The agenda for this week’s summit yet again lacks either the urgency or ambition required to tackle the immense problems facing the citizens of Europe. Since the last summit growth has fallen and an even deeper recession has been confirmed. Over 26 million people are now registered as unemployed, including a further rise in youth unemployment. Uncertainty has returned to the bond markets. The latest projections show that no significant recovery is on the cards.
And yet the leaders of Europe are to hold a two day summit which will consider no new initiatives and will again endorse a strategy which has not worked and will not work.
The items to be discussed and the draft conclusions reflect a group of leaders who appear to have given up trying to find a better way forward. They seem completely unwilling to do anything other than implement fiscal controls and hope that lower trade barriers will solve everything.
It is an unbalanced agenda which refuses to address the urgent need for stronger countries to try to stimulate growth. I find it particularly surprising that the Irish Labour Party is quietly going along with an agenda which appears to only fully satisfy the British Conservative Party.
Both before and after every summit the Taoiseach comes into the Dáil and talks about how giant steps are being taken to promote growth and jobs. The detail never matches the rhetoric.
No action being discussed at this summit is capable of making anything but a minor and probably distant impact on the economy. I will deal with these later, but I would like first to address the points made by the Taoiseach on Monday concerning Europe.
Over the last two years the Taoiseach has firmly established his reputation as the most partisan and tribal holder of his office. Every day in this House he responds to legitimate questions with snide political point scoring.
He is certainly the first Taoiseach ever to take domestic politics on the road with him when he goes on international trips. Why this matters is that it has stopped him from consistently pushing Ireland’s strongest arguments for the debt relief which is so important for our future.
Throughout 2011 he said that Ireland’s problems were entirely its own fault. He went to Berlin and the strongest argument he could muster was that “it would be a win for the whole team” to help Ireland.
By the time it got to October last year he had finally started recognising the role of ECB and EU-imposed policies in driving Ireland out of the bond market. On Monday he sought to ratchet it up a bit more.
Of course he couldn’t help throwing a few partisan digs and heaping praise on his government. He even managed to keep a straight face when attacking a bank guarantee he voted for and then re-enacted twice as Taoiseach. He of course also ignored his own repayment of unguaranteed, unsecured bonds long after the European panic had died down.
Something that struck many people on Monday was that the new, sharper demand for relief comes from a government which has spent most of the last month declaring that it has sorted everything out on bank debt. The speeches of the Taoiseach and Tánaiste about how they have closed the chapter of bank-related debt are now, apparently, forgotten.
This ongoing inconsistency is not just confusing for the public it gets in the way of Ireland achieving the scale of relief which the justice of its case deserves.
In the debate on the promissory note deal I laid out a series of additional reliefs which Ireland deserves on the basis of being treated equally and in light of policies agreed after 2010.
In the midst of the government’s euphoria my party welcomed the deal, but pointed out major – in fact possible more significant – issues which had not yet been dealt with.
There is nowhere on the record a statement from the government setting out all of the measures it believes Ireland should benefit from.
I should also point out that the Government has not yet published information covering more than the next two years’ impact of the promissory notes deal. We know what it means in terms of long-term refinancing, but the net interest cost to the state has not been outlined and is entirely subject to ECB intervention.
There are three major outstanding areas where Ireland deserves further relief.
First of all, existing loans should be placed on the same duration and interest rates as those available to others. Last week there was an attempt by the government to spin that it was delivering a breakthrough for Ireland. It quickly emerged that the EU is considering a deal which involves each of the bailout countries; there is no Ireland-specific initiative.
The sustainability of current bailouts is crucial for market confidence for all Eurozone countries, and this is a matter which should have been on this week’s agenda.
Second of all, the ECB should return to Ireland all of the profits it is making on its holdings of Irish debt. It is currently making €1/2 billion profits on Irish bonds and this should be returned, just as similar profits are being returned to Greece.
Finally the ECB should allow the Central Bank of Ireland to retain its new holding of Irish bonds to maturity. If these are sold off as soon as possible, which is something elements of the ECB say they want and have the power to demand, then it will eventually cost us €1 billion a year in lost interest. This would wipe out most of the benefit of the deal for our annual budget.
Taken together these three measures represent a large amount of money which would relieve pressures on services and struggling families.
London was probably the worst place for the Taoiseach to go to open a new line of argument on Europe because of the attitude of the Conservative government to the Union.
Their agenda is a destructive one which wants to strip Europe back to being merely a free market. It rejects the broader more progressive agenda of the Union which is vital for ordinary citizens. Britain has opted out of trying to help Europe through its crisis .A tough message in Berlin or Frankfurt would be far more impressive.
The principal decision which will be taken at the summit is to sign off on the latest part of the European Semester. This process embodies the overall economic strategy of the Union. The draft conclusions confirm the idea that leaders continue to believe that fiscal controls are the primary means for tackling the crisis. They are holding to this line in the face of overwhelming evidence to the contrary.
The only people who believe that there is no need for anyone to cut their deficits are those who either ignore reality or are only interested in exploiting public suffering. There are many countries, such as Ireland, where the facts of deficit and debt levels mean that bringing down the deficit is an essential part of restoring confidence. Of course there are many ways of doing this, and our government has chosen to do so in a way which is directly undermining public support for fiscal changes.
However, the majority of countries in Europe do not face similar conditions. The coordinated and ongoing contraction of public spending is damaging the European economy. Common discipline has been adopted for dealing with deficits but no such common discipline has been adopted to badly needed stimulus.
In recent weeks a series of studies have confirmed that the pan-European fiscal contraction is not only driving down growth, it is also reducing government revenues and making it harder to hit deficit figures. The policies which the summit will reconfirm this week are directly damaging Europe and driving unemployment.
The Fiscal Treaty contains within it provision which allow adjustments over a longer period. For countries which have a sustainable debt situation the lack of any proposed stimulus funding threatens to make the recession worse.
President Van Rompuy has written to all the leaders to ask that they use this summit to give an extra push to single market measures. He has said, as did the Taoiseach on Monday that these proposals are the core of their proposals for delivering growth.
Broadening and deepening the single market is in the best interests of Ireland because we have highly competitive sectors which will benefit.
It may also help slightly increase the long-term growth trend of the Union as a whole. What it certainly is not, is a way of tackling the crisis at hand. There are no projections from any economic body showing these single market measures have a significant impact in the next few years.
In light of this, it is wrong for our government to be acting as if this is the way for Europe to tackle the crisis. It is much worse that the government sounds as if it is signing up to the Tory agenda of reducing Europe to a free trade area.
This is the attitude which has led to a cut in the EU’s budget at a time when it badly needs an increase. It is also the attitude which means that vital social and economic policies of the Union are being cut back. You cannot claim to have an agenda for growth when you are cutting both the Common Agricultural Policy and the Research Horizon 2020 budget by over 10%.
This summit is considering no urgent measures to help Europe’s struggling regions. It is recommitting the Union to a narrow agenda based solely on fiscal controls and encouraging trade. It will ignore the need for stimulus spending by those who can afford it. It will address none of the urgently needed structural reforms to the Union.
This summit is another missed opportunity and may, unfortunately again see leaders waiting until the next crisis before snapping out of their growing complacency.