Mr. Michael Tutty:

The Institute of International and European Affairs, IIEA, set up an economic governance group in 2013 to monitor the significant policy developments that were taking place at European level. Nine reports prepared by group members have already been published on the IIEA website. The group made a submission in February 2015 to the European Commission and the Department of the Taoiseach on the analytical note Preparing for Next Steps on Better Economic Governance in the Euro Area. This analytical note was a precursor to the five presidents’ report we are discussing today. The group prepared and published its comments on the five presidents’ report and these have been circulated to the committee. This opening presentation just summarises the main points in our comments.

Overall, the IIEA economic governance group supports the need to advance the process of economic and monetary union. In our opinion, the five presidents’ report is too short on detailed proposals to form any view on how the process may develop in practice, although the Commission published some additional documents on 21 October 2015 setting out some more details. We are concerned about the lack of urgency displayed in the report and strongly believe that faster progress in reforming economic governance in the eurozone is needed. The report envisages little of real substance for stage 1 to mid-2017, just building on the existing instruments. Stage 2 has no deadline, apart from 2025 for the completion of the final stage. A White Paper is promised from the Commission to explore further the legal, economic and political preconditions of the proposals but that is not due until spring 2017, which is a long way off.

The report considers four different types of union, namely, economic, financial, fiscal and political. I will deal briefly with each. On economic union, the report correctly points to the inevitability of more sovereignty being shared over time through common institutions but it defers any such developments to the second stage. The IIEA economic governance group recommends that work be carried out on this aspect of the report in parallel with the first stage, rather than asking where we go next only when the first stage is completed.

We welcome the proposal for a euro area system of competitiveness authorities to inform national policymakers and social partners on the impact on competitiveness of various policy proposals and developments. This would build on the national competitiveness authority that we have had for some time and should give it added impetus. We also welcome the strengthening of the macroeconomic imbalance procedure, particularly the call for adequate reforms in countries accumulating large and sustained current account surpluses. Germany has so far ignored all efforts to get it to take action in this area. In terms of the revamp of the European semester, we welcome the suggestion that the focus initially be on the euro area as a whole and then on the country-specific discussions.

On financial union, significant progress has already been made. We look forward, in particular, to the Commission proposals for a European deposit insurance scheme, due by the end of 2015, and to the development of a capital markets union.

On fiscal union, the report proposes the setting up of an advisory European fiscal board along the lines of the national fiscal advisory councils. This has already been implemented through a Commission decision of 21 October 2015. We see this as useful if it concentrates on the overall stance of fiscal policy but we would be concerned if it were to become involved in assessing the position of each individual country, thus duplicating the work of the national councils. I have had a keen interest in this since my recent appointment to the Irish Fiscal Advisory Council. The setting up of a euro area treasury where collective decision making would take place is suggested as a long-term possibility. The five presidents’ report states member states should “continue to decide on taxation and the allocation of budgetary expenditures according to national preferences and political choices”. It does not spell out what decisions will need to be taken collectively. This is an area where early discussion would be desirable since progress will undoubtedly take a lot of time to evolve.

On political union, in respect of which the phrase “democratic accountability, legitimacy and institutional strengthening” is used, the report seeks to improve the interaction with national parliaments. While the Irish Parliament has been paying increased attention to the European semester process and the country-specific recommendations, this is still at a fairly superficial level and needs to be developed into a more in-depth process. We support the suggestion that national parliaments exercise their right to summon a Commissioner for a presentation on draft budgetary plans and that they should be closely involved in the adoption of reform and stability programmes. Consolidation of the external representation of the euro has been an ongoing issue, particularly for the IMF, with individual countries being unwilling to give up their separate representation. It is time to make progress in this area.

These are the main points in our submission. We will be happy to address any issues the committee may wish to raise with us.