Enda Kenny (Mayo, Fine Gael) | Oireachtas source

I am pleased to brief the House on the outcome of last month's meeting of the European Council, which took place in Brussels on Thursday and Friday, 24 and 25 October. As I told Deputies in my statement in advance of the Council, I had three clear priorities for this meeting - namely, to contribute to a productive discussion on the digital economy, innovation and services as vital sources of future growth for Ireland and Europe; to push for action on developing digital skills in order to combat youth unemployment; and to urge partners to reach agreement on the final elements of banking union. As I told the House on 23 October, I wrote to President Van Rompuy and my fellow leaders in advance of this meeting and advised them that Ireland is now preparing to exit our EU-IMF programme and that a successful and sustainable exit will be a very significant and positive step both nationally and at EU level. The stability of the eurozone and the wider Union is critical to help maintain and anchor our recovery. I emphasised the importance of delivering on our commitments and of maintaining and building on the achievements for which we have together worked so hard. In particular, I emphasised the need to ensure that the banking union is completed on time and the need to hold firm to our deadlines for agreeing the remaining legislation on deposit guarantees and on a single resolution mechanism. I stressed the necessity, as agreed in June 2012, of breaking the vicious circle between bank and sovereign debts that forced Ireland into a programme in 2010, at a time when there was a different consensus in Europe on the merits of bailing in creditors of failed banks. Breaking this link is important not just in ensuring that our impending return to full market financing can be a durable success story for the entire eurozone, but also for the longer term credibility and stability of the eurozone and of the Union.

I highlighted the need to maintain our focus on growth and jobs as the key goals to which all our policies and programmes must contribute. Nothing should deflect us from our focus on getting our young people into the workforce and creating productive and healthy lives for themselves. I believe our young people could be the main beneficiaries of the high-potential digital sector. We need to maximise this potential. As I said to the House prior to the meeting of the European Council, the reality is that most new jobs are created by fast-growing young firms in sectors such as cloud computing. With over a quarter of digital sector employers across Europe finding it difficult to fill vacancies, there is clearly more we can and need to do in aligning our education and training systems with the needs of 21st century employers.

There are now early signs of recovery in Europe's economic performance. The numbers for the second quarter of this year show GDP up slightly in both the EU and the euro area for the first time since the end of 2011. Net job creation has resumed in most member states, including, of course, in Ireland. However it is clear that unemployment remains unacceptably high on foot of a period of deep and protracted recession. It is also clear that there is more we can and must do to support a stronger EU-wide recovery so that unemployment falls faster. This means, above all, unlocking new investments in the real economy so that successful firms expand their activities at home and abroad, including new firms and new growth areas. From Ireland's point of view - I stressed this to the meeting - this is about growth in the digital sector, supporting real jobs, and ensuring our people, including our young people, have the digital skills to access the employment opportunities that exist and will grow. I also emphasised the opportunity represented by the many unfilled ICT jobs at a time of mass youth unemployment in so many member states. A presentation given by the Commission indicated that 1 million job vacancies will exist in this area by the end of 2015. This is our clear domestic emphasis. It is being implemented through the interlocked Action Plan for Jobs and Pathways to Work strategies. It is the emphasis that we must continue to strengthen at European level, building on the successful Irish Presidency programme. That is why I attach particular importance to our October discussion on the digital economy and innovation. With so many new jobs created by fast-growing young firms, it is appropriate that we seek to create the right conditions to support new growth areas. This includes early and tangible progress on SME access to finance.

Our discussions were informed by a very valuable presentation from President Barroso, which highlighted three key messages. First, innovation in both the private and public sectors is key to raising our productivity levels and is driven by ICT investment. However, Europe is clearly lagging here. EU investment in ICT as a share of overall investment is currently running at less than half the equivalent US rate. Second, this means Europe is not making the most of digital economy opportunities. A striking example is that the US, Korea and Japan between them account for almost 90% of the world's 4G mobile subscriptions, compared to just 6% in Europe. This is in stark contrast with Europe's leading position in the 1990s in setting global standards. Third, fragmented market rules are a key bottleneck that must be addressed. Our Single Market must become a digital single market, with clear dividends for both consumers and job-creating SMEs. We should not have any digital barriers. If we have removed physical barriers between countries, we should not have digital barriers. This last point in particular picks up one of the central themes of our Presidency - namely, that the next phase of Europe's recovery must involve a Single Market of the future, notably a digital single market, and the need to ensure that the legislation supporting the Single Market keeps up with new market trends and the way our citizens now live their lives.

The European Council agreed three political responses. The first of these is pressing ahead with work on a truly connected continent. We have already set a clear goal under the Compact for Growth and Jobs of having a well-functioning digital single market by 2015. We must now deliver that goal. In practical terms, this means breaking down digital barriers in areas such as online shopping and cross-border roaming charges. It also means having the right market rules for unlocking a new wave of investments in next-generation broadband and 4G mobile services. These investments can underpin productivity growth and provide a direct boost to the real economy. The second key area is making it as easy as possible for consumers and businesses to do their business digitally. Governments and public administrations will have a crucial role to play here, and must work harder to keep up with the rapid pace of market developments. This should be a win-win proposition, with some estimates suggesting potential efficiency gains of up to 20%. Building trust and confidence must of course be at the heart of our efforts. I attached particular importance here to the modernisation of our data protection frameworks, including careful attention to the role of streamlined market rules in supporting new growth areas. There was clear acknowledgement in this context of the enormous potential offered by developments in areas such as big data and cloud computing.

The European Commission will also complete its review of the EU copyright framework next spring.

I expect this will identify clearly the next steps needed here which will fall to the incoming Commission to take forward in the second half of the year.

Leaders also discussed taxation of the digital economy. There is widespread consensus that the changes that have occurred require a response but that it must be a global response; therefore, this is best handled in the OECD's base erosion and profit shifting framework. We agreed that, where appropriate, member states should co-ordinate their positions to achieve the best possible outcome in the context of that framework and that we would return to it in December.

The third area of agreement is a strong push on digital skills, including stronger linkages with ongoing work on youth employment. With estimates that one quarter of European employers are finding it difficult to fill vacancies, there is more we need to do to align the education and training systems with the 21st century reality. In that vein, I took the opportunity to inform my colleagues of the Dublin web summit which took place last week and which was such an outstanding success.

The October meeting also took stock of progress on other key initiatives being advanced within the framework of the Compact for Growth and Jobs. We agreed that work must continue to ensure the youth employment Initiative would be fully operational from the beginning of 2014. I highlighted our work towards implementing the youth guarantee in Ireland. I will participate next week in an important conference being organised by President Hollande in Paris which is intended to ensure continued political momentum.

The October European Council also highlighted the importance of finalising work on the new joint risk-sharing instruments between the Commission and the ECB to address the credit constraints still facing the job creating sectors. These should expand the volume of SME loans across the European Union from the beginning of next year and increase the alignment with the new multi-annual financial framework. The problems of financing SMEs will continue to be an important area for Ireland and the Union as a whole and I have no doubt that we will be returning to that issue again.

The Council welcomed, too, the important proposals made by the Commission in the area of regulatory fitness, REFIT. We need to see our digital and smart regulation agendas as complementary. This is about eliminating unnecessary red tape and reducing transaction costs for the businesses than can and will create new jobs. I fully support this. It was also an important endorsement of the work being taken forward by the Commission to ensure full implementation of the services directive, including on remaining barriers in the area of regulated professions. We agreed to annual reporting on the necessary national level reforms and that the Commission would make further proposals in the first quarter of next year.

One of the most immediate priorities, as emphasised by the Heads of State and Government at the June European Council, is to progress the banking union, as this is key to restoring financial stability to the euro area. We must follow through on the 29 June 2012 statement by the Heads of State and Government and break the link between the banks and the sovereign. I welcome the call by the European Council for the Eurogroup to finalise guidelines for European Stability Mechanism, ESM, direct recapitalisation in order that the ESM can have the possibility to recapitalise banks directly, following the establishment of the single supervisory mechanism. Parallel to this, the work on all other building blocks of a reinforced EMU must continue.

President Draghi updated the European Council on the steps being taken by the European Central Bank to support banking union. It remains my view which I reiterated to partners that not only must we implement what we have committed to, we must also strive do so within the deadlines we have agreed. In that regard, the European Council's reiteration of the urgency and importance of completing the banking union is welcome. I welcome the regulations for the single supervisory mechanism, SSM, recently adopted. This is an important step towards banking union.

With regard to the preparations for the ECB's asset quality review which is to be followed by stress tests, the European Council agreed that member states would make all appropriate arrangements, that European instruments would be available and that the ESM would have the possibility to recapitalise banks directly. As decided in June, the European Council will return to all of these elements in December with a view to taking final decisions. The ECB's comprehensive assessment of the banks of the member states participating in the single supervisory mechanism is key to restoring confidence in the European Union's banking sector and in helping to restore normal lending conditions to firms and households. Ireland will, of course, fully co-operate with this comprehensive assessment of its banks in advance of the ECB taking over direct supervisory responsibility. We fully support the creation of the single resolution mechanism, SRM, supported by the single resolution fund as the natural complement to the SSM. With the SSM coming into full effect towards the end of 2014, it is important that the SRM follow soon after. The October European Council called for agreement on the SRM by the end of the year and this will be the subject of further discussions at our December meeting.

Strengthened economic policy co-ordination was also discussed. The Heads of State and Government acknowledged that enhanced economic policy co-ordination should be accompanied by increased national commitment and ownership and December's Council is due to return to this subject.

At the December European Council we will discuss the policy areas identified by the Commission in the 2014 annual growth survey and the macroeconomic issues highlighted by the 2014 alert mechanism report. The Commission will also provide a first overview of the implementation by member states of the country specific recommendations. Ireland, as a programme country, did not receive country specific recommendations in 2013, but we will participate fully in the 2014 semester process.

The Lithuanian Presidency also updated the European Council on the state of play of preparations for the eastern partnership summit to take place in Vilnius on 28 and 29 November. Ireland is supportive of the aims of the eastern partnership.

The European Council expressed its deep sadness at the recent deaths of hundreds of people in the Mediterranean on their way to Lampedusa. The unfortunate victims were migrants seeking to reach Europe from Africa who had lost their lives when the boats carrying them sank. To this end, a task force for the Mediterranean has been established, led by the European Commission and involving member states, relevant EU agencies and the European External Action Service, to develop a strategy to identify priority actions in the short term.

The Heads of State and Government also issued a statement in response to the further recent revelations concerning data gathering activities by US intelligence agencies which have caused considerable concern among European citizens. In the statement the leaders underlined the close relationship between Europe and the USA and the need for this valuable partnership to be based on respect and trust, including in the activities and co-operation of secret services. They stressed that intelligence gathering was a vital element in the fight against terrorism and that a lack of trust could adversely impact on the co-operation on which such intelligence gathering depended.

Although not on the agenda and not least given the interest of other leaders in the subject, I took the opportunity, both in my letter in advance of the meeting and in contacts with colleagues around the European Council, to update them on our impending exit from the EU-IMF programme. I said we would be exiting in December. The economy is growing; employment is growing; our budget is on track, and our debt will peak next year. We also have significant cash reserves and these elements, taken together, mean that Ireland is in a strong position as we exit the programme. There was strong support among colleagues for our efforts. We have access to the ESM bailout fund of €500 billion, the same as any other eurozone country.

On the crucial issue of financing of the economy and, in particular, financing for SMEs, the European Council agreed additional measures. Banking union was recognised by the European Council which reiterated the importance of making progress by the end of the year. I look forward to returning to the House before the December meeting.

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