M J Nolan (Carlow-Kilkenny, Fianna Fail)

I welcome the opportunity to speak on this motion. At the spring European Council, held in March, the European Heads of Government agreed to refocus the Lisbon strategy on jobs and growth. Given Ireland's record regarding job creation and growth levels over the past ten years, there was not much need to point the finger at it in terms of bringing forward a reform programme therefor.

A central part of the new approach in achieving the Lisbon goals is the preparation of a national reform package by each member state. Although a deadline was set for the preparation and submission of these programmes — they were to be returned by 15 October — many member states, including Ireland, notified the Commission that they would not present theirs until 28 October. The preparation of Ireland's national reform programme has been co-ordinated by the Department of the Taoiseach with the help and input of other major Departments. I am pleased to note the social partners have all been consulted on the text of the report.

The revamp of the Lisbon strategy was considered necessary for a number of reasons, as outlined by the Minister for Finance. Insufficient progress has been made in reaching the Lisbon objectives. Although EU productivity levels were growing faster than those in the United States for five decades, they have been lagging behind since 1996 and are now far inferior. Labour productivity in the United States is now growing twice as quickly as it is in Europe and consequently the relative levels of wealth have also started to slip.

I suppose the European Union is in competition with the United States and we have been slipping further behind in the past few years. Europe is not investing enough in a number of areas, particularly in research and development. The United States spent approximately €100 billion more than the European Union on research and development last year. This will have to be addressed. In the United States, 32% of the population has a university or third level degree whereas the corresponding figure in the European Union stands at only 19%. The percentage receiving third level education in Ireland is increasing significantly. However, given the Union has extended to include 25 countries, the average percentage will slip even further in comparison to the figure that obtains in the United States. These trends, if not addressed, will drag down the potential growth rate in the European Union to a figure slightly over 1%, which is one third of the Lisbon objective of 3%.

The recent report by the Central Bank, while not glowing in its outlook, is not negative. It states Irish growth for this year is projected to be 4.5%, which is well ahead of that of our European partners. However, given that our economy is so small compared to that of the European Union as a whole, a growth rate of 4.5% would be diluted significantly when compared to those of some of our EU partners.

The Central Bank has also highlighted weak export performance over recent months. Increased dependence on the construction industry has also been highlighted. In talking about the Lisbon Agenda, one must be mindful that the construction industry has been the driver of economic growth and increased employment in Ireland in recent years. This is outlined in the report.

The external environment looks reasonably positive, if somewhat uncertain. The significant increases in oil prices have certainly caused some wobbles in the international economy. The recent bad weather, which has hit the United States in particular, has also caused some problems but, all in all, the world's economy seems to be performing reasonably well. The picture seems to be less favourable in Europe. We have been told the UK economy is slowing down and that growth remains modest in some of the other European areas. These areas and the United Kingdom are significant trading partners for Ireland and therefore they will have an impact on its economy.

Ireland's national reform programme has been set out by the Government. The Government and the Taoiseach's office have outlined the need to secure economic stability, promote the effective and efficient allocation of resources and contribute to a dynamic and well-functioning monetary union. Also highlighted are the requirements to extend the Internal Market, ensure open and competitive markets and create a more attractive business environment. Improvements have taken place in respect of the latter requirement over the past five years, partly due to our low tax regime. I encourage this low tax regime and hope the Government will retain it in the upcoming budget.

We have become very cost-competitive, which has attracted much inward investment. The environment still remains attractive to foreign companies. While labour costs have increased somewhat and certain companies that have invested in Ireland in the past 15 years are relocating abroad, we still have almost full employment, for which the Government must take credit.

The Government has also recommended the promotion of a more entrepreneurial culture and a supportive environment for SMEs. We have a thriving SME group. The work of county enterprise boards in encouraging young entrepreneurs is welcome. Their establishment ten or 15 years ago, and the investment and support they receive from the Department of Enterprise, Trade and Employment are positive developments. Long may they continue.

We have fallen behind in research and development and must increase and improve our investment in this area. This is true in general of the European Union. The Minister and Government must focus on contributing to strengthening our industrial base which has weakened in recent years.

The integrated guidelines proposed by the Department include implementing policies aimed at achieving full employment and improving quality and productivity at work. Our productivity, which industrialists study when looking for scope to set up an overseas base, lags behind that of the United States.

We also need to improve the matching of labour market needs to expand and improve investment in human capital. While that has improved recently we need significantly more. We must also adapt educational and training systems in response to new competence requirements.

The work of third level institutions in these areas is welcome. Many institutes of technology, in particular, are adapting their courses to suit the needs of industry through increased contact with industry and commerce. For far too long the system whereby the Department of Education and Science set down the courses and syllabi for the institutes was too rigid. Only in the past five or six years have we begun to tailor courses to suit the needs of industry which has improved job creation, particularly in rural areas. It has also improved the potential for graduates to find jobs locally.

I welcome this debate and commend the Government's guidelines.

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