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

The best that can be said for last week’s summit is that it received very little attention and did not cause any new crisis. The Taoiseach clearly shares my view that the summit was inconsequential given that he was prepared to postpone this debate for several weeks. However, the record shows that at a time of urgent need for action the leaders of Europe chose to spend their time on the formal discussion of longer term items. They did not discuss a single item which could create a job this year or next year for one of the 27 million unemployed people in Europe. They did not consider any measure which would restore the bank lending that is vital to the survival of businesses and families. They did not even address the delays in implementing already agreed policies.

The summit’s agenda was effectively as set out early last year. It did not include any significant new input from the Irish Presidency and did not reach any formal agreement. While the areas of tax and energy are important for the long-term economic success of the European Union, they are marginal to immediate needs. Throughout the five years of this crisis there has been a constant pattern of periods of relative calm being wasted as leaders fall back into complacency. Inevitably, they wait for new turmoil in the markets before taking long needed decisions. Unfortunately, we are now in another period of complacency. There is no discernible movement on any of the urgent measures which should be taken this year to restore confidence and growth to the Union.

Two weeks ago, the President of the European Central Bank, Mr. Mario Draghi, outlined what he considers to be the economic strategy of the European Union. He summed it up this strategy as "confidence, credit and competitiveness". Mr. Draghi, who has been by far the most constructive force for change in the Union in the past two years, said this approvingly. The problem is that it is the same strategy which has been in place for the past five years. No one can argue that the current strategy is working and it is unrealistic to expect it to suddenly deliver growth.

The highly discouraging decision taken at the March summit on the European Union’s budget confirmed there will be no direct stimulus from Europe - on the contrary. I accept that the scope for changing the current position in the near future is almost zero. The Taoiseach and everyone else should not speak of this as a good agreement.

As a result of this, we must focus on other steps that can be taken. There are four specific actions which could be taken by the Union in the coming months and which would, collectively, have a positive impact on the economy. These are: support for extra investment by states who can afford it; completion of the banking union; political support for the European Central Bank's new lender of last resort facility; and a frontloading of some programmes in the new budget.

There are states, such as Ireland, which have no alternative but to maintain a policy of further cutting deficits. However there are others which have significant room for maintaining or even increasing spending. The common policy of cutting deficits has made the economic situation of all countries worse, with most now missing both growth and budget targets. At June's summit, EU leaders will sign off on country-specific economic recommendations. Ireland and other states should insist that these recommendations should end the policy of uniform austerity. States may well continue with their self-defeating policies but we should stop endorsing them and should support any states which have room for stimulus spending to implement it.

The absence of a banking union to go with monetary union was at the very core of the creation of the financial crisis. The agreement to form a banking union was seen as impossible two years ago but it has now been agreed in principle. Without this union a restoration of normal credit flows within the eurozone is impossible. In the context of the core pillars of such a union, namely, regulation, deposit insurance and a resolution regime, the negotiations taking place are at best delivering a semi-banking union. Without a single approach covering the entire eurozone, the basic principle of sustainable confidence in the banking system will not be achieved. If the negotiating process goes on for too long and if the final agreements continue to be watered down, a renewed destabilising of banks is entirely possible. We should not be willing to accept something we do not believe delivers what is needed. The pace of negotiations must be speeded up. This matter should be a permanent item on the agenda of full Council summits until it is finalised.

A rapid collapse of the euro was avoided by the statement from the ECB last July that it would do "whatever it takes" to save the common currency. This marked a radical departure from rigid orthodoxies and immediately restored confidence in European investment markets. This move was an unequivocal success. However, it continues to be the subject of regular sniping and the legal basis of the most important measure - outright monetary transactions - has been challenged at senior political level. If any part of the ECB's new strategy were to unravel, the impact would be severe. Even with these changes, the euro does not have a central bank which can support long-term growth. However, it has at least stopped causing major damage. It is surprising how few political leaders have clearly outlined their support for the ECB's new policies. This is serious because there has been no push-back against the flawed claims that the ban on monetary financing of governments has been infringed. There is a clear need for political leaders to address this matter and, at the very least, to prevent any doubt about whether the ECB's new policies are permanent.

The multi-annual funding framework agreed in March is a step backwards for the Union. An already inadequate budget is to be cut and the sharpest reductions will be made in areas where the Union is making the biggest impact. The Taoiseach said yesterday that the level of youth unemployment in Portugal and Spain is shocking. That is true, but what is also shocking is that he and the other leaders of the Union are pretending that they are doing something by creating a fund worth €144 per year to each young unemployed person throughout Europe. I accept that the deal will not be reopened. However, there are specific steps which could be taken to immediately improve its impact or at least to delay its most damaging features. The European Parliament's demand that this year’s shortfall should not to be taken out of the budget should be supported. I have not heard the Taoiseach indicate whether he supports this demand. Where it is possible to bring forward investment initiatives or support programmes, these should be frontloaded. The 10% cut in rural support schemes has already been deeply damaging. We are led to believe that there will be a conclusion in respect of the negotiations on the Common Agricultural Policy by the end of next month. I sincerely hope the final deal will preserve family farms as well as productive farmers.

The final immediate step which could be taken to help recovery would be to ensure that all countries are treated equally and that none suffers disproportionately from the fact that current policies were absent in the first four years of the crisis. It is incomplete but there is at least today a framework for dealing with banking collapse and sovereign debt pressures. Some countries, including Ireland, did not benefit from the new measures and were effectively left to carry an unfair burden as Europe sought to hold the line on policies now acknowledged as failed. As the Taoiseach belatedly put it in October "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". The Taoiseach does not like to repeat this much because it gets in the way of party politics. It is, however, a powerful case for Ireland.

These legacy issues are not some side point of little relevance. They actually go to the heart of achieving recovery and restoring popular support for the Union. There is a shared responsibility for the failures of past European policies and this has not been fully acknowledged. The recent deal on promissory notes represents progress, but it goes nowhere near meeting the justice of Ireland's case. The entire fiscal benefit of that deal could unravel if the Central Bank of Ireland were to be forced to sell off its new holding of bonds earlier than planned. If recovery in Ireland is to be fully underpinned, further movement is required. Specifically, the ECB should not only allow the Central Bank to hold its Irish bonds to maturity, thereby returning interest payments to the Exchequer, it should also commit to returning to each country's central bank the profits on its holding of sovereign debt. A deal on this has already been of significant assistance to Greece. If these two measures were implemented, Ireland's fiscal position would see a secure improvement of more than €2 billion per annum. Their implementation would also remove much potential for resentment regarding unfairly carrying the burden for the inflexible and failed European policies of the recent past.

At present, 100% of the space in budget figures about which Ministers have begun to argue has developed as a result of changes in European Union policies on debt. A more comprehensive and equitable response would make a huge contribution to Ireland's recovery as well as to the recoveries of other countries. As was long-scheduled, last week's summit addressed the issue of the administration of tax systems, particularly to combat fraud. Nothing surprising emerged in the final communiqué. The measures involved should be studied further, but in principle, they are to be welcomed.

The international headlines concerning our administration of corporate taxation were not helpful and, in many cases, were not informed. This is a complex area and it is simply not the case that Ireland is or ever has been a tax haven.

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