Dáil debates

Tuesday, 26 June 2012

4:00 pm

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

The important meeting of the European Council that will take place on Thursday and Friday of this week will have a full and significant agenda. The main item for discussion will be economic policy. The matters to be examined include the contents of a compact for growth and jobs and President Van Rompuy's report on how to strengthen economic and monetary union. We will also discuss the future budget for the Union - the multi-annual financial framework. Under the heading of enlargement, we will consider the question of the opening of negotiations with Montenegro. We will address a number of matters in the Justice and Home Affairs area. We will welcome the work that has been done on nuclear stress tests on foot of the request we made in December 2011. We will also discuss foreign policy matters, including the situation in Syria.

The House will be aware that the European Council has met with increasing frequency since the economic crisis in Europe started. During all of these meetings, we have sought to move Europe beyond crisis and into a phase of stabilisation, recovery and growth. Our approach has not always been as balanced, ambitious or sure-footed as it should have been. The crisis has continued. It is clear, including from recent events, that we have yet to convince the markets that Europe is a stable and safe place in which to invest. As a Union, our growth prospects remain low. Too many of our people, especially young people, are without jobs. As I have said previously, recent meetings of the European Council, especially those in January and March and at the end of May, have been much more firmly focused on how we can put in place concrete measures to engineer recovery, generate growth and support job creation. That will be the focus of our work again later this week. I will look for progress to be made on all fronts. I will seek concrete steps to help us to stabilise the current situation; to get investment flowing in the real economy and thereby encourage growth and jobs; to prioritise policies, including in the Single Market and on trade, that have real growth potential in the short and medium terms; and to lay the groundwork for a more stable and deeper economic and monetary union.

Our discussions on economic matters will centre around three elements: the conclusions we will adopt, the compact on growth and jobs, and the report we will receive from President Van Rompuy on the building blocks needed to strengthen economic union. The European Council will take the final formal step in this year's European semester in endorsing the country-specific recommendations addressed to each member state. These will be reflected in upcoming decisions on budgets, structural reforms and employment policies. As a country that is receiving financial assistance, the recommendation to Ireland is that we should continue to implement the terms of our EU-IMF programme as we have been doing to date. Importantly, the meeting will adopt a compact for growth and jobs. This is a welcome departure. As the House will be aware, the Government has long argued that such a pact is urgently needed not just in its own terms, but also as a vitally important balance to the fiscal pact we adopted through the new treaty. Just as we need reform and discipline, we also need an equally firm focus on growth and job creation.

The compact contains measures that have the capacity to make a meaningful impact over the short and medium terms. Most immediately, it proposes initiatives with the potential to deliver a boost to growth by injecting increased investment into the real economy. It proposes an increase of €10 billion in the European Investment Bank's capital, an amount that can be converted with leverage into an additional €60 billion in lending, thereby supporting an additional €180 billion in investment. The compact also urges that we press forward with the pilot phase of project bonds, focus Structural Fund spending on growth-oriented projects, and bring the European Investment Fund into play. All of these steps will make a positive difference, but they will not achieve the real results we are looking for if they are not fully accessible to countries where investment is most urgently needed. Therefore, I will continue to make the case for the maximum flexibility and creativity so investment can be targeted where it should be. I welcome the recognition in the draft text that the European Investment Bank's increased lending should be "spread across the whole European Union, including in the most vulnerable countries".

The compact also calls for deepening of the Single Market, particularly in digital and network industries. As the House is aware, the Commission is advancing work on the first 12 measures under the Single Market Act. It will bring forward its proposals for the next phase in the autumn. This will be a key input into the work of our Presidency in the first half of next year. I have said many times that the digital agenda is particularly promising. I expect that next week's meeting will call for swift progress on measures aimed at further developing online trade, including e-invoicing, e-identification and other electronic services. We will also note the crucial importance of rolling out high-speed Internet, modernising Europe's copyright regime and facilitating licensing. I hope it will be possible to reach final agreement on the patent, a file that has been open for so long it has become a symbol of Europe's capacity to act.

The compact highlights trade as an important driver of growth. In particular, it calls for efforts to be geared towards the removal of trade barriers, the facilitation of better market access, the creation of appropriate investment conditions, the protection of intellectual property and the opening up of public procurement markets. As an open trading economy, Ireland welcomes this focus. A priority will be concluding work on free trade agreements with Singapore and Canada by the end of the year, with negotiations with India to be given a new momentum. The compact calls for a deepening of the EU's trade relations with Japan and looks forward to the possible launch of negotiations on a comprehensive trade and investment agreement in 2013. This is something we will be working towards energetically. The compact also refers to the potential of tax policy to make a contribution to fiscal consolidation and growth. While I firmly support efforts at European level to improve the fight against tax fraud and evasion - I look forward to the Commission's action plan in this regard - the Government's position on CCCTB is very well known and will not be changing. I know I have the support of the House on that.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

What is it?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

I would be misleading the House if I did not acknowledge that some member states have not yet agreed to some elements of the compact, including the additional funding for the European Investment Bank. Some member states believe the bank should first make better use of the resources that are already available to it. There are concerns about protecting the bank's AAA rating. In my view, these concerns are sometimes overdone. While a top-class credit rating is important, its maintenance cannot be allowed to become an end in itself. It is a means to an end.

President Van Rompuy has tabled the report on strengthening economic union that we commissioned from him when we met at the end of May. His paper reflects the consultations he has had in the intervening period with Presidents Barroso, Draghi and Juncker. He briefed Ministers on its contents at the meeting of the General Affairs Council earlier today. The report is a welcome contribution to what will be an important debate. It is worth noting at the outset that it is not, nor does it pretend to be, a means of addressing the immediate crisis we face in the eurozone. It is an agenda and a roadmap towards a stronger economic union. We will work our way through it over the months and years to come. It should not distract us from the urgent steps that need to be taken to stabilise the markets. In this regard, I believe the time has come to allow the European Stability Mechanism to fund banks directly, thereby taking pressure off Europe's vulnerable sovereigns.

President Van Rompuy's report contains four key elements - an integrated financial framework, or banking union as it has been called; a more integrated budgetary framework with commensurate steps towards mutual debt issuance; an integrated economic policy framework; and a means of ensuring the necessary democratic legitimacy and accountability apply. There is a great deal in the report. I recommend that people should read it. It requires a great deal of careful study and consideration. I would like to offer some initial reactions to it. I welcome the recognition that we need to move towards more integrated financial arrangements, or "banking union" as it is called. It is something I have long advocated. We need integrated banking supervision and common deposit insurance and resolution mechanisms. It will take a great deal of work to advance these ideas. I would like to see an outcome where risk is shared to the greatest extent possible and where the burden of saving banks is removed from taxpayers.

We have already gone a considerable distance towards greater fiscal integration, including through the six-pack and the fiscal treaty. President Van Rompuy is proposing a further tightening in a manner that is consistent with democratic legitimacy. We will have to see the detail of what might be involved here. It is important that he explicitly links progress in this regard with progress towards the future issuance of common debt. The Government has argued for this. The ultimate goal is eurobonds. There are steps that can be taken in the interim, some of which President Van Rompuy points towards in his report. If we move forward, it has to be on both fronts, in step together. I also support the idea of greater economic co-ordination, especially between euro area countries. Towards this end, President Van Rompuy suggests we build on what already exists in the euro plus pact. Again, this is welcome. The fourth essential element of the report is the need to ensure democratic legitimacy and accountability, an indispensable element in advancing this work. We cannot move forward if the people are not with us. In Ireland, we know this better than most.

The meeting this week will offer member states an opportunity to give their reactions to what President Van Rompuy has proposed. I expect it will mandate further work and that the President will be asked to make an interim report when we meet in October, with a final report to come in December. I very much look forward to engaging with my colleagues on this. It is also important that this House is kept fully engaged and informed in the period ahead and I will brief Members on my return.

To reiterate, working on this medium to long-term agenda must be supplemented by efforts to get to grips with the immediate crisis we continue to face. The heads of the eurozone countries will meet over lunch on Friday during which time I expect some of the most immediately urgent issues will arise. In a context in which market pressure has continued to mount on a number of member states, especially Spain and ltaly, I expect we will discuss whether there are steps that can be taken to better manage bond spreads. A number of proposals involving the EFSF, the ESM and the ECB have been floated in this regard. This will not be an easy discussion but it is an essential one and cannot be shirked.

This week's meeting of the European Council will also take stock of the progress that has been made on negotiating the Union's budget for the period 2014 to 2020, also known as the multiannual financial framework, or MFF. The Danish Presidency has made good headway and has set out possible options in a draft negotiating "box" that will now be handed forward to the Cypriot Presidency. I expect the European Council will express its hope that agreement can be found among member states by the end of the year, an ambition I strongly support. There is acceptance that the new budget must make a strong contribution to jobs and growth. The Government sees agriculture and agribusiness as a very important part of this picture and I will make a strong case in support of the Common Agricultural Policy.

It is important that this week's meeting comes forward with a comprehensive and credible package which can address the immediate crisis and can set us on the right path for the future. I look forward to the contributions from Spain, France, Germany, Greece, Italy and the other countries towards dealing with the immediate crisis of banking that afflicts the eurozone, evidenced most recently in the application by Cyprus for bailout funding for its banks. I look forward to playing to a full and active part in the discussions at the meeting and to reporting to the House on my return. I welcome the observations of Deputies from all sides along with their views as to the immediate steps that might be taken by Europe to deal with the crisis that now afflicts us. Nobody wants to go through the summer and the autumn with continued uncertainty in the markets in respect of the eurozone and the euro.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

During this crisis a pattern has been established of leaders working feverishly to implement short-term solutions which unravel quickly and make matters much worse. Yesterday, the fifth of the 17 member states of the eurozone applied for European funding because it could no longer borrow at affordable rates. It is no longer possible for anybody to argue that this crisis is the responsibility of individual irresponsible member states. It is a systemic problem and can only be tackled by urgent, radical and systemic reform, none of which appears in the agenda of the European Council.

Preparations are under way throughout Europe for the departure of Greece from the eurozone so it appears to be already too late to save the euro. The question now is whether a further and more dramatic escalation of the crisis can be prevented. Can we stop a disastrous set of developments which would destroy the euro, wreak enormous economic damage and perhaps even threaten the European Union? The social impact of a crisis which is already severe could become much worse.

This rapidly evolving scenario can be halted but we can only do so if the leaders of Europe admit their failures and start to address the fundamental flaws in the design of the euro. Unfortunately, the indications today are that Friday will not bring any major move forward and these indications have been confirmed by the Taoiseach's address to the House. At the core of this is the fact that there has been no real effort to build a consensus for reform among the broad base of member states. Increasingly, our Government is taking a leading role in this failure. When he was seeking a mandate from the people last year the Taoiseach wasted no opportunity to talk about how he had superior contacts in Europe because of his position in the European People's Party. In the middle of the campaign he jetted off to Berlin to show how apparently close he was to Chancellor Merkel. He promised that a diplomatic whirlwind of activity would engulf Europe if he were elected. What is most incredible is that after a year and a half in office, and during a crisis that threatens even more dramatic damage, the Taoiseach and the Government have yet to say exactly what is their policy on Europe. They have never produced a single document or speech setting out the reforms we want to see made to the EU and the eurozone.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

I set them out in a letter.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

Instead, weak letters, in which the Taoiseach calls for measures that have already been agreed, are sent to other capitals before summit meetings. These letters are then leaked to the media and solemn briefings are given about how the Taoiseach is pushing hard. The current situation is that his overwhelming priority is managing the domestic media, with a whirlwind of empty photo opportunities for local papers. The Taoiseach has reduced to a trickle the level of substantive meetings with foreign leaders and although every week brings news of a new series of meetings between other Prime Ministers, he has been content to opt out. Just as with the promise "not a red cent for the banks", the diplomatic initiative has joined the growing list of abandoned election promises. No doubt the standard schedule of meetings which comes with holding the Presidency of the Council next year will be presented as a major new personal undertaking but nobody will be fooled.

We have an excellent diplomatic service which has always done its job but missing today is direct political engagement in pushing Ireland's position to other countries. The discussions should not be left to a handful of the larger states. There is more than enough common interest between other states to take the initiative and table substantive proposals. The time has come for the Taoiseach to put aside the timid approach of quietly going along with what has already been agreed by others and state clearly what this country believes in. He must state exactly where he stands on the different proposals for banking and monetary, fiscal and political union. The word "fiscal" was almost absent from his contribution today. He must state what he believes is the minimum required to save the euro and return Europe to growth.

One important change in the Taoiseach's position was indicated in his office's leak of a letter to the British Prime Minister, David Cameron, which dealt with Ireland's bank-related debt. For the first time since 2010, the Taoiseach admitted that our obligation to carry all this debt was a key factor in Ireland's being forced out of the bond market. In the past he refused to make this case because it did not suit his partisan political agenda. Now that he has taken this step he needs to go further, set out a clear demand and propose a set of actions we would take in the different scenarios. Well over a year ago the Taoiseach told us a technical paper was being prepared - urgently. The Minister for Finance went to Washington and handed out an exclusive story about the imminence of a new programme of burning unsecured unguaranteed bondholders. This week, however, the bond redemptions continue unchecked and yet again the Taoiseach has stated that Irish debt sustainability is not on the European agenda.

The Taoiseach has chosen to share no information about what is being asked so we are left to get information from other countries. Ireland has laid down no tough negotiating position and has not clearly made the case that this debt must be handled differently from normal sovereign debt. The ECB has publicly made the case that there is moral hazard involved in treating this debt more leniently. In response our Government has failed to make even the most obvious arguments. What about the moral hazard in letting reckless lenders escape untouched? What about the moral hazard in telling countries that play by the rules they will not be allowed to benefit from subsequent changes in policy? What about the moral hazard in leaders and institutions obsessively promoting an orthodoxy which has clearly failed? What about the moral hazard in refusing to show respect for the view of all states within the Union? With a large and secure majority and major movement on policies not available before last year the Government has succeeded in negotiating exactly nothing which was not developed for others first and then applied to all states.

The point has long since arrived where our Government needs to set out a bottom line. With an attempt at market re-entry not scheduled until late next year, we must set out a bottom line in regard to what debt we believe is sustainable. It is clear from other capitals that they do not know what Ireland's basic need is and all they are hearing is that everything is on course. If everything is in on course then why would they change anything in regard to Ireland?

We should say unequivocally that, at a minimum, to return to the market successfully the remaining promissory note funds should not be allowed to become core sovereign debt. They should be placed on lengthy terms which lift the extra burden being imposed on already tough adjustments. The Taoiseach should cut out the vague generalities and speak directly. To save the euro there must be a new approach.

Today, as much as at any time in the last three years, there will be no relief from the sovereign debt crisis unless the markets regain confidence that they will get back money they lend. Contagion has happened and is escalating. There is little to distinguish Italy and Belgium from the five countries already unable to freely borrow and the borrowing costs of others continue to rise. There simply is not enough money in place to show that governments will be able to finance their deficits and refinance their debts in all reasonable circumstances. The ESM is a good development and, at a minimum, it must be leveraged. This may break rules on monetary financing within the eurozone but surely it is better to change these rules than let them bring down the currency they are supposed to underpin?

The ESM should not be used on the secondary bond market. This would use up vital reserves and simply continue to provide an opportunity for investors to exit the market. The interventions by the ECB on the secondary market have not contained the crisis and the involvement of the ESM will not do so either.

As the growing reserves placed on deposit in the ECB and a range of other indicators highlight, the Depression-era evidence that more direct action is required has been more than confirmed. We should not waste precious time and resources on a policy which has failed. Instead of working to fund bailouts we should be doing everything possible to stop them being necessary.

If the leaders really want to agree measures to tackle the crisis, they should also signal that they are willing to take a dramatic initiative to both fund urgent needs and show a credible pathway to long-term sustainability in public debt. The mutualisation of debt in some form is inescapable. At the less radical end of what could be done, the idea of a European redemption fund is exactly what is needed. Under this funds would be used to guarantee debt over a certain level. It would limit exposures, reduce debt costs and provide a stable foundation for reaching a sustainable long-term debt position. It is also originally a German idea and is compatible with Germany's basic law.

The €180 billion stimulus talked about last week, and to which the Taoiseach alluded in his speech, is nothing of the sort. The proposal is €60 billion in project bonds issued by the EIB with some form of common guarantee. The rest is due to come from co-financing and private-sector leveraging. This is no stimulus and it is no help. The countries most in need do not have the co-financing and cannot add further to their general government debt levels. As proposed, the countries likely to benefit are those that least need help. We need more than generalised conclusions or recommendations from the Council, we need specific insistence that there can be applications to countries like Ireland. I ask the Taoiseach not to return to this House next week once again making inflated claims about decisive steps to fund growth and jobs. The project bonds are a minor distraction from the real business of restoring confidence and transferring funding to regions in need.

The meeting on Friday is likely to see agreement on some form of greater banking union. If this is limited to a handful of large cross-border banks, it will be irrelevant. A single monetary policy needs a single core banking regulator. There can be no opt-out for powerful regional banks.

In regard to the proposed financial transactions tax, no one has produced even the most basic analysis of how this could operate on a selective European basis without costing tens of thousands of jobs and huge investment. It is a good idea to constrain the speculators but this will only be done if all significant financial markets sign up. The current proposal would deal a dramatic blow to financial services in participating countries and we should have nothing to do with it.

There has been a lot of briefing about making a decisive move towards real fiscal and political unions. From the available information no such unions are being proposed. The models being promoted in the media simply involve a further heightening of budgetary controls on eurozone members. Genuine fiscal and political unions involve a significant and flexible transfer of resources between members. The redistribution of surpluses between states is the core of the fiscal and political union of states in the United States of America. The way in which this matter is being discussed goes to the heart of whether leaders are serious about tackling the crisis. Germany and others have to be called-out on the way they refuse to acknowledge that a large part of the surpluses they are jealously protecting were generated because of the flaws in the euro which have engulfed others in deficits. Without a transfer union there can be no fiscal union and it is time to stop pretending otherwise.

The timid approach of our Government and many others must stop. The Taoiseach needs to end his policy of sitting quietly on the sidelines refusing to speak directly when urgent needs are being ignored. Wringing his hands about Germany is no substitution to setting out a policy and lobbying for it. Unless he actually tries to work with others to persuade leaders to take a different approach, he can achieve nothing. The Taoiseach should stop talking about technical papers and set out what we think we need on promissory notes to return to the market next year. He should stop mumbling about vague ideas and set out clearly what reforms he thinks are the minimum required to save the euro and end the crisis. He should stop putting media spin ahead of the harder and more important work of pushing Ireland's position.

Many respected commentators fear that it is already too late for Europe. We need our leaders to understand the gravity of the situation. The cost of their failures last year is already high and there was some acknowledgement of that in the Taoiseach's opening remarks.

(Interruptions).

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

I admire the dexterity of language used by the script writer in terms of that acknowledgement-----

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

What you did was the greatest obscenity ever perpetrated on this State.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

Therein was the acknowledgement of successive failures of the last 19 summits in coming to grips with the heart of this crisis.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

The Deputy is wrong again.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

The cost of those failures of the past 15 months-----

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

Some €3 billion a year was flushed down the toilet.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

-----of the various summits have been very high for the people of Europe.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

That is what you did.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

The citizens of Europe cannot afford another summit of brave words but timid action.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

Many schools and hospitals could have been built with that money.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context

This would be a betrayal of them and the great cause of peace and prosperity among the nations of Europe.

Photo of Peter MathewsPeter Mathews (Dublin South, Fine Gael)
Link to this: Individually | In context

The next speaker is Deputy Adams and I note he is sharing his time with Deputy Tóibín.

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
Link to this: Individually | In context

Go raibh maith agat a Chathaoirleach.

This week the Taoiseach has yet another EU crisis summit. Yesterday Spain formally requested European aid of up to €100 billion for its banks, making it the fourth state to require an EU bailout, within hours of that Cyprus became the fifth state seeking a bailout for its financial sector and today Italy is paying more at a bond market. This summit, which was billed as a growth and jobs summit, will inevitably be dominated by the rising borrowing costs of Spain and Italy and the weaknesses of the European banks.

The Taoiseach needs to set out what he will be advocating at this summit. Will he be bringing forward a stimulus plan? We have not heard that. Does he have concrete proposals about how the EU Structural Funds should work, we have not heard of those, or about how funds from the European Investment Fund could be used in conjunction with the National Pensions Reserve Fund to stimulate growth in Ireland, about which we have not heard any word? Has the Taoiseach spoken to other EU leaders about this plan? We have not heard of either the plan or of the Taoiseach lobbying in support of it. Has he sought allies for his proposals? We have not heard his proposals or who he may have contacted in support of them.

The Taoiseach told us on 6 June after the informal summit that the board of the European Investment Bank had been asked to report to the June meeting on the capacity of future lending for qualified structural projects. Has the Taoiseach had sight of this report? I do not have the same script writer as Deputy Martin but the script before me states: "You cannot continue to sit on the sidelines and hope, as you did on the issue of the jobs and growth-----

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
Link to this: Individually | In context

Well done lads.

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
Link to this: Individually | In context

-----that other leaders will come up with proposals that will benefit the citizens of this State". What the Taoiseach said is in the programme for Government. The Government needs to deliver the commitments made in the programme for Government and during the recent referendum campaign. The Taoiseach promised to remove the burden of the banking debt from taxpayers but this has not happened. He promised jobs, investment and stability and I regret very much that this has not happened. It is my certain view and also the view of many citizens that Europe's leaders are failing. Last July, they and the Taoiseach agreed to a restructuring of Greek debt but almost one year later and the situation is as bad as ever. Last autumn, the European Central Bank provided large-scale liquidity to banks to try to ease the situation in Spain and Italy but this has not worked either. Last December, the eurozone agreed the fiscal treaty and more money to end the crisis. I note what Deputy Martin said during that campaign and juxtapose it with what he has said today. The Taoiseach and Fianna Fáil - most of Fianna Fáil - persuaded citizens to vote for the treaty in May and this has not worked either.

I refer to the situation in Spain where €100 billion was allocated to help clean up that country's banking crisis but Spain's bond costs have risen even further. I have not had much time to study the Taoiseach's statement but he states he looks forward to the report from Herman Van Rompuy. However, this report is expected to demand even greater fiscal union within which the EU could intervene directly in the budgets of member states. More fiscal authority will be given away by the Government and supported by Fianna Fáil, despite all the protestations by Deputy Martin today. I welcome the Taoiseach's conversion to Sinn Féin policy because Sinn Féin policy has been consistently to argue for the ESM to fund banks directly. However, he needs to go beyond Government rhetoric on this important issue and he needs to advocate actively for this policy. Similarly, on the issue of growth and jobs, the Taoiseach needs to bring forward proposals for job creation and retention. He engages in revisionism in his statement today when he suggests the Government has long argued for such proposals. On the contrary, the record shows that he never mentioned jobs even once before the French presidential election. It is all a mess and the Taoiseach and his partners in Europe need to stop digging the hole deeper. Unless there is a radical change in the current policy the instability will continue and may result in the collapse of the euro. The Irish Government needs to work with other EU states to find a real solution to the eurozone crisis.

From the very start of this crisis, Sinn Féin has advocated a restructuring of private bank debt and a separation of bank debt and sovereign debt. Sinn Féin has argued consistently that the function of the ECB needs to be re-examined and it needs to fulfil the role of a lender of last resort. The current policy of austerity and bank bailouts has caused only greater instability in the eurozone. The one-size-fits-all monetary policy was part of the problem and it cannot work.

Sinn Féin is firmly of the view that what is required is a different approach based on investment and economic growth. A total of 24 million citizens are unemployed across the EU and in this State, 440,000 are on the live register. We see once again the scourge of emigration. The Taoiseach represents a rural constituency. I am currently doing a tour of rural Ireland and the situation is heart-breaking. The effects of emigration are more invisible in the cities but in some rural parishes, as many as 18 young men and as many young women are gone. Senior teams are unable to play games because they do not have sufficient numbers for a senior panel. The visit of President Michael D. Higgins to London last week illustrated how many of our young people are now ensconced there. We need our young people back and we will only get them back with investment in jobs. There is a fixation with austerity. Fine Gael is a conservative, right-wing party which has austerity at its core but for the Labour Party to embrace this policy goes beyond any sense of itself or its history or possibilities.

The crisis is a crisis of under-investment. The banking crisis led to a withdrawal of private sector investment from the domestic economy on an unprecedented scale. The result is the loss of jobs for many and of spending power for all. In the absence of private sector investment the State needs to fill the investment vacuum. This can be achieved by combining the resources of member states, for instance, combining the €5 billion in the discretionary portfolio of the National Pension Reserve Fund with an enlarged investment fund in the European Investment Bank.

This summit needs to give the people of Europe some hope that leaders have learned from the mistakes already made. The crisis has been made much worse by the policy of the European Central Bank, supported by the German Government and the previous French Government, of bailing out banks irrespective of the cost.

Austerity is part of the problem and a continuation of this bad policy will have devastating social and economic consequences. This can be seen in the numbers of patients on trolleys in our hospitals and the long waiting lists for treatment. I have given examples from Louth and I am sure the situation is similar right across the State. I note that some members of the Government are committed to cutting social welfare rates or to an increase in income taxes. The Taoiseach needs to stand up for Irish Interests at this summit and we need to stop the slide towards the collapse of the euro. This should not be another crisis summit which ends up with a commitment to hold yet another crisis summit. There must be a clear plan for renewal and growth and for jobs and investment. The European banking system must be cleansed of its toxic debts. There is an urgent need to reduce the debt levels across the eurozone through debt restructuring. The Taoiseach repeated this fallacy this morning that we will not be defaulters. The huge burden on citizens of the banking debt must be reduced. The crisis will not be brought to an end by greater fiscal integration, by giving away more fiscal power; it will not be brought to an end by austerity and by bank bailouts.

Sinn Féin recommends a strategy of investment, debt write-downs and market return. This is the type of plan which EU leaders need to agree this week. The Taoiseach must advocate this plan if he has not done so. He has not told the House of any plan. It appears he is going to the summit not as a player but as a spectator and I am disappointed in that.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
Link to this: Individually | In context

It is not even a month since the people went to the polls on the issue of the austerity treaty. We are the lucky ones because most of the 495 million EU citizens did not get a chance to have their say at the polls. The Irish people said "Yes" with a very heavy heart. Many did so because they believed they had no choice. They believed they would otherwise fall off the funding cliff. A week or two following that referendum result, there has been a complete disregard of the Irish people. The Government then claims it is likely to push for a further federalisation of Irish political and fiscal powers. Individual citizens who had done their best to come to a difficult decision are now told that this is not enough because the plan is to force further political development in the State. The Government is not standing up for the people of Ireland. The difficulties being experienced by us are being disregarded. My colleague, Deputy Adams, has described some of the cuts implemented in his locality. In County Meath, Our Lady's Hospital in Navan will soon lose overnight accident and emergency services. The Government's cutbacks and austerity are creating deep difficulty within Irish society in terms of the basic services people require. In addition, as has been mentioned, 76,000 people were forced to emigrate last year due to the Government's decisions. The GAA generation is being deleted from our midst because of austerity policies.

Consider the damage caused in this State by monetary union. The property bubble could not be ameliorated because we did not have interest rate powers to try to pour water on that fire. There is also the damage from €64 billion being sunk into the banks by this and the previous Governments. That is a direct result of the monetary union in which the State finds itself. The Government's solution to all this is further monetary and fiscal integration. This Government, in tandem with Angela Merkel, is pursuing a policy that is creating instability. The policy of this Government and the German Government will either bring about the end of the euro or, the only other option, federalisation of the eurozone. Again, it will be an either-or choice for the Irish people.

European Council President van Rompuy and European Commission President Barroso pulled no punches in the pre-Council meeting report, entitled "Towards a Genuine Economic and Monetary Union". The language is unambiguous and federalist. They are preparing the road for yet another power grab. We voted "Yes" and by doing so we have, unfortunately, emboldened the federalists within Fine Gael, the Labour Party and in the EU to grab more power from the Irish people and hand it to the centre. Every time power is grabbed from the Irish people and given to the centre the priority of the Irish economy is no longer accepted. Indeed, we have come down to third, fourth and fifth in the list with regard to policy decisions that happen in Europe, instead of the Council summit considering appropriate ways to deal with investment. Members will recall that the debate before the fiscal treaty referendum was about investment for jobs and how jobs and growth are the only ways to get us out of our problems. Now, however, Fine Gael and Labour Party Ministers increasingly tell us that it is not investment that will solve the current problems, but the further hand-over of Irish sovereignty and political power.

The Government has a major opportunity at the forthcoming meeting to take the problem by the scruff of the neck for the first time. It can talk to other marginalised states around Europe, build a consensus or a coalition of nation states in Europe and use that coalition to create a bulwark against the federalists who are increasingly trying to take power from Irish citizens. It can also use that consensus and coalition to seek investment from the National Pensions Reserve Fund and the European Investment Bank to get people back to work rather than sending them on the route to emigration.

Photo of Joe HigginsJoe Higgins (Dublin West, Socialist Party)
Link to this: Individually | In context

I am sharing time with Deputy Stephen Donnelly.

The meeting of European Union leaders on Thursday and Friday will be the 20th meeting since the eurozone crises started in earnest in Greece in early 2010. Since then, the political and economic ruling classes within the European Union have floundered in the face of a catastrophic crisis of their system. The abject failure of the political leadership in the European Union to find a solution arises, of course, from the failure of Europe's major capitalists to overcome the contradiction within their economic system. It is a system through which a tiny corporate elite, including the speculators in the financial markets, rules.

The abject failure of European political and economic leaders is most horrifically expressed in the fact that 17 million people are currently unemployed in the eurozone and an horrific 27 million people are unemployed in the European Union. The youth in Europe are the foremost casualties of mass unemployment, with an unprecedented level of over 50% in Spain alone. The President of the European Council, Herman van Rompuy, is to present a report to the EU summit this week, including what he says is a vision that can best contribute to growth, jobs and stability. Unfortunately, it is a mammoth contradiction to speak of growth, jobs and stability on the one hand and, on the other, to continue to implement a savage regime of austerity, which is designed to salvage the capitalist economic and financial system, particularly the financial markets, from the crisis on the backs of the ordinary working class people of Europe.

How disastrous austerity is for the working class, the poor, the youth and the pensioners of Europe is seen most graphically in Greece where, most tragically, society is being destroyed. To satisfy the bondholders, people in Greece are being driven into penury. Children are hungry in the classrooms while workers, both manual and professional, queue for soup kitchens. Tragically, the suicide rate has shot to the highest in Europe as people see no way out. Greece is being pauperised and turned into a country with what used to be described as Third World conditions. This is happening in the European Union, whose leadership used to lecture us and boast about what a model of solidarity the European Union was.

The Taoiseach talks about getting investment flowing in the real economy. In reality, he is looking to corporate Europe for investment. He referred to an increase of €10 billion to the European Investment Bank's capital, which will leverage a further €60 billion. He then mentioned a figure, and we do not know where it comes from, of €180 billion in investment, which is relying on the corporate private sector. The Taoiseach has not been reading the financial press. If he had been, he would have seen striking articles in the Financial Times and the Wall Street Journal on the fact that the proportionate rate of investment to gross domestic product in Europe is at a 60 year low. Within the eurozone €2 trillion lies uninvested by major corporations. They are uninvested profits because the corporations are not confident that they can make further profit if they invest. That is €2 trillion that could and should be invested in massive job creating enterprises, major and necessary infrastructure and services that would take millions of workers from the unemployment wasteland and put them into productive employment, remaking and regenerating our society.

What is the Government's approach to corporate profits? It says that corporations have a sacred right to make whatever profits they wish and to do anything they wish. It will not even consider further taxation. The Irish Government, pathetically, will not even support a tiny tax on speculation in the financial markets, the financial transaction tax. We should have an emergency tax, of at least 50%, on the €2 trillion of uninvested profits lying in corporate cash hoards throughout the eurozone. It should go into investment in job creation, rebuilding society and creating hope for young people and people who are under so much pressure at present. What Herman van Rompuy's document promises, in fact, is even more draconian regimes than covered by the austerity treaty we debated over the last few months. It is clear that the central agenda is to give the markets what they want once again; what is being acceded to is their agenda. It is more austerity to bleed more from the ordinary people of Europe to satisfy the greed of the bondholders and the speculators. Unfortunately, the Irish Government falls on its face in front of this agenda and the financial markets. Ongoing austerity to bleed the resources of society to feed the bondholders and the speculators is what Mr. Von Rumpuy is proposing rather than any fundamental break or plans of growth and investment.

On 19 May The Independent newspaper in Britain carried a banner headline on its front page - "Capitalism at a Crossroads" - referring to a global crisis of this system. It is critical and clear that an alternative to this disastrously failed system is desperately needed. We need socialist policies, socialist planning and a socialist alternative to replace the chaos of the financial market system, with policies that put human beings at the centre of society before private profit. The working class people in France, Greece and many other countries have shown by their actions, movements and votes in recent months that they want an alternative, and their power must be used to mobilise to change society rather than relying on yet another meeting of floundering EU leaders.

6:00 pm

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Independent)
Link to this: Individually | In context

As the Tánaiste is very well aware, over the next three days this country will pay €1.1 billion to bondholders in the former Anglo Irish Bank and Irish Nationwide Building Society. As he is no doubt aware also, those bonds were originally issued by those institutions in 2007, therefore, the people who bought those bonds in 2007 knew that they were taking a risk. If they did their due diligence they will have seen that those institutions were heavily exposed to a property bubble. The IMF warned at the time of an abrupt unwinding of the housing boom.

If the people who purchased this €1.1 billion from Anglo Irish Bank and Irish Nationwide did their homework they will have known that they were buying inherently risky financial products and that they were getting higher profits on them than had they bought bonds from the Irish sovereign, the American sovereign or the German sovereign because there is an implicit risk. Since then, a group of those original bondholders will have sold them on and they will have been bought at massive discounts by speculators. For the next few days, therefore, the Irish people will pay hundreds of millions of euro in profits to speculators and professional investors who know that sometimes the value of their investments go down as well as up. I imagine most people in the Government, and perhaps all Government Deputies, would agree that it is grotesque for us, the Irish people, to be paying €1.1 billion to people to whom we owe no money while at the same time cutting services to disabled children throughout the country.

I have no doubt that the Government would prefer not to be paying this money, certainly if we are to believe some of the pre-election statements on the issue by the Tánaiste, the Taoiseach, the Minister for Finance and many others. However, what the payment this week says to me, and this is one of the last outstanding payments on Anglo Irish Bank, is that the strategy this Government has pursued has failed. The strategy the previous Government pursued also failed. It has bankrupt the country and left us in a very precarious position.

In terms of that strategy, what I have heard, as a member of Dáil Éireann, is a Government state repeatedly that the debt is sustainable and that we can and will pay our way. I constantly hear a quasi-moral statement that we will pay our debts, that we always pay our debts and that Ireland is a country that pays its way in the world, ignoring the fact that we are paying other people's debts at the same time. I see a Government which has repeatedly acceded to demands from foreign powers that we pay all of these bondholders and whose strategy appears to be based around waiting and seeing what other countries, seeing if we can get a bit of it as well and hoping that moves us into a more sustainable economic position.

On our strategy, the Nobel laureate Professor Stiglitz recently stated:

Iceland did the right thing by making sure its payment systems continued to function while creditors, not the taxpayers, shouldered the losses of the bank. Ireland's done all the wrong things, on the other hand. That's probably the worst model.

Why are we getting the worst model? Why are we doing everything wrong? Why are we getting the worst deal? Why did we not get a write-down similar to that given to the Greeks? Why are we not being looked at in favourable terms as is the case with the Spanish? Why is it that we in Ireland seem to get the worst deal from everybody?

I put it to the Tánaiste that there are two serious reasons for that. The first is that we are not acting like we cannot pay these debts, and the second is that we are not saying we cannot pay these debts. In terms of how we are acting, on the floor of the House this morning increments were brought up with the Taoiseach and I understood him to say that the Government would honour the Croke Park agreement. That means that this year the Government will pay €180 million in non-performance related automatic pay rises. A total of 47 of the people getting those automatic pay rises are at assistant secretary level and earning €127,000.

The other way we are acting is that we are not saying that we cannot pay. Again, on the floor of the House this morning the Taoiseach stated that a default would be a disaster and a catastrophe. He went on to state, "This country has always paid its way". Of course we are not getting any write-down and are being forced to pay the bondholders. How can we credibly say to the European Central Bank and the European powers that we do not have the €1.1 billion when they can say that we have given our own employees €1 billion worth of pay rises in the past four years? They will say that we can afford it. We are acting and speaking in a way that we are able to afford this debt and that we have some moral obligation to pay this debt.

I ask the Tánaiste to consider changing the strategy in two ways. First, we have got to behave like a country that cannot afford to pay these bondholders. We must start acting like a country that will not be able to service a debt that is about to be 120% of our GDP. It will not happen.

Second, I ask the Tánaiste and the Government to recognise that others in our position achieve write-downs. Iceland achieved an €85 billion write-down in its banking debt and as we know, its economy is picking up nicely and it has half our unemployment rate. We know that Germany got write-downs in 1932, 1939 and 1948. The list goes on.

There is a paper by well known economists Rynhart and Rogoff on the history of default in which they conclude that default is the rule rather than the exception, and that is default on sovereign debt. We are not even talking about that. We are talking about default on private debt or non-payment of private debt.

There is some good news to help our strategy. The IMF put it on record recently that the ECB has incorrectly forced this country, under very serious threat, to pay off these bondholders and that it should not have done it. There is a growing acceptance here, in Europe and across the world that the State should not have to bear the burden of the banking sector, particularly when it does to a state what it is doing to us.

I suggest that now is the time to change tack. A concerted diplomatic offensive in Europe and with our allies in the United States and in other parts of the world would help, and it must include a change in the conversation whereby we would say that we cannot pay this debt, we never owed it, and we do not pay other people's debts. We should remind those on the other side of the table who are telling us we have to pay all this banking debt of all of the debt write-downs they have had in the past 50 or 60 years before we get up on our high horses and start moralising. I ask the Tánaiste to consider those suggestions and start changing the conversation to get this debt under control.

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
Link to this: Individually | In context

I welcome the contributions made by Deputies to this debate. It is very important that the Oireachtas is fully involved in our European business, particularly when such important issues are involved and these debates are a significant part of that work. We are truly at a critical juncture for the future of the European Union project, and the future of the eurozone in particular. I believe this House has an important contribution to make to that work.

I will travel to Brussels this week with the Taoiseach to participate in pre-European Council political consultations and will work with the Taoiseach to prepare the Government's position for the Council. As the Taoiseach outlined earlier, it will be a key meeting for a number of reasons. First, this week's meeting of the European Council will agree a new compact for growth and jobs. This is a sea change. For the first time, the growth agenda will take centre stage and be endorsed with the highest level of political commitment. This is a welcome development which this Government has been advocating for some time. While it is clear that we will not have stability until governments bring their budgets under control, it is equally clear that there will be no recovery within Europe without growth. We need a clear and concrete strategy to achieve it, and this compact is a major step in the right direction. Coupled with the Van Rompuy report, it will map out a way forward. This is the time for action. We need to see our way out of the crisis and to take the necessary steps to get there.

The new compact will bring together a series of actions to be taken at the level of member states, but critically it will also set out the contribution that European policies can make to growth and employment across the Union. These will include efforts to get investment flowing to where it is needed most, through the European Investment Bank, project bonds and the re-programming of structural funds. In doing this, it is essential that we do not allow bureaucratic hurdles to get in the way of getting important investment flowing to the regions which have been hardest hit by the current crisis and where it can have the most positive impact. The Government will be making the case for a pragmatic flexibility. That affects Ireland's future interests and we will be clear in our views on this in Brussels this week. The new compact also addresses the very considerable growth potential which remains within the Single Market. There remains considerable scope to achieve more. Once again, we see Ireland as a beneficiary of that potential. To this end, we look forward to the presentation by the Commission of a further set of growth-enhancing measures during the autumn.

We must prioritise a properly-functioning digital Single Market, which facilitates cross-border on-line trade. Trade also offers a real engine for growth. We look forward to the early formalisation of free trade agreements with both Singapore and Canada. Progress in trade negotiations with the US, and with India and Japan, will be important in giving the global economy a shot in the arm, and will boost the export of European and Irish goods that serve markets around the world.

As well as adopting the new compact, this week's European Council will also consider President Van Rompuy's report on how to strengthen economic and monetary union. In his report, the President has identified the essential elements on which we need to work to ensure a strong, stable and durable economic union, namely, greater integration on banking, on budgetary frameworks and on economic policy. This is a perspective the Government has called for and it is welcome to see it now formally on the table. However, although all of these proposals will build momentum in the right direction, it remains my firm and clear view that until we break the pernicious link between bank and sovereign debt, we will not restore confidence. This needs to be done in the short term because for as long as it remains, it will be difficult to restore confidence in the markets.

The Van Rompuy report sets out an agenda for strengthening economic union in the medium to long term in a way that is fundamentally in the interests of all Europeans, including the people of Ireland. It does not, of course, pretend to address the immediate crisis. That will also have to be addressed in a clear and decisive way at this week's meeting of the European Council. President's Van Rompuy's report covers the elements on which we are going to have to find a way forward if we are to deliver long term stability. which is, after all, what it is about. It is not about integration for integration's sake, but reinforcing economic union to ensure a stable and secure future. We need to see the right balance between sharing of mutual risk and furthering of integration. Put simply, solidarity must accompany integration in a balanced manner. Our challenge is in the immediate here and now. We need political will to show concrete steps in the short term. A theme running through all elements of President Van Rompuy's report is the need to ensure full democratic legitimacy and accountability throughout the process ahead. This is absolutely vital and we have long advocated it. We in Ireland know better than most the critical importance of bringing people with us. Their support cannot be taken for granted. President Van Rompuy clearly envisages a role for national parliaments, including this House, in what lies ahead and this is both necessary and welcome.

This meeting of the European Council has a very full agenda. In addition to the compact and President Van Rompuy's report, it will address for the first time at Heads of State and Government level the next multiannual financial framework. It will also address a range of other issues including: the Justice and Home Affairs area;the opening of accession negotiations with Montenegro; nuclear stress tests; and foreign policy issues, most notably the evolving situation in Syria. The House can be assured that the Government will work to advance and defend Irish interests throughout the process.