Kathryn Reilly (Sinn Fein)

I welcome the Minister to the House and echo the sentiments of my colleagues on the importance of the ministry for European affairs. I hope that with the permission of the Leader we will have regular debates with the Minister on issues of importance, given the current flux in European affairs.

The European Union has an odd relationship with the concept of innovation. If points were awarded for all the talking we do about innovation we would surely rank as the most innovative and creative region in the world. However, the sad reality is that is not the case. The innovation union scoreboard based on innovation performance has the USA at 0.672, Japan at 0.641 and the EU 27 at 0.516.

There appears to be a paradox now at the heart of EU policy towards enterprise, innovation and job creation across Europe and specifically in its application in this State. The Europe 2020 document, the key strategic document to which the Minister referred, the framework for European economic growth, sets out a vision for Europe's social market economy over the next decade and rests on three interlocking and mutually reinforcing priority areas: smart growth - developing an economy based on knowledge and innovation; sustainable growth - promoting a low carbon, resource efficient and competitive economy; and inclusive growth - fostering a high employment economy delivering social and territorial cohesion.

The Europe 2020 strategy was launched as a new economic strategy to simulate sustainable growth and employment with the year 2020 in mind but that strategy will fail to succeed, much like its predecessor, the Lisbon strategy, if it does not take into account the local and regional capacity for sustainable development, creativity and innovation with the well-being of citizens at heart.

The question of the well-being of citizens of Europe should be prioritised at all levels of the policy and decision making process but as we can see, the EU-IMF deal does not do that. The success of Europe 2020 and the innovation union cannot be divorced from the current EU-IMF deal, which undermines the ability to grow the economy and adds to the burden of unsustainable debt. The EU policy for dealing with the debt continues the failed cycle of cutbacks, austerity and unemployment. As the Nobel winning economist, Joseph Stiglitz, pointed out, the EU recipe for recovery is more of the same, namely, to meet the deficit reduction targets with more austerity, which in turn means still lower growth and higher unemployment. As we examine our own unemployment figures it undermines the priority of the Europe 2020 strategy.

The Government accepted the EU-IMF deal and as a result we cannot make investments to the scale we would like to create growth, make the economy more competitive or deliver the necessary employment. The deal demonstrates that the rhetoric of Europe 2020 has all the warmth and comfort of the emperor's new clothes. It would appear that this Government, which was elected with such a strong mandate and with so much promise, has allowed itself to be reduced to going along with the charade.

We must be clear that the EU-IMF deal does not contain targets for job creation, spending commitments to get people into employment or help for small and medium-sized companies to maintain or create jobs. In terms of the EU-IMF deal, there is no plan to reduce unemployment, create jobs or stimulate the economy and no amount of rhetoric can disguise that fact. It is important that we remember that job creation, growth and competitiveness is key to sustainable economic recovery and the objectives of Europe 2020 must be met at a national and European level. Those objectives must be supported not with rhetoric but with resources and a policy.

The World Economic Forum ranks the competitiveness of economies across the globe and Ireland is ranked at only 29th behind other European countries that offer higher levels of social protection such as Germany, the Netherlands, Norway, Denmark and France. The reason they identified us for a low rank was under-investment in education, research, infrastructure and broadband connectivity. There is a danger that we are tackling the issue of competitiveness by cutting back on investment in these areas. We must remember that our economy will not grow or be more competitive by reducing the wages of the lowest earners. Competitiveness is not a race to the bottom to attract low paid, low skilled, low value jobs. We must remember that we are not competing with the emerging economies such as China on those grounds. We are competing with them, and competitiveness can only be achieved through investment in education, infrastructure, technology, research and development and innovation.

Our competitiveness on a European level and particularly on a global level will continue to be undermined by partition. Barriers to trade remain between North and South. I listened to a speech by Dr. John Bradley, a former economist at the ESRI, who said that the two disjointed research and delivery strategies and two disjointed third level sectors on the island are not helping our competitiveness. We have a situation where complementary companies on the island are trading in splendid isolation.

The Minister of State mentioned that the EU has a role in growing our economy and in delivering competitiveness and employment. We want to play a full role with our European partners, but that will require a fundamental change in policy. We need to look at a radical policy shift from austerity to stimulus that will deliver smart, sustainable and inclusive growth. Will the Minister of State or her counterparts in the Department of Enterprise, Jobs and Innovation co-operate with the relevant Minister from the North to see how Europe can support the greater integration of innovation and research and development on the island, including the take up of programmes such as the FP7? What percentage of FP7 projects are on a North-South basis and what exactly is the value of these projects?

It is critical to remember, among all this talk of enterprise, innovation and job creation, that Irish industrial policy, in spite of some shift towards the development of indigenous firms in response to many industrial development reports, remains over-dependent on low corporate taxes to attract MNCs. Our economic development policies focus to far too great an extent on high-tech and research and development, rather than on innovation at all levels. While I welcome any and all research and development spend, the focus on innovation solely at this high-tech level is not an accurate reflection of the make up of our economy. We need research, technology and innovation of industrial relevance across the whole spectrum of enterprise in this State. With all the talk of indigenous enterprises and export-led growth, we need to be looking at how to innovate in indigenous enterprises such as the agrifood sector. Central to all this are small and micro business start ups. In terms of developing small enterprises and getting communities back to work, what steps is the Minister taking to promote the €500 million EU Progress Microfinance Facility?

Unless we fundamentally rethink the policy direction of the austerity programmes at European level, our economic development and our capability to innovate will be crippled. As innovation starts at home, we need to look at the EU-IMF deal and its effect on our innovation.