European Communities (Amendment) Bill 2012: Committee and Remaining Stages

Wednesday, 27 June 2012

Seanad Éireann Debate
Vol. 216 No. 5

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Question proposed: “That section 1 stand part of the Bill.”

Senator Paschal Mooney: Information on Paschal Canice Mooney  Zoom on Paschal Canice Mooney  First, cuirim fáilte roimh an Aire Stáit. During the Second Stage debate last night, Members went over the various aspects of this Bill in great detail with the Tánaiste and at the time I noted it was somewhat historic in that three of its four elements relate to past events. I reiterate Members’ welcome — I believe it was unanimous — for the accession of the Republic of Croatia. However, in the context of the protocol that is about to be put into law through its inclusion in the original 1972 treaty, I wish to raise again with the Minister of State an issue I raised with the Tánaiste. Unfortunately, because of the division of ministerial duties yesterday, the Tánaiste was present for the first part of the debate while the Minister of State, Deputy Costello, attended its second part. As a result, the Minister of State referred only to those contributions he had heard during his presence and there was nothing about contributions during the first half of the debate. Given the Minister of State’s European affairs role, she may be able to provide clarification in respect of the meeting that took place recently in Rome between Angela Merkel and representatives of Italy and France, in which there was some talk of a figure of €180 billion being set aside as a form of stimulus package that would involve the European Investment Bank, EIB, unspent Structural Funds and other [340]sources. Reference was made to the aforementioned sum of €180 billion and were the Minister of State to clarify, I would be grateful. Obviously, it would be in the Government’s interests to be able to access funding for infrastructural projects in particular, which from what I have been reading is being discussed in the margins at least. The focus of my query is whether the Minister of State has positive news in this regard, whereby Ireland might be able to access money to be used for structural projects.

Minister of State at the Department of Foreign Affairs and Trade (Deputy Lucinda Creighton): Information on Lucinda Creighton  Zoom on Lucinda Creighton  I thank the Senator and regret my absence from the Chamber yesterday, as I was in Luxembourg to attend the General Affairs——

Senator Paschal Mooney: Information on Paschal Canice Mooney  Zoom on Paschal Canice Mooney  There was no inference at all.

Deputy Lucinda Creighton: Information on Lucinda Creighton  Zoom on Lucinda Creighton  I know that. However, given the way it transpired, it was somewhat inconvenient for the House, for which I apologise. I was in Luxembourg at the General Affairs Council.

Briefly, on the issue of stimulus, funding availability and what may or may not be available, it would be irresponsible of me to raise expectations about underspent Structural Funds. This is entirely a good news story, in that Ireland is one of the best countries at absorbing Structural Funds. In consequence, there are no unspent moneys available to us. By the end of the current financial framework, Ireland will have spent all the money available. This applies to the new member states of the European Union, particularly countries such as Bulgaria and Romania, which have huge difficulty in absorbing Structural Funds and which are finding it very difficult to so do. As I stated before the Joint Committee on European Union Affairs this morning when this exact question arose, as one of the more developed member states with one of the best records in absorbing Structural Funds, Ireland should assist these countries. If Structural Funds can benefit newer member states to the east in respect of expenditure on roads or whatever, it benefits everyone because obviously, Ireland has goods and services, as well as skills and labour, to provide. While this would be beneficial to Ireland and we should be working to assist those countries, it has proven very difficult. In some instances, they have absorbed only approximately 10% of their allocated funds, which is quite startling. Unfortunately however, there are no unallocated funds for Ireland.

The good news, however, regarding the figure of between €160 billion and €180 billion mentioned by the Senator is that it specifically relates to European Investment Bank funding. Last Monday evening in Luxembourg, I attended a dinner with Werner Hoyer, the President of the European Investment Bank. He is a former counterpart of mine as he was the German European affairs Minister until January this year. He is highly constructive and very engaged and is extremely positive towards Ireland and the programme countries. He is conscious of the need to prioritise investment in countries such as ours, which are struggling at present and which could do with some form of injection of growth stimulus. The figure of €180 billion is approximate and it could vary upwards or downwards. Potentially, it could range between €150 billion and €200 billion. It will arise, assuming there is agreement at tomorrow’s summit on a €10 billion capital injection into the EIB, which will dramatically increase its funding capability. Werner Hoyer, in conjunction with the President of the European Commission, last week circulated a joint paper to all the Heads of State and Government, which in essence stated that with a €10 billion paid-in capital injection from the member states, the European Investment Bank could leverage that amount up to €60 billion for strategic infrastructure projects.

In the aforementioned paper, they detail quite well how they would do this, with a focus on youth unemployment, training opportunities for young people, strategic infrastructure in the [341]form of broadband etc., as well as the green energy and technology sectors. This is very much in sync with Ireland’s national priorities and we could really benefit from it. The €60 billion available from the European Investment Bank would be then be leveraged up, through co-financing and various private funding mechanisms, to the figure of approximately €180 billion. This comprises a significant capital injection for the EIB. The bank does not lend its own capital or taxpayers’ money but borrows on the financial markets. Consequently, its triple-A status is of huge importance and one slight difficulty we must overcome is to identify how the EIB can invest in countries such as Ireland that do not have triple-A rating without compromising its own rating and therefore its ability to borrow on the markets. It is a little complicated, but Mr.Werner Hoyer, the president of the European Investment Bank will visit Dublin next Dublin and will meet the Minister for Finance, Deputy Michael Noonan, and the Minister for Public Expenditure and Reform, Deputy Brendan Howlin to explore opportunities. I am friendly with him and he has expressed his sincere and genuine interest in working with Ireland to identify projects that would be a good fit for the EIB, helping it to maintain its credit rating yet also being very beneficial for Ireland. It is a good news story.

Senator Paschal Mooney: Information on Paschal Canice Mooney  Zoom on Paschal Canice Mooney  I thank the Minister of State for that very comprehensive reply. Ireland is still drawing down some Structural Funds under the original 2007 to 2013 programme. Has the Government formulated its priorities and set out a plan in anticipation of this funding or will it wait until the money is on the table before it decides on how it will be spent? We are borrowing this money. How does the rate of interest compare with the 3% interest rate that applies to funding under the bailout programme?

Deputy Lucinda Creighton: Information on Lucinda Creighton  Zoom on Lucinda Creighton  It depends on the availability of funding for the EIB and on the individual projects. I do not think I can give the Senator a figure for a flat rate of interest, as much as I would like to. It is below cost funding and the rate of interest is very competitive. For countries such as Ireland, it is very attractive. Countries in a stronger financial position might in fact be able to access financing at a cheaper rate elsewhere, depending on the domestic situation but for countries in the position that Ireland is in, it would be below cost and very attractive.

We are doing a great deal of preparatory work. The Cabinet committee on European affairs has met on a number of occasions and the key ministries, the Ministers for Transport, Tourism and Sport, and Communications, Energy and Natural Resources have been charged with looking at potential projects. The Minister for Public Expenditure and Reform, Deputy Howlin, is overseeing that and has already done quite a bit of work on it. To respond to Senator Mooney’s question on whether we look for the money first and identify the project afterwards, the answer is absolutely “No”. That would not work with the European Investment Bank, it makes its decisions on a project-by-project basis. The EIB is a commercial entity and operates in a commercially viable context and therefore it is important that we go with obvious projects that can fit the criteria that have been outlined by the European Investment Bank. It is worth noting that companies such as Bord Gáis, for example, has successfully attracted EIB investment. It is not just a question of the State accessing this money. Banks can access finance from the EIB, as well as semi-State companies. There are a range of opportunities and we are exploring all of them. The key outcomes from the summit tomorrow is that we get agreement on the paid in capital. In principle that was agreed at the ECOFIN Council so it should be agreed by the Heads of State and Government tomorrow. That is our first priority. Our second priority is to ensure that unlike the initial project bonds initiative, which focused very much on transnational major infrastructural projects, which ruled out projects in Ireland because we are a small island country, we must ensure there is flexibility about the types of projects so that smaller countries, such as us, can benefit from the opportunities. That is already acknowledged by the European [342]Investment Bank in the paper I mentioned, which was co-authored by Werner Hoyer and José Manuel Barroso and identified specifically the sort of language we have been pushing for. They identify a priority programme country, peripheral countries, small islands and so on. We are very much on their radar and that will make it much easier when we go with our projects to be able to say that as per the Council decision or as per the criteria set out by the European Investment Bank, we are a programme country and we have projects that fit the bill. Therefore, I am very optimistic about our potential.

Senator Jim Walsh: Information on Jim Walsh  Zoom on Jim Walsh  I would like to explore some of the points we raised with the Tánaiste and Minister for Foreign Affairs and Trade yesterday, and to which we did not get answers as he left early, which was unfortunate.

I am somewhat sceptical about states becoming involved in the creation of jobs. They have tried that in other countries and failed miserably. It is fundamental for the State to create the conditions in which the private sector can create jobs. I know that is significant challenge but on the other hand I do not dismiss the Minister of State’s efforts, as outlined to my colleague, Senator Mooney. Focused investment might generate some improvement.

I am very conscious that this Government raided the pension pots of many people in the past year on the pretext of generating jobs. Very little, if anything, was achieved by it and the money was used to support Exchequer finances.

I know this will be a different matter because the money borrowed must be repaid. I would like to see the emphasis put on the semi-State sector. I presume, but the Minister may correct me if I am wrong, the private sector could access some of the money from the European Investment Bank. I think we should encourage that in order to generate jobs.

There are probably certain key infrastructural projects, to which the Minister of State alluded, that would also be appropriate areas but I am concerned that with the political pressures, the high levels of unemployment, the Government would start spending money to satisfy a political imperative that we are seen to be doing something to create jobs. We end up adding to the debt levels, which makes it more difficult to extricate ourselves from where we are.

The Minister of State mentioned training and that is a good idea. Let me repeat a point I made yesterday about the ESM. The Minister dismissed an earlier comment when I said that €700 million, in my opinion, was not sufficient to meet the challenges. I am not sure that I mentioned the figure at the time, but I had it in my mind some months back, that Europe would need about €2 trillion, to get ahead of the curve on this. It has not been happening. Each crisis is being addressed as it arises and we are now four years into the most difficult economic situation I have seen in my lifetime and I am older that the Minister of State.

When this crisis happened I was trying to draw comparisons with previous events in history. This is probably the greatest global financial and economic crisis since the Wall Street crash in 1929 which signalled the ten year Great Depression.

Most economists will accept that there was not much of an improvement by 1939. The war intervened which makes it difficult to extrapolate any conclusions from it, because one does not know whether war prolonged it or it assisted a recovery which came about in the 1950s. I remember saying that we were looking at a period of at least a decade, if not longer, of stagnation and recession. Many people dismissed my comments as alarmist, but I am concerned about the situation. I do not have solutions, but what worried me is that nobody seems to have solutions, including the experts. What we must do at European level is to get a template as to how this crisis can be successfully tackled in order to set the European and the global economy on an upward curve. I talk to people in the United States. The outlook is similar there but is [343]not as bad as in this country because they have a more optimistic approach. To support my argument, the governor of the Bank of England, Sir Mervyn King, warned the financial crisis will last at least five more years. Many of the experts are starting to revise their earlier optimistic views. I am not patronising the Minister of State, but I am impressed by her intellectual capacity and knowledge and that she is well on top of her brief. It is often unusual among politicians and Ministers and I am trying to encourage the Minister of State to take that on.

I have seen reports on the Spanish situation. If they get into difficulty and are not able to borrow from the sovereign they talk about for their banks, they would use up what has already been allocated for this particular process. I do not want to scaremonger because it can be self-fulfilling. Equally, there is no point in avoiding reality. Cyprus has joined and is borrowing €10 billion which, by our standards, seems small but is more than half of its total economy and is quite significant. It puts Cyprus in almost the same bailiwick that we are in, but Italy is on the fringe. There is no talk now but very early in the crisis there was a lot of talk about Spain, Italy and France. We are in a serious situation but I do not know what we can do here other than to urge the Minister of State and the Government, particularly the Taoiseach, to make European leaders face the issues.

I have been highly critical of a lack of facing up to things and that brings me to another point I think is covered in this particular section. The Leas-Chathaoirleach can correct me if it is not. One of the four planks of the provision is to increase the number of Members of the European Parliament from 736 to 751. An increase in numbers in democratic structures, including the European Parliament, is going in the wrong direction. The European Parliament should be significantly reduced in size to improve its effectiveness and efficiency. Yesterday my colleague, Senator Sean D. Barrett, made an interesting observation by suggesting a bicameral European Parliament to allow for another house and allow other voices to be brought to bear on these issues.

I have strong views on my final point and I expressed them to the Tánaiste yesterday but did not receive an answer. He mentioned the fact the provision also covers the protocols that the then Minister for Foreign Affairs, Deputy Micheál Martin, succeeded in getting when the referendum on the Lisbon treaty failed in this country. As the Tánaiste pointed out in his address to us yesterday, the protection of life and the protection of family and education are fundamental protocols that are now being incorporated and underpinned, as was promised at that time. I welcome the move. He rightly said that Europe was living up to what was expected of it and I said to him, and I shall repeat it for the Minister of State present, that I am concerned about the approach made by the Government on the issues.

As the Tánaiste pointed out in his speech, the issues were important to the Irish people and were matters of great concern to them. I am highly critical, therefore, of the establishment of the expert group because its composition was changed at a late stage, and I have tabled a motion on the Adjournment on the issue. New people were added to the panel and some people on it were replaced, but I do not know why. The change has raised a lot of suspicions within the pro-life movement. Strong abortion advocates, ones whom the Minister of State probably knows, have also been included in the expert group. They were strong abortion advocates in the past. I am concerned about the outcome from that move. I want a commitment from the Minister of State that the Government will honour the protections in the protocols that have been included as part of this provision and which we secured from our European colleagues. I do not want us to throw them out now having fought to get them and their having been endorsed by the Irish people. They are part and parcel of what we are and are part of our value system in Ireland. Any attempt to dilute them would be a retrograde step for the citizenry and country.

[344]I am not sure that my next point applies to the Minister of State. The explanatory memorandum supplied did not help in our understanding of the legislation and her speech was far more informative. Either we get an explanatory memorandum that does its job or the name should be changed. Perhaps they should be dispensed with altogether, although I would not recommend that. I would ask for my criticism to be passed on to whoever drafted the explanatory memorandum. It did not give us the information we needed to understand the contents of the Bill.

Deputy Lucinda Creighton: Information on Lucinda Creighton  Zoom on Lucinda Creighton  I can read my script or I can respond to the Senator. Are we due to conclude?

An Leas-Chathaoirleach: Information on Dennis O'Donovan  Zoom on Dennis O'Donovan  Unfortunately, there is a guillotine at 5 p.m.

Deputy Lucinda Creighton: Information on Lucinda Creighton  Zoom on Lucinda Creighton  I would much rather respond.

Senator Paschal Mooney: Information on Paschal Canice Mooney  Zoom on Paschal Canice Mooney  I want the Minister of State to reply to my question in her response. I am curious to establish the significance of the accession of the Republic of Croatia. There has been strong support for Croatia’s accession from all parties, inside and outside of Government, dating back to the mid-1990s. We have raised the issue in the past and the Minister of State is probably actively doing that daily. It should be remembered that we, as a small country, need to forge alliances or consolidate alliances of mutual interests. What significance in terms of Ireland’s interests does the Minister of State attach to the accession of the Republic of Croatia?

Deputy Lucinda Creighton: Information on Lucinda Creighton  Zoom on Lucinda Creighton  I thank Senator Walsh and Senator Mooney for their comments. I also thank the Cathaoirleach and the House for affording me the opportunity to come here to conclude this element of the Bill’s passage through the Houses.

I shall begin by responding to Senator Walsh’s point on the role of governments in job creation. I could not agree more with his comments. Sadly, there has been a lot of rhetoric, particularly in the past two to three months, that has almost misled the public in Ireland and across the European Union. There has been a great white hope that governments can step in with money they do not have and create millions of jobs that will result in a rise in everybody’s standard of living. The crisis we face is a lot more complex. I have never believed that increased government spending either by increasing budget deficits or, more crucially, increasing national debt levels is a solution. Ireland learned that lesson in the late 1970s and in the 1980s when governments did precisely that. All parties in the House participated in those governments. They pandered to populism and went into government by making unsustainable promises and spending taxpayers’ money. All they did was mount debt upon the shoulders of Irish taxpayers without it doing anything to improve the employment situation. It was not until 1987, when the then Government and Opposition collaborated, that public finances were brought under control and the positive conditions for growth and job creation began to be created. It was done by restructuring the economy and that is why I support the European agenda of restructuring. Some call it austerity but I disagree.

We have a long way to go to reform the public sectors in all the European member states. I value and treasure the European social model. Our democratic, economic and social models in Europe are the best in the world, bar none. Notwithstanding the current crisis, it is the best in the world but it is unaffordable. Europe spends more on social welfare and social protection than the rest of the world combined. We can continue to pretend it is sustainable but it is not. People, across the board, must work longer for less pay and until an older stage in life and probably with fewer holidays. We must face that difficult reality. It is unpalatable politically but it is reality.

[345]How do we drive innovation and creativity in Europe? How do we help Europe to compete with the rest of the world to maintain the standard of living we have come to expect? We have to do the things to which we have already signed up. The best drivers of growth in the European economy are not fantastical stimulus projects with governments spending on roads to nowhere. The best thing that we can do is honour the commitments we have made such as implementing the services directive and the Single Market, that is, sadly, lagging behind where it should be or what we have committed to doing. We must end the tiresome debate on the seat of the European patent and get on with implementing the European patent. Ireland is the most creative country in the European Union because there are more entrepreneurs here than in any other European member state per capita.

More than any other country, Ireland can benefit from implementation of these measures which have the potential to add significant capacity and wealth to the nation and the European Union collectively. I am very supportive of the EIB model of investment because it is a commercial investment and not a case of governments spending money they do not have. It is a viable economic banking authority which will invest in the provision of viable strategic infrastructure, which is well worth doing.

I am sorry if I dismissed the Senator’s view on the ESM previously. I do recall that happening, but I take his word for it. Perhaps, it was misconstrued in some way. When it was said previously that the ESM was not adequate, my firm view was that it would be better to have an ESM with €700 billion than no ESM and no fund. Many Members in this and the other House advocated that we vote against it, which would have meant we would have no emergency backstop. That was irresponsible. The other point I have made is that the ESM fund has already grown. It started as a fund of €500 billion, but it has grown to €700 billion and has capacity to grow in the future.

  5 o’clock

I have repeatedly stated the ESM should receive a banking licence, that we should change the terms in order that it can effectively act as a bank and raise money in the markets and potentially increase its capacity to approximately to €2 trillion, although I do not have a precise costing, but to significantly more than €700 billion. The ESM should be enabled to recapitalise banks in member states directly rather than through the sovereign. We have learned that lesson here. We have learned the hard way that lumping private banking debt on the shoulders of ordinary taxpayers is the wrong approach. That is my position and that of the Government. It has been the position of the Minister for Finance, Deputy Michael Noonan, at ECOFIN, but there was no agreement on the issue, which is not to say it is not possible. The wonderful thing about the European Union is that it is evolving all the time. We should never throw in the towel and say the debate is over because it is constantly evolving. Even when one looks at the crisis, where people were two years ago is a different place from where they are today. Positions have changed and people have moved on. We should constantly strive to build consensus.

That brings me to the Senator’s point about Croatia and its significance as a like-minded member state of similar size. I believe passionately in the role of small and medium-sized countries in the European Union. We have to start working together much more effectively. Last week I visited Bratislava, the capital of Slovakia, and we have almost an identical approach to EU policy at this time, especially to the crisis. There is huge potential to forge common positions from everything from tax to European integration, likewise with many of the other small member states. The accession of Croatia is significant for more reasons than this: it marks the beginning of the process of reunifying the Balkans with the rest of Europe. Next week I am visiting Croatia, Bosnia and Montenegro and in the autumn I hope to visit Serbia and Macedonia. My commitment, as we approach the Irish Presidency of the European Union, is to the Balkans and enlargement of the European Union, of which traditionally we have been [346]supportive. That commitment and passion will not diminish but strengthen while I have responsibility for that issue.

An Leas-Chathaoirleach: Information on Dennis O'Donovan  Zoom on Dennis O'Donovan  The Minister of State is well over time.

Deputy Lucinda Creighton: Information on Lucinda Creighton  Zoom on Lucinda Creighton  I am sorry I did not get to the other point, but I have no doubt I will be back.

An Leas-Chathaoirleach: Information on Dennis O'Donovan  Zoom on Dennis O'Donovan  As it is after 5 p.m., I am required to put the following question in accordance with the order of the Seanad of this day, “That section 1 is hereby agreed to in committee, that the section undisposed of and the Title are hereby agreed to in committee, that the Bill is hereby reported to the House, without amendment, received for final consideration and passed.”

Question put and agreed to.

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