No matter how the Taoiseach talks up the outcome of last week’s summit the fact is that no significant step forward was delivered. At the end of a fourth year of economic crisis the leaders of Europe have decided once again to take the path of complacency.
Following the decisive action of the ECB in the middle of the year the leaders have used it as an excuse to water down and delay every significant element of the programme which Europe needs for jobs and recovery.
This summit did not deliver a banking union – it merely agreed to joint supervision of less than 2% of Eurozone banks and kicked down the road other vital reforms.
This summit did not deliver measures to reform the deep flaws in the foundations of the Euro – it took all ambitious reforms off the table and fudged what is left for at least two years.
This summit did not deliver any actions to help the over 20 million Europeans who are unemployed – it simply repeated empty phrases.
This summit did not do anything to address the increasing disunion between member states – it ignored the issue so that yesterday the British Prime Minister said for the first time that he could imagine his country leaving the EU.
Many commentators have concluded that this summit was the moment when the leaders of Europe signalled that they will take no major move until once again an emergency develops.
In relation to Ireland’s contribution, yet again no attempt was made to speak up on behalf of vital reforms and the policy remains one of hoping that something turns up. This remains one of the only governments in Europe which has failed to detail its views on the specific actions required to secure recovery in Europe.
From the first time this Dáil discussed European matters after the General Election I and my party have taken a very consistent and constructive line. We believe that a reformed Europe is a vital foundation for sustainable growth and job creation. We reject the empty rhetoric of those who attack Europe as a conspiracy or an all-powerful dictator. In fact, we have argued that Europe has been too timid. It has tried to tackle an unprecedented crisis with minor incremental changes, always seeking to do as little as possible rather than everything that is required.
I remain the only party leader in this House to set out in detail specific proposals capable of addressing the worst flaws in the Euro and allowing the EU to take the lead in helping countries like Ireland to tackle unemployment. We were the first party to demand that we protect the democratic legitimacy of Ireland’s relationship the European Union by having a referendum on the Fiscal Treaty.
At our Árd Fheis and in the referendum Fianna Fáil absolutely refused to take the opportunistic route, and campaigned on the basis of the Treaty being just the first of many required steps.
No one can question that we have been constructive and we have put the long-term national interest ahead of short-term politics.
I am sorry to say that it is becoming more and more obvious that this government has not developed and is not interested in developing a real strategy on Europe. Everything it does appears to be based maximising the credit which can be claimed rather than pursuing a clear set of goals.
What has happened in recent weeks is that tensions within government and fear of the people have started to impact on European matters, particularly the core issue of banking-related debt.
Since the Budget there has been an almost frantic effort by the government, and especially Labour ministers, to show that there is something happening buried deep beneath the broken promises, falling growth and rising disillusionment.
Both Minister Rabbitte and the Tánaiste have decided that pretending that Labour is the saviour of the nation on the promissory note is the only route to redemption. This has even gone as far as to prompt Minister Noonan to lose his temper and tell a colleague to butt out of things which are not his concern.
On Monday the Tánaiste broke three decades of precedent when he told the Irish media that he would be using the Presidency of the Council to secure one of Ireland’s main demands. He said this in spite of the facts that he has not attended a single negotiating meeting with the ECB and that the ECB is not subject to decisions of the European Council.
A Budget has been pushed through the Dáil which has rightly been condemned by most of the public and some government backbenchers because of its entirely avoidable targeting of the most vulnerable in society.
What has been less commented upon is the fact that the Budget figures are highly unlikely to be achieved. The Budget figures can only be achieved if major unspecified savings are imposed by a range of Ministers. As we saw this year, claims about an iron-hand guiding spending were completely untrue and nothing has been changed to make sure that next year is better.
Yesterday it was announced that GNP, which is the most important measure of national income in this country, is falling. This is due directly to the major damage done to domestic confidence by government decisions. Other than trying to follow fiscal targets set out by in October 2010, there is no strategy to tackle any problem which has grown in the last two years. Domestic confidence simply cannot recover as long as the government puts all of its effort into talking about recovery rather than taking concrete steps to achieve it.
The mortgage and household debt crisis has been allowed to keep growing with no credible response. Investment plans have been published which actually cut investment – with all proposals for funding a job-creating stimulus rejected.
It is highly unlikely that the figures announced in the Budget will be achieved. No major initiative is underway to deliver the spending commitments and the tax plans will not deliver the claimed revenue. This is especially true of the family home tax.
All that is left is the hope that Europe will again turn up with something which will make up for the failures in budget planning.
As I’ve said before, I believe that there will be a deal in relation to the promissory note. The justice of the Irish case demands an outcome which would lengthen the term and reduce the rate to halve the impact of repayments on the Irish deficit across a few decades.
The case for Ireland has been repeatedly hampered by the refusal of the government to put aside domestic politics. However the Taoiseach summed up our case well in Paris this October. He has not repeated this line since, so perhaps it was an accidental slip on his part; certainly it was an unusually non-partisan point for him to make. He said then:
“Ireland was the first and only country which had a European position imposed upon it in the sense that there wasn’t the opportunity, if the government so wished, to do it their way by burning bondholders”.
Any deal which replicates the handling of the repayment made in January this year would be deeply unfair and cause serious economic damage. While the Tánaiste and Minister Rabbitte appear to believe we didn’t pay the promissory note in March, we paid it and received a thank you note from the ECB.
The national debt continued to reflect the full value of the promissory notes but the interest paid out of current funding increased.
This muddling through will have to end and it should end in the next three months – yet so far the government has refused to publish even a single sheet of paper setting out what it is asking for. No one has been shown any technical papers. No details have been supplied. All we know is that whatever happens the claims of ministers cannot be taken on face value.
As the Taoiseach is aware, since the rotating Presidency of the Council was created 40 years ago it has been the absolute principle that the holder of the Presidency does not promote their unique national concerns. This Presidency is significantly less influential than in the past because the Taoiseach will not be leading the Council, however the principle remains.
Ireland is lucky to have an excellent group of diplomats working on European issues in Brussels, Dublin and throughout our network of Embassies. They are ably assisted by public servants from Departments which carry a heavy load of EU-related work. I have no doubt that they will ensure that the Presidency is carried out to their normal and incredibly high standards of professionalism and effectiveness.
It does not help when members of government try to grandstand at home, looking to impress people with sabre-rattling about using the presidency to secure Ireland’s goal.
Minister Creighton was right when she said that Ireland being asked to chair the OSCE was a mark of the high esteem European countries hold for us. Of course this happened over a year before the current government took up office, something never acknowledged in the growing party politicisation of this area by the government.
The Taoiseach should instruct his ministers to stop the empty grandstanding in our media. It has already caused us problems, with the German government talking about Dublin consistently over-spinning deals.
The summits deal in relation to the banking union is a major concern. The banking union has always had three fundamental elements to it – a single supervisory mechanism, a common system of guaranteeing deposits and a common system for closing down failed banks. All that has been agreed so far is an incomplete supervisory mechanism, the operation of which is yet to be decided.
Under the deal, the new supervisory system will only include extremely large banks. Fewer than 2% of the Eurozone’s banks will be covered. Some leaders have pointed out that the new supervisor can step in when banks get into trouble – an amazing point given the fact that the entire point of supervision is to stop the trouble in the first place. It also misses the fact that, as we know all too well from the Anglo-Irish case, it is smaller, rapidly-growing banks which nearly always cause the trouble.
The €30 billion assets limit will become a target to be worked-around by creative financial management and it is a foolish capitulation of the idea which was supposed to have been agreed in June.
The resolution and deposit guarantee issues have been kicked down the road as a result of this summit and there is no sign whatsoever of a growing consensus. As one commentator pointed out on Sunday, the decision to exclude 98% of banks from direct supervision may have already scuppered the other elements of the banking union. As he wrote; “if there are hardly and German banks in the new system why should one expect Berlin to take part in a resolution system?”
Europe’s leaders left the summit patting themselves on the back for what they had agreed – and we have heard more of the same from the Taoiseach – but in reality they may have fatally undermined a vital element to restoring Europe’s financial system.
Fiscal & Economic Reform
If it were not for Mario Draghi there is no doubt 2012 would have turned out to be the most destructive year in the Union’s history. He intervened to stop a potential economic meltdown. By stretching the ECB’s remit to its very limit and facing down fundamentalist opponents he did the citizens of Europe a great service. There is more he should have done, but his work in 2012 deserves our praise.
In contrast, the political leaders of Europe have actually used his work to step back from taking urgent decisions. Even though an imminent collapse was avoided, so too, were major steps avoided.
This summit postponed every single major reform proposal for the future of economic and monetary union. Twelve months ago we were supposed to be committed to urgent, time-bound and radical action. As of last Friday all radical actions have been removed from the agenda, there is no urgency and agreement is targeted for some indefinite time after the formation of the next Commission in late 2014.
This is not the leadership which the people of Europe deserve. I know it is a strong description, but it is a clear betrayal of the spirit which build the EU and earned it the right to receive the Nobel Peace Prize. The leaders who attended to receive that award should be ashamed of their behaviour in the last two years.
They have presided over a collapse in public confidence in the European Union. They have engaged in selfish agendas. They have shown no ambition or ability to show consistent leadership.
2013 must not be allowed to see a repetition of this. We need a determined effort to both fully tackle urgent economic issues and to put in place a real framework for sustainable growth.
A first start for this should be all leaders being open and honest by setting out their own proposals – by ending the practice which is now out of control with our government – of caring only about the public relations strategy.
This was a complacent summit which may have caused considerable long-term damage.