Minister Donohoe addresses the Joint Committee on EU Affairs on the Country Specific Recommendations set down by the European Commission
Speaking ahead of his address this afternoon (Thursday) to the Joint Committee on European Affairs, on the Country Specific Recommendations (CSR) set-down for Ireland by the European Commission, Minister for European Affairs, Paschal Donohoe TD, said Ireland’s engagement with the European Semester process will safeguard our economic growth into the future which will help to deliver a brighter future for our people down the line (full statement below).
“This is the first year that Ireland has been engaged in the Semester process, as, until now, we have been in a Troika programme. The CSRs outlined for Ireland by the Commission earlier this month brings us to the closing phase of the process, which will be fully agreed by the Taoiseach and other Member Heads of State at the next meeting of the European Council on 26th -27th June.
“While there is still much to do in terms of further reducing unemployment, we have made great progress over the last three years in turning the fortunes of our country around. It is critical that that progress is maintained and developed.
“Our engagement with the European Semester process is fundamentally about advancing our own national interests. It is about supporting competitiveness within the Irish economy and about ensuring we can generate the wealth that will support a high standard of living for Irish families in to the future.
“We have seen the consequences of bad policy mistakes in the past both at home and abroad, and how these can have ramifications extending well beyond national boundaries. That is why the European Semester establishes a set of arrangements whereby we keep our economic affairs in order, ensuring that other countries do too.
“The CSRs, of which there are seven, deal with public finances; healthcare spending; active labour market policies; social inclusion; access to finance; non-performing loans in the financial sector; and legal services. The overall emphasis is entirely consistent with the policy objectives already firmly established by the Government, through the Medium Term Economic Strategy (MTES), the Action Plan for Jobs, and Pathways to Work, in a bid to stabilise our national finances and support future growth.
“By focusing on the pursuit of growth-friendly budgetary measures, restoring lending to the economy and tackling unemployment and the social consequences of the crisis we can build a more stable Ireland for our people for the years ahead whereby opportunity and brighter prospects are available to all.”
Ends
Statement by Minister for European Affairs
JCEUA meeting on CSRs (Country Specific Recommendations)
Thursday, 12 June, 2pm
Introduction
Let me begin by thanking the Committee for the invitation to address this afternoon’s meeting on the Commission’s proposed CSRs—Country Specific Recommendations—for Ireland. These touch on issues that will be at the heart of the Irish policy agenda over the coming months. It is therefore welcome to have this early opportunity to review what’s involved, looking ahead to the June European Council and beyond.
Let me also emphasise at the outset that our engagement with the European Semester process is fundamentally about advancing our own national interests; about the supporting the competitiveness of the Irish economy; about ensuring we can generate the wealth that will support a high standard of living for Irish families.
We have seen the consequences of bad policy mistakes both at home and abroad, and how these can have ramifications extending well beyond national boundaries. That is why the European Semester establishes a set of arrangements whereby we keep our economic affairs in order, and others do too.
We should also be clear that the overall emphasis is entirely consistent with policy orientations we have already firmly established at national level, including through the Medium Term Economic Strategy (MTES), the Action Plan for Jobs, and Pathways to Work.
The key focus is therefore on the underlying performance of the Irish economy. This means, first and foremost, adapting our public policies and public services to ensure that we are responding effectively to the changing challenges and opportunities of an increasingly knowledge-intensive and interconnected global economy.
It means identifying the steps that can realistically be taken over the next 12-18 months towards supporting growth that is smart, sustainable and inclusive, and that is consistent with the objectives of the Europe 2020 Strategy.
And it means a particular focus, in current circumstances, on keeping at the very top of the political agenda our collective response to addressing what clearly remains an unacceptably high level of unemployment.
European Semester 2014
The Commission’s CSR package, produced on 2 June, brings us into the closing phase of European Semester 2014. It is about developing and implementing jointly agreed measures to support growth and jobs. In essence, we agree priorities at EU level; and we implement them at national level.
The European Semester process brings together the different strands of the EU’s stronger post-crisis economic governance arrangements. There are two key phases.
First, we agree on our shared challenges through the Annual Growth Survey. The Committee will recall that the five main priorities here, as endorsed by the December and March European Councils, are:
- Pursuing differentiated, growth-friendly budgetary measures
- Restoring lending to the economy
- Promoting growth and competitiveness for today and tomorrow
- Tackling unemployment and the social consequences of the crisis
- Modernising public administration.
Second, we agree specific orientations for each Member State, tailored, in the light of these overall priorities, to specific national circumstances. These orientations—the CSRs—are prepared by the Commission for agreement by the Council, and endorsement by the June European Council. They then fall to be taken forward by the Member States through the national budget and policy cycles in the second half of the year.
The crisis has of course taught us important lessons about the interdependence of the economic and budgetary policies pursued across the Member States. This is particularly true of the single currency area.
We enjoy a shared dividend when our respective economies are performing well and responding successfully to globalisation. And we have a shared interest in safeguarding against the emergence of avoidable instabilities.
That is why we developed the stronger economic governance arrangements now in place, including of course the so-called ‘Two-Pack’ agreed by the Irish Presidency. And that is why the European Semester process is anchored in advance policy coordination at EU level in the first half of the year, supporting stronger mutual surveillance, peer review, and shared learning.
It is a forward-looking process that aligns preparations for the national budgets with agreed economic and social policy objectives.
CSR Package
The Commission presented its CSR package on 2 June, responding to the national reform plans submitted by the Member States in mid-April: National Reform Programmes (NRPs) under the Europe 2020 Strategy; and Stability Programme Updates (SPUs) under the enhanced Stability and Growth Pact.
The Commission’s package is also informed by the 17 in-depth reviews (IDRs) produced on 5 March: one for each of the 16 Member States identified in the Alert Mechanism Report as being at risk for macroeconomic imbalances; and one for Ireland following our exit in December from the EU/IMF programme.
The Commission has presented CSR proposals for 26 Member States. The other two, Greece and Cyprus, remain under specific adjustment programmes. Ireland is of course a full participant in this year’s arrangements.
The CSRs will now be agreed within the Council over the coming weeks. EPSCO Ministers on 19 June will finalise the CSRs on employment and social policies. ECOFIN Ministers on 20 June will finalise the CSRs on budgetary and economic policies.
The General Affairs Council (GAC) on 24 June will then approve an integrated set of final CSRs for endorsement by Heads of State and Government at the European Council on 26-27 June. These will be reflected in a final Council Recommendation adopted by Finance Ministers in early July. Preparatory work by the relevant Council Committees began last week and is now well underway.
Irish CSRs
There are seven CSRs for Ireland. These are in the areas of stabilising the public finances; healthcare spending; active labour market policies; social inclusion; access to finance; non-performing loans in the financial sector; and legal services.
Before turning to the individual CSRs, I think it is fair to say that there are no particular surprises here for Ireland. Following numerous troika reviews, the key issues are quite well rehearsed.
There are some minor technical and drafting issues we have raised with the Commission covering both its assessment and the CSRs themselves. These fall for consideration through the Council Committee work that got underway last week.
But on the whole, we see these as broadly sensible policy directions that will underpin the positive trajectory we have re-established for the Irish economy following a very difficult and protracted recession.
2013 marked Ireland’s first year of net employment growth since 2007. 2014 will see a return to net employment growth for the EU as a whole. A strong momentum for this recovery into 2015 and beyond will now be reinforced by the CSR package to be endorsed by the European Council at the end of this month.
Let me now turn to say a few words on each of the CSRs proposed for Ireland.
CSR 1: Fiscal Consolidation
The first CSR focuses on the further work necessary to restore balance to our public finances, where lead responsibility rests with the Ministers for Finance and Public Expenditure and Reform. Notwithstanding the very significant fiscal adjustment already undertaken—measures of about €30 billion, or almost 20% of GDP—the Department of Finance’s official forecast is for an exchequer deficit of 4.8% this year.
The Government is fully committed to bringing this deficit below 3% of GDP in 2015, consistent with successfully exiting the Excessive Deficit Procedure (EDP). The amount of further consolidation necessary will be determined in the context of the October budget, informed by the latest forecasts and endorsed by Irish Fiscal Advisory Council.
This CSR is one where we have raised a drafting issue with the Commission. We do not agree that expenditure ceilings require further reinforcement. We have amended the Constitution to ratify the Stability Treaty and already legislated for relevant expenditure ceilings.
CSR 2: Health Spending
The second CSR is focused on cost-effectiveness in the health sector as part of our overall management of public finances. Lead responsibility rests with the Ministers for Health and Public Expenditure and Reform
The direction set here is fully consistent with the ambitious reform programme produced in 2012, ‘Future Health’. It should also be seen in the context of the significantly increased demand on services associated with the crisis. This includes 500,000 more Medical Card holders since 2008, an increase of more than one-quarter.
We envisage further savings on pharmaceutical spending this year; are developing the business case for procuring a new integrated financial management system; and aim to roll out individual health identifiers in early 2015. We have also raised a wording issue here, as the January target specified for the health identifiers in the draft CSR is not realistic. We expect to agree a suitable amendment.
CSR 3: Active Labour Market Policies
The third CSRs is focused on further strengthening of our Active Labour Market Policies (ALMPs). This means building a bridge to the workplace for the unemployed. It also means being responsive to an accelerated pace of change by supporting continuous upgrading of skills and capabilities. Lead responsibility is with the Ministers for Social Protection and Education & Skills.
The INTREO one-stop-shops will be fully rolled out by end-2014. We have produced a new five-year Further Education and Training strategy, following the establishment of SOLAS in October last. And we are continuing to support a significant expansion in training and work placement, including through rolling out the first phase of the Youth Guarantee.
While we face a significant challenge in expanding service provision within current resource constraints, the further development of our Active Labour Market Policies remains unambiguously at the very top of the Government’s agenda. The next phase of this work will be reflected in the forthcoming Pathways to Work 2014.
CSR 4: Social Inclusion
The fourth CSR focuses on an inter-related set of policy challenges in the area of social inclusion: jobless households, child poverty, and childcare services. Lead responsibility is primarily with the Ministers for Social Protection and Children.
‘Low work intensity’ is the official EU indicator for households with little or no paid employment. And it is clear that the share of the Irish population in such households—at almost one-in-four—is significantly above the EU average.
Key policy responses include INTREO, reform of lone parent supports, and the development of the Housing Assistance Payment. The Advisory Group on Tax and Social Welfare is due to report shortly on structuring a smoother transition from welfare to work. We also have further research underway through the National Economic and Social Council (NESC) to support clearer identification of key problems and solutions.
There is, however, little doubt that increased labour market participation remains the best route out of poverty, and that affordable childcare will continue to play an important role in this context.
CSR 5: SME Finance
The fifth CSR is focused on policy supports for SMEs, with a particular emphasis on access to finance. These are issues on which the Ministers for Finance and Jobs, Enterprise & Innovation lead.
Minister Bruton is finalising proposals to improve the operation of the Credit Guarantee Scheme. A review of the Microfinance scheme will commence shortly. And Minister Noonan recently launched the SME online tool that will help Irish start-ups and small businesses navigate the range of supports for which they may be eligible.
Establishment of the Strategic Banking Corporation of Ireland was also announced on 22 May. This envisages a mix of funding from KfW, the European Investment Bank and National Pension Reserve Fund. The first phase is expected to make €500 million available, with work continuing to expand its scope and size.
We will ensure strong political momentum behind these initiatives to support SME finance through ongoing development and implementation of work under the Action Plan for Jobs.
CSR 6: Non-Performing Loans
The sixth CSR is focused on non-performing loans in the banking sector. It addresses a very difficult set of issues arising from the complete collapse of our banking system. There is therefore a strong continuity here with a challenging agenda already advanced up to December last.
An integrated mortgage arrears strategy is now firmly in place. It includes Personal Insolvency, the Mortgage Advisory Service, and the Mortgage to Rent Scheme. The most recent Mortgage Arrears Resolution Targets were produced by the Central Bank on 4 June, setting expectations out to the end of 2014: sustainable solutions for 85% of customers over 90 days in arrears; and concluded solutions to reach 45%.
For SMEs, the Central Bank has been setting quarterly institution-specific targets since June 2013. This means moving distressed borrowers to longer-term forbearance solutions. Progress by the Irish banks in restructuring their SME loan books is well advanced.
On distressed commercial real-estate exposures, this is an ongoing process through the work of NAMA, including the wind-up last year of the IBRC. Work to establish the Central Credit Register is being taken forward by the Central Bank.
CSR 7: Legal Services
The seventh CSR focuses on legal services reform. This is an issue repeatedly highlighted by our own National Competitiveness Council for many years.
We are committed under the Action Plan for Jobs to enacting the Legal Services Regulation Bill by the end of the year: striking a better balance between the interests of consumers and legal professionals. Work here is of course being taken forward by the Minister for Justice and Equality.
We agree that we need to improve data collection in relation to the efficiency of court caseload disposal. This is another area where we would expect to secure agreement on more suitable wording, including removing the reference to the ‘quality’ of judicial proceedings. Work in this area is being taken forward by the Courts Service with a particular focus on upgrading of ICT systems.
Conclusion
When we look at the seven CSRs in the round, it is clear that they touch on a wide range of issues relevant to both preparations for the October budget and ongoing public policy development more generally.
It is also clear that they cut across the responsibilities of a number of lead Ministers and Departments. The detail, timing and relative prioritisation of any individual policy measures here will therefore remain firmly a matter for determination by respective Ministers, and by the Government.
Within this wider context, this afternoon’s meeting is part of an important process of developing a more visible role for the Oireachtas in the European Semester processes. It builds, of course, from our constructive meeting at the beginning of April in the context of finalising our National Reform Plans for submission to the Commission later that month.
I understand Minister Bruton has already had a useful discussion with the Jobs Committee on Tuesday in advance of next week’s EPSCO Council that will settle the CSRs on employment and social policies. Minister Noonan is due to have his pre-ECOFIN meeting with the Finance Committee on 18 June, where I expect the agenda will touch on the CSRs on budget and economic policies. We will also have Dáil Statements on 25 June in advance of the European Council.
Endorsement of the final CSR package by the June European Council will, in turn, line up plenty of opportunities for further engagement on all policy areas, across all relevant Committees, over the months ahead and beyond.
ENDS