Oireachtas Joint and Select Committees
Thursday, 18 June 2015
Joint Oireachtas Committee on European Union Affairs
Country Specific Recommendations 2015 (Ireland): Discussion
Today we will have two sessions, the first with the noted economics lecturer from University College Cork, Mr. Seamus Coffey, who has previously appeared before the joint committee. He will talk to us about the EU country-specific recommendations 2015 for Ireland. He will be with us for about 25 minutes and at approximately 2 p.m. the Minister of State at the Department of Foreign Affairs and Trade, Deputy Dara Murphy, will attend to tell us about the Government's planned responses to the country specific recommendations. We will also ask him about the migration crisis in the Mediterranean and for his views on what is happening in Greece.
I welcome Mr. Coffey. As many will be aware, he has been before the committee on a number of occasions to help us on a range of economic matters concerning Ireland and the European Union. It is always good to see him back to get his perspective of the economic climate.
I remind members of the long-standing parliamentary practice to the effect that they should not make charges against, criticise or comment on 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 the evidence they give to the committee. 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 is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity either by name or in such a way as to make him, her or it identifiable.
I welcome our guests in the Visitors Gallery. As the meeting is being broadcast, it is very important that mobiles phones are switched off. They must not be left in silent mode, as even in that mode they interfere with the broadcasting of proceedings.
I would appreciate it if they could respect that request.
Mr. Seamus Coffey:
I thank the Chairman and the members for the opportunity to speak before them again. In terms of examining the issue of the country-specific recommendations, I will make some comments on where they come from and then focus briefly on some of the particulars with regard to Ireland before dealing with issues the members might want to raise.
Following Ireland's exit from the EU-IMF programme we have become more familiar with what is termed the EU semester. One criticism that might have been levied at the EU in the run up to the crisis, and particularly during the crisis, was that certain parties took their eye off the ball in regard to imbalances and risks that had built up in certain member states. It appears now that the EU has responded in the sense of overkill because as I am sure this committee is aware, a huge range of documents are now produced by the EU on an annual basis that examine issues across the entire spectrum of the economy for each of the 28 members. It starts in November with the annual growth survey, moves on to an alert mechanism report, followed by a macro-economic imbalance report and then the Commission staff working document that finally leads to the Commission's country-specific recommendations that were published a fortnight ago. It is a barrage of material and, in a sense, the EU has gone a bit too far because I do not know if anyone reads it in detail any more. There is simply too much material and by the time one gets to the detail, much of it has been lost in the noise, so to speak. We have gone from a position where the EU as a whole did not look at what was happening in individual countries and now it is looking at it in too great detail when perhaps it should focus on particular issues.
It does seem to be learning from that. Even though it is our second year in the process it has been going since 2011. If we look at Ireland, in the first year we got seven country-specific recommendations across a broad range of areas. This year we get four. The four are part of the set of seven so they have carried through but they have dropped three, and that is not simply because we have met them. The three that have been dropped relate to active labour market policies, issues relating to performance small and medium business financing, and issues relating to the costs of legal services in Ireland. In its report the Commission states that we have made some progress on the first two of those but limited or little progress on the last one regarding legal costs.
Those country-specific recommendations are not included this year. This year, we are down to four. One that appears regularly in regard to Ireland is looking at the public deficit. There is then the issue of the work intensity of households, and Ireland's standing as having a very high propensity of very low work intensity households. There are many households in which nobody is working. There are then issues relating to apparently high health care costs in Ireland, particularly in the area of pharmaceuticals, and also the way we fund our hospitals via block grant rather than through activity-based funding. Finally, there is the issue of addressing the carryover from last year in regard to mortgage arrears.
One issue with the country-specific recommendations is that, by and large, they are just concerns. Reading through them one can see they contain very few concrete proposals. Essentially, the Commission is highlighting these as problems and it leaves it up to the individual members to solve them. It identifies the problems and asks them to address them.
The only one that has a numerical target is the deficit where it requires a reduction in the structural deficit of 0.6 percentage points of GDP. In terms of our own documents - not only do we have a barrage of documents from the EU but we have Ireland's stability programme update, SPU, and our national reform programme update - if members read the stability programme update, as our fiscal council has done, they will see that the intention is that we will not meet that structural deficit reduction target in 2016 whereas the EU rules require us to reduce it by 0.6% of GDP. If members read the current targets in place they will see that the SPU published by the Department of Finance states that the intention next year is to reduce it by 0.3%, which is half the required target. However, when it comes to work intensity, health costs and mortgage arrears, no numerical targets are mentioned; they just list these as problems. The issues in regard to solving them are left at national level and the EU next year will say whether much, some or limited progress has been in regard to those targets.
Moving away from the deficit one, issues regarding very low work intensity have been highlighted for Ireland for a number of years. It comes from the SILC, survey of income and living conditions. In that survey, 23% of people are said to live in households with very low work intensity, essentially where there is no work taking place. That is a complete outlier in EU terms. It is the highest in the EU. The EU average is approximately 10% of people living in households with very low work intensity; we have 23%.
There are some doubts about the figures, and concerns have been raised that there may have been some measurement issues in that we are such an extreme outlier something else must have been going on. Figures from the quarterly national household survey put the number at 17%, which is the second highest in the EU. The Central Statistics Office, CSO, is examining these two figures and trying to decide what is the actual figure. Whatever the figure is, Ireland is quite high in this respect.
We must examine the reason our figure is so high. Is it something we need to fix, a structural problem or simply a demographic problem? One issue that stands out in the case of Ireland is the number of lone-parent households. The 2011 Census of Population showed there were approximately 1.7 million households in Ireland and of that number, 180,000 were lone-parent households. More than 10% of households in Ireland are headed by lone parents, which compares to approximately 5% across the EU. We have far more high-risk households, and for lone parents it is much more difficult to enter into employment given child care costs, issues relating to the supports available, and the possible loss of welfare benefits. One reason low-work intensity is higher can come down to demographics but do we want to change that? Do we want to force single parents into the workforce or are we happy to have them at home rearing their children? While the EU might raise this issue as a concern and for us to reduce the number, it is up to us to decide whether it is priority.
Regarding mortgage arrears, there is more probably more emphasis here to do something about that. The EU states that we should have a system in place that sets out what we are trying to do in this area, what represents a sustainable solution, how long should such provisions should last, and what can happen to people who cannot reach a sustainable solution. We still have a hodgepodge of solutions, including interest-only payments, arrears capitalisation, hybrid split mortgage or the possibility of participating in a mortgage-to-rent scheme, and there are very few repossessions taking place. The EU would like to see something happening in terms of defining what represents a sustainable solution. It states we should do this but that no progress has been made on it.
On the health area, the EU notes that we seem to have relatively high health care expenditure. Given that we have a relatively young population, our health care expenditure is towards the highest in the EU. It also has issues with the way we fund hospitals. We generally give them a block grant in that they are allocated their money for the year and they use that for their needs. That practice tends to disadvantage the more effective hospitals where more procedures are carried out. They will spend more money and by October or November they tend to run out of money, whereas hospitals in which fewer procedures are carried out can better balance and manage their block grants throughout the year. The EU is asking us why we do not fund hospitals on an activity-based system, whereby if a hospital does more in terms of providing more health care, it will get more funding. There is a change to move away from the block grant system to more activity-based systems.
There are also the long-running concerns about how much we spend on pharmaceuticals in Ireland. The prices for them appear to be higher here. We appear to have a greater level of expenditure. It is unclear why that is the case, whether it has to do with agreements relating to the large presence of multinationals in the pharmaceutical sector here or that we are such a small market we cannot get the price lower. It is an issue that has been raised time and again, with little of no progress has been made on it. Those are my brief comments on the process and some of the specifics in regard to Ireland.
Thank you, Mr. Coffey. It might be an idea for our committee to write to the other relevant committees that are referenced by the country-specific recommendations, CSRs, to bring to their attention the recommendations. I am not sure if the health committee, for example, debates the CSRs or gets a chance to question the Minister as to whether changes are being made. We might make a recommendation on foot of this discussion to write to the clerks of the relevant committees and ask them to table items for their agendas. We have a number of speakers offering, the first of whom is Deputy Bernard Durkan.
I apologise as I will have to leave the meeting fairly soon to attend another meeting but I will return after that. I welcome our guest speaker. He is right that there is always a danger that we would go from one extreme to the other, in other words, from having virtually no regulation to over-regulation. However, in our economic situation which is recovering I would warn that we could find ourselves in the same position once again whereby there would be a tendency to overlook the necessity for regulation and find ourselves in a difficult situation down the road.
I particularly draw attention to the period prior to the introduction of the European semester whereby there was a five- or seven-year period without adequate monitoring of the trends that were beginning to emerge. That was a big fault at the time, and I made this criticism previously. We waited until the end of the term before action was taken and it was then too late.
I consider the semester system to be much better in that it gives an opportunity for an annual review of progress. It is not rocket science to determine which way the economies of European Union member states are going.
We need to get more recognition for our own efforts in this country and for the efforts of the people of this country. For instance, we came from a really serious annual budget deficit of 15% or 17%. We reached a peak total debt of 125% of GDP, which has come down dramatically, and the budget deficit is ahead of projections. Our total indebtedness is coming down rapidly. There is a need for a recognition of the efforts made by those in this country by the rest of the European Union, because some countries have made those efforts while some have not, to my mind. As we are intrinsically interlinked with each other in our fortunes and our futures, economically, socially and politically, it is important that we encourage all other countries to follow what appears to be best practice in order to achieve the result that is required as quickly as possible.
My final point is about the workforce. I do not think lone parents or parents should be forced into the workforce. There should be a provision whereby one person in the household should at least have an opportunity to be at work, and the second person should also have such an opportunity if possible. The most important factor is that the second person should not be forced into the workforce by virtue of high mortgage repayments, which means that all he or she is doing is working for the repayment of the mortgage, perhaps to the detriment of his or her health.
I do not accept the notion that lone parents are reluctant to go to work. I have never had any experience of that. Like other colleagues, I have dealt with thousands of lone parents over the years, and I have never once seen a situation in which there was a reluctance to go to work. On the contrary, there was every indication that lone parents wished to go to work at the earliest possible opportunity. As soon as this was possible, either by means of child care or when their children were at school, they went into the workplace very quickly for reasons of their own satisfaction.
I think I am the victim of Deputy Durkan's excesses. I thank Mr. Coffey for his rapid-fire and impressive presentation. For the life of me I do not know why the legal services segment has been dropped and we are reduced to four. I am very happy that we are quite capable of dealing with the four that are highlighted. In fact, why would one want to drop the legal services issue in favour of a solution for the restructuring of the majority of mortgages in arrears? We have been doing that consistently. However, what we have not been doing is reducing the bloody cost of legal services. Mr. Coffey is an expert in the field and he may be able to tell me what kind of juggling is going on that has resulted in the reduction in the list from the original seven items to these four.
I absolutely agree with the concept that nobody should be confined to welfare or have to live a life on welfare. It is repugnant to my feelings about citizenship and humanity. The State should encourage everybody. Work needs to be valuable and the rewards for going to work need to be greater than those of being on welfare. However, the issue of the lone parent allowance has been raised. I do not know whether Mr. Coffey advocated it, or where this thinking originated. It may have come from Europe. We want to remove people out of poverty. However, in so far as this policy of adjusting the lone parent allowance is concerned, of the 30,000 locked into that lone parent allowance system, the vast majority of them will be happy with the adjustments and will gain from them. However, there is a core of 4,000, mainly women, who will potentially lose and suffer from the adjustments. While we are all in favour of getting people back to work and facilitating them - the majority of lone parents on this allowance, with the adjustments, are likely to earn quite substantially more than their allowance - why do we need a system that is structured in such a way that 4,000 people who are lone parents will suffer? If Europe and the Irish Government agree and we all agree that we want to take people out of poverty traps - it is well documented that lone parents and their children are the most vulnerable to poverty - then why would the Society of St. Vincent de Paul and The Irish Timesbe arguing against the adjustments that are taking place?
In conclusion, I have two brief questions. Is Mr. Coffey arguing that our Government, which has done a phenomenal job in creating jobs and in turning the country around, would be overstepping the mark in the next budget? Is Mr. Coffey arguing that we should be putting the windfall of the success of economic growth into paying off our debts? We would argue that the economy is lively enough to be able to spread some of the benefits to a wider audience. I will conclude on that point. Mr. Coffey's presentation is very interesting. I apologise that we are under pressure of time, as this topic merits a more in-depth debate.
On that point, Mr. Coffey will be aware that after the Second World War the United States reduced its debt-to-GDP ratio not by paying off debt but by increasing GDP. In 1991 Ireland had a debt to GDP ratio of 90%, and that went down to 35% a decade later, not because we were paying it off at a rapid rate but because we were growing at a rapid rate. I would be interested in Mr. Coffey's view as to whether we should rely on the current large growth rate of 3% to 4% per annum to reduce the debt-to-GDP ratio or we should be paying down the debt.
I thank Mr. Coffey for his presentation. He referred in his presentation to the cost of pharmaceutical products, which increased from €570 million a year in 2000 to €2 billion by 2010, a huge increase. No checks and balances seem to have been applied. Legislation on the use of generic drugs has been introduced and we are moving closer to the same usage ratio as in the UK. The consumer price index compares the prices of a basket of products with prices in nine other countries. Has enough been done in this regard? Is further work required?
I refer to the issue of health care costs. The health budget is approximately €13.2 billion, and about €3.26 billion is paid out to 2,600 organisations, including hospitals, those caring for people with disabilities and very small organisations. Are we getting value for money for that €3.26 billion, which is more than 25% of the budget in real terms? Is there a need for a more co-ordinated approach to the amalgamation of services in order to be more cost-effective?
Mr. Seamus Coffey:
I thank the members for those comments. I refer to Deputy Byrne's comments about the choices made in cutting the list from seven to four. No indication was given as to why those three items were dropped. Legal services was the matter on which the judges of the European Commission had made the least progress in 2014, yet that was the one they dropped. Legal services in Ireland cost up to €2 billion per annum. Costs in the Irish legal system are quite extensive when one considers the cost of solicitors, barristers and court cases. The costs appear to be relatively high. I agree that there could be greater benefits for the broader economy if that system were reformed. On the issue of mortgage arrears, sufficient progress has not been achieved, but some progress has been made and at least we see the problem and people want to solve it. In contrast, with the legal costs issue, there are large vested interests - those who benefit from these high costs - and it is unclear why this item was dropped.
On the question of what we should do with the benefits of economic growth and whether the extra money resulting should be used to pay off debt, as the Chair has mentioned, we are unlikely to pay down debt. It must be remembered that we are still running a deficit. We are experiencing economic growth. If we continue to spend more and cut taxes, it will not reduce our debt; it will increase it. We are just deciding to borrow more. The deficit this year will still be more than €5 billion, and even by next year, according to the current projections, it will not be much below that. The issue is not necessarily about reducing the debt. I do not think we will repay it. We will use growth to reduce the debt ratio. The issue is how to stop borrowing money. Our deficit opened up in 2008 and the current projections are that it will not be closed until 2019. That is a 12-year span in which we have borrowed money to run the country on a year-to-year basis. Our objective should be to reduce the debt. In the midst of the crisis, there were a lot of references to counter-cyclical policy. When the crash came the one thing the Government should have done was to spend more money and reduce taxes. Now we are going through a growth phase in which the economy is expanding. If we are to stick by the logic of counter-cyclical policy, this is when the Government should step back. We do not need to undermine the tax base or increase Government expenditure excessively. Changes should be made so that if wages are rising and inflation is present we should adjust income tax. If there is inflation, one should adjust welfare payments and public sector pay, but not excessively. I would argue that we should use the benefits of the growth to reduce the deficit that exists rather than reducing the debt. That will happen naturally. I think we should stop borrowing money.
The lone parent allowance is a complex issue, and when one makes changes there will always be losers. The allowance is a payment based on status. We have lots of payment based on status – disability, illness, and payments for those who are widowed, among others - but the lone parent allowance is a bit different in the sense that it is one of the few statuses that to a certain extent is under the control of the individual. One does not make one's self widowed, sick or disabled. There are issues in terms of the selection of people into the payment. Clearly, there will be losers in the change in terms of moving people across to work-related payments, but the overall system needs to be reformed, not just tinkering around the edges in terms of eligibility. I am in favour of payments for everybody and I feel that we should scrap the broad range of payments that exist and merge them into one payment. Then one would not have a debate about winners and losers.
On debt, which was raised by the Chairman, I do not think we will repay it. We will bring down the debt ratio through growth. The economy is growing at the moment and we should use the benefits of that to reduce the deficit rather than trying to push the EU rules to the extreme, as seems to be the case at the moment, to find how much we can cut tax and increase expenditure to the maximum. At the moment it does not look as though we will meet the EU budgetary rules, but we should try to meet them, bring our deficit down and put ourselves on a stable footing. We have undermined the tax base before and it looks as though we might do it again. The universal social charge is a very unpopular tax, but it is one of our best taxes because one cannot get out of it. If we take people out of the universal social charge and reduce it at the top, we would be pushing people back into income tax, and there is a broad range of ways of getting out of income tax, whether it is for wealthy people using particular schemes or through pension contributions. For those at the bottom of the income distribution, the effective rates are quite low. For this reason, I would favour holding on to the universal social charge and perhaps changing the name of it, as it seems to be such a high-profile issue, but I do not think we should undermine the tax base, given that we expanded it during the crisis. We should use the benefits of it as we go forward, and if it does bring in extra revenue we could provide extra services across the community.
On Senator Burke’s point on health care, I do not know why our pharmaceutical costs are so high. Reference was made to baskets across EU countries that we can use to price ourselves against, but one must remember we are also in the baskets for other countries that are far larger than us, so if the Irish price is one ninth of the price that is set in Germany, it suits the pharmaceutical companies that the price is higher in Ireland, and that can be the same for the UK, France and other countries. There might be some issues in terms of the smallness of the Irish market. If companies can get away with it they will push the price up as high as they can, because that will make one ninth of a difference in Germany, so they will not make much money in Ireland, but getting the price up by 11% or 12% in Germany is clearly a big issue. The question is how far we push it. Do we go to the companies and say we should not be charged such a high price on patent-protected products when the sector has 40,000 or 45,000 direct jobs and perhaps as many indirect jobs again, bringing a couple of billion euro into the country every year? We see the visibility of high prices for those products, but in the background there are huge inflows from the sector itself. It may be the case that there are some trade-offs going on there. It has never been proven but it has been suggested from time to time.
I thank Mr. Coffey for coming before the committee today and for answering those questions. He has given us very useful food for thought for our next session with the Minister. He is due to come before us in a couple of minutes to outline the Government’s proposed response to the country-specific recommendations, CSRs. I am sure the debate we have had in the past half hour will be useful for our meeting.
On behalf of the committee I welcome the Minister of State, Deputy Dara Murphy, back to the committee to brief us on a number of issues, not just the proposed response by the Government to the country-specific recommendations, but also to outline his views on where we are at the moment in regard to the Mediterranean crisis and also the Greek situation.
Gabhaim buíochas leis an gCathaoirleach agus le baill an choiste as ucht cuireadh a thabhairt dom freastal ar an gcruinniú seo. I welcome our guests from the diplomatic service who are here, and my colleagues in the Oireachtas. I am very happy to be here in advance of the General Affairs Council, which takes place next week. The General Affairs Council, in preparation for the European Council on Thursday and Friday of next week, will consider five issues: the European semester 2015, specifically the approval of the country-specific recommendations; the better regulation agenda; the situation in the Former Yugoslav Republic of Macedonia; and a new action plan on strategic communications to counter misinformation campaigns in the European Union’s eastern neighbourhood.
Preparations for the European Council will build on our discussions at the May General Affairs Council, during which we had an initial exchange on the annotated agenda. We also discussed in some detail at that meeting a follow-up to the special European Council of 23 April in relation to migration. Finally, there was a brief exchange about the forthcoming report by the five Presidents on improving economic governance in the euro area.
The committee has asked me to focus my statement today on a limited number of issues, namely Ireland’s country-specific recommendations, migration, EMU governance and, finally, the question of the UK’s relationship with the EU. All of these issues will be considered by the GAC in the context of preparations for the June European Council.
The other issues which will feature on the European Council's agenda are broadly as I outlined during our meeting last month. They include security challenges, covering the development of the Common Security and Defence Policy, CSDP; the review of the European security strategy and counter-terrorism; and also the broad topic of economic issues, including steps to progress the digital single market and VAT strategy.
With respect to our country specific recommendations, CSRs, and the European semester process, the June European Council will conclude semester 2015 by endorsing this year’s CSRs. With a period of prolonged weakness in the wider euro area representing what is probably the key risk to the Irish economic outlook, we all stand to benefit from a well-functioning European semester process that guides our collective polices in the right direction and supports the right mix of monetary, fiscal and structural policies. On 13 May the Commission presented its proposals for the 2015 CSRs. In the case of Ireland, there are four proposed CSRs. They cover continuing to restore balance to the public finances, including through the measures that will be reflected in the October budget; further improving the cost-effectiveness of health care spending in line with the Future Health reform programme adopted in 2012; continuing to improve the arrangements we have developed for addressing the risks of intergenerational transmission of poverty through so-called low work intensity households, including through strengthened child care provision; and completing the work under way to deal with the very difficult post-crisis legacy of non-performing loans in the financial sector. The proposed CSRs can be seen as reflecting continuity from last year's process, while building on the comprehensive country report already produced by the Commission at the end of February and consistent with the "no surprises" principle. They align well with policy directions that are already firmly established at national level through the Government.
It can be noted that Ireland remains fully on track to exit the excessive deficit procedure in the year ahead. Our stability programme update in April was forecasting a general Government balance of -2.3% in 2015 and -1.7% in 2016 below the required 3% deficit threshold. We should all welcome this. We have over-performed on deficit reduction every year to date and expect to see the deficit completely eliminated before 2019. Our debt-to-GDP ratio is also on a firm downward trajectory.
One of the most important lessons of the European semester process as it has evolved in recent years concerns the need for it to become more open and inclusive, including through more meaningful engagement by national parliaments and other key stakeholders. The process the committee has adopted today and at previous meetings and which is ongoing at the finance committee can continue to be improved. We continue to aim for a better balance, at both national and EU level, between more effective economic governance arrangements, on the one hand, and increased democratic participation and legitimacy, on the other. That is why the Government produced its new spring economic statement at the end of April, setting out a clear framework within which all stakeholders could contribute to the political dialogue that would inform further decisions to be taken in the October budget, including having regard to Ireland’s CSRs. This will be a key focus of the national economic dialogue to be hosted by the Minister for Finance, Deputy Michael Noonan, and the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, in Dublin Castle on 16 and 17 July.
Returning to developments at EU level, proposals to strengthen economic governance in the euro area will be brought forward in a report to be published in the coming days by European Commission President Jean-Claude Juncker, euro summit president Donald Tusk, European Central Bank President Mario Draghi, Eurogroup president Jeroen Dijsselbloem and European Parliament President Martin Schulz – the so-called “five presidents” report. The drafting of this report responds to a task from the Heads of State and Government in the euro area at a euro summit meeting last October.
Important policy and legislative changes introduced in recent years have served to strengthen European Monetary Union, EMU, in many cases responding to hard lessons learned as a result of the economic and financial crisis. An extensive economic governance framework has been put in place, including the European semester and the macro-economic imbalance procedure, while significant progress has been made in the implementation of banking union. As a result, we have an economic governance and financial system that is more robust, better able to identify and manage risk and that seeks to take account of the interdependencies between economies. Notwithstanding the positive measures adopted in recent years, some analysts and policy-makers argue that EMU is not yet complete and that more far-reaching changes are required. There is an expectation that the report of the five presidents will be reasonably ambitious in setting out a vision for the long term, while also considering what can realistically be achieved in the short to medium term.
Ireland, together with other member states, has had the opportunity to offer its views on EMU reform through specially convened meetings of the sherpa network, which comprises senior representatives of the Heads of State and Government. However, I underline that, while member states have been canvassed for their views, the final report will be presented solely on the authority of the five presidents. The more ambitious, longer term proposals brought forward during discussions included fiscal capacity for the euro area; a common eurozone finance Minister; and binding reform contracts whereby member states would agree to implement structural reforms in return for support from a solidarity fund.
Ireland, together with many other member states, has argued that our focus at this point should be on full implementation of existing economic and financial governance instruments. Implementation of these instruments is not yet optimal. For example, we see scope for a greater focus on the aggregate economic and fiscal position of the euro area as a whole, recognising that excessive current account surpluses and deficits both need to be tackled. Ireland also argues strongly that measures which can contribute to sustainable and job-rich growth across the European Union must be prioritised and driven forward. This includes completion of the Single Market, including the digital Single Market, roll-out of the investment plan and giving further impetus to trade negotiations. We believe it is towards these tangible objectives, rather than protracted introspective negotiations on new instruments, that we should channel our efforts and energies. Given that the report of the five presidents has not yet been published and, as a result, there is little time for analysis by member states in advance of the European Council, my expectation is that discussion by the Heads of State and Government will be very limited.
One of the most challenging and pressing issues for consideration by the forthcoming European Council is the migration crisis in the Mediterranean. The committee has also been actively engaged on the issue and corresponded with the Taoiseach on it. I have seen the Chairman's letter and the Taoiseach's response. To address the crisis, the special European Council in April set out clear priorities focusing on strengthening the European Union’s presence at sea, fighting traffickers in accordance with international law, preventing illegal migration flows and reinforcing internal solidarity and responsibility.
The Latvian Presidency, which comes to the end of its term at the end of this month, and the European Commission have translated this vision into what is termed a roadmap, which will form the basis for discussions at the June 2015 European Council next week. The Commission has also brought forward a new strategy, the European Agenda on Migration,which puts forward a range of short and longer term proposals.
On the question of the immediate actions necessary, I wish to comment briefly on some elements of Ireland’s approach. In response to the Commission’s recommendations on resettlement, Ireland has offered to take 300 refugees in addition to our existing commitments for the 2015 and 2016 period. That will bring our resettlement commitment over the period to 520, which is almost double the share proposed for us by the Commission in the European Agenda on Migration.
In addition, the Government last month dispatched the LE Eithne, a Naval Service vessel, to assist in humanitarian search and rescue tasks in the Mediterranean. Thus far, the LE Eithnehas conducted nine rescue operations, resulting in the rescue of more than 1,600 migrants. I am sure the committee will join me in thanking the crew of the LE Eithnefor its courageous work in the Mediterranean to date, and to wish it continued success in its life-saving endeavours. I had the pleasure of being at Haulbowline on the morning the Naval Service vessel departed. We are all very proud of the great work being done in the Mediterranean in very difficult circumstances.
There is no quick fix to the migration crisis. I expect there will be a robust debate at the General Affairs Council and, subsequently, at the European Council as to how the European Union can most effectively respond. A key sticking point is the Commission proposal to introduce a mandatory emergency relocation mechanism, whereby 40,000 people in need of international protection in Italy and Greece could be redistributed among other member states. There is concern among some EU partners, in particular, about the mandatory nature of the mechanism. A number also have issues with the allocation key for distributing the proposed cases among the member states.
Ireland’s opt-in protocol under the treaties would apply to this proposal and so the Commission has not allocated Ireland a relocation quota. However, we are examining the proposals very carefully with no final decision yet taken.
As a final comment on migration, I note that this discussion can be a little lopsided at times because of the understandable urgency of the humanitarian situation. It is excessively focused on the consequences of Europe’s pull factor, whereas we also need to engage more effectively with external partners in relation to the push factors that cause the migrants to take such perilous risks. Ireland has a positive story in regard to our record of working with African countries, in particular to stimulate their economies to provide better livelihoods for their young people. In addition to the steps I outlined previously, we will also continue, in co-operation with our international and United Nations partners, to provide humanitarian assistance in regions from which many migrants originate. This has included support totalling €41 million to those affected by the brutal conflict in Syria.
I turn to the EU-UK relationship. The committee is fully aware of where the Government stands on this issue of fundamental national interest. I am aware it has engaged and has visited the UK. As I have said, we want the UK to remain a full, integral member of the European Union. As the committee may be aware, the Taoiseach is in London today for a meeting with Prime Minister Cameron.The Minister for Foreign Affairs and Trade, Deputy Charles Flanagan, will meet the Foreign Secretary, Mr. Philip Hammond, MP, tomorrow in Dublin. Their discussions will no doubt cover a number of issues but the question of Britain’s future in Europe will, I expect, figure very prominently. The fact is that British membership of the EU matters hugely to Ireland's advantage and I expect the Taoiseach will avail of the opportunity to explain directly to the Prime Minister, Mr. Cameron, why that is the case. The hearings the committee held this spring provided a rich seam of evidence as to why British membership of the EU should be considered so important to Ireland. I very much look forward to reading its report on the issue which I understand is to be published next week. I thank the committee for its invitation to the publication but as it coincides with the General Affairs Council meeting I am unable to attend.
We are entering a more decisive phase of the UK’s relationship with the European Union. The Prime Minister, Mr. Cameron, was re-elected in May on the back of a manifesto that promised to reform the workings of the European Union, and to hold an in-out referendum before the end of 2017. Ireland respects the democratic mandate the Prime Minister has to pursue that agenda. What we now await is the substance of the UK proposals in regard to how the functioning of the European Union can be improved. This is the kernel of the matter. These proposals may be sketched out at the European Council, although it is not yet clear what level of detail Prime Minister Cameron is ready to provide. We already have a sense of some of the reforms the UK might seek to prioritise in the time ahead. I had the opportunity to explore some of these when I met my British counterpart, Mr. David Lidington MP, in Dublin on 26 May. They include issues such as an increased focus on competitiveness within the European Union, a greater role for national parliaments, and new provisions regarding welfare entitlements.
No matter what the UK actually puts on the table, the challenge is the same, namely, arriving at a consensual basis for continued British membership of the European Union. Given what is at stake, we will be playing a constructive and active role when it comes to any negotiations. Our instinct is also to be supportive and sympathetic on the substance. Let me repeat however what I have said before. As important as British membership of the European Union is to Ireland, we will not support any proposals with which we fundamentally disagree. Nor will we subscribe to any course of action that could significantly undermine or weaken fundamental principles of the European Union, such as freedom of movement of people. Next week’s European Council represents a first engagement at the level of Heads of State or Government on this issue. Much works lies ahead and Ireland is ready to play its part.
I thank the Minister of State. I am aware he has been speaking for more than 20 minutes and while I do not wish to exhaust him, could he give the committee one or two minutes on the current state of play with Greece and where he thinks it might be going?
I thank the Chairman. The committee will be aware that as we speak the Eurogroup meeting, at which the Minister for Finance, Deputy Michael Noonan, is present, is taking place. Amid lack of progress, the IMF has withdrawn its negotiating team from Brussels. Even at this late stage it is still very much in everybody's interest that agreement is reached. The situation of Greek finances is very challenging and its immediate financing needs need to be addressed. Deposit outflows from the banking system have continued. There is an urgent need for agreement on the necessary structural reforms. It is imperative to conclude the fifth review and to release these disbursements. The Irish position has always been to be supportive of Greece and of the Greek people but we have very serious timelines which need to be adhered to.
The Greek Government has a responsibility to deliver for the Greek people. The meeting is ongoing as we speak and we will get a report on it within the next couple of hours. It will be the main topic at the European Council meeting next week. That is the current position.
I thank the Minister of State. Perhaps colleagues have specific questions, but I will begin with two questions. The first relates to the EMU. The Minister of State said we want to see a greater focus on aggregate economic and fiscal positions within the eurozone and that we need to recognise that while some countries have excessive deficits, some have current account surpluses. One of those with a surplus is one of the main countries in the euro area, Germany. What direct pressure is applied at these meetings to countries like Germany to do something about the situation? It is in the interest of the rest of the eurozone that something is done, and to do that we need to focus on countries with a surplus.
My second question relates to migration. The Minister is probably aware that before a previous General Affairs Council meeting we had the Italian ambassador and Peter Sutherland, the UN special representative on migration, at our committee to talk about their views on the Mediterranean crisis. One proposal made by Mr. Sutherland was that we should explore the option for the European Commission to process migrants in a remote area outside of the European Union. The committee took this suggestion on board and brought it to the COSAC meeting in Riga where we had a debate at the plenary session on the issue. The proposal was not passed by sufficient numbers at Riga. However, what is the Taoiseach's and the Minister of State's position on this proposal. Is it something they would support and, if so, is it something they would push at the next General Affairs Council meeting?
I have a number of specific questions and will do my best to be succinct. I apologise that I may not be able to remain to hear the Minister of State's response, but I will read them afterwards in the Official Report.
I applaud the role of the Government in bringing about a situation where the country is now in a wonderful situation economically, where our debt-to-GDP ratio has improved considerably, our public finances are under control and significant employment is being created. This is a huge achievement economically. This leads us to recommendation No. 4, that we should deal with the issue of arrears and mortgages. This is the last leg of the programme. We have achieved a lot with establishing the pillar banks and getting people back to work, but dealing with the residual debt of arrears and mortgages is the last leg in recreating a normal functioning society and economy. This is crucial. What other steps do the Government and the Minister of State propose to take to ensure we get our historic debt, such as distressed mortgages and SME debt, dealt with? We need restructuring of debt rather than sales of assets and repossessions because these do not contribute to a good functioning economy.
Yesterday, I was disturbed to hear the anecdotal evidence of colleagues in the Dáil in regard to vulture funds which now propose to sell properties which are increasing in value to recover the debt. Will the Minister of State assure me this will not be allowed happen and that we will not see properties sold unnecessarily? Will he assure us that the first option will be to restructure and reorganise debt to create a better economic climate that will allow people recover from debt? This is particularly important for householders, but also for SMEs. How does the Minister of State propose to see that the Central Bank monitoring arrangements are carried out? These are timely and apt recommendations. What improvements does he propose to make on these? We have all heard stories as public representatives in our clinics of people not getting settlements. Will the Minister of State assure us the monitoring process will work and how it will do so? Will he assure us properties will not be sold simply because they are getting more valuable? That is a lazy option for the debt holders.
I will be quick. In regard to the Strategic Banking Corporation of Ireland, SBCI - a wonderful development - will the Minister of State assure us that people who were in distress previously, especially those with difficulties in the construction sector and particularly in Cavan-Monaghan, will not be the victim of those historic difficulties? Will he assure us there will be flexibility in regard to how the SBCI will work in order that it will allow these people get up and going again? If their business case and plan stands up, this should be the issue rather than their history, because it was through no fault of their own that a number of them had difficulties. I got a disturbing report that this might not be the case, so would like assurance from the Minister of State that the report was wrong.
Will the Minister of State specify why we are going for the 0.3% rather than the 0.6% reduction in our structural deficit? I assume that is to stimulate the economy and to generate more revenue, but I would like to hear an explanation.
The Minister of State said we have great relations with the United Kingdom and we want to keep that. We want to use our diplomacy to try to keep the UK within the European Union. I represent a Border constituency and it would be remiss of me not to raise an issue of concern. This is not something that should prejudice the good relations between two states that respect each other. Will the Minister of State use his good offices with his counterparts in the United Kingdom to secure a situation where the reports of the dreadful and horrific collusion during the conflict in Northern Ireland - reports we got this week from RTE and previously from the BBC "Panorama" programme - are dealt with? Will he ensure the reports are addressed and that the British Government sets up the necessary inquiries and provides the evidence to get a resolution and closure? I do not believe it would prejudice the Minister of State's good work to raise that.
I always feel a victim of the previous speaker. The Minister of State is welcome and I wish him luck in the meeting of the General Affairs Council. We heard there are five issues to be addressed, one of which is the country-specific recommendations. This committee had an excellent presentation from Dr. Seamus Coffey and I now have a question for the Minister of State. Why has the Commission dropped the country-specific recommendations from seven to four? Dr. Coffey explained to us in plain language that the legal services issue is the biggest rip-off in this country and the biggest financial drain on Exchequer resources vis-à-visothers such as lone parent's allowance.
Will the Minister of State give a commitment to this committee that he will resurrect this issue in Europe and demand that it be put back in for our analysis and action in the future? One of the items the Minister of State will deal with is a new action plan on strategic communications to counter misinformation campaigns in the union’s eastern neighbourhood. That is short for saying we lost the propaganda war with the Russians. Russian radio and television stations have bombarded Ukraine. Moldova is having serious trouble with the corruption exposed in the socialist party there, it being the most pro-Russian party. Georgia is very worried about the activities in this field. How does the Minister of State think Europe or Ireland will play a role and in what capacity to counter the black propaganda that comes from the Russians vis-à-vis the eastern partnership?
Greece is chaotic. It is deemed to be ultra-leftist, which is the majority but there is also an extremely right-wing constituency in that government. How does the Minister of State see the chaos that will result if the threats of a particular right-wing Minister in that government open the floodgates of immigration into Europe? It is speaking as a member of the EU.
Yes the Minister for defence said they would equip the Jihadis to move via Greece to Europe. Is the Minister of State worried about what Greece might attempt to do vis-à-visimmigration if it pulls out of Europe or if its antagonistic tone continues?
I welcome the Minister of State and wish him well at the meeting of the Council. Greece has to be the overarching concern in respect of the five presidents’ report on strengthening economic governance in the euro area.
The Minister of State spoke about the country specific recommendations and the European semester becoming more open and inclusive, including through more meaningful engagement from national parliaments and other stakeholders. The recommendations were published in June, there is a budget in October. Is the Minister of State advocating a post-budget debate to see that the recommendations are implemented?
On immigration, I commend the action of the Government, the Minister for Defence and others in this area. Ireland plans to take more migrants than the quota recommended. If the quota system is adopted there are certain countries migrants would wish to go to. Even if a certain country took in its quota, how can the migrants be stopped from going to the UK or Germany? While we cannot blame anyone for seeking a better life, the more migrants who reach and settle in Europe, the more are encouraged to make the same journey. This is the problem. There is no stop to the movement. I do not blame them seeking a better life. What can be done to stop them leaving? I distinguish between economic migrants and refugees.
Is there a timeframe for discussion on UK-EU relations? Will the UK continue with bilateral meetings? Is there any discussion on when it might put forward proposals on the changes it wishes to see in the EU?
I compliment the Minister of State on his address. One hopes all our influence will concentrate on encouraging our UK neighbours to remain within the EU. Exit will have disastrous consequences for the Union itself, for Northern Ireland and for this country. No matter what structure is put in place it cannot improve the situation. We hope the Minister of State and his colleagues will use every opportunity to convey that view at the meeting. The thinking people in the UK Government and the country will agree with that.
In respect of the meetings, competitiveness remains an issue and we hope work continues on that. I am worried by the reference to a greater role for national parliaments. I have raised this question on numerous occasions. I cannot see how a greater role for national parliaments is of any benefit to the European Union unless the national parliaments are similarly disposed towards the union. If they are not, how will the greater role for each parliament improve the cohesiveness and effectiveness of the Union? It cannot. I hope a greater emphasis will be put on the need to ensure the membership of national parliaments recognises the European project and whatever debate takes place does not take place in a divisive fashion, and that when we express our views in the European arena we have (a) our interests at heart and (b) the EU’s interests at heart and try to make the two converge.
There is a grave danger that the credibility of the institutions of the EU will suffer as a result of the Greek situation. For the past six months there has been continued speculation on what the resolution will be. If the member states want it one way, let them do it. If it is the agreed decision of each member state of the union that they come together to bail out the Greeks they should do so but let us not play around with it forever. If the member states intend to bail out a colleague in the Union then by all means do so. Let us remember, however, that we had to bail ourselves out with huge sacrifices on the part of the people, Government and Members of the Parliament. We all had to take a lot of abuse and criticism in order to do what needed to be done but we did it. We had the resolve, the conviction and dedication to do that. There are lessons to be learned from that. If it is the intention of the Union to come together with the opinion that we, the EU states, will bail out Greece then do it, but continued speculation and procrastination will not help the situation and will undermine, with disastrous consequences, the whole concept of the Union.
What is the Minister of State’s response to the fiscal council’s statement that the SP 2015 is falling short of the requirement on a forward-looking basis and that Government adjustments go against the level and spirit of the expenditure benchmark rule, that there is a considerable risk of non-compliance in 2016, that the deficit projections in the SP 2015 do not provide a useful picture of the fiscal position after 2016 and fall short of the requirements envisaged in the budgetary framework directive? Does the Minister of State agree with those comments?
The Minister of State mentioned the sticking point of the mandatory relocation mechanism on immigration. I am worried by comments from the Hungarian Government that it is building a 4 m high fence on its border with Serbia to keep out migrants. That can be seen as part of a wider anti-immigrant campaign by the prime minister.
He described the efforts to resettle migrants around the EU as insane and said all migrants were terrorists. Has this situation been discussed with the Minister of State's counterparts in Hungary and Europe?
Finally, I return to the country-specific recommendation on strengthened child care provision. That was also a country-specific recommendation in 2014 and in the summary assessment then it said that no progress had been made to improve access to more affordable and full-time child care. It is now one of the recommendations for this year. Mr. Seamus Coffey was here before the Minister of State and he mentioned that some of these recommendations do not really include proposals on what to do or concrete figures. What action will be taken by the Government to address the issue of affordable full-time child care? There is a danger that it might be left there and that we will keep seeing every year that no or limited progress has been made.
On some of the more direct questions on asylum seekers, the answer is, yes, we are in favour of processing applications in countries of origin. That is our position. Generally speaking, our focus has been on addressing the root causes of immigration and working with countries in the region. As the committee knows from COSAC, that is not a position that is universally accepted. Understandably, our discussions are focused on very short-term solutions. However, we must continue to encourage that the parallel root cause solution takes place, otherwise we will continue to be in the same position. With respect to the five presidents question, proposals for implementation in the shorter term will include greater attention to the aggregate fiscal and economic stance of the eurozone, which will include a better implementation of the macro-economic imbalance procedure. We will then see increased momentum in structural reforms that will follow on from those.
I take Deputy Byrne's point, but as Deputy O'Reilly will be reading the Official Report, we will cover his question as quickly as we can. Deputy O'Reilly asked about arrears and our fourth country-specific recommendation. We are fully aware of the requirement to reduce the difficulty for businesses and individuals. Clearly, we have to re-emphasise the importance of early engagement, steering as many cases as possible to the strengthened insolvency service. We are also looking at improving the court process. A particular question was asked about the Strategic Banking Corporation of Ireland. While there is, of course, an emphasis on - and we have the Credit Review Office in place for - people who have legacy issues when it comes to applications, it is still the case that any lending institution will have to look at a broad range, including the proposal itself, and history will always remain part of that. We are very eager to encourage that across a broad sector of Irish life we allow businesses, business people and individuals to rehabilitate themselves and move on from legacies that, in many instances, were not of their own making.
Deputy O'Reilly asked specifically whether the Taoiseach will raise the issue of collusion with Prime Minister, David Cameron. I am not aware that the issue is specifically on the agenda. The Taoiseach may well raise it. There will be other discussions, but given the European Council next week, the main item for discussion today is the proposals the British will bring forward with respect to the referendum they are going to have.
Deputy Eric Byrne mentioned legal services not being part of the country-specific recommendations this year. There are two elements to the answer in this regard. There have been fewer country-specific recommendations for everybody. There has been a specific push to simplify them. Equally, we have had very significant progress with respect to the Legal Services Regulation Bill which is now nearly through the Houses of the Oireachtas and there is a strong sense that progress has been made in this regard. The Deputy will remember that when the troika was leaving, legal services reform was identified as one of the few areas where we had not made progress. We can now say that the Minister for Justice and Equality has made good progress. I took one of the debates in the Dáil and Seanad and Committee Stage in the Seanad is scheduled very soon. The Minister and her Department are confident that the Bill will conclude shortly. Rather than request them to reintroduce it, we should focus on doing the job that was requested of us last year to ensure that it does not reappear as a country-specific recommendation.
We will all agree that the comments of the Greek Minister for Defence were very unfortunate. They were not supported by the Greek Prime Minister and others in subsequent commentary. Greece has participated constructively in EU discussions on migration and, to be fair, we must look at the fact that it is one of the countries with a very significant number of migrants seeking access or located there. The Commission's proposals aim to deal with the difficulties faced in particular by Italy and Greece. Deputy Kyne is correct that we must look at the push factors when it comes to migration such as conflict resolution and working with external partners to help their economies to progress.
I point out to Deputy Eric Byrne that the semester process is, first, a matter for each parliament. The agreements on the European semester allow the time and space for countries to engage with internal CSRs. In particular, this has been done at the finance committee although it is the second time we have discussed them here. A couple of years ago, the time between publication of CSRs and their adoption was very short but we now have a much longer period. Deputy Durkan made the accurate point that it is up to the Houses of the Oireachtas to engage to a greater extent with the European semester. I have been struck that we have not really evolved in the Houses in terms of looking at other countries' CSRs, which is part of the benefit of the semester process. Given the inter-related nature of all of our economies, we should have regard to and concern for what is happening in other countries.
That segues into the other question of when the surplus countries are going to play their role. Perhaps understandably, there has been an overemphasis on the deficit countries but the surplus countries also have a responsibility. That is why, within some of the discussions around EMU, there is an increasing focus on the aggregation of the European economy.
In some of the discussions concerning EMU there is now an ever greater focus on the aggregation of the European economy. One country in particular clearly has a greater surplus than everybody else.
How am I doing for time, Chairman?
Okay, my apologies.
On the issue of child care and low-density households, this recommendation goes to the heart of something about which everyone in the country is acutely aware - that a price has been paid by Irish families from the difficult economic period we have had. Everything we do is to try to encourage greater employment, giving people a greater opportunity to earn a living, and therefore allow the country through our social protection, education and health regimes to have funding available to support people in difficult situations, including long-term unemployment and child poverty.
The Senator's two-part question covered the fiscal space and the latitude we have to correct it, or by how much we should correct it. Both of those CSRs contradict each other in many ways. We have taken the view that within the fiscal space available to us, in order to have as much funding as possible to support out social welfare system, including for vulnerable young people, we will continue to achieve our targets. Where fiscal space is available, however, we will continue to reduce the amount of tax on work as well as increasing spending on public services.
While both CSRs are understandable, that is where the Government's political judgment must come into place as to how we can strike that balance. In some regards, the fiscal advisory council has a view as to how that should happen. I recently met with Commissioner Moscovici at a public forum attended by Social Justice Ireland, the Society of St. Vincent de Paul and other groups. It is clear that such groups would strongly encourage the Government to use the fiscal space it has, which was achieved with difficulty in recent years, to improve the situation for our citizens.
To be fair to the Minister for Finance, Deputy Noonan, and his Government colleagues, that balance has been struck while managing to achieve job creation and economic growth. As the economy recovers, this is the area where we need to work hardest to ensure that our young people are now looked after as best we can. The economic downturn has conferred a cost on some people, which has been very difficult.