Micheál Martin (Cork South Central, Fianna Fail) | Oireachtas source

This week the European Council is meeting at a time when the economic situation in Europe is taking a significant turn for the worse. The growth projections for all major economies and the eurozone as a whole have just been cut. Within the eurozone unemployment has increased by over 170,000 since leaders last met and now reached the unprecedented figure of 18.7 million people out of work. A familiar pattern of rising bond yields and threatened credit ratings has begun to return. Yet again, however, the agenda adopted by Europe's leaders is nowhere near ambitious or urgent enough to tackle the crisis. The summit will be entirely taken up with matters which should have been dealt with long ago. Banking union, an essential foundation for recovery, has been delayed. The draft conclusions for the summit state leaders understand the urgent need for radical reform of Economic and Monetary Union and that they might get around to doing something in two years time.

In terms of Ireland's needs, there is a lot of misleading ministerial bluster. As usual the Government is providing little or no information, but the evidence suggests it is no longer even seeking the scale of adjustment to the promissory notes which Ireland deserves. In advance of every summit President Van Rompuy publishes a short letter to leaders which contains a bland summary, mainly intended for the media. It has been the habit of the Taoiseach to limit what he says to the House in these debates to what has already been published in these summaries. This debate is unusual in that we have more information to work with because the detailed draft conclusions were leaked last week.

The core of the summit will be the issue of addressing the flaws in Economic and Monetary Union. I will address the wider part of this agenda later, but for the moment I will concentrate on the most urgent parts of it, namely, banking union and Ireland's bank related debts. The need for a strong banking union within the eurozone is obvious to everyone. No part of the existing system is as broken as financial regulation. There is no middle way between national and eurozone regulation. Trying to construct a middle way is what caused so much of the trouble in recent years. In June agreement was reached in principle to create a banking union and the eurozone leaders announced that proposals would be fully agreed by the end of the year. The core of the proposal, the single supervisory mechanism, was agreed to as the necessary first step before any money for bank recapitalisation from the ESM could be allowed to be paid.

Many meetings have been held since, but nothing has been agreed. Every significant target has slipped. Finance Ministers have repeatedly made matters worse by staking out positions which seek to undo the substance of a banking union. Germany's position is that it is in favour of a banking union as long as it does not cover most of its banks and has no shared system fof winding up banks or guaranteeing deposits. The non-eurozone countries, particularly Sweden and the United Kingdom, have raised reasonable points about having a say in all decisions which affect their banks. Ireland's only reported impact on negotiations has been to insist that nothing should be agreed which might need to be voted on by the people. According to the draft communiqué, legislation concerning bank resolution and deposit guarantees are not to be agreed to until next March at the earliest and no date has been given for when the single supervisory mechanism will take effect. This is a signal that Europe's leaders are rolling back on what they described in June as their determination to do everything possible as quickly as possible. There is serious uncertainty about whether real reforms will be adopted. Whatever emerges will, of course, be hailed by leaders as visionary. In reality, however, people no longer listen to their rhetoric because experience has taught them to wait to discover the substance.

The case for a lifting of the burden of much of Ireland's bank related debt is rarely aired in public by the Taoiseach beyond generalities. An exception to this rule was made by him in October, when he said: "Ireland was the first and only country which had a European position imposed upon it in the sense that there wasn't the opportunity, if the government so wished, to do it their way by burning bondholders." That is a powerful argument, because it is true. However, the Government has used it very rarely. It has preferred to keep up with empty political talking points. It prefers to keep up the claim of a bad deal, because saying it was the acceptance of an imposed position with no alternative available does not get the backbenchers excited.

The main tactic the Taoiseach has adopted at Council meetings so far has been to hope that something turns up. The ongoing Greek crisis has meant that on two occasions, significant interest rate cuts have been made available to all countries. In June, pressures applied by Spain won agreement to the principle of European financing of bank-related debt and a resolution regime which allows the burning of bondholders. The fact Ireland was not expecting or pushing for anything then was shown by the fact that the Tánaiste flew home early and had to do his interviews claiming credit for the deal in Dublin. As matters stand today, the public has no idea of what is being sought by the Government. The goalposts have been moved so often that there is now no doubt that the priority is to ensure the Government can claim whatever emerges as a victory. This is probably the major reason behind the failure to set out a definition of debt sustainability. We have just had a budget announced, but not one Member of Government has been willing to say what he or she believes is a sustainable level for our debt.

The promissory notes were structured in such a way that the interest returns to the State through our Central Bank. At the moment, it is the principle that matters and this is a burden too heavy for us to bear. Due to the way the notes were structured, a subsequent negotiation was always required. However that appears to have started seriously only in recent months. Last year's proposed technical paper - does the Taoiseach remember that, I think he got a year out of it? - never appeared and the Minister, Deputy Noonan, moved on to talking about selling bank shares to the ESM before he abandoned that as well.

Without a major deal, which we believe is justifiable, next year a further €3.1 billion will be converted from promissory notes into normal interest-bearing Government bonds. This will continue for ten years, by which time there will be nothing left but the full incorporation of all bank related debt into our sovereign debt at market rates. This matters more today than it did a week ago, because we now have evidence that the Government is missing its budgetary targets. Its decisions have pushed down confidence, growth, revenue and employment. Its Ministers have failed to deliver on spending commitments, with the Department controlling the largest discretionary budget in chaos and controlled by a man whose colleagues brief against him daily. Without a significant deal on the promissory notes, the suppressed revenue and overspending revealed last week will require increased adjustments. Given how these issues have been handled so far, they will further depress the economy and increase unfairness.

The Minister for Communications, Energy and Natural Resources, Deputy Rabbitte, is a man who has a career-long commitment to trying to shake foundations with his words, irrespective of the facts lying behind these words. He was at this again on Sunday, with his claims that the Government "has no intention of paying the promissory note", saying "we didn't pay it this year". Extraordinarily, the Tánaiste repeated most of these words yesterday in Brussels, although I am aware the Taoiseach took a different tack. Not only did the Government pay the promissory note this year, but the ECB issued a press release praising it for paying it in full and on time. What the Government did was convert the note into a 12-month bond, bought by the Bank of Ireland, with the Government paying the Bank of Ireland millions in profits. Because of the subterfuge used by the Government in trying to manipulate media coverage, it took a while for this to be spotted. If this is what Labour Party Ministers define as not paying it, they are fooling no one.

Given how Labour's way was abandoned even before the Government was formed, the idea that the Tánaiste and his predecessor as leader are getting tough has been dismissed. At best, it is believed they are trying to talk up their role in a deal they feel may be on the way. Because the Government has refused to publish any technical papers about what it is seeking, finance experts have been left to patch together ideas. Professor Karl Whelan of Trinity College, who has been consistently ahead of Ministers in understanding the operation of the promissory notes, has estimated that over half of the burden of redeeming the notes and converting them into standard sovereign debt could be lifted in certain circumstances.

Given the role that Ireland played in being willing to act in the interests of the wider eurozone, we deserve a concrete lessening of the burden of the debts we took at a critical moment. Without this, our fiscal consolidation may be deeply undermined. I believe there will be a deal on the promissory note and that if it is based on principles which have been agreed by Europe's leaders under pressure from other countries, it will make a significant difference to our budget.

It is time for the Taoiseach and the Government to put aside the public relations posturing and to be open with the people. They should publish the documentation they have submitted to the ECB and tell us what they believe is a sustainable level of debt and what they believe Ireland is entitled to out of fairness. If the policy continues to be to say as little as possible and to claim everything as a victory, there will be very negative reactions, and not just from the Irish people.

The Presidents of both the Commission and the Council have produced documents concerning the reform of economic and monetary union, and President Van Rompuy's more limited vision is the one which is now on the table. It is not good enough and the timetable is ridiculous. Even the man who first proposed EMU, Jacques Delors, has talked about the fundamental flaws in the euro which helped cause this crisis. Most of these flaws require changes to the European treaties. Yet, according to the draft conclusions for this week's summit, no such changes will be prepared for at least two years. The communique states that a "common stabilisation function", which is new jargon for actions capable of helping countries in economic difficulties, will not be discussed until after the next European Commission takes office in late 2014.

How can this be a credible response to a crisis which has seen unemployment grow to nearly 19 million people? How can it give confidence to investors who fear that governments do not have the commitment to get Europe back to real growth? It is long past time for the Taoiseach to set out the reforms Ireland wants to see implemented. The policy of supporting anything, as long as there is no referendum must end.

The summit will also issue conclusions relating to the development of the Common Security and Defence Policy, CSDP. The draft states that the pooling and sharing of military capabilities should be pushed forward and it is quite assertive in developing this dimension of the Union's work. While there is nothing to indicate this, I assume the Taoiseach has already said that we do not want to pool or share many of the defence capabilities of other states. I hope the Taoiseach will clarify this in his response. Nothing will be decided until next December, but we should set out now that we do not thing that the development of the CSDP is a priority and that the case for significant development has not been made. Recent changes to the treaties should be given time to bed down. Let us see how the European Union works in this area and, in particular, let us see if it can develop itself successfully as a support to the United Nations.

With regard to foreign policy, the summit should set out a strong and united EU position in opposition to the outrageous behaviour of the Netanyahu government in pushing ahead with escalated settlement building. This is a highly provocative move, without any regard to UN resolutions, the European Union, the US position or international law, which sets back any prospect for meaningful talks towards a durable peace process and settlement.

See this speech in context