Speech by Minister for Finance, Michael Noonan TD, to the Bloomberg Ireland Economic Summit, Dublin

Introduction…


Ladies and Gentlemen, good morning.

At the outset, let me say that I am delighted to have been invited to speak here today at the first Bloomberg Ireland Economic Summit.  Such events provide an excellent opportunity for informed discussion and debate on the Irish economy, on the challenges and the opportunities and I hope that this will become an annual event.

 

The programme of debates and speakers that Bloomberg have lined up today highlights the diverse nature of the Irish Economy and the broad range of opportunities that Ireland has to offer to investors.   The timing of this conference could not be more pertinent and comes at a critical juncture on Ireland’s ongoing path to recovery and I am sure that the discussion will be most interesting and thought-provoking.

 

The primary focus of this Government is to bring certainty and stability to the Irish economy  so we can return the economy to sustainable growth, continue to provide vital public services, continue to attract investment and reinvestment and, most important, we can continue to tackle the unemployment problem and get people back to work.

 

The Irish economy is in a much better position that it was this time last year and I am confident that this progress will continue. This can be seen in our headlines indicators, our bond yields and in investment and job announcements. However, significant challenges remain and stability, certainty and confidence at home and in Europe are key to our continued recovery.

 

The Stability Treaty referendum on the 31st of May, 15 days from today, is a key moment. The ratification of this Treaty will play an important role in continuing this progress and restoring much needed confidence to Ireland and to Europe.

 

I would like to talk to you this morning about the Stability Treaty and outline, in my view, the reasons to Vote Yes and why a Yes Vote is in Ireland’s best interest.

 

Fiscal Rules:

 

The first reason to vote Yes is that the Treaty promotes good housekeeping and passing of the Treaty will prevent future Governments from spending and borrowing excessively from future generations to finance reckless and unsustainable budgetary policies.

 

The Treaty is essentially a set of fiscal rules designed to strengthen and stabilize the European Union and to support job creation and growth. These rules are backed up by a strengthened surveillance, co-ordination and governance among member States.  For Ireland, this will mean legislating to introduce fiscal rules that will require future Governments to run sensible and sustainable budgets, and to put in place an agreed plan to reduce the debt ratio to 60% of GDP over time.

 

While some might argue that these rules are too little too late – I do not agree. We cannot let the crisis of the past define Ireland’s future and I strongly believe that we must learn from the mistakes and put in places rules to avoid making the same mistake again. If the Stability treaty had been passed 10 years ago Ireland wouldn’t be in the “fix” it is now in. If the fiscal rules underpinning the treaty were in place in 2002 and 2007 much of our present difficulties could have been avoided.

 

These rules will ensure that never again a Government will be able to increase current expenditure on the back of growth in unsustainable tax receipts from, for example, property bubbles.

 

The rules will not, as has been suggested, lead to our budgetary and fiscal policies being decided in Brussels or Berlin.  The Government of the day will be free to decide what level of public services that they wish and in line with basic common sense they will just have to make sure that they raise sufficient revenue to pay for these services.

 

As we build for the future it is essential that we put the appropriate Budgetary frameworks in place.  It is it never too late to plan for the future and legislating to prevent future Governments from spending and borrowing excessively is sensible and prudent. Thinking longer term, adhering to these rules will mean that Governments will have resources available during economic downturns to spend and invest so as to stimulate economic growth and job creation.

 

Foreign Direct Investment…

 

The second reason for voting Yes relates to attracting Foreign Direct Investment in Ireland and the jobs it creates. The multinational sector in Ireland employs over 140,000 directly in factories and offices across the country and this number is growing each year. Ireland has much to offer multinational companies

 

This key sector is proving yet again to be a key driver of job creation and following on from record levels of investment in 2011 over 1,000 jobs  a month have been announced in multinationals so far this year.  This sector employs thousands of graduates directly from Irish colleges and universities and offers graduate great opportunities to build rewarding and challenging careers. Indirectly, this sector sustains thousands of jobs across all sectors of our economy ranging from construction to transport, to local shops, to restaurants and pubs and each job announcement by a  multinational will indirectly create additional jobs. For example, IDA has also announced that recent investments will lead to the creation of approximately 1,500 construction jobs over the next two years.

 

Multinational companies see Ireland as an excellent base from which to services their European and World markets. In addition, to the US and European multinationals, emerging countries such as China are starting to look at Ireland as hub and a gateway to the European and US markets. I note that one of your discussion items this morning is China’s interest in Ireland and the potential for developing this key relationship. The recent successful state visits to and from China highlights the opportunities that exist for Irish companies from developing this relationship.  This Government and all State agencies will do all we can to translate this potential into jobs and investment.

 

These companies are not establishing in Ireland to services the domestic market. For potential investors our central place in Europe is key to our attractiveness to  and a Yes vote will send a clear message to investors that Ireland is fully committed to the European project. If we are not central to the European project our attractiveness declines.

 

A Yes vote will ensure that investors who have put decisions on hold pending the outcome of the referendum will make the investment and will ensure that the existing companies continue to trade and prosper in Ireland. However, a No vote will diminish our attractiveness as a base for investment, will not give investors the certainty and confidence to investment millions of Dollars, Euros or  Renminbi into the Irish economy and will not create jobs and opportunities for the Irish people now or in the future.

 

Access to the ESM…

 

The third reason to vote yes is it guarantees access to the ESM, Europe’s firewall and permanent source of non-market funding. From 2013 this will be the only European fund available to European countries who cannot fully access the market. The Government’s objective is to re-enter the markets when our programme concludes.  However, if in the worst case scenario, we are unable to borrow at affordable rates from the markets the ability to access to ESM is essential.

 

This access guarantees the funds for our public services including pensions, social welfare, education and health services in the future.

 

Even if we do not need the ESM, the very fact that we can access low cost funds available, will make our market return easier and cheaper. It is a truism of lending that those who can access a number a number of lenders will get better terms.

 

Balance of Certainty…

 

The Fourth reason to vote Yes draws on the experience of previous European referendums. The Lisbon Treaty and the Maastricht treaty were complex treaties and the consequences of a Yes were somewhat uncertain. A No vote was a vote for the Status quo. On this occasion the balance of certainty is not with a No vote. A Yes vote gives certainty and the consequences of the treaty are easily understood.

 

A No vote is a leap in the dark – a dangerous leap that Irish citizens should not take.

 

Conclusion

 

Ireland has gone through an unprecedented period of turmoil over the past four years. The crash that we have experienced has caused great difficulties for many families and businesses across Ireland. However, as a result of the resolute and flexible nature of the Irish people, we are recovering.  We have restored competitiveness, we are attracting investment and jobs and growth is returning.

 

The Irish people have made huge sacrifices to bring public finances under control and return the economy to growth. While much work remains, we have been meeting all of our programme commitments and we are on target to emerge from the Programme.

 

We are doing everything in our power to get the economy back on track. Of course, there are many factors beyond our control that will have important influences on our economy; but our task must be to position the economy so that we can take advantage of global recovery as it emerges.

 

One factor that is within the control of the Irish people is the decision to ratify the Stability Treaty. A Yes vote will bring an end to the boom-bust cycle that has caused great difficulties to so many Irish people and business, it will bring stability, it will ensure that we can continue to provide vital public services, it  will continue and boost the steady flow of inward investment and it will give certainty to investors and the markets.

 

I hope that this treaty is passed by the Irish people on the 31st of May. If it is it will maintain the Stability that this Government has established since taking office, it will continue to build confidence in the economy and will build a firm foundation for growth and jobs.

 

Thank you.