Mr. Michael Tutty:

Germany has been running a huge current account surplus and that is why it is being condemned by the Commission and the rest of us. It is because it is breaching the guidelines set out in the macroeconomic imbalance procedure, which is not even symmetrical. It has gone above the upper limit in place at a time when it is over-achieving on its medium term objective on the budget and when all in Germany and elsewhere say they need more capital investment but Germany is not willing to do that. I suspect that at the time when Ireland and others were running large deficits, Germany was unwilling to show solidarity until we got our houses in order and that maybe in the future it will be more accommodating. It will not say then it is doing it to bail out these other countries but is doing it to help at European level.

On the European semester, it has developed well over the past few years and there are mechanisms in place to prevent what happened leading up to the recession from happening again. The macroeconomic imbalance procedure I mentioned is looking at wider issues than just the fiscal deficits or surpluses. Therefore, there will be more early warnings of things going wrong. This is a good system, although it must be developed more towards common mechanisms, solidarity and, perhaps, interstate transfers. All of that will come later. The five presidents' report dropped any references to transfers or solidarity but these will arise again in stage two when looking at euro area treasuries and such things. Obviously, the five presidents felt the member states were not ready for this yet and there was not the political will to go down that road. Therefore, they are saying we should try to develop what we have first and then, in stage two, we can get downs to doing things better. We feel they should be a bit more ambitious in terms of getting the discussion going, even if we know proposals will not be implemented until later.

The semester process is working well and the country specific recommendations have been refined and narrowed down to a smaller number. There used to be a large number of recommendations and the Commission did not return to ask what had been done. Recommendations were made but nobody followed up later to see whether they had been implemented. This is now happening and we now have to report on how we are implementing the country specific recommendations. If we have not implemented them, we will now we will be shown publicly not to have done so, whereas previously nothing happened.

These country specific recommendations are discussed with the member states beforehand and do not just come out of the blue. It is not that the Commission sits in Brussels thinks that Ireland, for example, needs to do something on its health services. In the discussions with the member states, they try to identify the most important issues and to put forward what each country should be doing. The French always seem to be the ones to jump up and down when the country specific recommendations are issued and to say that we cannot have the Commission dictating to us what we do with our pension system, for example. However, they usually turn around and do something anyway. Last year, France's pension system was the issue highlighted.

The French had plans on the table already to do things but did not want to be seen to be dictated to from Brussels.

The whole European semester is starting to work well and can give a route map towards taking further initiatives such as the euro area treasury. Senator Reilly asked where would that go. I quoted from the five presidents' report, which indicates that it would not determine a country's individual taxes or expenditures. That will still be a matter for national preferences. It is about what overall deficit or surplus the European Union should be looking for and how that be distributed among the member states. It is about looking at the sort of fiscal position Ireland, France and so on should have, all adding up to a good European one, but then leaving it to the member states individually to determine the specifics of expenditure or taxation. Going beyond that, it is hoped that in the future there would be some solidarity mechanisms in place, not so much for transfers but to deal with shocks in individual states that are not in others. That can be developed over time once we get more confidence in the member states. It will not be simply transfers from Germany to those dreadful southerners, Ireland or other states which cannot control their situation.

The Chairman spoke about the Fiscal Advisory Board and whether it would be appropriate to have a second opinion. My own view is that when we have what is almost an appeals body, the first body gets ignored because something will always be appealed to the appeals body. I have never been happy with an independent body being subject to an appeals mechanism to someone else who might say they do not agree with what the Fiscal Advisory Council says. I would see the European board being available to see whether grave errors are being made in individual countries that are not being picked up by the fiscal advisory boards but not one that routinely draws up the same sort of reports as the Irish Fiscal Advisory Council or the other equivalents and tries to second guess them. It should stay more at a European level, perhaps looking at whether gross errors are being made in others but not duplicating the work the individual authorities are doing.

Deputy Eric Byrne asked which proposals in our submission on the analytical note had been taken on board. We have a little section at the end of our comments on the five presidents' report which looks at elements from our comments on the analytical note as to what was taken on board. I will not read them all out but they did take on board some of the suggestions. I do not believe our comments were totally original. There were elements in the analytical note that we favour and which have followed on through into the five presidents' report but the main items dropped were the solidarity type mechanisms that do not appear at all in the five presidents' report. It became much less radical than the analytical note had been, presumably on the basis that they did not think the member states were ready to go down more radical lines. Our main comment would be that they should get moving on drawing up these more radical proposals now and not wait for a White Paper in the spring of 2017, which would then start generating discussion. We need the discussion leading up to that White Paper so that it will reflect all the work being done in the meanwhile and not just that worked on within the Commission.