Enda Kenny (Mayo, Fine Gael) | Oireachtas source

As I will be at the European Council Meeting in Brussels tomorrow, on behalf of the Government I wish Members on all sides of this House, Members of the Upper House and everyone who works here in Leinster House a happy and peaceful Christmas. I thank the Ceann Comhairle for his patience in some difficult and contentious issues that were raised here over the past 12 months. I thank his team here who ensure the House functions as a modern, efficient Parliament. They put in very long hours. I also thank the Captain of the Guard and the Superintendent for the work they do in presenting the House to the public. I thank everybody involved in the running of the Houses of the Oireachtas for their services and courtesy.

The European Council in Brussels tomorrow and Friday will be the first Council since Ireland successfully exited our international bailout. I will inform my European colleagues that this success was due to the sacrifices and perseverance of the Irish people. As the first eurozone country to successfully exit a bailout it is an achievement not only for Ireland but for Europe. It is also the final Council of the Lithuanian Presidency. Lithuania, together with Ireland and Greece, form the current trio Presidency group. I congratulate Lithuania on a successful maiden Presidency and wish Greece well with its impending Presidency.

This month the European Council has a very substantive agenda, with a number of very important issues to be discussed. The main items on the agenda are: the common security and defence policy, CSDP; economic and social policy, including implementation of the compact for growth and jobs, SME financing and taxation; economic and monetary union, EMU, including banking union; migration flows; and enlargement. Leaders will also take note of progress reports on the implementation of the internal energy market and on external energy relations. We will revert to energy policy in the spring.

The European Council will also welcome the successful outcome of the recent WTO Ministerial Conference in Bali. In addition we will discuss the ongoing and very serious humanitarian situation in Syria. The Minister of State at the Department of Foreign Affairs, Deputy Donohoe will provide more detail on this in his contribution. I expect the European Council might also look at recent developments in the Central African Republic and in relation to Ukraine and the eastern partnership.

My main priority for this Council meeting will be banking union. I welcome the fact that President Van Rompuy has also identified this as the top priority. As I have said here and elsewhere on many occasions, timely delivery of what we have already agreed in this area is a key credibility test for the Union. Finance Ministers continue to work on these issues and there are some indications of progress overnight from Brussels. A good and balanced agreement will be important for Europe and for Ireland.

On the common security and defence policy, conclusions were agreed by foreign and defence Ministers in their meeting on 18 and 19 November. We will be seeking to maintain a strong focus on enhancing the effectiveness of CSDP tomorrow. In his letter to Heads of State and Government, President Van Rompuy has set out what he sees as the key priority issues for the remainder of his term and that of the European Parliament. He emphasised the need to begin implementation of the youth employment initiative and the SME financing initiative from 1 January next. I welcome the fact that we will have discussions on these at the European Council.

I fully share the President's emphasis on the importance to the credibility of the Union of implementation of all of our commitments. Now more than ever as we prepare to ask people to vote for their representatives in the European Parliament elections, the public needs to see that we follow through and act on our commitments at European level.

The European Council will open with a discussion on the Common Security and Defence Policy, CSDP. This will be the first significant discussion on it in five years and it will provide an opportunity for a serious strategic discussion on what the EU and member states should do to maintain critical capabilities. In December 2012, the European Council reiterated its commitment to enhancing the effectiveness of the CSDP as a tangible EU contribution to international crisis management. Leaders invited the High Representative, with the European External Action Service and the European Defence Agency, as well as the Commission, to develop further proposals and actions to strengthen CSDP. We agreed to return to this issue at the December 2013 European Council, on foot of the work undertaken in the interim by the Commission and the High Representative. In July, the Commission published its communication and High Representative Ashton published her final report in October. These contributed to the conclusions agreed last month, which themselves inform the draft conclusions for the European Council.

As a strong and active supporter of CSDP, Ireland recognises the need to improve the effectiveness and visibility of EU action in this area. We currently participate in six civilian CSDP missions and three military CSDP missions. We consider that it is important for a correct balance to be struck in the conclusions between civilian and military CSDP and we wish to see the comprehensive approach to crisis management duly reflected in the December European Council outcome. We have also sought to ensure that the crucial role of the UN and regional partners is highlighted. The Minister of State will expand on this element of the European Council agenda in his contribution.

The work we do to shape our economic and social policy could not be more urgent. This week we will conclude the preliminary phase of the European Semester for 2014 by welcoming the annual growth survey and the alert mechanism report presented by the Commission on 13 November. The challenge now facing Europe's economy lies in sustaining a fragile recovery. We fully support the Commission's continued emphasis on five main priorities over the coming year: pursuing differentiated, growth-friendly fiscal consolidation; restoring lending to the economy; promoting growth and competitiveness for today and tomorrow; tackling unemployment and the social consequences of the crisis; and modernising public administration. This is the fourth European semester cycle, the third under the enhanced governance arrangements introduced by the six-pack, and the first under the further enhancements introduced by the two-pack. Ireland, of course, having successfully completed our EU-IMF programme, will be participating in the 2014 European semester.

We will also review the compact for growth and jobs which was agreed in June 2012. This represents an important reinforcement of political commitment to doing what is necessary to support recovery in the real economy. This is as important today as it was in June last year. The December Council will take stock of progress under the compact, in particular in regard to mobilising enhanced EIB lending capacity, implementing youth guarantees and finalising outstanding Single Market files.

The compact for growth and jobs provides a clear framework for actions at three levels. First are the actions to be taken at the level of member states. This means renewed attention to the Europe 2020 strategy and the enhanced economic governance arrangements underpinning the European semester. The December European Council will, in light of the annual growth survey and alert mechanism report, identify the main areas for co-ordination of economic policies and reforms over the period ahead. Second is the contribution of European policies to growth. This means keeping up strong momentum in the work taken forward by the Irish Presidency towards deepening the Single Market, expanding the Union's external trade relations, and accelerating progress on banking union. The compact also provided for a €10 billion increase in the paid-in capital of the European Investment Bank, EIB. Third are EMU-related growth factors. This means further development of the work on the 'four essential building blocks' for strengthening the economic and monetary union. It is clear that Europe will have recovered from the current crisis only when its economies are growing again and creating jobs. The compact sets out very clearly what we need to do to support this recovery. We must ensure that it is implemented.

I expect there will be a particular focus in discussions on measures to underpin the financing of the economy. This follows the investment plan which the European Council agreed in June, mobilising the €10 billion increase in the capital base of the EIB. This will support a 40% increase in lending capacity up to 2015, bringing annual EIB lending volumes to between €65 billion and €70 billion. The report from the Commission and EIB that was presented in June indicated that the bank had already identified new lending opportunities of more than €150 billion in agreed priority areas such as innovation and skills; SME access to finance; resource efficiency; and strategic infrastructures. These are projects that would be unlikely to proceed without EIB support.

The investment plan also develops important synergies between enhanced EIB lending capacity and the new EU budget settled by the Irish Presidency. Resources here will be combined to support a significantly expanded volume of new SME loans across the Union. Work being led by Ministers Howlin and Noonan will see almost €1.2 billion worth of EIB project signatures and loan approvals in Ireland in 2013. This represents an increase of just over one-fifth on 2012 levels, which were in turn up more than four-fifths on the previous year. We also see room for further progress here, building from the successful reopening in April of the Irish PPP market -for the first time since 2007, and for restoring normal lending conditions across the economy generally.

The Council will also touch on the continuing work at European and national levels to tackle the scourge of youth unemployment. Work is continuing to ensure our initial youth guarantee implementation plan ready before the end of this year. This work is being led by the Department of Social Protection and supported by the OECD. Preparations are on track. Job creation is, of course, a vital pillar of our new medium term economic plan.

The December European Council will also aim to reinforce momentum under Single Market Acts I and II. In that regard, the EPSCO agreement last week on a general approach on posted workers is a welcome development. On 2 and 3 December, the Competitiveness Council identified three main strands that will lead to a better functioning of the internal market, the governance of the single market, the steps to be taken to unlock the full potential of the services sector and the actions to promote the transition to electronic procurement.

Heads of State and Government are also expected to review actions undertaken since May in the area of taxation by ECOFIN and the Commission. In May, the European Council highlighted the need for effective steps to fight tax evasion and fraud and called for rapid progress on a number of issues, including extension of the automatic exchange of information; an action plan on strengthening the fight against tax fraud and tax evasion; and, the directives on the VAT quick reaction mechanism and on the VAT reverse charge mechanism. The European Council also pointed out that these issues must be tackled at a global level and linked this work to ongoing work in the G8, G20 and, most importantly, the work already under way at the OECD.

The OECD's global forum on transparency and exchange of information for tax purposes confirmed on 22 November that Ireland is one of 18 out of 50 countries or jurisdictions, and one of six EU member states, which are fully compliant with regard to practical implementation of the forum's information exchange standard. At the October Council, these issues were raised again in the context of the digital sector, and the Council welcomed the Commission's establishment of an expert group on taxation of the digital economy. I am pleased to report that an Irish woman, Ms Mary Walsh, has been appointed to the group. She is a chartered accountant and served on our Commission on Taxation.

Ireland welcomes the establishment of the expert group and we hope it will be able to assist the EU in tackling this issue. It is clear that the digital economy has moved at a pace that international tax rules may not have fully kept pace with. An expert analysis of these new business models is needed to ascertain where the economic substance and value and income producing activities lie and to consider to what extent international tax rules are still fit for purpose. This is already happening as part of the OECD BEPS task force on the digital economy. We support this initiative.

For our discussion on the shared analysis of the European economy based on the 2014 annual growth survey, and on economic and monetary union, we will be joined by ECB President Draghi. Clearly, the establishment of a banking union is a major political priority and will be a landmark in the evolution of the economic and monetary union. The first step in creating the banking union was taken with the recent adoption by the Council and the European Parliament of the single supervisory mechanism, SSM. The SSM has now entered into force, and the ECB will take over its full tasks under the regulation, exercising direct supervisory responsibilities from November 2014.

As part of the transition to the SSM, a balance sheet assessment will be conducted, comprising a supervisory risk assessment, an asset quality review and subsequently a stress test. The purpose of this exercise is to ensure that banks are appropriately capitalised going forward. The ECB, before assuming its supervisory role in November 2014, will provide a single comprehensive disclosure of the results and any recommendations for supervisory measures to be undertaken by banks. As part of the troika programme, the Irish banks had to complete asset quality reviews before the bailout exit earlier this week. Earlier this month, Bank of Ireland, Allied Irish Banks and Permanent TSB informed markets that, following the asset quality reviews, they were well capitalised and passed minimum capital requirements.

The agreement reached between the Presidency and the Parliament last week on the bank recovery and resolution directive is another welcome step in putting together banking union. There has been progress on the deposit guarantee scheme. Ministers for Finance are in Brussels with a view to reaching agreement on the single resolution mechanism, SRM. There are some positive signs emerging from these discussions. They include agreement that a common backstop will be developed during the transition period of the SRM and that the banking sector will ultimately be liable for repayment. This is fundamental and welcome. Work is continuing on governance arrangements, including voting rights for the single resolution board. Again, we will continue to press for our concerns to be addressed. This is a complex and sensitive task. Each member state has a vested interest in seeing a good and balanced outcome. I know that the Minister, Deputy Michael Noonan, and his ECOFIN colleagues are working very hard to find the right way forward. Ireland supports a broad scope for the SRM and the creation of a single fund which should also have a credible EU level backstop. The combination of a single fund and the backstop will assist in achieving the objective established by the Heads of State and Government of breaking the link between the sovereign and the banking sector. As I mentioned, indications overnight from Brussels are positive. After all, that is the point of the exercise. Moreover, it is what we have committed to do.

With regard to partnerships for growth, job creation and competitiveness, the Council agreed in October that work would be taken forward to strengthen economic policy co-ordination on the main features of a proposal to introduce contractual arrangements and associated solidarity mechanisms. While a great deal of work has been done and good progress has been made, significant divergences of opinion remain on these proposals. This is a serious business if we are to commit member states to new binding arrangements. We want to ensure we get this right and should not rush to make decisions if there is a need to elaborate further on the nature, process and impact of such contracts. Any new contractual arrangement should operate within the framework of the existing European semester process. A number of economic governance instruments have been in operation since the adoption of the six pack and the two pack and we should approach this entire debate from the perspective of adding value to the existing framework, where appropriate, and avoiding duplication. Further discussion and clarification are required on central issues such as the nature of the proposed contractual arrangements and whether they would be mandatory or voluntary, the source of funding for the proposed solidarity mechanism, how we can encourage participation and to which policy areas the contracts might eventually apply. These are very necessary.

The precise roles in the process of the member states, the Council and the Commission also need to be defined. As a supporter of the Community method, Ireland welcomes the proposal that the Commission monitor compliance with the contractual obligations by recipient member states. However, we will need clarity on the respective roles of the Commission and the Council. Overall, I would like to see far more detail on these proposals before we make hard and fast decisions. Many other member states share this view. I believe we will return to this matter again in 2014.

I undertand my time is up.

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