Dara Murphy (Cork North Central, Fine Gael) | Oireachtas source

I thank the Seanad for the invitation to participate in this debate on the future of the Europe 2020 strategy. It is an honour and privilege to be here today.

It is fitting that the occasion allows me the opportunity to commend once again the very valuable work undertaken by the Joint Committee on European Affairs in contributing last November to the European Commission's public consultation on the future of the Europe 2020 strategy, including an important series of public sessions with key stakeholders. I see the committee's report as representing an important milestone in stepping up engagement by the Oireachtas with the European semester process of economic policy co-ordination and with the core objectives of the Europe 2020 strategy. We face few greater challenges in our role as public representatives than ensuring we have in place the right foundations for the sustainable prosperity of all of our people.

As the House is aware, Europe 2020 is the EU strategy to support growth that is smart, sustainable and inclusive. Its ten-year plan, which was adopted in 2010, is based around five headline targets in the areas of employment, innovation, climate and energy, education and social inclusion. These are translated into specific goals for each member state, with progress being monitored through the European semester process.

For the EU as a whole, performance against these objectives is at best mixed, having been overshadowed and undermined by the economic and financial crises that began to emerge in the euro area at around the same time as the Europe 2020 strategy was adopted. The EU-level climate and energy and education targets are broadly on track. This means that 20% improvements in greenhouse gas emissions, renewable energy, and energy efficiency have been achieved. Increasing third level educational attainment to above 40% and reducing non-completion of second level education to below 10% have also been achieved.

However, the innovation target of raising research and development investments to 3% of GDP is unlikely to be met based on current projections. There has actually been negative performance against the employment and social inclusion targets, with fewer people working and more people at risk of poverty and social exclusion across the EU than when the strategy was agreed, reflecting the depth of the economic and financial crisis in recent years.In 2008, the overall employment rate in the European Union for the 20 to 64 age group peaked at 70.3% after a period of steady and sustained increase. However, employment trends reversed in subsequent years, with the rate falling to 68.4% in 2013, which marked a deviation of 6.6 percentage points from the European 2020 target of 75%. The evidence none the less suggests that Europe is now once again in the early stages of recovery from this period of deep and protracted recession. The year 2015 is the first since the onset of the crisis in which the economies of all member states are expected to record economic growth. Recovery in Ireland is particularly strong and remains firmly on course. The Commission's 4.8% estimate for Irish gross domestic product growth last year is the highest for any country in Europe, with a strong performance of approximately 3.5% growth expected to continue this year and indeed next year. The tough decisions already taken by this Government will bring the headline Exchequer deficit to below 3% of GDP this year, allowing us to exit the excessive deficit procedure in 2016. This will be a further important milestone following the successful exit from our EU-IMF programme a little more than 14 months ago. What is probably of greatest importance is the recovery we are seeing in our labour market. We have almost 1.94 million people at work, which is up around 95,000 since the low point in mid-2012. The latest EUROSTAT estimate yesterday put our unemployment rate in January at 10%, now more than one full percentage point below the euro average of 11.2%, which represents a clear downward path from a height of 15.1% in 2012. We are now set to be back in single digits within the coming months.

The key risk to the Irish economic outlook, as acknowledged by the European Commission, is a period of prolonged weakness in the wider euro area. We can reasonably expect, however, that lower oil prices, the expanded asset purchase programme recently announced by the ECB and the depreciation of the euro will also contribute positively and collectively to what remains a fragile recovery. The Commission's latest forecast on 5 February offered GDP growth of 1.3% for the euro area and 1.7% for the European Union as a whole. Private sector lending has also returned to a positive position, and the Commission's economic sentiment indicator also rose slightly in February for the second month in a row, which does mainly reflect improved consumer expectations.

We can see early signs of this more positive economic outlook beginning to feed through to Europe's labour markets, though it is fair to say this is not significant and not to the same degree as in Ireland. However, the seasonally adjusted unemployment rate in the euro area, 11.2%, is down in January from 11.4% in the previous month and down from 11.5% for the corresponding month last year, January 2014. This is the lowest rate we have seen since April 2012. The EU unemployment rate was at 9.8% in January, down from 9.9% the previous month and from 10.6% a year previously. This again is the second consecutive month in which the rate of unemployment for all 28 member states is back in single digits. We should, however, bear in mind that these are average figures and they mask significant regional variations. Unemployment rates are as low as 4.7% in Germany and 4.8% in Austria but as high as 23.4% in Spain and 25.8% in Greece. Crucially, youth unemployment remains the major challenge across Europe's economies. There are as many as 4,890,000 people under the age of 25 unemployed in the European Union, while in December 2014, some 3,250,000 unemployed persons under the age of 25 were living in the euro area, giving average youth unemployment rates of 21.2% and 22.9%, respectively. The youth unemployment rate is as high as 51% in Spain, and the figure is almost the same in Greece, at 50.6%, while the rate in Croatia is 44.1%. Italy is also at 41.2%. In Ireland, the unacceptably high youth unemployment rate is 22%. A situation in which well educated young Europeans face little or no prospect of joining the labour market is completely unacceptable.

It is very welcome that the extent of this challenge is exclusively acknowledged in the work programme of the new Commission led by President Juncker, building from the political guidelines he presented to the European Parliament on the occasion of his election last July. President Tusk, the new president of the European Council, has also made explicit reference to the need for ruthless determination to end the economic crisis. This political emphasis is reflected strongly in the ambitious investment plan presented by the new Commission in its first major announcement on 26 November last. The investment plan will aim to mobilise €315 billion in net additional investments in the real economy over the next three years, which is consistent with the Europe 2020 objectives. The Commission's proposals are designed to attract private investors by reducing complexity and sharing risk, and the focus is essentially on quickly establishing a pipeline of high-quality projects that would otherwise be unlikely to succeed. There are three key elements to this. The first is the setting up of the new European fund for strategic investments, EFSI. This will be guaranteed an initial budget of €21 billion, supporting €63 billion in new higher-risk EIB lending, which should mobilise a further €252 billion from private investors. Second is the setting up of a credible project pipeline and an advisory hub, and this will include significant stepping up of technical assistance to member states and deepening of co-operation with national promotional banks. Third, there will be improvements to the regulatory environment, including further streamlining of single market rules for digital and energy infrastructure in particular and also for capital markets. It is clear that President Juncker's investment plan cannot be a magic bullet for all of Europe's economic problems, but it is also likely that it can make a significant and overdue contribution, combined with the right mix of structural, fiscal and monetary policies. EU-wide investments are now down 15% on 2007 levels. This is a gap of around €430 billion, or somewhere between €230 billion and €370 billion relative to historical norms. These are the Commission's own estimates. There are also private sector surplus savings of around 3.5% of euro area GDP. This approximates to a figure of in the region of €350 billion which is required to be recycled effectively to support appropriate expansion in economic activity. Successful implementation of the Commission's proposals can therefore begin to close the gap with net additional annual investment of €100 billion out to 2017 and beyond. This would be the equivalent of boosting the GDP of the European Union area by around 0.8% per annum, before multiplier effects are applied. It is not unrealistic to think in terms of potentially adding a full percentage point to the annual aggregate GDP growth, which is vital. In view of the levels of growth around Europe, the addition of a percentage point would be extremely welcome. The EFSI is essentially being designed to provide additional risk-bearing capacity to the European Investment Bank, which will allow it to obtain private-sector finance for these new projects. As Vice President Katainen has indicated, there is plenty of liquidity in Europe but it is not currently being translated into investment. The Taoiseach was, therefore, happy to support strongly the firm endorsement by the December European Council of this overall approach, including setting clear expectations for political agreement between the Council and Parliament by June. While there are many issues of detail that remain to be settled over coming months, there is now consensus with regard to the broad outline of this new approach.

As the Taoiseach indicated to Dáil Éireann on 27 January, he has asked his Department to ensure a coherent and well co-ordinated approach by Government Departments to the new investment plan. While we need to be careful about setting unrealistic expectations about potential benefits for Ireland, there may be opportunities to develop synergies between the new investment plan and the Ireland Strategic Investment Fund and the Strategic Banking Corporation of Ireland, both of which were established by the Government last year.

The new EU investment plan shares the focus of these initiatives on using public resources to mobilise a stronger pipeline of private sector investments in the real economy. We should not lose sight of the plan's main benefit to Ireland, which is its potential role in contributing to stronger growth in our European partners, which is badly needed. As one of Europe's most open and trade-dependent economies, any boost to the growth prospects of the wider European economy also becomes an important boost for Irish prospects and interests.

It is also encouraging that the emphasis of the investment plan will be reinforced by the European semester 2015. The annual growth survey, as presented by the Commission on 28 November, is proposing that the next phase of the European semester process will be advanced on the basis of a threefold emphasis on boosting investment and pressing ahead on national and EU level structural reforms, which will also be underpinned by continued fiscal discipline. As the House is aware, the European semester is a set of processes, developed in 2010, whereby member states co-ordinate their economic policies to support growth and jobs. We agree shared priorities at EU level in first half of year and we then implement them at national level in the second half of year. It is fundamentally designed as a mutual surveillance process that is supported by the European Commission. The key lesson of the crisis is that we need to take these arrangements seriously, particularly in so far as the stability of the single currency area is concerned.

Members will have noted that the Commission produced its comprehensive country reports for each member state last week. There is now a window of more than two months before draft proposals for the next round of country-specific recommendations are produced by the Commission in mid-May, for adoption subject to amendment by the Council in June. Members may be aware the period for deliberation was very much shorter last year. In the case of Ireland, the assessment in the new country report is a broadly positive one, reflecting the strength of the economic recovery under way and supporting, in turn, a gradual unwinding of the deep imbalances developed during a period of appalling economic mismanagement. We are one of only five member states whose budgets were found by the Commission in November last to be fully compliant with the provisions of the Stability and Growth Pact. Of course, it is our own citizens who benefit most from that reality.

I look forward to a fuller discussion of the Commission's analysis at my meeting with the Joint Committee on European Affairs on 10 March, which will look ahead to the meeting of the General Affairs Council on 17 March that will prepare for the spring European Council a number of days later. I hope that other joint committees can also take an interest in the sectoral assessments set out in last week's country report in so far as matters falling within their respective areas of responsibility are concerned. I believe this is the opportunity for Oireachtas committees to engage at sectoral level with the recommendations. It is an important rationale behind the widening of the period between the reports of last week and the country-specific recommendations which will follow in a number of months.

Returning to the mid-term review of the Europe 2020 strategy itself, the new Commission is due to present proposals this year for an improved and updated strategy, ensuring we have the right post-crisis arrangements in place for supporting growth and jobs in Europe. The Commission's preparations in this regard will, of course, be informed by the public consultation to which the joint committee made its important contribution last November. In an increasingly knowledge-intensive and interconnected global economy, it is crucial that we have a shared view of changing challenges and opportunities at both the domestic and EU levels.

The Commission's proposals were originally expected to be presented before the spring European Council. This timeline has now been reset to the latter part of the year, keeping the political focus in the first half of the year on getting the new investment plan, which is so important, up and running. The Commission has, however, produced this afternoon a short review of the public consultation process, along with a refreshed status update yesterday on EU level progress against the five headline targets. In my first meeting with the joint committee on 25 September last, I stressed that we need to unlock a new wave of EU-wide investments, supporting growth that is smart, sustainable and inclusive. This means investments in the knowledge, skills and next generation infrastructure necessary to compete successfully in the digital economy; investments in setting a clear path to decarbonisation, appropriately balanced with global food security objectives; and investments in the education and active labour market policies necessary to ensure greater adaptability to accelerated change and to address the most deeply embedded forms of social advantage. I believe the new Commission's proposed €315 billion investment package sets the right direction and should become an important driver of the reinvigoration of Europe 2020 objectives that is so clearly needed.

I look forward to hearing the Senators' views and to continuing my close engagement with the joint committee on these matters as they progress in the coming months.