Lucinda Creighton (Dublin South East, Fine Gael)

I welcome the opportunity to update Members on the ongoing situation in the eurozone, a situation which greatly affects us all. The euro area sovereign debt crisis has been going on for almost two years, but has stepped up a gear in recent months, particularly since August. The events of the past week have been particularly disturbing.

It is worthwhile to point out that EU policy has actively responded since the crisis began. That response may not have been adequate but it has been substantial. I refer, among other actions, to the following: the establishment of crisis resolution mechanisms; of the temporary facility, the EFSF; and the more permanent structure, the ESM, which are designed to help vulnerable member states and ensure an improved governance structure within the European Union and particularly the eurozone and the European semester.

Notwithstanding these important developments, the perception has remained that policy makers were playing catch-up with the full scale of the problem. This is not simply a question of perception, but is reality and we have suffered as a consequence. However, a substantial leap was taken at the European summit in the early hours of 27 October. Although the situation remains fragile as the events of the past week have clearly demonstrated, Senators might agree that the co-ordinated approach clearly demonstrates that the EU can unite and work in the interests of all its citizens. It shows the EU is strong and can make significant decisions and the kind of progress that not so long ago would have been regarded as almost unthinkable. The deal of the morning of 27 October marked an important turning point because it was the first time we saw a clear political will to get to grips with the issues we face. I hope everyone would agree that we can take some encouragement from this.

As I am sure Senators will be aware, on 23 October the European Council identified a number of key priorities for internal economic policy to be pursued in the short and medium term in order to achieve smart sustainable and inclusive growth. These include the completion of the Single Market, including the digital Single Market, measures to support SMEs and the reduction of administrative burden. It also called for a stronger focus to be given to growth-enhancing aspects of the European Union's external policies in order to maximise their contribution to growth in Europe and to shape the conditions to attract more inward investment. It is clear that acting in unison to tackle these challenges within the framework of the European Union rather than doing so in isolation makes eminent sense.

Recognising the pressures on national budgets, the European Council also agreed temporarily to increase co-financing rates for EU funds, which will have direct benefits for Ireland and will facilitate us in drawing down EU funding. In this regard, the Heads of State and Government agreed to the Taoiseach's suggestion that, in examining the possibilities for boosting investment in Europe, the European Investment Bank should have a particular focus on countries implementing an EU-IMF programme, which is a welcome commitment.

Over the course of the European Council meeting and euro summit on 26 and 27 October, work was finalised on the various elements of a comprehensive package of measures designed to restore stability to the euro area. The agreement reached covers a number of key issues, including bank recapitalisation, debt sustainability for Greece, firewalls to prevent contagion and improved governance within the euro area. In each area, Irish interests have been fully protected. Measures were agreed that, when implemented, should put Greek debt back on a sustainable footing and would help Greece to start rebuilding its economy which will take quite a long time. It was agreed to extend the capacity of the EFSF, through two basic leverage options, to ensure that we have robust and secure firewalls to prevent contagion into other member states.

Notwithstanding our limited business and financial links with Greece, as a so-called "programme" country, Ireland is more exposed to the fall-out from the Greek situation than other countries might be. Therefore credible and viable firewalls are vital. This will help to reduce the risk of derailing the recent substantial progress we have made. As such, this is to be welcomed.

Measures were agreed to ensure that Europe's banks are adequately capitalised and have access to funding. In addition the Heads of State and Government agreed on ten measures to improve euro area economic governance, including regular euro summit meetings at least twice a year, and regular meetings of the presidents of the euro summit, Commission and the euro group.

President Van Rompuy, working closely with the presidents of the European Commission and of the euro group, will prepare a report for the December European Council on possible steps to further strengthen economic convergence within the euro area, to improve fiscal discipline and deepen economic union. As part of the report, President Van Rompuy will explore the possibility of limited treaty changes. In this, it is very important to bear in mind that no outcome is predetermined. I am convinced there is considerable scope to go further within the parameters of existing treaties and we should exploit that mechanism to the full in the first instance.

Bearing in mind the recent events in Athens, it is important to remember that the Greek situation is a key part of the current difficulties. A credible solution to the Greek crisis is in all of our interests, including for us in Ireland. Of course, the involvement of the private sector in resolving the Greek situation has led to similar demands here. I reiterate what the Taoiseach and Minister for Finance have said when I say that the restructuring of its public debt will be no panacea for Greece. In fact, the very harsh austerity measures and the conditions affecting the sovereignty of Greece, which must complement the new adjustment programme, will have grave implications for the living standards of the Greek people for the foreseeable future. These measures and other conditions are much more severe than anything that we in Ireland have experienced, will experience or wish to experience. This is simply ignored by those who call on Ireland to do the same.

In addition, there is the crucial issue of reputational damage. Reneging on our commitments would have major adverse implications for our international reputation. Such action could seriously damage our prospects of attracting foreign direct investment and trading our way to economic recovery. This brings up a final critical difference between the two economies in this regard and it relates to the importance of international trade. In Greece, exports amount to the equivalent of just 20% of GDP, whereas this figure is more than 100% of GDP in Ireland. I believe that any move towards a default, whether structured or unstructured, would have severe negative consequences for the exports that drive our economy and the long-term health of the country.

Equally important is that any reneging on our commitments would necessitate eliminating the primary budget deficit almost immediately. In other words, it would be disastrous and the effects would be felt by every man, woman and child in this country. I want to be clear in this regard: the Government will not contemplate such an irresponsible approach. However, the Government is acutely aware of the huge burden that has been placed on the shoulders of Irish citizens and we have already done a considerable amount to renegotiate the programme agreed by the previous Government, including the interest rate reductions, which is worth up to €10 billion; the acceptance by the troika of the measures contained in the jobs initiative; and the extension of the fiscal adjustment period to 2015.

Another key element of our strategy involves a strengthening of economic and fiscal co-ordination in the euro area. A set of measures that go beyond recently adopted reforms will be put in place, reflecting the need for greater co-ordination within a monetary union. In general terms, the surveillance of national budgets in the euro area will be tightened. Specifically, among other things, euro area member states will be required to adopt fiscal rules into national legislation to consult with other member states before adopting any policies with potential spill-over effects. More rigorous oversight is envisaged for member states in excessive deficit - in other words, where deficits and-or debt are too high.

A number of important governance improvements were also endorsed. There are many dimensions to this including the following: Heads of State or Government of the euro area will meet at least twice a year at euro summits in order to strengthen euro area governance and ensure closer integration; there will be a president of the euro summit; the EU Commissioner for Economic and Financial Affairs has been given additional functions; and various changes at the level of officials to improve matters are also envisaged.

In my view, governance reform is essential. There is no point in addressing the symptoms without addressing the underlying root causes. In other words, the Government's view is that every appropriate step should be taken to ensure that the difficulties now confronting us do not recur. As such, we are very supportive of enhanced economic governance within the euro area. The lesson from the current predicament is very simple. Being part of a monetary union requires effective co-ordination and surveillance of monetary and fiscal policies, which can only be achieved through an adequate and balanced system of governance.

I will briefly outline some of the main guiding principles regarding our approach to the governance debate as it moves to its next stage.

Ireland is firmly in favour of improved governance that is balanced and offers correct safeguards. We believe it is in all our interests. The urgency of the current situation demands prioritisation of value added measures that can be implemented quickly and, preferably, within the existing treaty. We need to see and then assess in due course any proposals that may require treaty change. We propose that institutional balance must be maintained, avoiding, where possible, excessive use of intergovernmental methods and respecting the role and expertise of the European Commission.

I acknowledge that these are unpredictable and worrying times but a significant amount of progress has been made at European level to deal with this crisis. There is no doubt that further steps need to be taken. The euro has been good for Ireland and has contributed dramatically to its economic growth in the past decade. The euro can be great for Ireland in the future. Ireland's place is in the euro. There is no viable alternative.