and comprehensive manner the details of the meeting of the General Affairs Council and there is nothing in that with which I would disagree. That is excellent work, particularly in respect of the digital centre and such developments, which will have marvellous benefits for job creation.

I would like, however, to draw attention to matters that are not covered in the Minister of State's script or plans. The European Union is not taking an active role on the situation in Palestine. We are too passive. The European Union is a major contributor to the Palestinians. We have influence in that region but we do not exert ourselves enough. I hope that the Minister of State will be briefed on the present position regarding the peace negotiations which are generally being de-railed. Nevertheless, we must keep the dialogue going between Palestine and Israel. The European Union has a major influence in that region.

Turkey's accession has been delayed. There is no tremendous enthusiasm among the 28 member states for it. Ireland is seen to be very fair. I know from speaking to our Turkish friends at the Council of Europe that they are well aware of how supportive Ireland is. A key point in Turkey's joining the EU is that it is an Islamic state. This would bring a new dimension to the working of the Union, to have a multicultural Union, with Islamic influence, which will help in respect of the growth of Islam worldwide.

In respect of Turkey the Cyprus question cannot be ignored. It must be resolved. The division of Cyprus between Turkey and Greece is a tragedy. Famagusta is a ghost city in the Europe of 2013 and nothing is being done about it. Ireland should play a more important role. We are divided and we played an important role in the peace process, which sets an example.

Our country has a record for having sent many missionaries to Africa and around the world. Europe should develop a peace corps, of young and not so young people. The Department of Foreign Affairs and Trade has a voluntary scheme but there could be a European dimension by which we joined up to work in the Third World, to show the Third World that the EU is concerned about it. For example, approximately 1 million people live in shanty towns in Nairobi, the same is true of South Africa and so on. The Minister of State might consider this concept. Maybe in this committee - although it may not really be our remit - we could consider a structure to put forward an idea or come up with a new policy or idea to say we can do something. It would create employment, even in the short term. It would take very talented people and put them to work in areas where their skills would be appreciated. Thank you.

2:20 pm

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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I agree that it should be discussed. To be fair to the Minister of State, I am sure he is happy to take the questions, but many of the Senator's initial queries would normally be dealt with at the Foreign Affairs Council by the Tánaiste.

Photo of Eric ByrneEric Byrne (Dublin South Central, Labour)
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I welcome the Minister of State and I applaud his rapid understanding of the brief he has inherited. The committee discussed stability and the disturbing circumstances during the time when we thought the country and Europe was going belly-up and there was a danger that the euro would not survive. It is great to wake up in the morning now to hear that the euro is rated at €1.35 to the dollar and seems to be climbing. I hear it is €1.35.6 at the moment, which is very encouraging as it means that the euro has stabilised and is a really attractive currency. Those who were panicked by the near collapse and who purchased silver, gold, dollars and sterling would be advised to revert to the euro as quickly as possible.

The Minister of State informed us that the digital economy will be on the agenda of the Council meeting. It is a fascinating subject which has been on the agenda on previous occasions. Ireland is ideally located and suited to giving leadership to and benefitting from the digital economy. It is very welcome that in County Kildare, after two years of research and development, Irish Intel engineers managed to design from scratch and manufacture the next-generation chip for computers. They had to compete with other Intel plants in New Mexico, Israel, California and other countries in order to tender for its production. The successful digital economy makes me very proud to be Irish. Irish engineers won the contract for the manufacture of this chip, which is at the forefront of innovation. Those of us who know Dublin are familiar with the Digital Hub, where entrepreneurs are working with mentors to produce a wide variety of digital products. I am not very familiar with the digital world; I am still trying to learn how to use my mobile phone.

It may not be politically correct to say so, but Denis O'Brien has digital facilities all over the world. His company is in Jamaica, for example, and every Jamaican has a mobile phone. His company is also in Haiti and in South Africa and other African countries. He is providing digital solutions to many of the communications problems in Third World countries. I have a question about GPS. I understand this was originally an American military system and that GPS information can be controlled by forces in America. Is the EU working on having its own GPS system which would be independent of the American system? I understand that the Irish troops on UN duty in the vicinity of Israel and in the Golan Heights do not use the GPS system when on patrol because it can be manipulated by outside forces. Instead they use regular compass readings.

The issue of youth employment is very important because of the levels of youth unemployment in Europe generally. I concur with the Minister of State that the Turkish issue is of key importance in the development of European stability. I encourage Ireland to take a leading role. Notwithstanding the religious composition of that country, it is a very important strategically located country which borders East and West. Moldova and Georgia are counties which could benefit from closer association with the European Union.

The Minister of State referred to the Eastern Partnership. Turkey is one of the most strategically important countries. In the case of Ukraine, I ask the Minister of State to use his good offices to encourage the Ukrainians to bite the bullet on Yulia Tymoshenko, and I think they have begun to release some prisoners who were imprisoned around the time that Tymoshenko was taken in. Europe would benefit immensely if that issue could be concluded and if Tymoshenko were released to go to Germany for medical treatment for her back problems. The Russians are applying increasing pressure. They have already succeeded in seducing Armenia away from the European programme and they are putting great pressure on Ukraine.

I am very concerned about Spain, given the regional structure of that country. I note that in Catalonia, which is the economic engine of the country, over 1 million people marched in support of Catalan independence. The Basque region is another issue. I ask the Minister of State to give the Irish Government's position on Spain. I hope that position is that under no circumstances does Ireland support the breaking-up of the regional structures. I find it very worrying in this day and age when we are hoping to create a unified Europe that these forces are at play in Spain. This may also be the case in Italy to some degree in the northern region. I always compare such situations to that of Katanga in the Democratic Republic of the Congo. Attempts are made to grab hold of the oil or mineral wealth or the wealthy industrial regions and other regions are regarded as being poor and not entitled to benefit from the wealth of the richer regions. I ask for our position on the situation in northern Italy and the growth of a certain political party there.

Photo of Seán KyneSeán Kyne (Galway West, Fine Gael)
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I welcome the Minister of State to the meeting. He spoke about the return to stability after years of concern about the euro. Ireland plans to exit the bailout in December, which will be very well received among his European colleagues. What has been the feedback from them with regard to that exit? I refer to the concerns about other countries such as Portugal and Greece, and also the Italian economy.

The banking union involves an integrated system for the supervision of cross-border banks. If this system of oversight and supervision had been in place for the past decade, what would have been the impact on our economy and on events in the banking sector? Will a referendum be required on the question of a banking union? The European semester 2014 refers to country-specific recommendations. What is required in Ireland? The European semester 2014 programme will only fully apply to Ireland once we exit the IMF programme.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I thank all members for their questions, which I will handle in order. I thank Senator Leyden for raising many different issues. I compliment him on his continued focus on international issues.

In regard to Palestine, I respectfully take a different view from the Senator. The European Union has done a great deal of work to ensure our investment programmes in the Middle East, and specifically within Palestine, are focused on assisting the peace process in that region and supporting the various communities. The Tánaiste has taken every opportunity, at the Foreign Affairs Council and in all of his bilateral meetings with leaders of other member states, to continue to press the case for progress in the Middle East and ensuring all parties do what they can to build a more prosperous and peaceful future for the people of the region. In that vein, I welcome the discussions currently under way and the role therein of the United States Secretary of State, Mr. John Kerry. We all hope that initiative will have a successful conclusion.

I thank the Senator for acknowledging the focus we have placed on Turkey. I agree with him that the Union's relationship with Turkey is of enormous importance and sends out the clearest possible signals to the rest of the world in terms of how different cultures can interact with each other. That is why we prioritised the issue during our Presidency. We hope the progress that has taken place following the opening of the Chapter 22 process will be maintained.

Likewise, in regard to Cyprus, we want to see the United Nations sponsored discussions, which recently resumed, delivering a comprehensive solution to the issue to which the Senator referred. We continue to urge Turkey to play a positive role in developing better relationships with Cyprus. Again, what we are seeing is that discussions and negotiations with a particular country regarding its relationship with the European Union afford the perfect opportunity to raise these types of issues.

I completely agree with the first point Deputy Eric Byrne made. I have referred on previous occasions to the large number of telephone calls I received last summer from constituents asking what we proposed to do in the event of a break-up of the eurozone. The points the Deputy made regarding gold and silver, sterling and the dollar are issues I discussed with concerned constituents. We should acknowledge that during that particular period, when things looked very bad for the euro, reasonable people were concerned that the currency was on a vicious and irreversible downward spiral. Since then, however, several extremely important developments have occurred, including the intervention by the Governor of the European Central Bank, Mr. Draghi, which brought clarity to the role of that institution, and the very strong public leadership and tough decisions taken by all member states to show their support not just for the survival of the euro, but for its future prosperity. Like the Deputy, I am relieved that the collapse of the currency is no longer being discussed every day on the radio as an imminent prospect. I was always of the view - the Deputy shares that view, as I understand it - that there was an underestimation by certain commentators from afar of the commitment of member states to the currency and their determination to ensure its survival and prosperity. There was a collective determination to avoid the disastrous consequences of a collapse of the euro, but also an awareness that a strong currency offers the best opportunity for all members of the EU to do what they do best, allow businesses to flourish and ensure people, young and old, can secure employment and live the lives they wish to live.

On the Deputy's question regarding a global positioning system, work is taking place across many member states to develop a new system called Galileo. That is a major priority which flows directly from agreements reached under the multi-annual financial framework. The Deputy is right to observe that in many countries - he mentioned the United States, but it is also the case in Israel - the scale of their defence industries generates technologies that are subsequently used in a very different way within the civil science sector. We are seeing a renewed focus within Europe to ensure member states work together to develop technologies and undertake research of the right critical mass to lead to that type of work. What that in mind, I congratulate the University of Limerick on its ambition in working to attract additional world-class professors to its campus. The announcement today is fantastic and very encouraging.

As the Deputy noted, the Eastern Partnership summit, which both the Taoiseach and I will attend, will take place at the end of November. It is a mark of our continued recognition - shared by all political parties in the country - of the importance of a strong neighbourhood policy to ensure countries across the centre and into the east of Europe are benefiting from the types of opportunities membership of the Union has offered to many other countries across the Continent, including our own. In this regard, I acknowledge the role of my predecessor and the work of the Department of Foreign Affairs and Trade leading up to the conference which marked ten years since Thessaloniki, which Deputy Bernard Durkan and I attended before the summer. This country has always shown a strong commitment in that area, and it was something we wished to prioritise during the Presidency .

In regard to Ukraine, the Deputy will be interested to know that I had a meeting this morning with the Ukrainian ambassador. It was a very positive bilateral engagement during which we discussed significant improvements and developments within our respective countries and the forthcoming partnership summit in Vilnius.

On the questions regarding Spain and Italy, the Deputy will appreciate that it is not for the Government to involve itself in discussions concerning other countries and any decisions they might make regarding their own future, in the same way as we would have grave concerns if any other Government sought to do the same to us. I have seen at first hand the major work the Spanish Government is doing to address the problems afflicting its economy and the opportunities it would wish to exploit. It is making very strong progress in that regard. Likewise, I acknowledge the excellent work being done by the Italian Government, led by the Prime Minister, Mr. Letta, to address the challenges and opportunities that country is facing.

Deputy Seán Kyne referred to discussions on our planned exit from the bailout programme. The Government made clear at the start of the week that we have as yet made no decisions in this regard. For now we are evaluating all options. At the same time, we have a very clear process in mind, the first part of which was delivery of the budget for 2014. The Minister for Finance, Deputy Michael Noonan, has indicated that in the run-up to the 12th troika inspection, which will take place in the coming months, we will be examining the choices that are open to us to ensure we achieve a sustainable return to the financial markets.

On the question of how other countries participating in an external aid programme are faring, I have already referred to the very strong decisions being taken by fellow member states in that regard.

On the question of banking union, we continue to believe that a very strong banking union is an essential element ensuring that our currency and economy prosper into the future.

It is essential in moving towards breaking the link between the difficulties of the sovereign and those of the banking system. This is about coming up with a sustainable framework for dealing with banks that are failing and then putting in place the right regulatory framework.

On the Deputy's specific question on the impact on our economy if such a system had been in place for the past decade, I have no doubt that what he said would be the case. If a pan-European regulatory framework had been in place at that time it would have been evident that there was a difficulty and it would have been apparent for two reasons. First, it would have been able to identify and prioritise the capital flows across borders from one bank to another at the time. That would have been evident to a pan-European regulator because it would have been regulating a far broader breadth of banks. It would have been possible to identify those banks that posed a systemic threat not only to our health but to that of the broader European economy.

On the Deputy's question on whether a referendum will be required, we know and are confident that the existing treaty framework will allow a robust banking union to be put in place. The country specific recommendations will focus on the main economic and social policy areas. The process will consist of the Commission making recommendations in those areas to ensure that national economies and societies can take advantage of all the resources they have. It will focus on labour market activation, recommendations on the development of European priorities, European infrastructure and so on. We will be engaging in the European semester process for the first time when we make our successful exit form the external aid programme later this year.

2:40 pm

Photo of Catherine NooneCatherine Noone (Fine Gael)
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I apologise for not being here for the Minister of State's presentation but I was otherwise detained. I have quickly read through it. A proposal I noted in recent weeks is an EU digital tax that is being talked about and the French in particular seem to be keen to push a digital minimum tax internationally. It launched a campaign on this in the past few weeks and this proposal will be before the next Council meeting on 24 October. It is something that could be negative for Ireland, especially considering that Google, Facebook and various other such companies are located here. I understand that Fleur Pellerin is making a European tour but I do not know if it will include Ireland. I would be interested to know if that issue is on the Minister of State's radar or if it is one of the Government is aware or about which it is concerned.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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I thank the Minister of State for addressing the committee and his presentation was interesting. I have a few questions related to the Council meeting. The emphasis in the agenda is correct and the issues on it are salient, those of employment, youth employment, banking union and economic and monetary union, all of which are hugely important. Regarding the digital economy, to what extent is the European Union as a body encouraging the universal availability of high-quality technology, such as high-speed, modern, state-of-the-art broadband, throughout all regions of the Union without exception? If the European Union is to prosper it must naturally follow that such technology is equally available in all member states without exception, otherwise a distinct advantage will rest with some member states. We regularly hear negative comment about our alleged preferential corporation profits tax, implying that in some way we have an advantage over other member states but little emphasis is ever placed on the fact that we are a "far-out region", for want of a better description. In other words, we are not in the centre of the European Union and there are costs associated with our peripherality that need to be borne in mind at all times. In order to address those issues, it is hugely important that the modern technology we aspire to have is made readily available throughout member states. If it not available, we should ask why can it not be made available and to what extent can the European Union assist in that respect.

Another reference that was interesting, which has been discussed at this committee and other meetings on several occasions in the past, is the degree to which the modern education system is able to produce a finished product in terms of qualification for the workplace. This issue is increasingly being raised. I attended a seminar recently at which it was suggested that the degree to which apprenticeships are available now is not similar to the number that were available in the past and that many firms in this jurisdiction and in other areas throughout the European Union are finding it difficult to source suitable employees with the required qualifications to fit positions. To what extent is the European Union engaged in making provisions in that area?

The Single Market is interesting. Some would claim that we do not all have the same access to the Single Market that we should have, but again the digital economy is hugely important in that area. If we do not have state-of-the-art technology, we are not at races and neither is the European Union as a whole. At one time the United States was many leagues ahead of the European Union in terms of its ability to provide employment in the services sector. To what extent is the European Union focusing on that sector with a view to maximising job creation possibilities in it using innovation and technology to the extent now anticipated and required?

My last point relates to a debate that I attended sometime ago during which reference was made to the fact that international employers are unable to fill their labour requirements from the European market for a series of reasons. However, those employers have been loth to mention that in moving their operations to South East Asia there is an economic element involved in that respect. They do not always emphasise that to the extent that they should. The question to be borne in mind is whether it is best for the European Union for the relevant labour force to be attracted to the location in the European Union where an enterprise is based or whether it is beneficial or wise to allow such an industry to relocate to cheap labour markets. My analysis on that is that the quality of the product is important but it is equally important that we recognise that 500 million people in the European Union, that market has huge buying power and it also can benefit from the location of manufacturing and services sectors within its own jurisdiction as opposed to relocating industries elsewhere. My apologies for talking at such length.

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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I will join in the spirit of having a grouping of questions from three members by making a few comments now. I welcome the agenda and it sends out a clear message. Europe is not in a time of crisis at the moment which gives us quite a rare opportunity to examine some of the areas on which we fall down. I am interested in one of the messages that at last is coming strongly from Europe, that of the concept of "think small first". In order words, that with regulations in place and so on that small businesses would be considered. Having small businesses established and supporting people in becoming self-employed is the best way to tackle unemployment across the Continent because such businesses are very labour intensive. Europe has recently focused on industry rather than smaller businesses. I ask the Minister of State to push that message at the Council.

The other area where Europe falls down badly is that of innovation. Many people wince at the mention of term "entrepeneurship".

The people of the Continent of Europe tend to be extremely risk adverse. Of the top 50 companies in the world in the past 25 years, only one is European. A total of 80% of university students in America have the aspiration to set up their own business but the figure in Europe is less than a third of those surveyed. Now is the time to push the agenda in that respect, in particular given that this week’s budget was so focused on small business innovation and getting people back to work through the small business sector.

The Minister of State, Deputy Donohoe, from an Irish perspective is uniquely positioned to focus on labour mobility, which is a considerable failing of the European system. It is ridiculous to Irish people and those in Spain, Greece, Portugal and other areas of high unemployment that there are significant labour shortages in northern Europe. That must be addressed. We must bite the bullet in that it is not about exporting young people but satisfying the demand that exists. We have a shortage of labour in certain sectors as well so it is not just about net outflows of people from this country as there is potential for people to come here also.

Could the Minister of State refer briefly to recent reports about Albania? Talks on its accession were suggested by the Commissioner this week. Three years ago there was a refusal to enter into talks on Albania’s accession because of its reputation for organised crime and other issues.

This morning the committee met Lord Wallace. The Minister of State met him prior to his coming to the meeting. Could he comment please on what he heard? There has been some discussion on Spain and Italy. I fully accept what the Minister of State said about this country not interfering in what happens in other countries but the current debate in the United Kingdom affects us in various ways. I would welcome a comment from the Minister of State in that regard.

2:50 pm

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies and Senator Noone for their questions. I will begin with Senator Noone’s question on taxation and the digital sector. It is possible that there will be reference in the conclusions of the forthcoming European Council meeting to taxation and its role in the digital sector. I wish to make clear this country’s commitment to its corporation tax rate. It is an utterly transparent principle-based agreement. We are of the very strong view that the way in which dimensions of this issue could be addressed is by means of a multilateral process in which all countries participate. That is why during our Presidency and since this country made very clear its commitment to participate in the OECD base erosion and profit shifting work that is taking place having been mandated to do so by the G20. That is the forum within which we will work with our neighbours and partners on this matter. The Minister for Finance, as members are aware, used the budget as an opportunity to restate our commitment in that regard. He also made clear that he would introduce changes in the forthcoming finance Bill to address Irish registered companies and the concept of being stateless. I reiterate our strong commitment to our corporation tax model and acknowledge that the reason we have it is because as a country that is physically remote from the Continent of Europe, we have developed a business model that will allow our competitiveness to be maintained, in the same way as it is open to other countries to use their sovereignty to decide what business and competitiveness model they wish to use.

I agree entirely with the first point made by Deputy Durkan on the disparities in the provision of infrastructure across various member states. The technical term is the concept of market fragmentation, which arises because we have so many different national markets and it is not possible for the level of scale to be reached to allow appropriate levels of infrastructure to be achieved. That is one of the key issues on which the European Council will engage.

A point raised by Deputy Durkan previously is that the digital sector will not be able to employ everybody; that there will be people who due to their own skill-set and inclinations will not work in it. The February European Council meeting will specifically examine industrial policy and the strength of the manufacturing base across all of Europe because that is crucial to coming up with an economy that is capable of providing employment to all sections of society in this country and elsewhere.

On Deputy Durkan’s point on relocation, as he is aware, in the globalised world in which we operate there is free movement of capital and companies, large and small, decide where they want to locate. We should acknowledge that within that framework this country has had extraordinary success. Based on our share of global FDI compared to our share of global output, we are punching nearly three times above our weight because of the quality of the workforce and the success we have had to date in providing the skills and the environment in which business wants to locate and within which Irish people want to do business. It is the broader job of Europe to ensure that within the framework of companies being able to locate anywhere in the world that Europe is competitive and offers workers a competitive environment within which international companies want to locate. That goes directly back to Deputy Durkan’s first question, which is that if we do not have the physical infrastructure in place and the type of environment provided by other large economies, then it will be difficult for us to compete.

On Deputy Durkan’s point about mobility and ensuring Irish and European workers have the ability to prosper within that environment, the assumption was prioritised by the Presidency and we worked very hard on the posted workers directive. We also made strong progress on the professional qualifications dossier and another dossier on the portability of pensions. I identify and agree with Deputy Durkan’s point in that regard.

I will now deal with the questions raised by the Vice Chairman. I hope I have addressed labour mobility adequately in the response to Deputy Durkan’s question. We must also acknowledge that this is an area in which national governments still very much have the ability to decide how they want to handle particular issues. We must respect that and accept that countries make choices, as we do, on such issues. The point goes back to what I said in response to Deputy Durkan. That is why progress on the professional qualifications dossier and the portability of pensions is so important. The jewel in the crown of the European Union is the ability of workers and citizens to move across the Union either freely or with limited difficulty compared to the situation historically.

We must also ensure that they do so with the ability to gain work and for their rights to be recognised.

On the point the Vice Chairman made about looking at smaller companies first, I would refer to the point he made earlier and say that we need to see national governments taking a lead in much of what needs to be done to foster the culture about which the Vice Chairman spoke. He did not do it but I am sometimes struck by the way other people blame Europe for all the failings. If there is a difficulty within a particular country or culture regarding levels of entrepreneurship, that is something national governments must tackle. They have to take advantage of the relationships they have and the tools available to them as a result of our membership of the European Union. That is something each Government must prioritise. That is why I was delighted, as I am sure were the members, to see the strong measures the Government announced on that earlier in the week.

Regarding the Vice Chairman's question about Albania, as he will be aware, a new Government was elected in Albania during the summer and it has outlined strong plans regarding how it is looking forward to moving ahead with reform. The European Commission has given an initial positive assessment of progress in Albania but the granting of candidate status and the formal moving forward of discussions with it is something in which all member states will have to engage. However, I welcome the strong messages from the new Government in Albania and we hope that leads to positive movement for it and its people. What we know to be important is that the conditions are met to allow Albania move forward its relationship with the European Union.

The last point was on the state of play within the United Kingdom. I had a meeting earlier today with Lord Wallace, as did other members of the committee. What we said at that meeting and what I have said publicly on a number of occasions, most recently during my visit to the Northern Ireland Assembly at Stormont yesterday, is that it is very much the right of any country to decide the type of relationship it wants with the European Union, and the terms of that membership. Given the number of referendums Ireland has had on our terms of membership, such a view will come naturally to us.

We are also clear that we believe the European Union is a stronger and better place for having the United Kingdom as a fully participating member and we see our future being very much back at the centre of Europe in terms of the work and the development that is taking place there. Work is taking place in the United Kingdom over the balance of competences review. As a Government we have decided not to participate in that, but were the current Government, or a new government, to become clear on a potential referendum in the future, we will discuss the impact any such decision will have on Ireland and make clear where we see our future and how we want to engage with Europe.

3:00 pm

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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I thank the Minister. I should have said, for those who were not aware, that Lord Wallace is the speaker for the Government Whip in the House of Lords, a Liberal Democrat, who visited today.

I fully accept that for small businesses the work done by national governments is vital, but there are three areas that differentiate small businesses from large businesses that will be discussed next week. The first is a banking union. Small and medium-sized enterprises will benefit most from that because larger companies can access moneys everywhere.

Also, better regulation in terms of simplification of administration impacts very much on small businesses. The area of the services directive is another issue. The one area where we have seen most growth in Ireland has been our exporting of services. I am aware that a peer review of the services directive is ongoing. Is the Minister aware of how we are performing within that review? Do any of my colleagues have additional comments to make before the Minister responds?

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Vice Chairman is correct that larger companies tend to have either their own pools of finance that they can draw upon or access to credit at different rates from those offered to small companies. It is worth acknowledging that the Commission and the European Investment Bank presented their report in June confirming they are working closely with the European Central Bank to develop a strategy to alleviate business funding constraints, because a well-functioning banking market is capable of meeting the needs of small and medium size companies. Work is taking place to look at revitalising and strengthening that part of the banking sector, and I acknowledge the work of the Department of Finance in doing that. We see Ireland as a strong pilot location for that kind of work to take place.

What I was acknowledging in part of the answer I gave to the Vice Chairman is that, along with him, I will continue to acknowledge the important role of national government and the work it does to develop the type of culture about which he spoke. I saw a fantastic example of that recently. The amazingly successful development of the new microchip about which Deputy Byrne spoke took place in Deputy Durkan's county. Deputy Byrne made reference to the Digital Hub, which is off Thomas Street in Dublin South Central. Extraordinary work is taking place in each of our communities and constituencies. The Deputy made reference to the bafflement his phone occasionally offers him. I struggle sometimes with the difficulties that arise in technology; I see Deputy Durkan is manfully dealing with the iPad at the moment. There are people in our country doing work that would have been unthinkable even a few years ago in terms of technological sophistication.

I visited an incubation centre in the Docklands, in my constituency, last week and saw the operations of many young business there. One business was set up less than three years ago but is already entering the third European market and employing ten people. They are the kinds of business that will prosper the most from the issues about which Deputy Murphy spoke.

A difficulty we face frequently here, and within Europe, which perhaps differs slightly from what some colleagues said, is the issue of scalability. From a start-up point of view, many of our larger capitals are unbelievably fertile in terms of new businesses being set up. They can increase in size from small to medium with the existing support, but how do they get from medium to very big in terms of size? The scalability aspect is a real challenge. That is why the work being done on having a fully functioning digital single market is so important, because it provides the scale within the market to allow that to take place. I look forward to updating the committee on the work that will take place in future general Council meetings.

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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Deputy Durkan.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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Is this about my comment about his iPad?

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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No, but it is associated with it. We should remember that some of the biggest companies and multinational corporations in the world, including Intel, were formed in a small office, a back garden or a shed and have grown to international standard.

There are opportunities now with the availability of innovation technology and telecommunications. It should be possible to create more opportunities in locations that were previously not accessible from the point of view of transport or other reasons. There are some tremendous industries in the Yukon based on technology and innovation that would not previously have been viable. They are mostly in the services sector but manufacturing is also possible. I hope the European Union and this country fully appreciates the opportunities that are possible in the area.

3:10 pm

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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I thank Deputy Durkan.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I fully agree with Deputy Durkan. This goes back to the issue of scalability to which we referred. All global companies had humble origins. There are many such companies located in this country at the moment. I am certain that in a few years time companies that will be globally recognised brands will originate from this country.

Photo of Dara MurphyDara Murphy (Cork North Central, Fine Gael)
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I thank the Minister of State for attending today. I wish him the best of luck at the General Affairs Council meeting. I thank members of the diplomatic corps who have attended today's meeting. I also thank the secretariat for the great work it does.

The joint committee went in private session at 3.22 p.m. and adjourned at 3.23 p.m. until 2 p.m. on Thursday, 24 October 2013.