Lucinda Creighton (Dublin South East, Fine Gael)

I thank Senator Mullen.

The European Council also addressed a range of other issues including the need for a complementary focus in Europe on the speedy implementation of measures which will boost growth and jobs; follow-up on the issue of energy, including a review of progress made on delivering the safety stress tests undertaken at nuclear installations across Europe during the course of this year; in the margins of the European Council, Croatia's accession treaty to the Union was signed by leaders, including by the Taoiseach on behalf of Ireland; and a comprehensive set of conclusions were also adopted by the European Council on a package of measures related to the future enlargement of the Union. Leaders also assessed recent developments in Iran, Syria and Afghanistan and concluded by taking stock of progress made so far with the preparatory work on the European Union's next Multi-annual Financial Framework, the EU's budget for the period 2014-20. I will return to these issues later in my statement.

Without doubt and entirely appropriately, most of the energy and oxygen at last week's European Council meeting was consumed by and directed towards issues related to the euro currency. Addressing the severe challenges facing the euro area is what was required of leaders last week and that is what European Heads of State and Government delivered.

The political agreement reached by European leaders last week is to be welcomed. It represents a step in the right direction and maps out, for all concerned, a credible means for the euro area to move forward with stability.

Prior to last week's meeting, other members of the Government and I highlighted consistently that European leaders needed to strengthen the short term crisis management tools available to Europe and particularly the euro area, while also agreeing to a series which will fortify economic union. In other words, we needed to respond to the urgent threats, while also laying out clearly the way forward beyond the immediate.

That is largely what transpired last Friday. The outcome was a good one for Ireland and for the future stability of our shared currency and it should be welcomed by this House.

Last week's European Council began with a dinner meeting on the Thursday evening which ran late into the night, or indeed into the early morning. The President of the European Council, Herman Van Rompuy, presented his interim report, which euro area leaders had requested of him at their meeting in October, on possible steps to strengthen European economic union. President Van Rompuy's report was the product of his close consultations with each EU member state, including Ireland, and with the President of the European Commission and of the eurogroup. The Government considered that his proposals struck a broadly acceptable balance. This view was shared by many EU partners and they formed the basis of the substance of the agreement eventually reached. The agreement reached concerning the euro area covers two broad aspects: first, the development of stabilisation tools, or firewalls, to address the immediate challenges; and, second, agreement on a new fiscal compact which will strengthen budgetary rules and economic policy co-ordination. Looking first to what was done to address the immediate crisis, important steps were taken to bolster the euro area's stabilisation tools or firewalls. This is part of a programme of immediate action to respond to the considerable current pressures in the markets. The creation of credible and robust firewalls to address spillover effects from one member state to another were a top priority for Ireland in the run up to and at last week's meeting. The outcome is welcome from an Irish perspective.

Leaders agreed to bring forward the entry into force of the European Stability Mechanism, ESM, the permanent successor to the European Financial Stability Facility, EFSF, with the objective to have it enter into force in July 2012, a year earlier than anticipated. The early operation of the ESM is most welcome, as it will contribute to instilling credibility, given its permanent nature. It was agreed that the EFSF should remain active until mid-2013, as previously planned, and that it will continue to ensure the financing of on-going programmes as needed.

Critically from Ireland's view point, euro area leaders agreed that the requirement for private sector involvement, PSI, should be removed from the ESM treaty and that we would strictly adhere to well established IMF principles and practices in this regard. The removal of this PSI provision in the draft ESM treaty has been an objective of the Government for some months now. We have vigorously argued that this needed to be done. The Taoiseach raised this specific issue at his meeting with Chancellor Merkel and in his contacts ahead of the European Council with President Van Rompuy and Prime Minister Cameron. PSI was acting as a serious impediment to those member states, including Ireland, who were seeking to re-enter financial markets in the future. We are gratified that our partners listened carefully and responded appropriately.

It was agreed also that the adequacy of the overall ceiling of the EFSF and ESM, of €500 billion, would be reassessed in March 2012 and that partners stand ready to accelerate payments of capital into the ESM if this is needed to maintain the required ratio between paid-in capital and loans, and to ensure a combined effective lending capacity of €500 billion. In order to further underpin our firewalls, member states will consider providing up to €200 billion in the form of bilateral loans to the IMF to ensure that it has adequate resources to deal with the crisis. This will not impact directly on Ireland, as we are in an EU-IMF programme and hence are not expected to contribute. It is our hope also that international partners, beyond Europe, will make parallel contributions to the IMF.

The second substantive element of the euro area package agreed last week concerned the strengthening of European economic policy co-ordination, a new fiscal compact. Leaders agreed the new compact, which in essence is a set of reinforced budgetary rules for countries within the euro area. The compact has a number of specific elements. Heads of State and Government agreed that government budgets should be balanced or in surplus. This is an acknowledgement that, as a rule, broadly speaking, each member state will need to live within its means. Given the situation we are all now in, that is a reasonable proposition. The new fiscal rule provides that a member state's annual structural deficit should not, as a rule, exceed 0.5% of nominal GDP. This is an ambitious rule, but it was important to signal clearly that Europe is deadly serious on this issue. Of course, we will now work through the country specific implications for Ireland, once negotiations are under way.

As yet, last week's agreement is a political one. Now detailed technical and legal considerations must be carefully teased out by experts before any legal text is adopted. This critical process, in which Ireland will be fully and actively engaged with, will get under way in Brussels as early as next week. To underline the absolute earnestness of all member states concerned, this commitment will be carried over into national law "at Constitutional or equivalent level" and the European Court of Justice will have a role in assessing that this is done correctly. We are now examining this requirement carefully, particularly in light of work which is already under way on the fiscal responsibility Bill.

Euro area leaders agreed that euro area member states in breach under the existing rules of the excessive deficit procedure will be required to work with the Commission and the Council in an economic partnership programme detailing the structural reforms intended to get back on track in a sustainable way. The implementation of this programme and annual budgetary plans will be monitored by the Commission and the Council. Leaders also agreed that the rules for the excessive deficit procedure should be made tighter for member states within the euro area. Specifically, there will be automatic consequences for a member state that exceeds the 3% ceiling, unless a majority in the Council decides not to adopt a Commission recommendation in this regard.

On 23 November last, the European Commission brought forward two significant new proposals on the monitoring and assessment of draft budgetary plans and on strengthening economic and budgetary surveillance of member states experiencing or threatened with serious difficulties. In response, leaders last week called on the Council and European Parliament to rapidly examine these proposals, with a view to their entry into force for the next budgetary cycle. Under this new legal framework, the Commission will, in particular, examine the key parameters of draft budgetary plans and, if necessary, adopt an opinion on them. Where a plan is seriously non-compliant with the requirements under the Stability and Growth Pact, the Commission will be able to request a revised one. Given the clear interdependence of European member states, particularly those within the euro area, we should have nothing to fear from these proposals. In fact, we stand to benefit from them. Ireland is already fulfilling all its obligations under its programme in full and on time. It will be in our national interest to ensure that all are operating within the rules agreed. As we all know, that is not what has happened over the past ten years.

For the longer term, leaders agreed that we should continue to work on how to further deepen fiscal integration so as to better reflect our degree of interdependence. President Van Rompuy has been asked to prepare a further report on this issue, in conjunction with the Presidents of the Commission and the euro group, for March 2012. These new arrangements will mean more oversight of what member states are doing with their budgets, such as sharing budgetary plans in advance. As the House is aware, preparations are well under way for a fiscal responsibility law that will ensure that the blunders of the past cannot be repeated in the future. Similar arrangements in other member states should be to our advantage and should be welcomed. It is clear that as we proceed with each of these important steps, we must do so on the basis of sound and clear analysis. The fundamental requirement for democratic legitimacy and political accountability must not be lost at any stage. I have no doubt but that the members of this House will agree with me on that.

Having reached agreement on the substance of what was involved, last week's European Council turned its attention to the steps necessary to put the substance in place, in other words the form the agreement would take. All leaders agreed that there was considerable scope for making progress through secondary legislation, where this was possible within the framework of the existing treaties, while it became clear that some of the agreed steps would require primary law. As chair of the meeting, President Van Rompuy sought to move forward on the basis of all 27 member states. That too was Ireland's strongly held preference. However, when agreement among all 27 proved elusive, we agreed to move forward by way of an international agreement which would involve all euro area member states, plus as many other member states as wish to join. A number of non-euro area partners are now consulting government partners and parliaments and it looks as though up to 26 member states will agree to participate in this new international agreement. The exception in this instance is the United Kingdom, which felt that it was not in a position to agree.

We have made no secret of the fact that we would have wished to reach agreement last week on the basis of all 27 member states. That proved not to be possible on this occasion and is a disappointment to the Government. However, it is the sovereign right of each government to determine what is in the best interests of its country. I fully respect that right. The British Prime Minister's decision at last week's meeting in no way changes the reality that the UK is and will continue to be an active and important member state of the European Union, with whom we co-operate very closely across a very wide range of policy issues. We look forward to continuing our close and fruitful co-operation with our UK colleagues in the context of our common membership of the European Union. These enduring and close ties with our nearest neighbour will continue and were reflected earlier this week in the context of the Taoiseach's contacts with Prime Minister Cameron and the Minister for Finance, Deputy Noonan's, visit to London the day before yesterday.

The United Kingdom has decided not to participate in the specific arrangements agreed at last week's meeting, but it has not in any way turned its back on the European Union. Prime Minister Cameron made that point very clearly in his address to the House of Commons earlier this week. In view of this what was achieved last week was a political agreement to proceed via the route of an international agreement. That political agreement must now be given technical and legal effect. Work involving the legal services of the Commission and the Council is already under way. We expect an initial text shortly and, on that basis, detailed engagement with member states will take place by the beginning of next week and continue throughout January.

There is great interest in the House, as there is outside, in what the adoption of this agreement will mean for Ireland and whether a referendum will be required to ratify it. However, the Taoiseach has confirmed a simple fact, that being, until we have the final legal text to consider, it will not be possible to say. At that stage, the Attorney General will wish to give the texts full and careful examination before offering her considered advice. We cannot rush or force the process. We need to proceed with appropriate care and attention. The Taoiseach has confirmed that should a referendum be required to allow Ireland to ratify the agreement, we will have one. We will look forward to putting forward a strong case on behalf of the Government.

In advance of last week's meeting, the Taoiseach wrote to and spoke with President Van Rompuy to alert him to the points the former would raise at the meeting. The Taoiseach sought the support of his colleagues in making the burden that the Irish people are carrying as a result of the steps we have taken to recapitalise our banks more manageable. Specifically, the Taoiseach asked that the facilities now available, for example, the European Financial Stability Facility, EFSF, be deployed to assist in this regard. Ireland is seeking a re-engineering of its bank-related debt, not to avoid any commitment entered into in good faith. We are meeting and will continue to meet on time and in full all of our commitments. This is not in question. The Taoiseach's colleagues gave him a receptive hearing and the issue will be taken forward via contacts between officials during the period ahead and subsequently at meetings of ECOFIN and eurozone finance Ministers.

The meeting of the European Council also addressed a number of other issues. Heads of State and Government agreed on the need for the EU to adopt measures swiftly that offer the most potential to boost growth and jobs, with particular reference to the Single Market Act, the digital single market and the reduction of the overall regulatory burden for small and medium-sized enterprises, SMEs, and micro-enterprises. Ireland has been strongly supportive of efforts in this regard. At the General Affairs Council, which I attended in advance of the European Council, Ireland and a number of other member states specifically requested a reference to these issues in the European Council's conclusions.

Among the other issues addressed was energy. Leaders took stock of progress made since they last considered this issue in February. Focus was given to completing the internal energy market, energy efficiency, developing energy infrastructure and external energy policy. Leaders also assessed the initial findings of nuclear stress tests and the progress report on the security of nuclear power plants. Final reports on both are expected by the middle of 2012.

Leaders also addressed the issue of the enlargement of the Union, arguably the EU's most successful policy to date. They endorsed conclusions that set out the prospects of opening accession negotiations with Montenegro and granting Serbia candidate status during the course of next year. On the margins of the meeting this day last week, the Croatian accession treaty was signed. Croatia will join the Union as a member state in July 2013. It is important to point out that at a time when the EU is experiencing great difficulty and the eurozone is under considerable pressure, the EU continues to present an attractive option to countries that were ravaged by civil war and widespread genocide just 20 years ago. We can be proud of having played a constructive role in enhancing democracy, human rights and the rule of law through the EU.

The Heads of State and Government also adopted conclusions on developments in Iran, Syria and Afghanistan and looked forward to negotiations on the Union's budget for the seven-year period 2014 to 2020, the so-called multi-annual financial framework. These will be carried out during the Danish Presidency.

This crisis is the greatest ever faced by the European Union. Therefore, the Union and we as members must act as never before to overcome these challenges. There is no easy way out, the choices are limited, the window of opportunity is narrow and the consequences of inaction are almost incomprehensible. I am glad that at the summits in October and December, European leaders began to act. We must maintain this progress. It will mean travelling a long and difficult road, but there is no other option. We must save our currency. It is plans A, B and C. We cannot turn back the hands of time and revert to some other fictional currency over one weekend, nor would we want to. It would be an economic disaster. The euro can and will survive, but not by happy coincidence. We need to realise this fact and, therefore, co-operate to ensure its future and, consequently, the future of the entire European project and its countless associated benefits.

I thank the House for affording me the time to address it today. I look forward to hearing the contributions of Senators and to responding to the House on the points raised.