Brian Cowen (Laois-Offaly, Fianna Fail)

It should be on the way.

I agreed that these consultations should be concluded in time to allow formal adoption of this decision in March 2011, completion of national approval procedures by the end of 2012 and entry into force of the amendment on 1 January 2013.

The proposed amendment is simple and states:

The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionally.

Once agreed and ratified, it will be inserted into Article 136 of the Treaty on the Functioning of the European Union.

The Government is satisfied with this simple and straightforward text. Having considered the matter carefully, including the legal advice of the Attorney General, the Government is confident that it is compatible with the Constitution. As no amendment of the Constitution arises, a referendum will not be required for Ireland to ratify the amendment.

The European Council also called for Finance Ministers of the euro area and the Commission to finalise work on the intergovernmental arrangements setting up the future mechanism by March 2011, integrating the general features set out in the euro group statement of 28 November which we endorsed. The mechanism will be activated by euro area member states in case of risk to the stability of the euro as a whole. We also called for an acceleration of the work on the six legislative proposals on economic governance proposed by the Commission, building on the recommendations of the Van Rompuy task force, in order that they can be adopted by June 2011.

The meeting also represented a valuable opportunity to discuss the broader economic issues confronting the union in general and the eurozone in particular. There was a general commitment to do whatever is required to ensure the stability of the euro area as a whole. In a statement issued after the meeting by the heads of state or government of the euro area and the EU institutions, we stated the euro will remain a central part of European integration and called for determined action in a number of important areas. The statement called for the full implementation of existing programmes, noting the impressive progress made in implementing the Greek programme and the agreed adjustment programme for Ireland, including the adoption of our budget for 2011.

It called for the keeping up of fiscal responsibility by all, renewing our commitment to implementing budgetary policy recommendations strictly, fully respecting the fiscal targets for 2010 and 2011 and correcting excessive deficits within the agreed deadlines. It also called for a stepping up of growth enhancing structural reforms, for strengthening the Stability and Growth Pact and for implementing a new macro-surveillance framework from summer 2011.

The statement called on all concerned to ensure the availability of adequate financial support through the EFSF, pending the entry into force of the new permanent mechanism. It noted that, so far, only a very limited amount has been committed from the EFSF to support the Irish programme. It also called for a further strengthening of the financial system, in terms of the regulatory and supervisory framework, and the conducting of new stress tests in the banking sector. Finally, it expressed full support for the independent role of the ECB in ensuring price stability and anchoring inflation, thereby contributing to the financial stability of the euro area.

We agreed that elements of the strategy set out in the statement will be further developed in the coming months as a comprehensive response to any challenges, together with the new arrangements for economic governance. Given the tendency of the markets to react, or over-react, when ideas at an early stage of consideration are aired publicly, I urged colleagues to ensure that this work be taken forward in a considered, discreet and careful way.

I do not, therefore, intend to go into detail on the work now being undertaken on foot of the mandate given by the European Council in December. I do, however, wish to assure the House that I took the opportunity of our discussions to emphasise once again the importance of Ireland's corporation tax arrangements in the context of our economic recovery. As the House will be aware, various issues and options relating to the EFSF are under consideration. These were discussed at the euro group and ECOFIN meetings this week and I expect this work will be carried forward in the coming weeks and months.

In addition to the matters I mentioned, the European Council considered a number of other issues which I will mention briefly. Although we did not have a substantive discussion of the matter, we look forward to the Commission's proposals for the new multi-annual financial framework for the Union which is expected to be brought forward by June. We invited all relevant institutions to co-operate in order to facilitate its timely adoption.

We also welcomed the first progress report presented by the High Representative on the European Union's relations with its strategic partners. We endorsed the Council's conclusions of 14 December on enlargement and agreed to give Montenegro candidate country status. The European Council condemned the violence following the second round of the presidential elections in Côte d'lvoire and confirmed the EU's determination to take targeted restrictive measures against those who continue to obstruct respect for the sovereign will expressed by the Ivorian people. Finally, we welcomed the successful outcome of the United Nations climate change conference in Cancun.

As I said at the outset, the work of the European Council during 2010 was dominated by the economic situation. As we face into 2011, it is clear this will continue to be the case. As the Commission said in its annual growth survey, published last week, there are signs of economic recovery, albeit uneven ones, across Europe. While financial markets remain volatile, the real economy has shown signs of improvement in some quarters, leading to growing exports. Nonetheless, uncertainties remain, particularly due to the risks associated with the sovereign debt market. European economies, including Ireland, face major adjustments. The financial sector across the Union has not yet returned to normal conditions and there are vulnerabilities to stress and dependency on state support.

Credit conditions are not yet back to normal and in a number of member states household and corporate debt levels are still very high. The Commission's growth survey notes that the crisis of recent years, despite the significant steps taken by the Union to address it, has had a far-reaching impact. It has resulted in a large scale loss in economic activity, a substantial increase in unemployment, a steep fall in productivity and badly weakened public finances.

Across the Union, about 9.6% of working population is unemployed. Some 80 million people are estimated to live below the poverty line. The Commission assessment is that medium-term potential for growth in the EU will remain low, at approximately 1.5 % until 2020, if no structural action is taken to resolve the productivity gap with our main competitors. As the Commission states, recovery alone cannot take Europe back to the pre-crisis economic situation.

To avoid stagnation, unsustainable debt trends, accumulated imbalances and to ensure its competitiveness, Europe needs to accelerate the consolidation of its public finances, the reform of its financial sector and front-load structural reforms now. That is why we have collectively adopted the Europe 2020 strategy which aims to secure the reforms necessary to restore the Union to a growth trajectory. Member states have now submitted draft national reform programmes under the strategy, under which they are to set national targets in the areas of employment, investment in research and development, education, social inclusion and climate change. These programmes are to be finalised by mid-April.

Taken together, the process of reform under Europe 2020, the review of the ESFS currently underway, the establishment of a permanent stability mechanism in 2013 and the new framework for reinforced economic governance within the Union represent a significant and comprehensive approach to restoring growth and economic stability and sustainability across the European Union. This will continue to be our most important challenge in 2011.

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