Address by President of the European Commission.

Thursday, 19 November 1998

Seanad Éireann Debate
Vol. 157 No. 5

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An Cathaoirleach: Information on Brian Mullooly  Zoom on Brian Mullooly  Mr. President, I wish on my own behalf and on behalf of my fellow Senators to welcome you most cordially to Seanad Éireann [311] and to extend to you our traditional Irish welcome of céad míle fáilte — 100,000 welcomes.

It is just 25 years since Ireland acceded to the then European Economic Community on the occasion of its first enlargement. By a massive yes vote of 83 per cent we decided to accept the invitation to become a full participant in the great movement conceived by the founding fathers of modern Europe in the aftermath of the catastrophes of the first half of the 20th century.

As President of the Commission of the European Union, you are especially entrusted with responsibility for addressing on behalf of the citizens of Europe the complex and competing yet interdependent needs of diverse peoples, each of whose nations, with the sole exception of Sweden, has in this century experienced one or more civil war, world war or dictatorship. Your task is formidable and the journey forward subject to the vagaries and uncertainties of global, political and economic tensions of which many examples are starkly evident at present. Yet fortified in the knowledge that it is in the most noble tradition of the human spirit and public service to embrace this endeavour we can with hope and purpose together undertake that creative journey.

Mr. President, your previous distinguished and multi-faceted career in government, politics and international finance has ensured that you bring a depth and breadth of experience and erudition to the high office which you have occupied since 1995. We congratulate you and wish you every success and distinction.

I am also very pleased on this historic day in the life of Seanad Éireann to welcome most warmly all the ambassadors from the EU member states and the other distinguished guests who have joined us for this very special occasion. Mr. President, it now gives me great pleasure to invite you to address Seanad Éireann.

President of the European Commission, Mr. Jacques Santer:  Leader, Senators, I am deeply honoured to be the first President of the European Commission to address the Seanad. I do so at a time when Ireland has passed a quarter of a century as a member of the EU, a period of rapid political, economic, structural and social change. This is, of course, true everywhere, of every nation, region and in the global economy. However, it is rare to find any period of such profound transformation as successfully managed as it has been in Ireland. I wish to briefly survey what has happened and try to determine the lessons we can draw for the future as we approach new European challenges in the millennium ahead.

During my long political career, both when I was Prime Minister of my country, Luxembourg, and now as President of the European Commission, I have always been struck by the broad enthusiasm of Irish people and Irish politicians for the process of European integration. I do not believe that this is predominantly or solely for [312] reasons of fiscal transfer — the agricultural subsidies and/or access to the Structural Funds. It always seemed to me that Ireland's determination to make its membership of the European Union a resounding success also derived from its desire to strengthen its own identity, to release its own cultural forces, to broaden its economic and political relations and to seek wider platforms for your business and trade; indeed, a desire to seek more freedom, more influence and more outreach in a multi-polar complex world, a desire to participate, share but also to learn from the best practice of others.

I understand these sentiments very well, coming as I do from the smallest member state of the European Union. The European Union, contrary to what some think, does not crush individualism, culture or identity. On the contrary, what we observe, is that it offers wider opportunity for all European identities to flourish.

Ireland is a fine example of that. It seems to me that Irish culture and influence is now felt far more widely than ever before in Europe and in the world. In the last 25 years, I believe there have been other forces that have strengthened the comparative advantage of smaller nations: first, the flexibility and the ability to take expeditious economic and political decisions and second, the astonishing growth of the global information society and the global network economy that is in the process of being built. This has meant that distance from market is much less of a handicap than before in those fast growing service sectors of the economy where Ireland has excelled.

Size in itself is less important. Europe is increasingly moving towards an economy of brain, not brawn, intelligence and innovation rather than muscle and repetitive shop floor working. Today Schumpeter's theses are right — small companies, fast on their feet, can be immensely successful, growing quickly in the local, European and global economies, and creating many jobs in the process.

The third reason is perhaps more controversial to prove but I think true. It is that smaller countries have been, by the very nature of their size, and because of the scale of the external forces bearing upon them, more able to forge social consensus on the right combination of economic and social policy. To some extent it has been a question of sink or swim for all small countries. I do not want to suggest these matters have been easy to resolve — far from it — but the costs of non-agreement are particularly prohibitive for small countries. The footloose international investor will not invest in areas of social pandemonium.

Again, Ireland's success with its social dialogue has been a major contributor for defining where your country finds itself today. Finally, the traditional emigration of people from smaller countries for education, work, etc., and particularly in Ireland, was always seen in terms of a loss of human resources and the sad break up of families. While this is undoubtedly true, there is also [313] an upside in the forging of strong links with many other parts in the world, learning other ways and importing them. Ireland's strong links with the United States are a case in point. Links with European countries have grown ever since the flight of the Wild Geese and the establishment of the Irish Colleges in Leuven in Belgium, Salamanca in Spain, Paris and Rome.

Any reading of Ireland's political and economic relations with the European Union over the last 25 years would lead one to focus on six main reasons for your outstanding success. The first is the overall management of the economy from the middle of the 1980s onwards. By the middle of the 1980s Irish GDP/capita was barely two-thirds of the Community average, Government borrowing was persistently above 10 per cent of GDP and the debt ratio was spiralling above 100 per cent of GDP along with negative employment growth. Barely a decade later, following the process of fiscal consolidation, we find the following dramatic change: Irish GDP/capita is now above the Community average and inflation is in the 2 to 3 per cent bracket. The average growth rate is estimated to be above 10 per cent this year, after 8.3 per cent in 1996 and 10.6 per cent in 1997.

Furthermore, the Commission forecasts further very strong economic growth next year and for the year 2000, as well as a Government surplus estimated at 2 per cent of GDP for this year, with the stock of Government debt being substantially reduced, in addition to a 4 per cent growth in employment this year, resulting in Ireland's unemployment rate now being 8 per cent, the lowest for 14 years.

The nexus of this outstanding economic performance has meant Ireland has joined economic and monetary union, beginning in barely six weeks time. Ireland's economy will benefit even further from this in the future. This is, to use a German word coined to describe the rebirth of Germany after the Second World War, a true wirtschaftswunder.

The second reason is the strong social partnership that has developed as an integral part of its economic and planning process. I have always believed that strong social partnership is the complement not the antithesis of competitiveness. Ireland's social partnership is a shining beacon in this regard because it has become an integral and accepted part of the economic and social planning process, providing predictability, partnership, solidarity and cohesion. Partnership 2000 is the most recent example.

The more we can forge strong social partnerships right across the European Union, taking into account the different specificities of each member state's traditions, the stronger we will be. We have to go further in the future — encouraging new forms of stakeholding by employees in companies and continually improving the training, adaptability and employability of our workforces in line with the employment guidelines process set up by the European Commission and agreed by the European Council. I would like to [314] pay tribute here to the work of Commissioner Pádraig Flynn who has advanced this agenda so successfully.

The third reason is the very strong and sustained effort to improve the educational and training systems. Ireland's major investments in education and training are also now paying off, as the employment figures show, but no one can rest on their laurels.

For example, we find today a generalised European shortage of skilled information technology specialists of at least 500,000 people and growing fast, as demand for these skills for the euro and millennium bug problems exceeds supply. Not enough students are following information technology courses. Here, further efforts are needed to ensure all children are brought up to be fully IT conversant so as to encourage the flexibility, adaptability and innovative abilities of everyone, and to ensure that sufficient children go on to study these subjects in higher education.

The fourth reason is the professional and productive use made of the Structural Funds in Ireland. According to the ESRI, the cumulative effect of the two recent rounds of the Structural Funds shows that their combined effect in the period 1995-9 has been to raise the level of Ireland's GNP by between 3 and 4 per cent above the level it would have been without the Structural Funds while the long run supply side impact on productive potential is estimated to have raised the level of GNP by 2 per cent above the level which would otherwise have been reached. This efficient use can, I think, be explained by four key factors: Ireland's effective medium to long-term planning of public expenditure; strong social partnerships; well targeted domestic fiscal and monetary policies; and concentration of funds on three main areas, productive investment, human resources and infrastructure. While it is clear that there remain a number of major areas still to tackle, such as the divergence in Irish regions, reducing long-term unemployment, the remaining infrastructure gaps, public transport and waste water treatment, I am confident these can be overcome. Your history suggests so.

Fifth, the outstanding public service you have constructed. The accolades for your public service can be adduced from having run five quality Presidencies of the EU, shaping, in the chair, some of the major recent political developments of our time. In 1990, for example, the Irish Presidency played a considerable role in helping to clear the way for German reunification; in 1996, Ireland's chairmanship presided over some of the key steps to EMU and the Amsterdam Treaty. Can I remind you that more than 400 Irish officials work in the European Commission making their contribution? I am happy to say, in my own Cabinet, I am lucky to have three outstanding Irish assistants. Ireland has quite rightly made sure that some of its brightest people work on European issues, a good investment decision.

Sixth, pursuing open market trade policies, encouraging inward investment, and making full [315] use of the EU's internal market, the largest market in the world. By the pursuance of open market policies and access to the Single Market, Ireland's trade profile has radically changed over the past 25 years. The UK, having taken 55 per cent of Ireland's exports in 1973, now only takes a quarter, but exports to other EU countries have doubled from 20 to 40 per cent. Here is the hard commercial evidence of Ireland's new pro-European focus, but I note that in percentage share terms exports to Northern Ireland have declined by two thirds in the same period. With the successful peace process, maybe this will change in future.

Senators, your record of success in the EU is one that is widely admired. It could hardly be anything else, but permit me to focus on the new challenges for Ireland in the future as the European agenda changes. In the near and medium terms, I see the following political priorities for the EU.

On the external side, the first is to build an effective common foreign security and defence policy. Contrast our Treaty powers in trade matters, where our Trade Commissioner, on the basis of a mandate for the Council of Ministers, negotiates head to head with the United States or any country in the world on trade, trading concession for concession, dollar for dollar, euro for euro. There is no domination of Uncle Sam on trade matters.

Contrast this with the timidity and our failures to act in Bosnia, Kosovo. On foreign policy/ defence the British Prime Minister, Tony Blair, is quite right that we must do better in the future. The Union is paralysed by procedure, over-caution and timidity. Houses burn in Kosovo. Atrocities are carried out on our borders or in former colonies of member states.

Any peace agreements that are brokered are done by the Americans. The EU is strong economically. It must be politically as well. This means the capacity to act decisively externally, to influence, defend our common interests as well as provide economic aid and trade concessions.

Likewise in defence, taking fully into account the sensitivities of all the member states, a common European defence capacity has to be built up on rational industrial structures — common procurement; common standards; joint purchasing; interconnectivity. Costs will then fall and European defence budgets will be trimmed — common sense surely. At last we are seeing moves towards this. Europe can make major gains here. Just look at Airbus with 50 per cent of the world market.

The second is to make full success of the enlargement process. As you know this is an open, not closed, approach. We have begun negotiations with six countries. We are carefully monitoring the others to bring them into the process if and when they are ready. I believe Ireland can provide a major model, an example to these aspiring new members of how to be economically [316] successful and how to make membership of the EU a success. There is nothing wrong with replication. However, before enlargement we must build an institutional structure in the Union that is even more efficient and sensitive to national interests, but capable of taking expeditious decisions. This, of course, means ensuring that smaller member states can continue to play their major role in the process of European integration. It means more qualified majority voting; a streamlined Commission structure and fewer Councils; more openness and accountability; a Union closer to our citizens and more comprehensible along with a European Parliament that should have much stronger links with national parliaments. I believe we should view institutional change as part of building competitive advantage.

On the internal side by far the most important political priority is to ensure the success of the single currency. I believe the effects of the arrival of the euro from next year will be very powerful — more dynamic and transparent markets; low interest rates; fewer consumer rip-offs; a surer climate for investment; government deficits under the permanent control of the Maastricht disciplines, releasing productive capital for the private sector; integrated capital/financial services markets driving down the cost of capital in the euro zone and strengthened European external economic power.

I felt this at first hand when I met China's political leaders three weeks ago who told me that the Chinese National Bank will hold a significant part of their reserves in euros. With the euro, the EU is a big global economic player. The doubting “EuroThomases” will remain. On and on they will drone. Will the Euro be stable? Yes, it will. Will the asymmetric shocks blow EMU apart? No. Will governments stick to the Maastricht disciplines? Yes, of course. I ask you to consider one question. What would have happened to the European Union's currencies during the recent financial turmoil if the euro exchange rates had not been fixed last May?

Three-quarters of the way through the recent financial turbulence the Italians lowered their interest rates. Ireland did as well — twice within a month — with no apparent difficulty. A more severe short-term test for the euro project is hardly imaginable. It passed with flying colours.

The euro will inevitably lead to a closer coordination of economic policy in the future. The euro-11 has been set up for this purpose, although ECOFIN with all 15 members will take any decisions. There will also be a dialogue with the European Central Bank as foreseen in the Treaty and I believe that sooner rather than later the other member states outside will join the single currency.

The fourth is to build a really entrepreneurial Europe. I have said this many times. We will not create far more employment in the European Union unless and until we are able to grow our [317] small/medium companies into world beaters. That is where jobs will come from. We have to be able to develop European ideas, European brilliance inside the EU with a vibrant pan-European venture capital community and integrated capital markets. One figure only: the 5,400 companies quoted on NASDAQ, the American second market, employ 9 million people. We have nothing like this yet in the EU.

This means that all governments must get the risk-reward ratios right in their economies. Surely if we can do this: we have a future of enormous promise before us. I see a very powerful dynamic being created, composed of the benefits of the single currency, the Single Market, now nearly completed, widespread availability of pan-European risk capital, supply side opening — the information society is growing very rapidly, energy opens next year, electronic commerce, to open the whole European/global market for our 18 million companies, social solidarity and a well trained, adaptable workforce, and enlargement. The real economic challenge for us is to capture and derive full benefit from the synergies of these factors. If we do, and I believe we can, we will be on the path to tremendous success in the next century. If you agree, help us achieve this for the benefit of all future European generations.

Let me now make some remarks about the Agenda 2000 process, including the financial perspectives. You will be fully aware of our proposals which are fair and balanced. We are faced with constraints that severely constrain our margins for manoeuvre. There is a need to stick within the Edinburgh financial guidelines to finance not only the main Community spending policies but also to help the pre-accession and accession countries and ensure equity as regards the contributions of the 15 member states. Not the easiest calculation to make. In short, we have to concentrate our resources where they are most needed.

As the Taoiseach said on 4 November at the Irish Institute of European Affairs:

We, Ireland, are moving towards a situation in which our receipts from the EU budget will decline significantly and our contribution to the EU budget will rise. That is not a sign of failure on Ireland's part — but a sign of success. That is why, with Ireland's GDP well exceeding the 75 per cent Objective One threshold, under the formulas we have put forward, Ireland, like other similar cases, should be given a transition status with Structural funding progressively reduced in the 2000-2006 period. However, we propose that Ireland should continue for the time being to benefit from the Cohesion Fund.

I am, of course, fully aware of your Government's position on the review of the Common Agricultural Policy and the future financial perspectives. In the former, we must work towards a more competitive, sustainable and balanced agricultural sector while ensuring the interests of rural farmers are fully taken into account. On the [318] own resources issue, we have put forward a range of options for consideration by the member states.

These negotiations have now begun in earnest. They are highly complex, but I very much hope we will be able to achieve political agreement by March next year. Otherwise, there will be a serious programming problem and unnecessary uncertainties. I believe that if we all work together we can achieve a balanced and equitable result that protects everyone's key interests. But it will not be easy.

Lastly, I would like to share with you a most poignant moment I had two weeks ago in Brussels when virtually all the Members of the new Northern Ireland Assembly came to visit the European institutions in Brussels. I think the visit opened some eyes to the benefits that European integration, common understanding and working together can bring. Most were struck by how people from 15 member states so often at war over centuries now work together in the European institutions, looking forward to the future and not back to the horrors of 100 million dead in European wars this century.

They were able to draw parallels between the process of European integration and their own role to build a new Northern Ireland. They learned how the European Union has financed no fewer than 10,000 cross-community programmes to bring Protestants and Catholics together in Northern Ireland, benefiting 500,000 people. The aim throughout has been to show that where communities can work together in practical partnership and co-operation, peace, prosperity and social progress will follow. Our Structural and Social Fund contributions have also greatly helped the peace process. I would like to place on the record here my profound admiration for the contribution of successive Irish Governments towards achieving the British-Irish Agreement.

In my speech to the new Assembly Members I challenged them not just to seek money from Brussels but to contribute to the European Union in the future, using the words of President Vaclev Havel who said:

. Let us teach ourselves and others that politics can be not only the art of the possible — especially if this means speculations, calculations, intrigues, secret deals and pragmatic manoeuvring — but also the art of the impossible, namely the art of improving ourselves and the world.

So I hope another small step towards the peace process was made in Brussels.

The origin of the EU has always been the desire of European leaders to ensure that peaceful co-existence would replace Europe's terrible history of war between its peoples. We will continue to work with the Irish and British Governments to find creative ways to support the peace process in whatever way we can in line with the Cardiff European Council conclusions.

[319] Distinguished Senators in European political life we should never forget our vocation to work to improve the lives of ordinary people, to inform and explain matters fully, to build the broadest consensus possible and to design inclusive political and economic systems. This is essential in European politics and becoming more complex as people rightly demand more control over their lives, more say and more involvement.

I believe European integration is a noble political goal. As I sit through hours and hours of meetings in the Council or Parliament, I can only wonder at the progress we have made together in the last 40 years — towards friendship, peace and common understanding and working towards our common goals. Ireland's contribution to European integration has been profound and enduring. There are 25 years of proof and centuries more to come. Thank you so much.

An Cathaoirleach: Information on Brian Mullooly  Zoom on Brian Mullooly  President Santer has kindly agreed to take questions from Senators and I will allow a number of questions before asking him to respond.

Mr. Cassidy: Information on Donie Cassidy  Zoom on Donie Cassidy  A Chathaoirligh, I endorse your kind words of welcome to the distinguished President who has enhanced our proceedings by his presence and in celebrating our 25 year membership of the EU. It is good that he had time to spend with us today and I am pleased he accepted the invitation to address Seanad Éireann. I hope that after today's proceedings, he will have a better understanding of what remains to be done in our country. The EU has assisted us in many ways since we joined 25 years ago. I hope this knowledge will enable the President to support us in securing the additional funding we will need to complete the job, which has already been started, in the coming years.

What options is the President considering to strengthen the relationships between national parliaments and the key European institutions? When might any substantive changes in this area be expected? I would be grateful if the President could outline the type of changes the Commission envisages in relation to its own operations with a view to greater efficiency and transparency.

Mrs. Taylor-Quinn: Information on Madeleine Taylor-Quinn  Zoom on Madeleine Taylor-Quinn  I am pleased to welcome President Santer as a former office holder and, indeed, senior member of the European People's Party. I am pleased he now holds a key position as President of the European Commission. Undoubtedly, as a citizen of Luxembourg, the smallest state in the European Union, he has a keen insight into the particular problems which arise in small member states.

The President referred to the Government's submission on Objective One status. What is his opinion on the Government's view of Objective One status and on its policy on regionalisation? I would like him to address that issue bearing in mind the situation in relation to agriculture and [320] the devastating fall out experienced by that sector as result of the 1992 CAP reforms and the subsequent World Trade Organisation talks. The agriculture sector is suffering the serious and devastating effects of that. I hope that by the time the talks conclude at the end of March there will be a much better outcome for the agriculture sector than there were from previous World Trade Organisation talks which took place.

Mr. Ross: Information on Shane Peter Nathaniel Ross  Zoom on Shane Peter Nathaniel Ross  I thank the President for his address. What he had to say was understandably strong on the benefits of Europe and the great part Ireland has supposedly played in European development. We also have serious problems ahead of us and I would like to ask what Europe will do for us in those particular areas.

The first I would like to mention concerns European monetary union. The President will know our link to sterling is very close because of the close trade links to which he referred, and he rightly said they were diminishing. However, the UK is still our closest trading partner. We could have serious difficulties in the event of a movement of sterling which affects our industries. Whether it is up or down, our problem is that on the one hand, inflation may be imported from the UK while, on the other, if the English pound becomes very weak, damage is done to our exports. This could be immensely serious in terms of unemployment in certain industries and other industries collapsing. We had a parallel situation in 1992-3 when we had to devalue. That option will not be open to us.

We are unique in Europe in that we have a special dependence on and relationship with a currency which is outside European monetary union. What can Europe do for us if we come across such a crisis again? Because of what the President referred to as our staggering economic growth, about which he was quite right, as being around double digit figures and growth in France and Germany which stands at around 3 per cent, we could face extraordinary problems because our economy is totally out of sync and is in a different cycle from the major economies of Europe.

It is obvious from talking to people in European banks and Governments that interest rate policy, which is the key in the EMU context, will be set to suit the larger and not the smaller economies and that interest rates in Europe at the moment are completely unsuitable for the Irish economy because of the cycle. What is likely to happen is that the Irish economy will overheat because interest rates are far too low for the economy at this stage. What can Europe do to help us out of this situation which could become critical?

Mr. Costello: Information on Joe Costello  Zoom on Joe Costello  I am delighted to welcome the President and congratulate him on a very fine address. My question relates to duty free and the 140,000 people whose jobs will be affected if duty free arrangements are abolished on 30 June 1999, [321] as decided in June 1991. Ireland is a small island nation which will be disproportionately affected because we access Europe purely by air and sea. In light of the fact many other European Union states, particularly the big two, France and, as recently as last week, Germany, have called for the postponement of the abolition of duty free to another time, does the President consider that this is an appropriate time for the Commission to introduce an initiative to review the question of duty free given that it is eight years since the decision was originally taken and that concerns have been expressed by many member states?

Mr. Dardis: Information on John Dardis  Zoom on John Dardis  President, as a member of the European Liberal Group, I thank you for your address and for the gracious compliments you paid this country, which we appreciate. We realise what benefit EU membership has been to us over the past 25 years.

My concern is agriculture and the future of rural communities. The President mentioned the creation of a competitive, balanced and sound agricultural policy. We subscribe to that. He will have been made aware, however, by the Government, the Minister for Agriculture and Food and the farming organisations of the depth of the crisis in rural Ireland at present. What can the President say to reassure farming families and rural communities that the changes which we face under Agenda 2000 and CAP reform will leave them in a situation where they will be able to survive? Many of the initiatives in rural development and other areas within the community were designed to achieve that soundness and there are genuine fears that we are about to embark on a journey in the opposite direction.

An Cathaoirleach: Information on Brian Mullooly  Zoom on Brian Mullooly  I now invite President Santer to respond to those questions.

Mr. Santer:  Thank you. I want to respond to the questions which Senators have asked. My first answer is to Senator Cassidy. I am in favour of closer relations between European institutions and national parliaments. If Europe is to become closer to its citizens we have to integrate those people who are elected not only to the European Parliament but also to the national parliaments by their own citizens.

In future we have to stress how we can have closer institutional relations between the national parliaments, European institutions and the European Parliament. I am frustrated that there is such distance between the members of the European Parliament and the national parliaments; I am frustrated that national parliamentarians have nothing to say at European level. We must examine these two frustrations and see how we can overcome them. It will not be easy.

As President of the European Commission I think it is important that there should be an office of the European Commission in each of the national parliaments which deals with European affairs and gives a mandate to the Government in [322] the negotiation rounds. That would create new links between the national parliaments and the national governments. The governments are members of the European Council of Ministers which negotiate and are also accountable to the national parliaments. There must be stronger links in relations between the national parliaments and governments.

There can be closer relations with assemblies. That is more difficult because there are huge assemblies — the European Parliament is huge and COSAC is another large institution. There should be delegations from national parliaments meeting delegations from the European institutions to strengthen the links between them. Real linkage is vital, otherwise there will be a gap between the European institutions — the European Parliament in particular — and the national parliaments. We do not want to interfere in the mechanisms of the European institutions but to create links where national parliaments are informed and can bring forward their own opinions.

If you want a Europe which is closer to its citizens then there must be a mechanism which involves the citizen on the ground, not only elections every five years for the European Parliament, but also throughout the period between elections.

The next question concerned Objective One status and the proposals for regionalisation put forward by the Government. In some ways Ireland is becoming a victim of its own success. It is now coming above the threshold of 75 per cent which is the ceiling for Structural Funds. The European Commission is aware of the problems which could arise for countries such as Ireland, a model state in the European Union. Successive Governments have made good use of the Structural Funds. It is an example of how the pillars of economic and social cohesion, the strong pillars of policy based on subsidiarity and solidarity, have worked. I do not recall the figures which I mentioned earlier but Ireland performed well.

Now we have to look at the future. Therefore, in Agenda 2000 we have provided a formula which will give smooth transition to Ireland in a very generous phasing out system. The Commission has also proposed the continuation of the Cohesion Fund. This proposal is very controversial to other member states. They see that Ireland has performed so well that it is now a member of the European Monetary Union and therefore there is no need to retain the benefit of the Cohesion Fund. That would be unfair on Ireland in our view because it would penalise a country which did very well with its use of Structural Funds. We therefore proposed the continuation of the Cohesion Fund.

The question of regionalisation was raised this morning in my discussions with the Taoiseach and the Minister for Finance. This question is not within the competence of the European Commission at the moment. It is up to EUROSTAT, the very independent statistical agency of

[323] Europe, to examine these proposals. That is what it did for regionalisation in the UK, in England and Wales. I must be cautious at the moment because it is not up to us to interfere in the responsibility of an independent agency. It is up to EUROSTAT to make up its mind. In principle I have no objections because we live in a period in which regionalisation is becoming much stronger in all member states.

In the European Union of tomorrow the regions will have more importance than in the past. Since the Treaty of Maastricht we have had the Committee of the Regions. Regionalisation is part of the mood. In reply to the first question, I stated that we are creating a Europe which is closer to the citizen. We are also focusing more on regions. In principle the Commission has no objection, but as I stated, it is a decision for EUROSTAT, our independent statistical agency. It is difficult to say now whether I agree with all the details of regionalisation. The negotiations will be highly complex. A balanced and equitable result is achievable and must be our common objective.

The third question related to the functioning of monetary union and to the United Kingdom which is not a member of monetary union but with which Ireland has strong commercial trading relations. I understand these relations exist now when the pound sterling is different from the Irish pound. It is the same relationship and Ireland must deal with this problem now. There will be nothing new. The only new thing is that the Irish pound will be replaced by the euro.

The Senator questioned how Ireland will function inside monetary union. The European Central Bank will manage monetary policy in relation to price stability and inflation. The first goal of the European Central Bank is to maintain a low inflation rate. Therefore we must give it the tools to manage that. There are economic tools other than interest rates to manage this, such as restriction of the money supply. We are aware that the situation in different countries is not the same. They have difficult cycles. However the European Central Bank has different instruments to counter this so I do not see a major problem in relations, no more than exists now.

The countries outside monetary union will suffer more than those inside. In my view, it is an advantage to be inside rather than outside monetary union. Ireland should be glad to be inside. It may make many sacrifices and efforts to be inside, but as a representative of a very small country, I have always felt that we are better protected by a wider shield. Ireland will be protected by bigger countries under the same shield. If it was outside it would face harsh competition with other countries and that would not be to Ireland's benefit. There will be no negative effects on Ireland's trading relations with Great Britain resulting from Ireland's accession to monetary union.

[324] Of course there will always be some problems in the functioning of monetary union. That is our daily work. Every day I have problems with member states both inside and outside monetary union but I think it is better to be inside. As the first objective of the European Central Bank is to maintain price stability, the economy will not overheat. It has the means to reduce it, not only through interest rates. There are other instruments to deal with that. It will not create further major problems.

The fourth question related to duty free. This issue is like the Loch Ness monster, it keeps coming up. In 1991, I was President of the European Council when the Council of Ministers of Finance decided to abolish duty free with unanimity. I am now President of the European Commission. This is a very pleasant role as the European Commission not only takes initiatives but also implements decisions taken by the Council. It is an executive body, like all governments. We must implement the decision taken in 1991 by the Council of Ministers. As long as this decision stands, it must be fulfilled by July 1999. We must implement it, it is our duty. If we do not do so, citizens can take us to court.

I am aware of all the questions raised about duty free by unions and duty-free lobbyists. There are other lobbies, such as consumer lobbies which are very active in Brussels. Middle class lobbyists from retailers' organisations are also very active and they are against duty free. It is necessary to have a balanced view.

I realise that on Monday there will be an ECOFIN Council and this question will be raised. However unless there is a modification by unanimity among the 15 member states, the Commission must implement the decision taken in 1991. The decision taken in 1991 by unanimity allowed a delay in implementation until 1999. Duty free organisations had eight years to make the transition. That was the reason for the long transition period. I remember it very well.

We are well aware of the difficulties. I offered, and on Monday at the ECOFIN Council Commissioner Monti will offer in a working document, all possible instruments, such as the INTERREG programme and Structural Funds, if there are difficulties in the transition. If there are difficulties we will offer our contribution to overcome these difficulties during the transition period. There is a transition period of eight years to fulfil the criteria. If there is a new transition period of eight years, which must be decided unanimously, I am not aware if there will be a new decision. Therefore, it is not necessary to come all the way again but we must face it. There must be the same taxation system in a Single Market. The same system exists in the United States. We must overcome some transitional difficulties but at the moment the Commission has only to comply with the communitarian legislation. We must implement it if there is no other modification.

The agricultural sector is very important. I have always said that agriculture is much more than [325] statistics. In my view, agriculture plays a very important role in the sociological structure of a society. It creates a balanced society. Therefore, it is important to have strong agricultural lobbies. This is important because it is one element of the European model of society. It is important to maintain this agricultural balance in society and to have a policy of rural development. It is not just a question of price policy, it is also a question of income policy in agriculture. Therefore, we propose to continue the MacSharry reforms of 1992 in order to gain greater orientation into the international market economy. Farmers should be given compensation for income losses under the rural development policy. We must not isolate farmers as producers but see them in the context of the whole rural development. Therefore, it is important that the new agricultural policy is consistent.

I am aware of Ireland's difficulties at present, especially in the beef and pork sectors. This is as a result of the collapse of the Russian economy, one of the big trading partners. There is also a drop in beef consumption. Farmers are in a very difficult position at the moment so we must see what can be done in this regard. However, this will not affect the Agenda 2000 package which goes beyond the year 2000. We must look at how this policy can be successful. I am aware of the concerns expressed by farmers in Ireland, particularly since they are suffering as a result of the collapse of the Russian market and getting low prices for cattle, sheep and pigs.

The reform of CAP is geared towards the long-term benefit of those who derive their livelihood and income from the land. The current problems which beset the CAP, which accounts for 60 per cent of the total EU budget and brings more EU money into this country than the regional and social funds combined, are due to the success of the original policy. This has generated excess production on a regular basis. The new price subsidies have caused enormous problems for us within the GATT agreement. In financial terms, one of the consequences of the policy was that 80 per cent of CAP money went to only 20 per cent of farmers. Therefore, Agenda 2000 is a balanced and fair package. No doubt there will always be room for improvement and no doubt the Irish Government will use its negotiating skills to achieve these improvements.

The serious negotiations will begin on Monday when the Agriculture Ministers meet in Brussels. I hope we can finalise the Agenda 2000 negotiations in March 1999 under the German Presidency. In order to reach this target, the Vienna summit in December, under the Austrian Presidency, must try to reach some compromise in the agricultural negotiations.

We must work hard in the coming months to try to settle the agricultural problems and the problem of regional and Structural Funds. The financial perspective is the main problem which must be finalised within the Agenda 2000 negotiations. There is some possibility for manoeuvre.

[326] I am convinced that we will reach an agreement which will satisfy future generations in agriculture. It is important that Irish farmers and farmers elsewhere in Europe have some perspective for the future in the area of international trade. Therefore, I am confident agreement will be reached. I cannot say what the March 1999 agreement will be. Perhaps Members will avail of an opportunity to meet me after that date when I will be pleased to give the correct answer to your very difficult question.

An Cathaoirleach: Information on Brian Mullooly  Zoom on Brian Mullooly  I thank you, Mr. President. I now call on the Leas-Chathaoirleach, Senator Liam Cosgrave, to formally conclude the proceedings.

An Leas-Chathaoirleach:  Mr. President, I wish, on behalf of the House, to express our deep and sincere appreciation of your address and presence among us today. Your address has most certainly touched on and illuminated many grave issues which confront us as we face into the new millennium. We thank you. Your responsibilities as President of the Commission of the European Union are formidable. In leaving us today, be assured that you carry with you our profound goodwill and best wishes.

Mr. Santer:  Thank you.

Acting Chairman (Dr. Henry): Information on Mary E.F. Henry  Zoom on Mary E.F. Henry  When is it proposed to sit again?

Mr. T. Fitzgerald: Information on Tom Fitzgerald  Zoom on Tom Fitzgerald  Next Tuesday.

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