Dara Murphy (Cork North Central, Fine Gael)
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As mobile phones can interfere with the broadcasting equipment, I ask that they be powered off.

The first matter on our agenda is a discussion of the social dimension of Economic and Monetary Union. I welcome the representatives from the Irish Congress of Trade Unions, Dr. Peter Rigney; the Irish National Organisation of the Unemployed, INOU, Mr. John Farrell, development officer; and Social Justice Ireland, Dr. Seán Healy, director. We had an interesting session yesterday with Mr. Koos Richelle, director general for employment, social affairs and inclusion at the European Commission. It was interesting to learn from him that this was the first of the European Union member state parliaments to engage with him on a relatively new area of work. There is a growing debate at European level - not before time some might say - on the role social indicators can play in Economic and Monetary Union.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings should be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or an entity by name or in such a way as to make him, her or it identifiable.

I invite Dr. Rigney to make his opening remarks.

Dr. Peter Rigney:

I welcome the opportunity to speak about the social and economic dimension of Economic and Monetary Union EMU. In the autumn of 2013 Europe is not in a particularly good space. Unemployment across the eurozone averages 12%, while GDP in the second quarter was 3% below its pre-crisis trend. Meanwhile, the ECB is limited in what it can do because its mandate emphasises fighting inflation, even though the spectre looming over Europe is deflation.

The recent statements by Mr. Barroso and Mr. Van Rompuy on opening up a social space in the process for EMU are a late conversion almost on a par with St. Paul's conversion on the road to Damascus. The only difference is that at least we knew St. Paul was sincere. There is a view that the attachment of a few social indicators to the European semester process is a mere fig leaf and that current policy is to do the minimum in order that society does not break down altogether within the eurozone, while leaving the Internal Market to develop as a free trade area.

The European system has changed since Ireland entered the bailout programme. The world we are entering is one of budget surveillance, the European semester and country-specific recommendations. Having failed to join the train when it left the platform because we were in the bailout programme, we will be hoisted into it as if by magic. Bailout programme countries are exempt from this process, but as soon as we exited the bailout programme we entered into this process. It is an intrusive process that would have been unimaginable in 2006, but it is infinitely preferable to the troika process. In this context, we welcome any move to broaden the debate beyond the purely economic to the social because they are intrinsically linked.

The debate on the social aspect of EMU will be undertaken partly in Dublin and partly in Brussels. We operate through the European Trade Union Confederation, ETUC. At its conference in Dublin last June the ETUC proposed a social compact for Europe that would set out a vision for the future in which fundamental social rights took priority over economic freedoms and that the European Union honour its treaty obligations to work for the improvement of living and working conditions of all its citizens. It is vital that economic governance no longer be regulated purely by economic criteria such as deficits and public debt. Prioritising these issues over all others has sparked the increase in poverty and inequality and furthered the erosion of public services, social protection and social relations. In reality, economic and social factors are inseparably linked. Social indicators are essential points of reference if we wish Economic and Monetary Union to proceed in a coherent and socially positive way. The major problem, however, is that while these social indicators are a useful tool, they remain mere indicators. They have no teeth and lack the power to change the direction of economic policies. It is imperative that these social indicators carry weight in the development of economic policy.

We are particularly concerned about social dumping and how some employers exploit cross-border workers. I recently attended a meeting in the European Parliament on this issue and it seems that, owing to the actions of a small number of employers, Ireland is gaining an unsavoury reputation for sharp practice in the application of employment legislation. The core of our problem is that we have an evolving eurozone economy with a Central Bank observing the narrow mandate of price stability at a time when Europe's main challenge is deflation. The independence of the European Central Bank is not counterbalanced by any other European institution. By contrast, under the Humphrey Hawkins Act of 1978, the US Federal Reserve is required to take on board the US Government's economic goals, together with achieving reasonable price stability. Without easing up on the 2% inflation target, it is difficult to see how the European economy can be reflated and without reflation there are grim prospects for Europe's 25 million unemployed. We need a more intensive debate at European level on a new mandate more akin to the mandate of the US Federal Reserve.

The unpleasant truth of the matter is that EMU has removed currency devaluation from the toolkit of economic management. In the absence of this tool, the devaluation which occurs is internal, as we have witnessed to our cost in recent years. This imposes huge stresses on the fabric of society and these stresses are worsened by the policy straitjacket in which the ECB is placed. It is often said the generals are always prepared to fight the last war. In this case the ECB is mandated to fight the war of the 1970s and 1980s when the economy could have been better compared to that during the great depression of the 1920s and 1930s. The paradox is that the special priority given to price stability requires European integration to proceed at the expense of provisions and redistributive functions in member states. Welfare systems are a national competence and likely to remain so because, for example, the Scandinavians will never cede control of their welfare system to Brussels in the current circumstances.

Compounding the dilemma is that the eurozone is about to embark on its most ambitious phase of economic integration at a time when support among EU citizens for the European project is at its lowest. The citizens of creditor and debtor countries are up in arms for different reasons. The True Finns, the Danish People's Party and Alternative Für Deutschland are manifestations of "not another cent" Euroscepticism in creditor countries. Congress believes the opening of a genuine dialogue on the economic aspects of EMU is to be welcomed, provided it is dialogue to an end, not for its own sake. A genuine social dialogue might help to revive the tarnished image of Europe among its citizens.

Dara Murphy (Cork North Central, Fine Gael)
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We will take all of the delegates together and then allow members to ask questions collectively, if that is agreeable.

Mr. John Farrell:

On behalf of the Irish National Organisation of the Unemployed, INOU, I thank the committee for this invitation. I very much welcome the opportunity to make a presentation on the social dimension of the economic and monetary union, EMU. As Ireland prepares for the troika to leave, it is increasingly clear that austerity is not leaving with them. INOU is keenly aware that addressing the unemployment crisis in a smart, sustainable and inclusive manner will not be feasible unless alternative policies are developed and pursued. This is a challenge not only at national level but also at European level. The emphasis on strengthening the EMU's economic governance and multilateral surveillance has created a limited policy context in which social issues can be appropriately addressed. The focus on tight fiscal controls is also throwing up economic challenges, for example the implications of dangerously low levels of investment in Ireland.

At an individual level, economic and social issues are intertwined. A critical question facing unemployed people is whether they have a realistic prospect of finding sustainable employment. Unemployed people face the prospect of sanctions if they fail to take up the activation options presented to them. The current scale of job creation is insufficient to give many of those who are now unemployed any meaningful options. This is worsened by the fact that many unemployed people do not hear about employment options as many jobs are not advertised. When jobs are advertised some employers can be reluctant to recruit people who are long-term unemployed. These issues are not only personal but local, national and European, and addressing them at all these levels is critical. How the perceptions of unemployed people and jobless households are articulated, the language used in public discourse, the policies devised and how they are implemented on the ground all influence potential outcomes and, in particular, whether they are equitable and inclusive.

As a troika country Ireland was not subject to the full Europe 2020 process. As the troika leaves, this process and its targets will become more pertinent. Even with the revised and less ambitious poverty targets, introduced in light of the impact of austerity, Ireland is moving in the wrong direction. According to the Survey on Income and Living Conditions 2011 consistent poverty had increased to 6.9% and for unemployed people this figure is considerably higher at 16.5%. It is important that these targets are not just aspirational but are given real effect and are pursued with the urgency afforded to the economic and fiscal targets. One potential way to give effect at a national level is to place inequality-proofing and poverty-proofing on a legislative basis.

On the educational target, Ireland is moving in the right direction, but, as Ireland's structural unemployment problem indicates, we have a long way to go before addressing the challenges facing disadvantaged young people distant from the labour market. An equally difficult challenge is the one facing older long-term unemployed people whose skill set does not match up with current or emerging job opportunities. Welcome and essential as the youth guarantee is, in Ireland 87% of people who are long-term unemployed are aged over 25 and specific measures are required to address the issues facing older unemployed people, including discrimination.

While welcoming the proposed increased focus on social issues within the economic and fiscal monitoring procedures in place in Europe, INOU is conscious of the challenge facing Europe. For example, when the tight control envisaged under the macroeconomic imbalances procedure, MIP, are likely to prevent appropriate levels of social and economic investment to really tackle structural unemployment and those at risk of poverty and social exclusion. In seeking to strengthen policy co-ordination will an economic focus invariably dominate a social one or will the learning drawn from the key employment and social indicators scoreboard be used to address the underlying structural issues which give rise to long-term unemployment, poverty and social exclusion?

Without a strong focus on equality and policy and system design that strives to meet the needs of people living and working in Europe, there is a real danger that activation measures will fail unemployed people and others distant from the labour market. It is also striking that Europe-wide progress on social policy will be assessed through, for example, the exchange of best practice through the open method of co-ordination, OMC, which is very different from the more enforceable and potentially draconian measures envisaged on the economic and fiscal policy side.

A strong focus on active inclusion will be integral to developing a smart, sustainable and inclusive Europe; developing and deepening social cohesion within and across Europe; and realising the full potential of the social investment package, SIP. Europe has defined active inclusion as: "enabling every citizen, notably the most disadvantaged, to fully participate in society, including having a job." There are three interlocking aspects to active inclusion: adequate income supports; inclusive labour markets; and access to quality services. Access to adequate income supports and quality services are critical to addressing poverty and social exclusion. They are also critical in supporting people who become unemployed to manage their unemployment and access an appropriate response.

INOU is very concerned that the increasing focus on conditionality within and across Europe is undermining social protection supports and that elements within SIP that stress prevention rather than cure by reducing the need for benefits will leave an increasing number of people managing the personally unsustainable and impoverishing cycle of welfare and low paid precarious work. Such a development will undermine solidarity at all levels of European society. It also raises serious issues for labour market mobility and begs the question whether Europe is here for its people and the development of European society, or sees its people as an input into its economic development.

Welcome as financial instruments such as the European Social Fund are, their potential is limited by co-financing matching requirements at a time of tighter EU fiscal rules. The scale of the interventions required to address social issues, including structural issues such as long-term unemployment, requires increased national investment. What appears more likely is a redesign of existing measures to meet particular needs with limited resources.

It is critically important that any developments across Europe to strengthen the social dimension of the EU's focus and organisation explicitly include people who are living with and seeking to address unemployment and other forms of inequality and social exclusion. The vision for growth within Europe 2020 is for growth that is smart, sustainable and inclusive. To develop and implement policies that underpin this vision, it is not only critical but smart to include the people who are often the objectives of policy developments. The active participation of people living and working in Europe is critical to improving social cohesion and the creation of a Europe that is seen as meaningful to the lives of its inhabitants and citizens.

Community and voluntary sector organisations, CVSOs and NGOs as social partners have an important role to play in social dialogue and in the articulation and development of inclusive policies and their implementation. CVSOs and NGOs, like the traditional social partners, contribute to the roll-out, review and development of improved policy responses and good practice. A key element of good practice is engaging with people who are unemployed and socially or economically excluded and drawing on their lived experience to develop better and more appropriate responses. An integral part of such work is the provision of good quality information that facilitates people to make informed choices, and choice must be at the heart of activation and other policies.

The communiqué notes: "A well-functioning monetary union requires flexible markets and appropriate institutions to address the social situation and provide adequate national safety nets." It also requires that social policy be integral to European policy in the way economic and fiscal policy is. It needs to strive to have at the heart of its policy development a strong and demonstrable commitment to equality and inclusion.

Dara Murphy (Cork North Central, Fine Gael)
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I thank Mr. Farrell. I should have mentioned earlier that I have received apologies from the Chairman, Deputy Hannigan, Deputies Crowe and O'Reilly and Senator Kathryn Reilly.

Timmy Dooley (Clare, Fianna Fail)
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I thought there had been a coup.

Dara Murphy (Cork North Central, Fine Gael)
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There might be yet. I apologise for that interruption.

Dr. Seán Healy:

Social Justice Ireland welcomes the opportunity to address the committee on the social dimension of EMU, which is crucial to the future of the EU and whether it can survive. Most people would be positive about its survival but, as noted earlier, there is a growing and strengthening resistance to much of what is going on. I will step back and take a longer view to put this question into perspective. EMU has been on the agenda a long time. There have been three different understandings of how it could be delivered. The first saw EMU as following from political union. The second saw political union as following from EMU.

The result is that we have a third approach which basically sees economic and monetary union being achieved through a series of procedural governance methodologies and a recalibration of social models to the point where the president of the European Central Bank could say last year that the European social model is dead. He is still in office, which I find very interesting. I do not think any government has supported that view.

The Maastricht Treaty, when it was implemented, led to an imbalance in the institutional structure for economic and monetary union. In the 1990s and the 2000s, these imbalances were corrected in a number of ways. All across Europe we saw the development of social pacts in member states. In Ireland, that took the form of the social partnership process. A lot of strategies were put in place at a European level to deal with the social dimension. We saw the development of the European social dialogue, the European employment strategy, the Lisbon strategy, the open method of co-ordination in the fields of pensions, health and a variety of other areas. In a way then, economic and monetary union had a substantial social dimension to it, even if it was weak, contradictory and, in many cases, fragile. However, in the wake of the financial crisis of 2008 and the subsequent euro crisis, this social dimension has been steadily eroded. Some would argue that it was being eroded from 2004 onwards but that is a debatable point. The open methods of co-ordination, for example, which were used in a variety of different ways were gradually voided of any substance. The European social dialogue was no longer fed and the social goals of the Lisbon strategy were neglected. In fact, the strategy was eventually split in two and the social aspects put to one side. Few European legislative initiatives were taken in the social policy field.

The new approach is already putting more pressure on industrial relations, for example, in terms of wages and decentralisation. It is putting pressure on the welfare state, for example, on issues like labour market policy, pensions, welfare rates and so forth. Member states have put major programmes in place to reduce public expenditure and to introduce structural reforms. Austerity has become the order of the day. However, the austerity approach is based on an inaccurate analysis of what actually happened in 2007/2008. The popular understanding of what happened is very well articulated by Angela Merkel. She suggested that the causes of the crisis were twofold - catastrophic profligate drift in public finances and excessive national debt built up over many years. The argument basically was that because countries had allowed huge drifts in their public finances, had borrowed enormously, way beyond their means and had allowed their national debt to run to dangerous levels, austerity was necessary. That led to reductions in social expenditure and social services and to the financial sector being fully repaid for the loans and so on. Banking debt became sovereign debt and increased supervision of public finances became the order of the day. Sanctions were put in place for countries which missed their fiscal targets. The fiscal compact, the two-pack and the six-pack were put into place, the terms of which will be the order of the day here once we exit the bailout. The ongoing dominance of the financial sector was one of the responses to the crisis.

However, we have a question. Was the initial analysis of the cause of the crisis valid? Was it accurate? Did Ireland, for example, borrow way in excess of what it should have been borrowing in the decade up to 2007? In actual fact, Ireland ran a budget surplus every single year, bar one, in the ten years up to 2007. It ran a deficit in 2002. It is not true to say that Ireland had allowed a catastrophic profligate drift in its public finances. The second question is whether we allowed excessive national debt to build up over many years. In 2007 our debt to GDP ratio was one of the lowest in the world. I would suggest, therefore, that what we are looking at here is a misunderstanding of the problem. The causes being addressed are not the causes of the problem so the solution being applied is addressing the wrong issue. What actually happened was that the financial industry, including banks and bondholders, had run riot. They had gambled to an extraordinary degree and certainly we had a degree of responsibility as a country because we did not regulate the industry properly. However, we were not pumping in the money or driving it. Certainly, at Government level, Ireland did not engage in any of the activities to which Ms Merkel referred. An appropriate response would have been proper regulation, a financial transactions tax, the elimination of tax havens, a tackling of financial fraud, the separation of commercial and investment banking and a variety of other things.

The problem is that at European level, we have been focusing on tackling the wrong cause. As a result, we have structural unemployment, rising poverty levels, sustained child poverty, ongoing adult literacy challenges, high net emigration, lengthening social housing waiting lists and declining social infrastructure. In fact, the latter is being eroded. We would suggest that, in terms of the social dimension of what is happening, this is a road to nowhere. The process of developing economic and monetary union is producing a one-sided and ultimately unviable system. The social component is being undermined. An austerity approach is being imposed which insists that, for example, the cost of health care and pension systems should be reduced; that wage formation systems should be placed within a competitive framework with little respect for those on low incomes and the working poor; that social benefits systems create disincentives to labour market participation and so must be reduced, as if, in some way, reducing welfare rates creates jobs, which does not happen; and that labour costs must be reduced. There may be some structural reforms required in each of those areas but to basically argue that this should be done to get our house in order because these issues were the cause of the crisis is simply to misunderstand the reality and to put an incorrect solution in place. This approach has little or no interest in how social models are intended to reduce inequality and to supply assistance and protection nor does it acknowledge how social models could contribute to the operation of a regulated monetary economy. That is why this is a critical discussion. This is not just about putting social indicators into place. It is about making the social dimension a central component of the European project. We should be developing economic and monetary union with this social dimension at its core. We would argue that until these issues are adequately addressed, economic and monetary union will continue to have a corrosive impact on social services, social provision and the social infrastructure that underpins much activity in our societies. If economic and monetary union is to have a genuinely supportive social component, these are the issues that must be addressed and the current dominant negative trends must be reversed.

In our submission to the committee, we have spelled out in some detail, a five-pillar framework that we believe should be at the core of European development. Economic and monetary development is part of that, but so too is social development. The five pillars need to be addressed simultaneously and not in a linear fashion. We need macroeconomic stability and a just taxation system. We need social protection and the social infrastructure to be strengthened rather than weakened. We need real, effective governance, particularly in terms of issues like policy analysis and so forth. Finally, we need sustainability to be put at the core of the policy-making process. Those are the five dimensions that need to be put in place. When making proposals, suggestions, submissions and so forth to the Commission and the Council about the social dimension of economic and monetary union, these five elements need to be knitted together into a coherent tapestry and all five need to be addressed simultaneously and in solidarity.

Dara Murphy (Cork North Central, Fine Gael)
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I thank the witnesses for their opening presentations.

Timmy Dooley (Clare, Fianna Fail)
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I welcome the three delegations and thank them for the papers they have presented. I agree with Dr. Rigney that the social dimension to monetary union appears to be an afterthought. In the past two years when we faced crises, it was all about the markets and stabilising the euro rather than asking about their impact on society and people. I am not foolish enough to think the issue can be resolved in isolation, but it would have been nice in some of the communiqués to acknowledge the people impacted on by these monetary problems. However, it seems it is all about rectifying the markets to allow them to do what they best do, which is to follow greed and generate profits for some people, while the citizens are just minions.

There is a challenge ahead to forge the social agenda in the minds of those who are dictating the state of play. How do the delegations see their organisations interfacing to a greater extent in trying to ensure the voices of those most affected are taken into account? Some of the labour activation measures in place are ineffective. With such a large number unemployed, how can we put in place labour activation measures to ensure people do not go off at the deep end? Many of those who find themselves outside the labour net for eight to 12 months suffer depression and find it very hard to get back into the workplace.

Bernard Durkan (Kildare North, Fine Gael)
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I thank the delegations for giving us the benefit of their views on this subject. I agree with many of their views, but, equally, I strongly disagree with many of them, as Fr. Healy will attest from past experience.

When the economy collapsed, we had to start somewhere. Putting the house in order was one of the things that needed to be done. This is no longer a closed economy, protected by tariffs. We have to trade and to trade in the market, we had to put the basic fundamentals in order. From 2002, I was raising questions in this House as to whether the economic fundamentals were in order. They were not. One Minister famously replied to the effect that they were not. We refused, however, as a nation to accept reality. As long as everything appeared to be going well, we went for it. Unfortunately, we reaped the benefits of that approach. Unfortunately, too, those less privileged in society are the ones who pay most in these situations. When economic crises occur, it is the poor, the less well-off and those at the bottom of the social agenda who pay the highest price. That is in the nature of things. We do not have the resources to protect them at this time.

Today the Minister for Public Expenditure and Reform informed me at Question Time that he was €1 billion below the expenditure figue by the end of October, despite having fewer people working in the public sector. This did not come without sacrifice but at great cost to the people and it is to be hoped the economy will reap the whirlwind of benefits. It was our inability to take corrective measures in time which brought us to where we were several years ago. We got there by ridiculousness and not noticing the indicators. As a result, many of the people have suffered.

I agree with the points made by the Irish National Organisation of the Unemployed, but how we deal with them is where we differ. I am one of those with a strong social conscience. It grieves many of us greatly to find ourselves where we are. It is not a question of ignoring people’s concerns, the fact that they have been under severe stress and are in debt. It is a fact of life about which we can do very little.

I have had many of these conversations with Fr. Healy duirng the years and neither of us has changed. I disagree with his analysis because it flies in the face of what I suggested at the beginning was the cause of our problem - refusing to accept reality and take action. Action taken at an earlier stage would have made a huge difference to the extent to which the people have had to suffer what is now called austerity. It is the wrong name for it. It should be called good housekeeping, with very few resources. A Minister said in 2007 that there was too much money in the country and that the then Government did not need all of the money available. Why? It was coming from the construction sector, with its massive inflation rate and house prices increasing by 500% in seven years. That is what Angela Merkel has been talking about. The market, regardless of whether one likes it, takes cognisance of the stability of the economy. As we do not have control over is, unfortunately, we are vulnerable. I agree with Fr. Healy on the issue of regulation. However, regulation after the event is no good. People talk about bondholders and foreign banks, but this is about money borrowed by someone in this country from foreign banks who presumed there would be no need to pay it back. That is not done. Again, however, the ones who have paid the price are the unfortunate individuals at the bottom of the social scale, families and poorer people.

I have no problem with the financial transaction tax. Maybe Dr. Healy and I agree more than ever before. It could happen. The financial transaction tax must be accepted and applied by everybody. It is no good one country doing it. Financial services in this country, and all that goes with it, would be gone in the morning if we applied it alone. I understand the counter-argument on that.

I worry a little about the elimination of tax havens because in recent times a few people who have visited this country have referred to tax havens in this country. This may not be what Dr. Healy is referring to, but they have criticised the way we do things suggesting we operate tax havens here, but nothing could be further from the truth. It has been very damaging to this country's reputation abroad. Some companies which are not manufacturing or making a profit in this country reroute their profits through this and other European countries, and have been doing that for years with encouragement.

The need to tackle financial fraud goes without saying. I am shocking myself with the extent to which I agree with Dr. Healy, and I know I am shocking him. We do not have to go into all that. We accept it all. On the separation of commercial and investment banking, the two are a little interlinked and interdependent and one cannot always do the one. The length of social housing waiting lists is very dear to my heart. Dr. Healy will remember 15 years ago across a board room table I indicated to him that this would become the most important issue in this country in the future. I do not know if he agreed with me at the time.

Dr. Seán Healy:

I did.

Bernard Durkan (Kildare North, Fine Gael)
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There was no problem then but there is now. Every decision was to move away from direct provision of social housing and we got what we have. We have an appalling situation where people are at this moment crying because they do not know if they will be in a house tomorrow or not, people with families large and small, unemployed people who are entirely dependent on support from the Department of Social Protection because there are no houses other than the ones from the private rented sector. It is an appalling situation about which we should be duly ashamed.

Dr. Seán Healy:

Deputy Dooley asked what we can do about this as political organisations, and that must be addressed. My organisation conducted the first ever study on the impact of austerity measures on the five programme countries at risk, Greece, Portugal, Ireland, Italy and Spain. That was published in February. We are completing an updated version which includes Cyprus and Romania because we wanted to take in a country that was not in a good space but was not in the traditional western European social model. The same kind of approach was used in all the countries in pushing austerity. There were some differences, for example although Italy has a substantially higher total tax take than Ireland, its adjustments were accepted and involved a €2 increase in taxation for every €1 in cuts. That was decided by the Italian Government and accepted by the troika, the bottom line being that it had to reduce its borrowing each year.

We have maintained this position all along. We have met the troika on most of its visits here over the last three years and they have constantly told us they do not decide what the proportional base should be but that they insist only that the overall target should be reached. Speaking at our conference on Tuesday, the leader of the troika in Ireland over recent years, Dr. Istvan Szekely from the European Commission, made that point. That is in the publication. There is an issue there. We have seen huge increases in poverty and huge impacts in unemployment and social services being eroded. A very serious set of issues must be addressed in Ireland and across other European countries. We continue to analyse that.

We are strongly of the view that without investment there will be no jobs, without jobs there will be no recovery, and without recovery we will be stuck in austerity, so investment is critical. We must do this investment in a different way from just borrowing money as a State because we are already maxed out. My organisation has produced a policy briefing on how this could be done with a special purpose vehicle which the Government is using and has used in other contexts over the years. The point is to generate an additional €7 billion over three years to do the kind of investment the Government is talking about, but over a much longer term.

We found, in discussions with the Department of Finance, that the ECB is setting rules that try to block us from doing this. We have to pay back the money to the ECB and that is fine. Our proposal would have created approximately 65,000 jobs. Many of those people would come off the live register and would save the Government social welfare expenditure. Those people would pay tax, increasing Government revenue. We calculated the total benefit would be approximately €2.9 billion. For some reason the ECB has a rule that says we could not use that money to pay off that debt. With due respect, where is the social dimension of EMU with that totally arbitrary rule? That is the information we get from the leadership of the Department of Finance. It is a simple example of the problem we face.

I could say much about Deputy Durkan's comments, but I will not. I am happy he supports a financial transactions tax. We should be prepared to go with it if ten or 12 countries, particularly the bigger ones, go with it, and they are prepared to do so. We half agree on that. I want to address this analogy of us as a prudent household. Let us take a normal household and examine what it would do to be prudent. They pay their bills every year. They have only small debts and would be well able to pay them off over a relatively short period of time. The Irish Government did that up to 2007. It paid its way and had a budget surplus in all but one of the previous ten years and kept its national debt to GDP ratio at one of the lowest levels in the world.

The local bank manager of this household did serious gambling in his own business and ran up big debt. His solution was to transfer that debt to the household and let them pay it. That is exactly what has happened, and so the analysis is wrong because it protects the banker who gambled. We argue that the burden should have been shared. We must take responsibility for having poor regulation, so it will cost us a certain amount, but the bankers and bondholders who were gambling should never have got all their money back.

That is the fundamental error. I agree with the Deputy-----

Bernard Durkan (Kildare North, Fine Gael)
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I asked for clarification.

Dara Murphy (Cork North Central, Fine Gael)
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Just one sentence.

Bernard Durkan (Kildare North, Fine Gael)
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Given that we had a €37 billion budget deficit accruing at the time, from where were we going to get the money? Who would have lent to us?

Dara Murphy (Cork North Central, Fine Gael)
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That is the end of it.

Dr. Seán Healy:

I will answer the question, no problem.

Dara Murphy (Cork North Central, Fine Gael)
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I also want to bring in the other delegates.

Dr. Seán Healy:

My point is most of this €37 billion went to paying back the banks; the Deputy is making my point for me in that regard. We should not be paying off gamblers and people who were flying very close to the wind - if they were not already beyond it - who had gambled recklessly and lost. If goes went to Paddy Power to be paid after one's horse has come last, one will be laughed out of court, but that is what the banks did. They gambled and lost but got all of their money back and the entire debt has been put on citizens.

We must ensure the social dimension is central to Economic and Monetary Union and to do this, we need a framework to lock it in. If it is not locked in, it can be drained away. I was trying to outline this had been happening to the social dimension since the middle of the previous decade.

Mr. John Farrell:

I echo Dr. Healy's comments and he is absolutely right. A common theme running through the three presentations is how integral social policy should be to the European project. Deputy Timmy Dooley mentioned jobs, which are at the heart of this issue. A range of services and supports can be put in place and it is vital that they are, but they must lead to work for people. That is key. Investment in job creation at European level must be a priority; nationally it will also be very important. There is a need for quality in the training, education and range of services required to support people in getting back to work. Supporting those in low paid work and precarious employment is also key. We must ensure decent levels of income support are available for people when they are unemployed. These are the three interlocking areas we see as very important.

Deputy Timmy Dooley asked how we might go about strengthening the social dialogue or hearing from unemployed persons. I will outline briefly some of the work we have done on this issue. We have arranged a series of meetings with some of our members who are short-term and long-term unemployed, some whom go to local branch social welfare offices and others to local social welfare offices and the new Intreo service offices. We have gone directly to the social welfare and Intreo offices to hear from people about their experiences. I am glad to state we will meet senior departmental officials to speak about the experiences of unemployed persons. This model has worked very well and we would like to develop it further and see it replicated in the case of smaller community-based organisations. Community infrastructure is vital, as is the social infrastructure.

Deputy Timmy Dooley also asked what happened when people lost contact and connection with the world of work and its social aspect. Investment in a range of clubs, sports organisations and communities at a range of levels is vital to ensure people have places to go and others to talk to. Good practices have been developed by local employment services; for example, each week people volunteer to speak about the jobs they have obtained and the training and education courses they have completed. People are a very useful resource for each other. They keep coming back to celebrate the successes of those who leave, who are all too few in the current crisis. They are also a great help to each other in informing each other about courses. This can be replicated across the board. With regard to wider social dialogue, the social inclusion forum hears directly from people who experience disadvantage. This process could be very useful and needs to be effectively resourced.

We receive a number of requests from various media outlets with regard to people's individual experiences or comments on various aspects of being unemployed. It never ceases to surprise me that the biggest response is always on issues such as lack of sleep which are mental health issues which arise from long-term unemployment. It is vital that we tackle them. Keeping people connected and networked to potential jobs, training, education, community groups, social clubs and sports organisation is key. Employment services must have a job at the end and involve quality training and education courses.

Dr. Peter Rigney:

I came here to speak about issues at a European level and I will not deal with issues of national politics.

When the idea of reattaching the social dimension to Economic and Monetary Union was launched in October, it was done so in Brussels with great fanfare at a meeting attended by Mr. Barroso, Mr. von Rompuy and Mr. Andor. I also attended. According to my notes, Mr. Barroso stated the social dimension was not an add-on but an integral part and that citizens must see the benefits of the European project, the implication being that since the storm broke an increasing number of citizens had ceased to see the benefits of the European project and seemed disposed to vote for parties in 2014 which were outside the traditional club of the European Parliament such as the EPP, the socialists and democrats and ALDE. Perhaps it is the cynic in me, but I got the impression tht this might not have happened if the National Front had obtained fewer percentage points in the canton elections in France, but we are where we are and must work with it.

Looking to the future at a European level, my view is that now we have emerged from the bailout programme, we must start rebuilding our reputation and prevent our reputation from falling in other areas. This is important. A debate needs to start on the role of the ECB, which is a big mountain to climb because it is an article of faith in Germany. It is the Boston and Berlin issue put another way; the ECB needs to become more like the Federal Reserve and act as a lender of last resort. It needs to stop enjoying the privilege it has. It is said fear of inflation has been built into German DNA since the time it cost 1 million Deutschmark to buy a loaf of bread after which the rise of Hitler happened, but it is not quite that simple. That happened in 1923 and it took another ten years for Hitler to come to power. What brought him to power was the crash and the stagnation afterwards.

A very interesting seminar was held in Brussels in mid-October on the creation of a European system to pay part of, or the whole of, unemployment benefit. Commissioner Andor engaged a German foundation to run the numbers and it found that if this had been done in the past ten years, Germany, in particular, would have been neither a net contributor nor a net receiver. In other words, it would be contributing a lot now but would have received a lot earlier. Somebody stated it would require a fundamental treaty change and when I hear that phrase, I get a headache. It might be possible to do something along these lines in a reinsurance model.

The disappointing thing for all the young people who have left Ireland over the past five years is that they have actually deliberately not chosen the role of citizenship. The countries to which they tend to go are those that require a visa, where there is a lower platform of rights, such as Australia, Canada and the US, in that order. There are 155,000 vacancies for apprentices in Bavaria at the moment. That is a region that is Catholic and governed by a centre-right political party, so there should be a natural fit with us, but people would prefer to go to Sydney or Canberra. That is very disappointing for the advocates of European union because, when the first crisis happened, young Irish people tended to vote with their feet and say "No, thank you. I will go elsewhere." By the way, young Spanish people tend to go to Argentina and young Portuguese tend to take their chances with the oil boom in Angola. That is an example of people voting with their feet.

This is about the future. It is about where we go from here. How will this committee react in a year when we get a list of country-specific recommendations? For example, Sweden has been asked that the lower rate of VAT in the catering sector be reviewed to see if it produces anything. Does that sound familiar to anybody? The CSRs for Poland include a suggestion that, as it has a lot of young people on a succession of short-term contracts, this seems to be a treadmill rather than a ladder. How do we deal with that? We cannot make progress on all fronts at the same time, so the bet we will be putting down will be the debate on the privileged role of the European Central Bank and the European institutions and the debate about the privileged role of fighting inflation when the spectre that haunts us is one of deflation.

Dara Murphy (Cork North Central, Fine Gael)
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I will now bring in my other two colleagues, but when wrapping up I would like you to make some comment about the indicators that the Commission has suggested. The Commission wants a fairly narrow group of indicators in order to make analysis easier. These include the unemployment level as measured by the NEET rate, which is the number of people not in education, employment or training, the real growth in disposable income of households, the at-risk-of-poverty rate of the working-age population, and a broader inequality measurement using the 80:20 ratio. I would like the witnesses to make some comment on that. I call on Deputy Kyne.

Seán Kyne (Galway West, Fine Gael)
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I welcome the three speakers and I thank them for their presentation. There is much in them with which many of us would agree. With all the talk about different political ideologies, I have yet to meet any politician who likes high unemployment or who wants to see emigration or youth unemployment. The question is how to find a solution across the differences of opinion among the political parties.

I agree with Deputy Durkan about the word "austerity". To me, austerity is an incorrect term to use. As far as I can see, it is about balancing the books to make sure that we make ends meet. When we were outside the markets as a nation until recently and borrowing €1 billion a month to provide the services that we do provide, it was a question of balancing the books, not austerity. None the less, we have seen the effects that cutbacks have on our people and we are all as concerned as each other about the long-term effects of that. I agree with Mr. Farrell's point about the effects on people's mental health in respect of unemployment.

Dr. Rigney mentioned the "fig leaf" of the social indicators. Does he not agree that this will allow the Commission to better integrate unemployment and social concerns in policy formation? Does he believe the Commission is correct in stating that there should not be any trigger if we fail to meet these indicators? Should there be an automatic trigger or sanction on member states if these indicators are not met? Is he positive in any way about the potential of the youth guarantee across the region?

Dr. Healy spoke about the financial transaction tax, and I agree with Deputy Durkan on this. Unfortunately, we share a common space with the UK and London, and are greatly affected by any decisions there. If the British Government chose not to impose the financial transaction tax and we did so, it would be very difficult for our financial services sector. Perhaps he can comment on that. The OECD suggests that we have a very progressive tax regime. I imagine Dr. Healy does not agree with that, but it has come from a number of reports from the OECD and others. People often talk about wealth taxes and Dr. Healy mentioned this in his presentation as well. Does he accept the point about the mobility of the wealthy, who might leave the country? I know that President Hollande has not had a lot of success with the imposition of a tax on the wealthy. There is some concern about that, so perhaps Dr. Healy can comment on that as well.

Aideen Hayden (Labour)
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I thank all of the presenters for being here today. It is a very interesting and important subject and one that breaks some of the historical barriers with regard to what Europe is about and where Europe stands. We all know that there are different welfare systems within the European Union. On a basic level, we have the Scandinavian model to which Dr. Rigney referred. There is the more Anglo-based model, of which Ireland is a part, and then there is the social European model, which is a more family-based model of welfare. It is very important to recognise that there are significant differences in the way different European countries do business when dealing with issues such as welfare and unemployment. That is part of the reason this debate is so important.

I do not agree with Dr. Rigney's assertion that these indicators may be a useful tool but have no teeth. From my own personal experience at a European level, I have found that the difference is one of language. For example, a French person might say "J'insiste" and what he or she means is "I am asking you". There is a difference of language here. The fact that as European nations we are sitting around and talking about these indicators in itself has a moral persuasion which in European terms means an awful lot more than the same language when used on the floor of the House or Senate of the United States. That needs to be acknowledged.

I must agree with my colleagues on some of the points made, and I welcome the comment of Deputy Kyne on the OECD report, which has identified Ireland as a country that has, in spite of the daily rhetoric, hit better off people a lot more than it has hit poorer people. That needs to be acknowledged. In response to Dr. Rigney's comments on why Irish people do not choose Bavaria but go to Sydney, Alberta and so on, that is a lack of recognition of the history of Irish people and their patterns of emigration, which have absolutely nothing to do with the current crisis, and the pattern is also due to the fact that we never really got on top of learning languages. Like our nearest neighbours, that has prevented us from accessing some of the European opportunities.

I completely disagree with Dr. Seán Healy on the point that somewhere along the line, following what he called the 2008 crisis, we suddenly had reductions in social expenditure and social services. I am not talking simply in an Irish context, but in a Europe-wide context. It is important to take our heads out of Ireland alone and look more generally at what was actually happening on a global basis in 2007 and 2008. Globalisation was a significant factor in explaining why we arrived where we are today. I am sure the witnesses are all aware of the concept of asset-based welfare. The reality is that all countries, including Scandinavian countries, were looking at aging populations and increased costs of welfare provision and were moving towards asset-based welfare, which is the concept of enabling people, through the acquisition of assets, to look after themselves into their old age. I could cite a pension report in this country going back a few years - I cannot remember the exact date, although I am sure Dr. Rigney would know better than me - in which serious concerns were raised about that exact issue in Ireland: how are we going to fund the ageing population?

A similar debate took place all over the developed world. If we want to talk about the global crisis and why we ended up where we did, it is wrong to say that the cause of the 2008 crisis was entirely a profligate drift in public finances. It was the same drift in public finances, if the delegation does not mind my saying so, that happened on a global basis.

Dr. Seán Healy:

It was not my analysis. It was Angela Merkel's analysis. The Senator is right in saying that she was wrong.

Aideen Hayden (Labour)
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It happened on a global basis. It happened in Hong Kong and south east Asia. It was an emerging issue in countries such as Brazil and India, where governments encouraged people to engage in asset acquisition in order to fund the cost of welfare. That is the reality of the matter. I wish we had more of this type of debate on what happened in the Irish context, because it is a reality that needs to be accepted. Yes, it went wrong and crashed down around our heads. I have noticed that the Chairman is pointing at me because I have gotten a bit carried away. I shall focus my comments a bit more. It is important to recognise the global aspects of what we are talking about here and the need for a global response. If we are to go forward then we cannot go back to business as it was in 2008.

I seek the Chairman's indulgence to address two issues. The first is that raised by Dr. Seán Healy on social housing and the other is on the level of unemployment and so on. According to the OECD, even at the height of the Celtic tiger boom we had the second highest number of families with no member in employment of any developed country.

Bernard Durkan (Kildare North, Fine Gael)
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Hear, hear.

Aideen Hayden (Labour)
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That did not just happen in 2008. Structural issues in the Irish economy go way back.

The social housing waiting lists have lengthened since the 1980s, but that did not happen post-2008. There were serious structural issues here that were not addressed. I am aware of a number of Dr. Healy's positions over many years. We must stop being so parochial when we talk about Irish difficulties and see them for what they are in the context of the broader global environment.

Dara Murphy (Cork North Central, Fine Gael)
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I thank the Senator. This time I shall take the responses the other way around. Dr. Rigney may commence, particularly as some specific questions were addressed to him.

Dr. Peter Rigney:

Deputy Kyne referred to my use of the phrase "fig leaf". I explained it by saying that the grafting on of these indicators at the end of a process might not have happened had the Front National not done so well in an election. Only history will judge the Barroso Commission. I imagine that there are previous commissioners from both sides of the Strasbourg aisle who would have done a better job trying to bring the people of Europe with them in that difficult situation.

With regard to the existing indicators, I would prefer if they had the status of other indicators, but then they probably would not have got them through the Council. The chosen indicators seem to be a broad net. There cannot be too many or too few. Let us see what they produce and what the country-specific recommendations are.

I wish to make two points about the demographics of aging. First, we had a thing called the National Pensions Reserve Fund once upon a time which specifically dealt with the issue but it has, to quote the Bible, gone the way of all flesh, or the majority of it. Second, despite the falling birth rate we are still in a better position than most countries in Europe, in terms of our demographic structure, to be innovative in dealing with the matter.

Mr. John Farrell:

I wish to make a couple of points regarding Deputy Kyne's questions on the impact of social indicators and what failure may mean. The open method of co-ordination is very useful in trying to achieve best practice. Clearly, if social policy is going to be integral to the European project, then something stronger is required. That is something that might usefully be considered.

Without question, the youth guarantee is very welcome at a European level and, within that, at an Irish level. In an Irish context, one would like to see, as I am sure everybody would, the youth guarantee effectively resourced, particularly as people under 26 have been adversely affected for a number of years. What strikes me, in the context of social cohesion and social solidarity, is that an unemployed 24-year-old who does not live at home or have dependent children might receive €100 while a person who is 25, who is not part of the youth guarantee as it currently stands, will receive €144. Those people may well feel that social solidarity has been undermined.

I agree with Senator Hayden's remarks on the significant differences in social welfare regimes. One of the things we would like to see is ambitious European targets that are not about bringing standards or levels of social protection down. That should be key, not just in Ireland but right across Europe.

Dr. Seán Healy:

I wish to return to the Vice Chairman's initial question on indicators. The suggested range of indicators is far too narrow, as I said earlier. However, I shall deal with the questions first and return to the matter later.

First, I will deal with Deputy Kyne's queries. I feel that we should be prepared to go with the financial transaction tax if, as it appears, ten or 12 countries of substance are prepared to go with the tax. My response to another of his questions is "Yes, we do have a problem." We are part of the same area as the UK so there will be a certain consequence if we take on a financial transaction tax. I have a question, not just for the Deputy, but for the whole decision-making system and countries beyond Ireland. How do we propose to control the gambling instincts of the financial sector across Europe and the world? The financial transaction tax has at least some kind of mitigation or holding capacity. We need a mechanism. If the committee can come up with something better then I would be all in favour. The proposal seems to be one of the better things on the table at the moment.

The OECD does not believe - it is very important to pick up the nuance - and has never said that we have a progressive tax system. It has often said, and I agree with it, that we have a progressive income tax system. The fact is that the overall tax take and its base are not progressive. That is my basic point. The second issue, which is probably more important, relates to the overall tax take, not just income tax. I have not argued for a huge increase in income tax. I am saying that we have one of the lowest total tax takes no matter how it is measured. One can measure it as a percentage of GDP or GNP or use the new measure devised by the Irish Fiscal Advisory Council. It might solve the problem that Ireland always has in deciding whether to use GNP or GDP. Even using the new number, Ireland's level is more than €5 billion below what it would be if we were at the European average.

I am being fair when I say that there is room for work in the area. To have a decent social infrastructure we must support it, and not entirely through tax. It can be done with lots of combinations of private, public, community and voluntary engagements that are and will be required in the future. Therefore, we should take somewhere close to the European average in overall tax, as measured by the new figure. I would be prepared to go along with that decision.

I wish to say two things to Senator Hayden about her comments on the better-off having taken a greater proportion of the hit. The studies that revealed those findings omitted two things, which they acknowledged. First, there is the cumulative impact of changes outside the tax and welfare system, such as cuts in services. There has been an acknowledgement of same in the various studies by consultants such as Mr. Tim Callan, and the ESRI has shown this also. I have produced the rest of the study and the quotes that show that this is part of its acknowledgement that it did not measure the whole thing.

The second thing is more important in the longer term.

Some people have huge capacity to take hits, while others have very little. If someone is a millionaire and takes a 10% hit, that still leaves him or her with €900,000 and he or she will probably still able to survive. However, if someone is on €188 per week, he or she is already the best part of €20 below the poverty line and if he or she takes a 5% hit, it could push him or her over the edge. One is not comparing like with like in that context.

I am a little bemused by the lecture about the need to stop being parochial and realise there is globalisation and so on. As someone who has written books on the issue, I agree that we need to do it. To tell me that I have not done so is a bit much and I do not accept it. Last year I forwarded to the committee a copy of a book entitled, Does the European Social Model Have a Future, which looked at the five models, not three, across the European Union and which included a variety of contributions from academics across Europe, as well as our own views. In April we published the book What Would Real Recovery Look Like, a copy of which was also forwarded to the committee. In that publication we go back not just to the 1970s and 1080s but to the 1940s and 1950s. On some 80 pages we spell out exactly what happened across the world, using all of the best research available on financial issues, globalisation and a whole lot of other stuff-----

Aideen Hayden (Labour)
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On the international academic argument about whether there are three, five or seven models of the welfare state, there are three principal models.

Dr. Seán Healy:

No, there is a very simple-----

Aideen Hayden (Labour)
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There are three principal models.

Dara Murphy (Cork North Central, Fine Gael)
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We have a small issue with the clock. I want to hear Dr. Healy's comments on the indicators.

Dr. Seán Healy:

I agree on the asset-based assessment, as long as it is understood as developed by Amartya Sen and Martha Nussbaum in creating the capacity to maximise what people can produce, not that it is going to give them a small amount of money, which is the view of some.

I will omit the housing list because we could get into an unnecessary argument about it.

On the issue of indicators, as listed they are too narrow. A few years ago Amartya Sen and Joe Stiglitz, two Nobel laureates, were brought together by the noted radical President Sarkozy of France to produce a study - it is a masterpiece - of what needed to be measured. They identified four items not listed here, including an environmental measurement, the issue of sustainability in the environment which is critical, as is the issue of financial sustainability. Why is that so? The answer is because the first thing that is dropped when the situation gets really bad is the social dimension. The banks are protected, while services for people are cut. We need financial sustainability indicators. The social indicators, specifically well-being, are critically important. Much work has been done in this area, some of it by us. It has been published and we can make it available to the committee. Therefore, we need environmental sustainability, financial sustainability and well-being indicators. That was my basic argument. If we are to see Economic and Monetary Union progress and genuinely include, not just rhetorically, the social dimension, the indicators have to be across the five areas of macroeconomic stability, just taxation, social protection, governance and sustainability, and locked together. There must be no possibility of one being dropped in favour of another.

Dara Murphy (Cork North Central, Fine Gael)
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I thank the delegates. I fully agree with Dr. Peter Rigney in his comments on the ECB and the Federal Reserve and on broadening the role of the ECB. That said, I would not like to see us mirror the American social model because while its central bank has more power in that regard, it does not end up with a better system for its citizens. It has been a very interesting debate and an extremely broad topic to get into. I again thank the delegates for their time and attending. I look forward to meeting all of them again.