Brian Cowen (Laois-Offaly, Fianna Fail)

I welcome this opportunity to brief the House on the outcome of last week's meeting of the European Council, which was an important meeting in many respects.

There were four main items on our agenda: the report of the task force, chaired by President Van Rompuy, which examined issues relating to economic governance at EU level; preparations for the forthcoming G20 meeting that will take place in Seoul in November; preparations for the Cancun conference on climate change in December; and preparations for a number of upcoming summits, including those with the US, Russia and Ukraine. In addition, the question of the Union's future budget was raised by a number of partners, and the Council agreed that we will return to this question at our next meeting.

In the context of our discussion on economic governance, it is worth recalling recent events and developments in this area. In the light of the economic challenges facing Europe, in March of this year the European Council asked its President, Herman Van Rompuy, to establish a task force of member states, in co-operation with the Commission and the European Central Bank, to examine options to strengthen the Union's framework for economic governance and to bring forward recommendations before the end of 2010. In April, in the face of extreme pressure from international markets, Greece turned to its partners in the Union for support, which led to the putting in place of a programme of bilateral loans from other eurozone member states, in which Ireland played its part. In May, in the spirit of solidarity that characterises the Union, a "European stabilisation mechanism", aimed at preserving financial stability, was put in place for a period of three years.

In what was a fast moving context, an immediate and effective response was required. This was achieved through the establishment of the European Financial Stability Facility, through which euro area member states agreed to provide pro rata guarantees in respect of funding raised to support member states that find themselves in difficulties caused by exceptional circumstances beyond their control. Ireland, along with the others, took the necessary legislative steps to ensure the facility came into being. Under the circumstances, President Van Rompuy also readily agreed to accelerate the work of the task force, which conducted its business very intensively over the following months.

The task force, on which Ireland was represented by the Minister for Finance, produced its final report on 21 October. It made recommendations aimed at strengthening fiscal discipline in the Union; introducing new macroeconomic surveillance arrangements; and setting the principles for a robust crisis management framework. The package of measures proposed by the task force includes a number of key elements. The report proposes a strengthened Stability and Growth Pact, introducing greater financial discipline with an enhanced focus on public debt as well as deficits. While the report found that the current framework remains "broadly valid", it felt that it needs to be applied in a better and more consistent way. In particular, there is a need for greater focus on debt and fiscal sustainability.

On sanctions, which were the subject of particular and detailed consideration, the task force sought to strike the right balance. It proposes to enlarge the spectrum of sanctions available and to apply them earlier and on a more semi-automatic basis than is currently the case, with the new arrangements, in the first instance, applying to euro area member states only. The report also recommends the introduction of a new macroeconomic surveillance framework, including an "Excessive Imbalances" procedure, which will operate alongside the Stability and Growth Pact. Under this an annual assessment of macroeconomic imbalances and vulnerabilities will be undertaken. In particularly serious cases, and where prompt corrective action is not taken, euro area member states will, ultimately, face sanctions.

While respecting national responsibilities for fiscal and economic policies, the report also notes the agreement of the European Council earlier this year that economic policy coordination be deepened and strengthened through the institution of a "European Semester", a new timetable designed to enable the EU dimension to be better reflected when countries prepare budget and economic reform programmes. This involves the earlier submission of stability programmes, which will take place by the end of April each year. The task force also recommends that national budgetary frameworks be strengthened to underpin compliance with the SGP. At last week's meeting, the Council endorsed the task force report and called for a fast-track approach to its implementation. The task force recommendations represent significant improvements in economic governance and are to be welcomed. The task force set summer 2011 as a target timeframe for agreement between the Council and the European Parliament on the related legislative proposals from the Commission.

The task force also examined what was required to ensure a robust framework for crisis management. It acknowledged that the arrangements put in place earlier in the year offer a good line of defence for the next three years. It went on, however, to state that, in the medium term, it believed that there is a need to establish a credible, permanent crisis resolution framework for the euro area and that further work is required in this regard. Any permanent framework to safeguard the financial stability of the euro area must stand on a firm legal foundation. This is not just a matter for one or two member states, although the matter was highlighted in advance of our meeting by a joint declaration by Germany and France in Deauville on 18 October. All member states have a shared interest in ensuring our actions are fully within the boundaries of the law at all times.

While it was possible to design a mechanism that met our immediate policy and legal requirements earlier in the year, those arrangements were made at a time matters were urgent and pressing. There is an opportunity now, on foot of the initial consideration by the task force, to reflect on appropriate arrangements for the future building on the experience gained with the European Financial Stability Facility and to take a more considered approach to what is required of a permanent mechanism. The European Council has, therefore, asked President Van Rompuy to undertake consultations with member states including on the question of limited treaty change required to that effect. It has agreed to revert to the matter in December, with a view to taking the final decision both on the outline of a crisis mechanism and on a limited treaty amendment so that any change can be ratified by mid-2013 at the latest.

I am, of course, aware of speculation on what this might mean in legal terms for Ireland. It is important to stress that what is being proposed is a very targeted and limited exercise. When, on foot of the instructions we have now given him, President Van Rompuy has completed his consultations, he will bring forward a detailed proposal setting out what is required. Until this proposal is finalised, it is not possible to conclude what will be needed to enable Ireland to ratify the new arrangements. It will have to be analysed closely and carefully. However, I assure the House that whatever legal steps are necessary and appropriate will be followed.

It is worth recalling that the treaties contain various approaches to treaty change, including the "Simplified Revision Procedures". This approach provides for situations where it is agreed that some change is needed within particular policy areas of the treaties but where the competences conferred on the Union by the member states are not increased. No decision was taken last week on which approach will apply in this situation; this is something to which President Van Rompuy will need to give the careful consideration. However, the European Council conclusions place great emphasis on the limited nature of what is required.

Ahead of the summit, suggestions were also made by a small number of member states, most prominently France and Germany, that the treaties should be amended to provide for the suspension of the voting rights of a member state persistently in breach of its obligations under the Stability and Growth Pact. This was a particularly controversial proposal and there was little enthusiasm for it last week, either at home in Ireland or around the table at our meeting in Brussels. Nonetheless, the President of the European Council intends as a subsequent and completely separate exercise, to examine the matter in further consultation with the member states. No timeframe or deadline has been placed on this and I do not expect to see it get much support.

I will refer briefly to other matters discussed last week. While it was not an item on our agenda, a number of member states, led by the United Kingdom, indicated a wish to discuss the Union's future budget following a presentation by the President of the European Parliament, Jerzy Buzek. The treaties set out a procedure for agreement on the budget between the Council and the European Parliament. This process is under way for the 2011 budget and discussions are at a delicate stage. The Council did not have an opportunity to discuss the matter in detail nor, given the ongoing negotiations, would it have been timely to do so.

In our conclusions, however, we stressed that it is essential that the European Union budget and the forthcoming multi-annual financial framework reflect the reality that most member states face, which is the need to take significant steps to make their deficit and debt levels more sustainable. We agreed to discuss how to ensure that spending at the European level makes an appropriate contribution to this work at our next meeting in December. Subsequently, the Heads of State or Government of 12 member states cosigned a letter to the President of the European Council and the current Belgian Presidency stating that they were not prepared to accept that the EU budget for 2011 could increase by more than the 2.91% proposed by the Council earlier this year. Given that negotiations are continuing, and I expect will be brought to conclusion at the EU Budget Council later this month, I did not consider it helpful to participate in this initiative.

The European Council also discussed a number of issues, including preparations for the forthcoming G20 summit in Seoul, for the Cancun conference on climate change and for summits with third countries, including the United States, Russia, Ukraine, India and Africa. The Minister of State, Deputy Roche, will go into further detail on what was agreed on these matters. In broad terms, however, I welcome the approach being taken by President Van Rompuy in ensuring that a strategic debate takes place at head of State or Government level ahead of such important engagements.

Implementation of the recommendations of the Van Rompuy task force, as the President of the European Council said, will mark a major improvement in the economic governance of the European Union and the euro area. It will bring greater strength and clarity to the application of the rules, and real consequences to those who choose to ignore them. I welcomed the report and I welcome the decision of the European Council to endorse its conclusions.

A great deal has been said in recent times about the role of the European Union in economic matters, much of it ill-informed and wide of the mark. The fact is that Ireland, as a matter of sovereign choice, is a part of an economic and monetary union that brings great benefit to this country. It has helped us weather recent economic storms and placed us in a better position to deal with developments in the international markets than we could possibly have achieved on our own.

Like any other shared endeavour, membership brings within it opportunities and responsibilities. These must apply to all participants equally, without fear or favour. The Van Rompuy task force went about its work in a serious and comprehensive way. It has produced an important set of recommendations within a very tight timeframe. I pay tribute to the Minister for Finance and to his colleagues for the sterling work they did. Their work demonstrates again the fact that economic union draws its legitimacy from the member states and the rules which they set for themselves, and by which they collectively agree to be bound. This applies to Ireland every bit as much as to other member states.

We are currently engaged in preparing a detailed four year plan to chart our way to bringing our budget deficit back within the 3% limit set in the stability and growth pact by 2014. Developing and implementing this is necessary to rebalance our public finances and provide a platform for economic recovery and job creation. It is very much about the national interest. This work does not take place in a vacuum. Just as we have obligations to ourselves, we have also entered into commitments with others. This Government will continue to ensure that we live up to all of them.

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