Seanad debates
Tuesday, 7 February 2012
EU Fiscal Compact Treaty: Statements, Questions and Answers
4:00 pm
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
I thank the House for the opportunity to brief it on the European summit that took place on Monday. I appreciate the opportunity for a good exchange, and to date the exchanges have been robust, interesting and constructive in this House. I specifically want to brief Senators on the new treaty on stability, coordination and governance in the economic and monetary union.
I previously briefed this House following December's European Council meeting and I hope to continue this practice as time goes on. I am strongly of the view that the Houses of the Oireachtas have a critical role in ensuring that EU issues are properly communicated to the people and properly scrutinised and debated in the Houses. Such communication is really important as we deal with complex and difficult issues. In the programme for Government, drawn up 11 months ago, the Government recognised that there is a need for a marked step-up in engagement with the Oireachtas on key issues arising at EU level. Senators will be aware that this commitment is being taken very seriously by the Government and we are delivering on those words. My presence in this House is an element of delivering on that.
Understandably, there has been a great deal of interest, including here in the Oireachtas, in the contents and indeed in the form of the intergovernmental treaty agreed by leaders last week. There has, however, been considerable misrepresentation of what is contained in this treaty so, at the outset, I will set out as clearly as possible for the House the main elements contained in the new treaty. They include the introduction of a "deficit brake" at national level, which will require member states to have an automatic correction mechanism in their national laws, preferably at constitutional level, which ensures they abide by the requirement for countries with debt in excess of 60% of GDP to maintain budgets in balance or in surplus. There is also a restatement of the pre-existing obligation in EU law to have a "debt brake". This requires countries with debt in excess of 60% of GDP to reduce it at an average rate of 1/20 per year.
There is a requirement for countries in the excessive deficit procedure, as set out in the EU treaties, to have a "budgetary and economic partnership programme", the content and format of which is to be defined in EU law. There is an agreement among the countries signing the new treaty to support Commission recommendations in regard to a country's deficit under the EU excessive deficit procedure unless a qualified majority is opposed. This undertaking effectively reverses the voting rule under the treaties and is sometimes called reverse QMV.
It will be possible for a signatory of the new treaty to be brought to the European Court of Justice if its national law is regarded as not complying with the requirements of the new treaty regarding the establishment of the national deficit brake. The court has an ability to impose fines if a signatory ignores its judgment in this regard.
There is a commitment among the signatory countries to work towards an economic policy that fosters the smooth functioning of the economic and monetary union and a statement that they stand ready to make active use of enhanced co-operation, as provided for under the EU treaties, whenever appropriate and necessary. New arrangements are set out for the governance of the eurozone, including provision for at least two euro summit meetings per year, at the level of Head of State or Government, at which the Taoiseach will represent Ireland.
Particularly important for the Houses of the Oireachtas is the fact that the new treaty provides for a conference of representatives of the relevant committees of the European Parliament and national parliaments of countries participating in the treaty to discuss budgetary policies and other issues covered by the treaty. There are arrangements for the treaty to enter into force on 1 January 2013, once 12 euro area signatories have ratified it according to their national requirements. Countries will then have a year in which to transpose measures into national law.
The new treaty concludes with a provision that, within five years at most, following entry into force, the necessary steps will be taken with the aim of incorporating the substance of the EU treaty into the EU's legal framework.
Very significantly for Ireland and other countries currently in stabilisation programmes, it is made clear in the preamble to the new treaty that none of its provisions is to be interpreted as altering in any way the requirements of a stabilisation programme such as Ireland's EU-IMF programme. The preamble also contains a statement that access to the European Stability Mechanism is linked to ratification and implementation of the treaty's provisions. This is done on the not unreasonable basis that if a country is to have access to Europe's permanent support programme, the ESM, partners will have a reasonable expectation that the country will be committed to a measured and responsible approach to deficits and government debt.
Throughout this intensive and quite rapid negotiation process, Ireland negotiated to secure its priorities an outcome that reflected Ireland's particular position as a programme country; an outcome that ensured that the measurement of structural deficit would make sense for all member states, including small open economies such as that of Ireland; and an outcome tied as closely as possible to the existing EU treaties and law. On each of these points, our interests were addressed. I pay tribute to our team of senior officials, drawn from a range of Departments, on their sterling work on defending Ireland's interests throughout the negotiations, which stretched right across the Christmas and new year holiday period. These officials have, in the very best tradition of the public service, promoted and defended Ireland's interest throughout. It is appropriate to reflect on this and acknowledge it in the Chamber.
I have outlined the main elements of the new treaty. I now want to touch briefly on what is not encompassed by it. It is not an austerity treaty, as some voices in these Houses and beyond have claimed spuriously. The treaty states nothing at all about how tax should be raised or about how much tax each member state should raise, nor does it state anything about how or how much each member state should spend. All it calls for is an equilibrium between income and expenditure to be moved towards and maintained. That is already a stated objective of the Government. Any other approach is, regrettably, unsustainable. Each member state needs to pay its way in the world. Everybody, no matter how big or small his budget, knows the basic tenet that, over the medium term, one's income should cover one's outgoings. Anything else is simply a recipe for compounding the spiralling of debt, which is not something we should or could aspire to.
Very regrettably, today's debt cannot be magicked away by some sort of financial wizardry. If we keep adding to our debt in ever-increasing volumes to maintain unsustainable Government deficits, we will simply be borrowing from tomorrow and placing an added burden on generations to come in paying down our debts. If we keep adding to our debt in ever-increasing volumes in order to maintain unsustainable Government deficits, we are simply borrowing from tomorrow and placing an added burden on the generations to come in paying down our debts. That is not the basis for intergenerational solidarity and our children and grandchildren will certainly not thank us for it. We have a responsibility to sort this out now.
For all the attention it is receiving in Ireland and elsewhere, this new treaty is not a major departure from the EU treaties and existing EU law. Most of what is contained in the treaty, including the need for balanced budgets and sustainable debt already exists within the EU. What this treaty does is bring these approaches into sharper focus and tighten up some of the rules. What is genuinely new is the need for national legislation to implement the deficit brake. Of course, this was envisaged already in the programme for Government and the legislative programme and in that sense it is nothing new for us.
None of the provisions in this treaty, new or pre-existing, should cause any concern for a country like Ireland. The requirements placed on us by the EU-IMF programme go considerably further than what is envisaged in this treaty. What this treaty will do is level the playing field so that all member states, no matter how big or powerful, will in future be held to account just like everybody else. Every Member in this House should be aware at this stage that this is not what was happening under the pre-existing arrangement. Essentially, rules were there to be broken, and the first offenders were the larger member states, not the smaller ones. The automaticity that now applies under the terms of the new treaty will benefit small member states and ensure that all countries, big and small, must play by the rules. This is a really important development and, I reiterate, it is good news for Ireland. We are already delivering on our commitments, on time and in full. That is now acknowledged internationally, including by euro area leaders last week. What is good for Ireland is an arrangement whereby all member states play by the rules and are seen to do so. That will bring credibility to our common currency and stability to the financial markets. It is on this basis that I believe this treaty will be good both for Ireland and for Europe.
However, nobody has suggested, even for a moment, that this new treaty is the whole story. Clearly, it is not. It is a piece of a puzzle. Europe's response to the current crisis has been multifaceted. In addition to this treaty, we have established the EFSF, from which Ireland currently draws its funding. Its permanent successor, the ESM, has now been put in place and is due to enter into force in the middle of this year, a year ahead of schedule and without a reference to private sector involvement, PSI, which would have hindered our efforts to return to the financial markets. At the same time we have put in place the European semester which is overseeing the implementation of structural reforms set out in the national reform programmes provided by each member state.
Europe has also been conscious of the need to put in place robust and convincing firewalls in order to prevent detrimental spillover effects from one member state to another. This crisis has underlined for all that in a currency union what happens in one member state can have very serious repercussions on all the others. The level of interconnectedness is now extremely pronounced. It is very welcome that leaders reaffirmed last week they would return to reassess the adequacy of the overall ceiling of €500 billion of the EFSF and ESM when they next meet in three weeks' time. The Government has been consistent in advocating that firewalls in the euro area be as strong and as credible as possible.
The other element which is now being acknowledged as mission-critical among Europe's leaders is the need for a very sharp focus on sustainable growth and job creation. The credibility of all these efforts to get through the crisis will rest, rightly, in the minds of our people, on our ability to deliver a return to economic and job-creating growth. To this end, it was very welcome that the main thrust of the discussions among leaders last Monday was on stimulating employment, especially among young people, completing the Single Market and boosting the financing of small and medium-sized enterprises. The Taoiseach was invited by the European Council President, Herman Van Rompuy, to introduce the discussion on support to the SME sector. His intervention was extremely well received by his European colleagues and set out the extensive range of measures the Government is taking to try to improve the life of SMEs in Ireland, including through the forthcoming jobs action plan, the partial guarantee scheme, the micro financing loan fund and the strategic investment fund. The SME sector is the very lifeblood of our economy and of the economies of our European partners.
Across Europe, they number more than 23 million companies, which is staggering. Their potential to drive sustainable job creating growth is unmatched and the Government is strongly committed to supporting and facilitating that engine of enterprise.
The Taoiseach also highlighted the steps being taken to ensure the economy gets a return for the vast sums committed to recapitalise our banking sector, including through monthly monitoring of lending targets. The Government is pursuing this issue rigorously and we are determined to achieve results.
Ahead of last week's informal European Council meeting, Ireland joined a number of like-minded member states to submit two papers - one which identified steps with potential to deliver growth and the other on the digital Single Market. These papers formed important inputs into the outcome statement leaders eventually agreed.
The Government has been completely committed to proactively pushing the jobs and growth agenda at home and also in Europe. Steps being taken both nationally and at European level must support and complement each other. There is an appreciation among European leaders that this needs to be done and this issue is firmly fixed on the agenda of future European Council meetings.
Before concluding, I want to address one issue which has been generating a great deal of heat, whatever about light, since last week's meeting of European leaders, namely, the issue of how Ireland will ratify the new intergovernmental treaty. I confirm to the House that the Government has sought the formal advice of the Attorney General on what will be required for Ireland to ratify this new treaty. The Attorney General is giving the legal implications of the treaty careful consideration and she will advise the Government in due course.
As regards the question of the holding of a referendum on this treaty, the Government has been completely clear. If the treaty is not compatible with our Constitution, a referendum will be held. This House can be assured that whatever path towards ratification is required, the Oireachtas will be fully involved in the process. There is nothing undemocratic in proceeding to ratify this treaty through the Oireachtas, should that prove to be what is required. Our system is a parliamentary democracy, which is clearly enshrined in Bunreacht na hÉireann. In the vast majority of cases, international treaties are ratified without recourse to a referendum. Our tradition and practice in this State has been to have referenda only when it is necessary to amend Bunreacht na hÉireann and we have no intention of deviating from that.
It is regrettable in the extreme that Opposition parties, groupings and individuals are tripping over themselves to call for a referendum, even before advice is received by the Government on this point. It is most unfortunate that, on an issue on which Ireland has a vital national interest, many of those in opposition are attempting to score cheap and populist political points. It is sad that for many of those Opposition voices, Ireland's interests seem to take a back seat to their own narrow domestic political agendas. The Government will not adopt such an approach.
Darragh O'Brien (Fianna Fail)
Link to this: Individually | In context
That is what Fine Gael did last year before it entered office.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context
Opposition leaders have not even been brought in for a briefing.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
We will continue to strongly advocate for the best possible outcome for Ireland in Europe. That is where our vital national interests lie and that is where our energies will be directed. The people elected us one year ago to do a tough job for them but, at all times, to advocate and defend Ireland's interests. That is what we have done with this treaty and that is what we will do in seeking to have it ratified. I make no apology for that. I look forward to engaging with Members during the remaining time.
Jillian van Turnhout (Independent)
Link to this: Individually | In context
Group spokespersons will now make contributions of five minutes each. This will be followed by a contribution from a Sinn Féin Senator for two minutes and questions from Members, which will be confined to one minute each. I call Senator Leyden.
Terry Leyden (Fianna Fail)
Link to this: Individually | In context
I welcome the Minister of State to the House. She does not require senior officials from the Departments of the Taoiseach and Foreign Affairs and Trade to brief her on the questions that may arise, which means she is well up on her brief.
I refute the partisan comments she made towards the end of her contribution because the main Opposition party, Fianna Fáil, has been most constructive and helpful on this issue. Only 12 months ago, the then Opposition parties, including Fine Gael, were unhelpful to the Government, which was going through a difficult period with our national problems, by giving the impression to the electorate that it would burn the bondholders. It gave the impression that it would be Labour's way, not Frankfurt's way.
Terry Leyden (Fianna Fail)
Link to this: Individually | In context
If the Minister of State wants to say the way the Opposition parties have acted recently is regrettable in the extreme, she should recall her party's position in opposition 12 months ago. The fact is the Government has not burned any bondholders. It is Frankfurt's way, not Labour's. The Government misled the electorate. It must pay the price for this by being in government which means it must make hard decisions.
A team of senior officials drawn from a range of Departments were involved in the negotiations. Will the Minister of State confirm a number of representatives from the Attorney General's office advised the team on the treaty on stability, co-ordination and governance in the economic and monetary union? Will she confirm the treaty has been geared towards ensuring a referendum will not take place here?
I understand the Attorney General may give her recommendation to the Government this week. It is, however, a recommendation - her view and it must be borne in mind that she was appointed because of her political affiliations like all Attorneys General. It will be the Government's final decision.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
The Attorney General provides independent legal advice. If Senator Leyden is calling into question the integrity of the Attorney General-----
Terry Leyden (Fianna Fail)
Link to this: Individually | In context
I am not questioning her integrity.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
That was a bizarre statement.
Darragh O'Brien (Fianna Fail)
Link to this: Individually | In context
The spokesperson does deserve some protection from the Chair. The Minister should not be interrupting him.
Terry Leyden (Fianna Fail)
Link to this: Individually | In context
The point is the Government awaits the advice of the Attorney General. It then makes a decision based on its attitude to this particular issue or its wish to put a complex treaty to the Irish people for them to endorse or otherwise.
This treaty has far-reaching consequences for the people. The Minister for Transport, Tourism and Sport, Deputy Varadkar, let the cat out of the bag when he said he did not trust the people on a referendum because it would end up being a debate on issues such as septic tanks or the closure of Roscommon hospital's accident and emergency department, which is very important too.
John Gilroy (Labour)
Link to this: Individually | In context
It is a good job we did not send Senator Leyden to negotiate for us.
Terry Leyden (Fianna Fail)
Link to this: Individually | In context
However, the people are entitled to have a debate on the treaty and its details. It is confirmation of austerity over the next several years which the Minister of State claimed it was not. The Leader of the Opposition, Deputy Martin, has put a list of questions on the treaty to the Taoiseach. I hope the Minister of State will be able to give some responses to them here. Given that Ireland will remain in a programme of assistance with the EU and IMF until the end of 2013, the preamble makes it clear that the treaty's provisions will not apply to Ireland when it remains in the programme. Will the treaty's provisions apply to Ireland as soon as it leaves the programme on 1 January 2014 or will it apply on 1 January 2016?
I have been informed the Minister of State recently made some comments about Ireland's past attendance at European Council meetings. Attendance has always been exemplary and an independent assessment put us fifth highest out of 27 member states. When I was a trade Minister I attended all Council meetings. The Minister of State should show some humanity for any Minister who may have personal reasons for not attending a meeting. All crucial Council meetings were attended.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
It has never been suggested they were not.
Terry Leyden (Fianna Fail)
Link to this: Individually | In context
Fianna Fáil's work in Europe is exemplary. We have done more in Europe than the Minister of State will ever do. We have been exemplary in our stands, in putting referenda to the people, consulting the people, being with the people. We have proved to be the best party in government in Europe. Let the Minister of State prove what she can do but she should not disparage Fianna Fáil. I defended her in Independent newspapers in regard to her ministerial responsibilities for Europe but I am disappointed by her regular attacks on Fianna Fáil, which are grossly unfair and beneath contempt.
Michael Mullins (Fine Gael)
Link to this: Individually | In context
I congratulate the Minister of State and the Taoiseach on the progress they made on two key issues, namely, the jobs and growth agenda and the fiscal compact treaty. I pay tribute to the civil servants who put in long hours over the Christmas period to defend the best interests of this country. We are fortunate to have public servants of the highest calibre.
In the simplest of terms, this treaty is part of Europe's response to the current economic crisis, alongside growth enhancing measures and the firewalls to which the Minister of State referred. It will strengthen the rules underpinning the euro by requiring member states to run balanced budgets and ensure that expenditure is balanced against tax revenue. They will have to reduce their debt to manageable levels. The treaty will help the euro area in particular because it will show the rest of the world that we are serious about the stability of the currency. Everyone will have to play by the rules. Large member states will no longer be able to use their voting weight to wriggle out of their responsibilities. In economic terms, it means that Ireland will be part of a stronger and more credible currency. Future Governments will be not be able to run unsustainable budgetary policies without regard for the long-term consequences of their actions.
Despite the scaremongering, it is clear that the treaty will not impose decades of austerity that we could otherwise avoid. We are already in a stringent programme which will take precedence and we will in any event have to close the gap between spending and taxes to reduce our debt levels. This will require time and hard work. Over the weekend, a number of well-known Irish economists, including Karl Whelan and Alan Ahearne, confirmed that a considerable amount of work will be required before we return to a sustainable footing.
The treaty does not commit member states to a single economic philosophy. It is up to each state to decide how to tax and how to spend. It does not entail permanent interference in our economy. It is right and proper that members of a common currency view their economic policy as a shared concern, and that is already set out in the treaties. Our openness to peer review under the Commission's supervision is a necessary part of that process.
Considerable time was devoted to a discussion on economic recovery and job creation at the recent informal European Council meeting. The Taoiseach highlighted two key concerns which are raised regularly in this House, namely, ensuring access to finance and reducing red tape. These issues will have to be addressed before small and medium enterprises - the engine of economic recovery - can fulfil their potential. Banking behaviour has to be addressed as a matter of urgency. Reference was made on the Order of Business to what happened at Galway Airport. I look forward to the roll-out of the Government's jobs action plan and hope it contains some of the good ideas proposed in this House during our recent debate on employment creation measures. The partial guarantee scheme, micro-finance loan fund and strategic investment fund will help to support bank lending.
This treaty is good for Europe and good for Ireland. I hope the Attorney General comes to an early decision on whether a referendum is required. If she advises that a referendum is necessary, I do not doubt the Irish people will back the treaty in the interest of our country. If she advises that a referendum is not necessary, it would be irresponsible for the Government to waste public money on a referendum that was unnecessary.
Katherine Zappone (Independent)
Link to this: Individually | In context
I welcome the Minister of State, Deputy Creighton, to the House and thank her for coming to hear our views prior to the publication of the fiscal responsibility Bill. I note her comments at the beginning of her speech about the Government's commitment and the importance of engaging with the Houses of the Oireachtas. Shall we take it this is another sign of the relevance of Seanad Éireann? I thank her for being here.
I will order my comments and questions in three areas. First, what is missing in the treaty? The people of Ireland would have been happier with the treaty if the fiscal compact offered was an holistic compact. They would have been happier if it was a true and trusting compact that asks us to sign up not only to fiscal rules but to fiscal insurance. Such a treaty would offer a carrot with a stick, mutual support of EU membership as well as mutual monitoring, particularly in light of our high current debt-to-GDP ratio of 120%, our high level of unemployment and our high level of structural deficit, as distinct from our deficit at a point in time. I am referring to the average deficit over a long period of time.
As the Minister of State will be aware, the Taoiseach denied that Ireland's acceptance of the fiscal compact will condemn the State to further years of austerity and there have been a few comments from Senators on the issue of austerity. However, as she also will be aware, the Department of Finance recently predicted a budget structural deficit of 8% of GDP for 2012, reducing to approximately 3.7% in 2015 after, hopefully, we have exited from the bailout programme. This is a far cry from the 0.05% of structural deficit target that we must reach according to the treaty, if we are to follow the golden rule and not end up in the European Court of Justice because we deviate too much from the corrective mechanism. If we are only at a structural deficit of 3.7%, we need to contract our budget by another 3.2% which, some economists predict, would be approximately €5.5 billion and which sounds like more austerity to me post 2015. The structural deficit target is simply oppressive, certainly for the Irish.
That is not to say that we do not require fiscal rules for the EU. I am in favour of a fiscal union to match our monetary union if the euro is to survive and our economy is to move towards sustainability. I am not in favour of the fancy financial wizardry to which the Minister of State referred in her speech although if we were looking for an example of that, we might look at the emergency liquidity assistance that was used for the promissory notes, but that is a discussion for another day.
I suggest that what we also need are mutual insurance mechanisms such as the ESM being provided with more fire power, for example, a banking licence so that it can borrow from the ECB to be in a position to buy sovereign bonds for those countries in need of lower bond yields to stimulate growth, or the offering of eurobonds or some form of fiscal transfers such as the financial transaction tax or European VAT rate. Can the Minister of State give us any indication of some type of mutual insurance mechanism coming on stream relatively soon after the incorporation of this treaty? Such an indication would go a long way towards making the treaty somewhat more palatable to the Irish public.
Can we get clarification on the treaty's elements? Professor John McHale of the Irish Fiscal Advisory Council has argued that the real innovation of this treaty relates to its enforcement - the Minister of State referred to that in her speech - particularly the proposal for the correction mechanism if we are deviating from our adjustment path towards the structural deficit target. The proposed treaty does not provide much detail on the form the correction mechanism must take, only noting vaguely that we must follow common principles proposed by the European Commission. Can the Minister of State provide any clarity on the substance of these principles, or when they might likely be clarified? This will help us to have a better sense of the amount of flexibility, if any, we and other countries will have in moving towards the fiscal discipline targets. It seems that we must have some margin of flexibility in terms of the identification of a required adjustment path to ensure that lengthy austerity does not put us under for good.
My last question for the Minister of State is rather more brief. In the Minister of State's view, where is the added value to Ireland of signing the treaty? Is it that if we sign up we will be allowed access to European Stability Mechanism, ESM, funds should we require them again and, if we do not sign up to it, then we will not be allowed access? If we do not sign up, will we forego the solidarity of the European-wide safety net or the benefit of other mutual insurance mechanisms when and should they come on stream?
John Gilroy (Labour)
Link to this: Individually | In context
I welcome the Minister of State to the House. I welcome the opportunity to speak today on the implications of the fiscal compact treaty. When I heard and read about it first I was concerned about the terms and, initially, I was against them. I took the view that the implementation of the terms might not be the best thing for Ireland and I readily concede that this was my view. The following are among the questions that arose in my mind. How could Ireland possibly reduce its borrowing to 60% of GDP in such a short period? Why was it necessary to achieve balanced budgets within the 3% threshold set down? How could we agree to accept sanctions for not complying with these terms? Why should we believe it is fair to codify these terms in law and, if this were the case, would a referendum not be required? Even if it was not required, would it not be desirable? Finally, was the fiscal compact not simply a recipe for continued years of unrelieved austerity?
All these questions seemed legitimate at the time until I put some thought into trying to answer them. I asked myself whether there was anything in the fiscal compact which might allay my concerns. I noted that Article 3.1 recognises that exceptional circumstances would be considered in certain cases. The challenge of closing the deficit ratio over such a short or medium term will be simply that, a challenge. I questioned whether I was against the concept of balancing budgets or in favour of moving to a position such as that held by the former Minister, Mr. McCreevy, whose ideology was summed up by his comment that when he had it, he would spend it. The consequences of that ideology are all too obvious today. I held the view that it was reasonable that there should be no sanctions for a breach of the compact until I recalled that I had come across this somewhere before, in the Growth and Stability Pact signed in 1997. It contained such targets. However, did not Germany breach the terms of that pact in 2002, 2003 and each year up to 2008? Similarly, did not ten other European countries breach the terms? What sanction was implemented at the time? None. Perhaps these automatic stabilisers might act to protect Ireland's interests as much as they might inconvenience us by having us manage our affairs properly.
Would the fiscal compact consign us to years of austerity as suggested by some commentators on the Opposition benches? Whether we accept the terms of the fiscal compact, it must be conceded that further expenditure cuts and tax increases are inevitable and unavoidable. This is unpalatable for the Government and it would be unpalatable for any government, regardless of its make-up. We cannot finance the country without borrowing from the EU or the IMF. Banks cannot sustain their balance sheets without funding from the ECB. Rejecting the treaty will not alter these facts. These are not my words but the words of the economist, Colm McCarthy. He went on to say that a rejection of the fiscal compact could make things worse. One of the articles makes access to ESM money contingent on accepting the terms of the treaty. Whether we will need access to this funding is a moot point because we hope to have returned to the markets before this becomes necessary. Regardless, is it sensible to close off a source of funding in advance, whether we chose to use it on occasion?
Let us consider Government debt from a local point of view or perhaps through the back window of Roscommon County Hospital as some have suggested we should do.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context
That was Deputy Leo Varadkar, no-one else.
John Gilroy (Labour)
Link to this: Individually | In context
That will lead us to one point of view. We could move in another, perhaps more productive, direction and consider our situation in the wider European context. There is a compelling argument that the levels of debt being carried by European countries, not only Ireland, are unsustainable. Until a solution is found by which the debt can be re-engineered at European level, we will be unable to return to sustainable or affordable levels of growth that would allow all Europeans to enjoy the undoubted benefits that the Union brings. This might well involve a monetisation of debt by the ECB, supported by our European partners.
John Gilroy (Labour)
Link to this: Individually | In context
The main concern regarding this course of action has been articulated as moral hazard. The monetisation of debt is a radical measure and one the markets will not tolerate easily. In order to make the case for this course of action as a once-off move that will not need to be repeated, procedures need to be put in place to prevent the recurrence of a debt problem. Perhaps the adoption of the fiscal compact forms part of that strategy. There is no guarantee that being a member of the fiscal compact will place us in this position, but it is certain that being outside of the fiscal compact will guarantee we cannot be part of any debt resolution scheme at European level.
The question of the need for a referendum to ratify the terms of the fiscal compact has been raised. There has been significant uninformed comment on this and I recommend we await the decision of the Attorney General on whether a referendum is required. If the Attorney General's advice is that a referendum is required, we will have a referendum. However, if the Attorney General advises that the compact can be ratified into law without a referendum being required, some commentators have called for a referendum to be held anyway. We need to be very clear about this. The proponents of this position are obliged to clarify the constitutional position if such a scenario arises. The legal advice of the Government might be there is no requirement, yet those calling for a constitutional referendum might say the opposite. I would like someone to explain to me how this constitutional paradox may be resolved, because I see no resolution to such a conundrum.
At this stage of the debate, I ask commentators to be responsible in their comments and to take the time and the trouble to think about the inevitable result of the actions they are promoting. I thank the Minister of State for coming to hear what I have to say.
Sean Barrett (Independent)
Link to this: Individually | In context
I welcome the Minister of State, whom I always admire when she comes in to address these sessions. We are honoured by her presence.
I looked up the word "compact" in the dictionary to see what it is and one of the definitions was "a miniature flat vanity case or a refill for it". There are elements of that to this compact, because the miniature flat vanity case or refill is needed because of the design faults in the euro to which we have referred. I hope these design faults are not carried forward into this particular package. It is for that reason I particularly welcome the presence of the Minister of State, because we must get this right. There is no doubt that the faults in the euro on the monetary policy side are what caused the collapse of Ireland on the fiscal policy side and the difficulties which the Minister of State must face. I agree strongly with what she had to say on page six of her speech that if we keep adding to our debt in ever increasing volumes in order to maintain unsustainable Government deficits, we are simply borrowing from tomorrow and placing an added burden on the generation to come to pay down our debts. That is not the basis for intergenerational solidarity and our children and grandchildren will certainly not thank us for it. We have a responsibility to sort this out now. The Seanad has broadly endorsed this approach and as the Minister of State will see, No. 20 on our Order Paper is the Fiscal Responsibility (Statement) Bill 2011, which was discussed here before Christmas.
The problems relate to trying to have legally binding macro-economic rules when the macro-economists themselves are not sure how we adequately define a structural or cyclical deficit. The wisdom of trying to implement the compact in that situation creates a problem of clarity for the Seanad and for the Minister of State and the Government. There are great doubts among economists as to whether what we are doing is possible in either law or economics and as to whether we may end up with an unsatisfactory combination of the two, as we had with problems like the lack of an escape route out of the euro and the one-size-fits-all approach to how to deal with the massive transfers of funds. We have designed economic policies at European level which have had dire impacts on countries because they were not carefully thought out.
The view of Karl Whelan, who has been mentioned, is that this compact could give us a debt-to-GDP ratio of 25% which is a bit theoretical in our case given that we are heading towards a ratio of 125%, but which is felt is too low. Colm McCarthy estimates it could go down to as low as 10%. We could be engaging in unnecessary austerity and stringency. We do not really have an economic consensus on either the deficit brake, the debt brake or measurement issues. We certainly do not want to damage the economy, as happened on previous occasions.
It is important to mention that the flaws in the euro are not recognised and addressed. I can appreciate how this happens. The gestures are that the powers that be are in favour of small and medium enterprises but we should remember that the last time out, we destroyed the banks, which is pretty bad for small and medium enterprises. To correct the faults, we are destroying people's purchasing power, which is also pretty bad for small and medium enterprises. The Minister of State and her ministerial colleagues should stop the clichés and have policies that help small and medium enterprises rather than giving out consolation prizes after we have destroyed the resources of finance and purchasing power of customers.
I welcome the Minister of State's presence in the Chamber and the process that she started, which we began in the Seanad with our fiscal responsibility Bill. It will be a long road and we have quite the journey to travel before we get this right. I assure the Minister of State of our support and assistance to ensure that this can eventually work to correct the problems we inherited from 2008, with the bankruptcy of Irish banks, and two years after when we sought rescue. This is very much a work in progress, as the Minister of State has indicated.
Kathryn Reilly (Sinn Fein)
Link to this: Individually | In context
I welcome the Minister of State to the House. In the spirit of setting the record straight, particularly with the issue of the referendum, a high level European official was recently reported as saying the treaty had been specifically crafted to minimise the prospect of a referendum in Ireland. At a recent meeting of the European affairs committee, the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Gilmore, said in response to a question from me that Ireland, in common with a number of other member states, sought to have the term "preferably" included in the text of the draft treaty. Last week, the Taoiseach is reported as denying that the Government negotiated to avoid a referendum. Will the Minister of State advise on which version is accurate? Does she believe that seeking the term "preferably" could be seen as negotiating to avoid a referendum?
Reference has been made today to last week's meeting of the European affairs committee, at which Mr. Karl Whelan and other experts presented. The Minister of State mentioned that most of what is contained in the treaty is already in existence within the EU. Last week Mr. Whelan stated that the economics of this treaty are pretty terrible, although he believes that Ireland must sign up to the treaty because of the link to the European Stability Mechanism. He believes the treaty is significant because it is more constraining than anything in existence in EU law, and he referred particularly to the six-pack. He noted that one of the key differences is that it will be brought into permanent and binding law where, for example, the six-pack was not. His view is that once the treaty is passed, it will be extremely difficult to change it, whereas the six-pack, for example, could have been revisited in future. That could have happened if there was a realisation that some of the measures did not work. What is the Minister of State's opinion on the treaty's inflexibility?
Jillian van Turnhout (Independent)
Link to this: Individually | In context
I thank the Senator for keeping to time. We are moving to questions, each of which should not be longer than a minute. I have an extremely long list of Senators and we must try to keep within our time constraints.
Colm Burke (Fine Gael)
Link to this: Individually | In context
I thank the Minister of State for again coming to the House to keep us fully advised of what is going on at European level. My question relates to Article 3.3 and the right of a contracting party to deviate. I raise this in the context of what has happened in Ireland. When the building industry was doing very well, from every €100,000 a builder got in, some €44,000 would have come in to the Revenue Commissioners. Is the Minister of State satisfied that the definition of "exceptional circumstances" is adequate in the event of change? A simple example is a sudden downturn for whatever reason in agriculture, with a resultant drop in incomes. Is the Minister of State satisfied that the provisions of this section are adequate?
The United Kingdom never joined the Economic and Monetary Union, and now is distancing itself again in this instance. What are the consequences of the road the UK has decided to take from an Irish viewpoint?
Darragh O'Brien (Fianna Fail)
Link to this: Individually | In context
I ask the Minister of State to look at the independent report published by the University of Gothenburg on ministerial attendance at meetings in Brussels. It would highlight the truth. That is a minor issue.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
As I said to Senator Thomas Byrne on my last occasion in this House when the same issue was raised, members can look at the records for parliamentary question and the questions tabled by myself and other Deputies on the then Opposition during the last election.
Darragh O'Brien (Fianna Fail)
Link to this: Individually | In context
When the Minister of State looks at this report, perhaps we will have another chat.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
It clearly shows the representation by Ireland, much of which was not at ministerial level.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
This has changed with the change in Government.
Darragh O'Brien (Fianna Fail)
Link to this: Individually | In context
I see from the opening statement, we are trying to deal with the fiscal pact and I am merely suggesting that the Minister of State look at the report to which I have just referred because it might broaden her horizons on this issue and give her a more nuanced view of the situation.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
Unless the answer is given by Ministers from the last Government.
Darragh O'Brien (Fianna Fail)
Link to this: Individually | In context
More importantly, we will await the view of the Attorney General and I accept that we must do that. Expanding the role of the ECB is not covered by the pact. Nor is debt re-engineering, referred to by a colleague across the floor of the House, and which is the elephant in the room.
My question relates to the Taoiseach's remarks when he said on 24 January that we will pay our way and that we have never looked for a debt write down. On 1 February, the Minister of State, Deputy Creighton, referred to debt write-down and that looking for debt re-engineering, as Senator Gilroy said, was central to her negotiations. What is the truth of the situation? Is the Taoiseach correct or is the Minister of State right?
James Heffernan (Labour)
Link to this: Individually | In context
I thank the Minister of State for once again attending the Seanad and engaging with Members on the detail of the legislation that will come before the House.
In putting this question, I am playing the Devil's advocate. While it may be a hypothetical situation, there is a push to have this issue put to a referendum of the people, regardless of what the Attorney General states. I received a letter from a Deputy in the Technical Group who is looking for a majority of the members of Seanad Éireann and not less than one third of the Members of Dáil Éireann to petition the President to put the issue to the Council of State. While the defection of Senator Eamonn Coghlan to the Fine Gael Party makes that less likely, if this issue were put to the people and defeated in a referendum, what consequences would that have for the Irish people?
Feargal Quinn (Independent)
Link to this: Individually | In context
I welcome the Minister of State to the House. In the course of her speech she states:
It is not an austerity treaty, as some voices in these Houses and beyond have claimed spuriously. The treaty states nothing at all about how tax should be raised or about how much tax each member state should raise,
We have run our economy, very successfully over a long number of years, until very recently on the basis that a low tax rate brought in more money, but it is clear that this is not acceptable to both Germany and France. Will the Minister of State put our minds at rest, in spite of all that has been said here, that no more pressure will be exerted through this treaty on our low corporation tax rate, which brings in far more money than would come in otherwise? The belief that we have a competitive Europe is very important and I believe that others do not understand that.
Caít Keane (Fine Gael)
Link to this: Individually | In context
I welcome the Minister of State. I think I am correct when I say no referendum was ever held in this country on an issue other than to amend the Constitution. I know, as other Senators have said, there is provision for reference to the people under Articles 27 and 47 of the Constitution but no Government has conceded to a request for a referendum if it was not necessary to amend the Constitution. Should 12 of the 17 eurozone countries sign the pact, the sanction would then be semi-automatic. What will be the effect if Ireland does not sign? I know the Minister of State cannot fully answer my question, but who will implement the final fiscal compact treaty if and when it is signed? Is it the country holding the EU Presidency on the date or is it a policing member state? If it is, there is an existing provision in EU treaties that has been used six times in 60 years. It does not add anything new to treaties.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context
Why have the Opposition leaders not been briefed by the Government? I understand it was common practice in previous referendums. If one is looking for a common approach, I suggest that is a good way to start on these major European issues.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
There is no referendum.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context
The Minister of State said there is no referendum.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
As we speak, there is no referendum. Does the Senator have a question because time is moving on?
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context
I thought we were deciding whether there will be a referendum. Have we already made the decision? When will the Taoiseach and the Minister of State, Deputy Creighton, answer Deputy Micheál Martin's questions? When will there be a public education campaign? If the Government will not consult the people, at the very least it could explain what is in the treaty.
We did not use any leverage whatsoever regarding the common consolidated tax base. Chancellor Merkel and President Sarkozy are moving ahead with their implementation plans for it but the Government has done nothing except constructive engagement. We were told that would stop it but that has not been done. It is not part of the treaty but it is of concern to people.
The Minister of State did not mention that enforcement will be carried out by other European countries. Germany or France will enforce it on us rather than the European Commission, which should do it. She was not able to do it because of the veto. Why has that aspect of the treaty not been addressed?
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
I call Senator Harte and ask him to be brief as I want to allow as many people as possible to join the debate.
Jimmy Harte (Labour)
Link to this: Individually | In context
To put people's minds at rest, we want to know that it is a genuine European treaty and is not being pushed by the markets. People in the Opposition and outside the political arena are using the treaty to claim that the markets are pushing everything. We need clarity from the Minister of State and the Minister for Finance that the treaty is not being pushed by the markets, but for the right reasons.
John Crown (Independent)
Link to this: Individually | In context
I welcome the Minister of State to the House. To say that the pact is not an austerity budget reminds me of Big Vinny, the debt collector. When Big Vinny comes to one's house, he just wants his money. He does not tell one how to get it, or whether the kids should go hungry or not have health care. He just wants his money. To be honest, we are now being told to get the money.
I am not an economist or a Minister of State but a relatively simple doctor. However, I have had a look at the treaty and at Phillip Lane's dissection of it at the recent Dublin economic workshop. It is not clear to me, perhaps due to some ignorance on my part, what is a structural deficit. This leads me to two simple questions that I wish to ask the Minister of State on behalf of the people of the country, most of whom are not economists. What is the structural deficit and how exactly will it be calculated? Second, exactly what part of the treaty and its limitations on the structural deficit would have prevented the economic meltdown in the eurozone area over the past decade?
Fidelma Healy Eames (Fine Gael)
Link to this: Individually | In context
I agree with Senator Thomas Byrne's call for a public education campaign on the treaty regardless of whether there is a referendum.
It is widely agreed by most commentators that the treaty is only a piece of the jigsaw and is inadequate. What does the Minister of State think would be adequate? Do we know the endgame? What is her view on the comments of Michael Somers recently that we are likely to need a second bailout? My view is that it is not feasible or right for so much austerity to be placed on our working generation, and nor is it good for growth. Is it possible, against such a background, for Ireland to negotiate a structured write-down and a longer payback term for its current commitments?
Mark Daly (Fianna Fail)
Link to this: Individually | In context
I am interested in the answer to Senator Crown's question. It was in the news, and the Minister of State, Deputy Creighton said it herself, that we had no position paper going into negotiations. There is no support for the common consolidated tax base on our corporation tax. We lost the vote on it as recently as last October. Just nine European countries supported us. Mrs. Merkel and Mr. Sarkozy want to have this wrapped up by the end of the year. We are going to lose control over corporation tax. The corporation tax rate might stay the same, but the fact that France-----
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
Does the Senator have a question?
Mark Daly (Fianna Fail)
Link to this: Individually | In context
I want to know why we did not have a position paper on corporation tax. On the question of debt write-down-----
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
We circulated many such papers.
Mark Daly (Fianna Fail)
Link to this: Individually | In context
We did not go into the negotiations with a position on the consolidated corporation tax base.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
If the Senator wants to get a reply, he will have to conclude.
Mark Daly (Fianna Fail)
Link to this: Individually | In context
The Government is not entirely tuned in. By the end of the year, France and Germany will have taken away whatever competitive advantage we have.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
I cannot allow a discussion across the floor of the House.
Mark Daly (Fianna Fail)
Link to this: Individually | In context
I am wondering why the Government is-----
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
I ask the Senator to resume his seat.
Mark Daly (Fianna Fail)
Link to this: Individually | In context
I want to know why we did not go in with a position paper.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
If I do not call the Minister of State to reply now, there will be no reply.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
How long do I have?
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
We will give the Minister of State as much time as we can.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
She can speak until the bell goes.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
I do not have all day, unfortunately. I will try my best to answer the questions that were asked.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
If the Minister of State wants to be technical about it, she has two minutes.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
I will repeat-----
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
The Minister of State has two minutes.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
I will repeat the point I made the last time I visited the House, which is that more time is needed for these question and answer sessions. I would be happy if an extra hour were allocated for a proper and meaningful exchange. I apologise in advance if I am-----
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
For the benefit of the House and the Minister of State, I would like to mention that attempts were made to get the Leader of the House to extend the amount of time for this debate. The answer came back in the negative. That is why we are pushed for time.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
I would not have a problem with that. I will talk to the Leader about the matter. I do not want to interfere with the business of the House.
A number of questions were asked. Senator Colm Burke asked about Article 3.3 and the reference to "exceptional circumstances". Clearly it is a subjective test. It is impossible to predict what precisely is envisaged. Certainly, it refers to any unusual economic circumstances. It is clear that we are in an unusual economic period at the moment. Something along the lines of what he has suggested - a dramatic force majeure that would effect agricultural or agri-food output - would be taken into account.
I have to say the question of the United Kingdom distancing itself from Europe, and the consequences of that for Ireland, has been somewhat overplayed. The suggestion of a potential meltdown from an Irish point of view, simply because the UK is not part of this intergovernmental treaty, is unfortunate. I wish an agreement could have been reached between the 27 member states within the framework of the EU treaties. That was not possible, unfortunately. As has been said, this is not the first time our approach to European policy has deviated from that of the United Kingdom. Ireland's adoption of the euro is the best example of that. We have adopted a different position from the UK on numerous occasions. I do not think it-----
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
I ask the Minister of State to move to a conclusion. I am sorry.
Darragh O'Brien (Fianna Fail)
Link to this: Individually | In context
Is it in order to propose an extension to the time that has been provided?
Darragh O'Brien (Fianna Fail)
Link to this: Individually | In context
That would allow the Minister of State to give a longer reply, subject to her having time to do so.
Caít Keane (Fine Gael)
Link to this: Individually | In context
An amendment to that effect was proposed on the Order of Business but it was not agreed.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
Who is the Acting Leader on the Government side?
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
Excuse me, please. Who is the Acting Leader on the Government side?
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
Can I ask the Acting Leader if he wants to propose to extend the time allowed for the Minister of State's reply?
Michael Mullins (Fine Gael)
Link to this: Individually | In context
Unfortunately, the Order of Business was agreed earlier this afternoon.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
I am happy to speak for another couple of minutes, if that can be facilitated.
Maurice Cummins (Fine Gael)
Link to this: Individually | In context
The business was ordered earlier this afternoon. There is a Minister waiting to come in. We have to proceed.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
I thank the Leader. I apologise to the Minister of State.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context
Perhaps the Leader might provide for the Minister of State to come back on another occasion.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context
The Minister of State has made a suggestion to that effect.
Maurice Cummins (Fine Gael)
Link to this: Individually | In context
The Minister of State has been more than helpful to the House on many occasions.
Thomas Byrne (Fianna Fail)
Link to this: Individually | In context
I hope she can return at an early stage.
Maurice Cummins (Fine Gael)
Link to this: Individually | In context
I thank the Minister of State. I am sure she will come back to the House in the near future.
Fidelma Healy Eames (Fine Gael)
Link to this: Individually | In context
Would it be possible for the Minister of State to give us written answers to the useful questions that were asked?
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
I am happy to do that in the short term.
Fidelma Healy Eames (Fine Gael)
Link to this: Individually | In context
People like to get information.
Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context
I would prefer to return to the House for an exchange.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
I apologise to the Minister of State.
Paschal Mooney (Fianna Fail)
Link to this: Individually | In context
Unfortunately, the Chair has no role in this matter. The business of the House has been ordered as the Leader has indicated. I thank the Minister of State.