Statement by the Taoiseach on the Meeting of the European Council in Brussels

2nd March 2014 - Ken Gaughran

Next week’s meeting of the European Council was originally scheduled to be the first of 2014. However, as you are aware, an extraordinary meeting of EU Heads of State and Government was called in Brussels last week to discuss the deeply worrying situation in Ukraine.

For next week’s European Council, there is an extensive and substantive agenda in addition to Ukraine. As is traditional for the Spring European Council, the focus is on economic issues.

The main agenda items are:
· The European Semester
· The Europe 2020 Strategy
· Industrial Competitiveness
· Climate and Energy , and
· External Relations.

In Brussels next week, I also expect that we will review ongoing work on taxation issues as well as progress in completing Banking Union. Negotiations are continuing and I remain optimistic that we can reach agreement within the next few weeks.

Securing agreement on the Single Resolution Mechanism is the next essential step in completing Banking Union. It remains a key priority.

I am also looking forward to having a good engagement next week on the key economic challenges facing Europe. As we start to see more signs of recovery, we need to discuss what we need to do to support and strengthen the fragile return to economic growth and job creation. The discussion on climate change and energy also addresses a central strategic challenge for the union.

Before getting into detail on this, however, let me turn first to the situation in Ukraine.

What is happening in Crimea has rightly been described as the worst crisis which Europe has faced since the end of the Cold War. The EU, the Irish Government and most of the international community have strongly condemned Russia’s actions over the past 12 days and have called on it to immediately withdraw troops to their barracks.
Russia’s actions are in flagrant violation of international law and of their obligations to respect Ukraine’s sovereignty and territorial integrity.

It was against the backdrop of the deepening crisis in Ukraine that I attended last Thursday’s informal meeting of Heads of State and Government in Brussels, convened by President Van Rompuy to formulate a clear and carefully calibrated EU response. Before our internal deliberations, the new Prime Minister of Ukraine, Arseniy Yatseniuk, briefed us on the exceptionally difficult situation in his country and sought our assistance on a numbers of fronts.

I have to say that I was deeply impressed by his measured and sophisticated approach notwithstanding the intense pressures which he is under.

The Prime Minister came with three clear messages for us: talk to President Putin, press for the cancellation of Sunday’s referendum in Crimea and urge Moscow to open direct talks with Kiev.

As expected, the Prime Minister focused for the most part on the highly charged situation in Crimea, strongly condemning Russia’s violation of existing treaties and also rejecting the resolution of the Crimean regional assembly regarding the referendum on leaving Ukraine and joining the Russian Federation. I strongly agree with the PM that the decision to hold the referendum this Sunday, coupled with the wording of the question on the voting paper regarding Crimea’s possible “re-unification with Russia” is clearly a significant escalation of an already dangerous situation.

Despite this provocation, it is worth recalling that the Ukrainian government has shown restraint and not reacted militarily to Russia’s illegal actions or declared martial law. In our statement after the meeting, EU leaders applauded the courage and resilience of the Ukrainian people as well as commending the measured response shown so far by the government in Kiev.

I was encouraged by the Prime Minister’s assurances that the government’s proposed language law, diminishing the status of Russian and which caused a great deal of unease, will not be signed into law and that a task force has been established to consider the issue. I also welcome his commitment to reforms, including tackling corruption.

The Prime Minister argued that Ukraine is not anti-Russian – indeed views Russia as a friendly country – but that Ukraine will not be dominated or intimidated by Russia. He concluded that there is no time to lose and asked that the political chapters of the Association Agreement be signed immediately and that the EU expedite measures on visa liberalisation.

We adopted a number of measures which we believe can make a powerful contribution to the stabilisation of Ukraine’s macroeconomic situation as well as helping the new government in a broader political sense. We endorsed the comprehensive assistance package prepared by the European Commission which has a value of approximately €11 billion. We tasked all relevant Council bodies to process it rapidly and recalled the need to work with the IMF so that assistance can be unlocked.

The immediate priority is to restore macroeconomic stability through sound fiscal, monetary and exchange rate policies. At the same time, the government must urgently launch an ambitious set of structural reforms, including the fight against corruption, and introduce greater transparency. The Council has also frozen the assets of persons identified as responsible for the misappropriation of State funds. The intention is to recover those assets and return them to the Ukrainian people. We also made clear that we are prepared to respond immediately to requests for humanitarian assistance.

On the broader political front, we reiterated the EU’s commitment to signing the Association Agreement, including a Deep and Comprehensive Free Trade Area, with the Ukrainian authorities.

It is worth recalling that it was the announcement on 21 November last year by Ukraine’s President Yanukovych, of his decision to postpone preparations for the signature of the Association Agreement at November’s Eastern Partnership Summit in Vilnius that triggered major protests in Ukraine. The initial protests were overwhelmingly peaceful yet were met just over a week later by heavy handed police action which only served to inflame the situation.

We agreed last week that, in the interim and as a mark of solidarity with Ukraine, we will shortly sign all the political chapters within the Association Agreement. I expect that to happen very soon. The European Union also intends to adopt unilateral measures which would allow Ukraine to benefit substantially from the advantages offered in the Deep and Comprehensive Free Trade Area.

Such measures would entail an offer to apply provisions related to the import of goods by reducing tariffs and opening tariff rate quotas by so called autonomous trade measures. Finally, we pledged to continue work on the visa liberalisation process.

There was a great deal of speculation in the lead up to our meeting as to whether or not the EU would agree to impose sanctions against the Russian Federation, with much being made of the supposed divisions within the Union on this question. In the event, our statement delivered a clear and unequivocal message to Moscow, strongly condemning its unprovoked violation of Ukrainian sovereignty and territorial integrity, and setting out our collective response to the Russian Federation.

We made clear that negotiations between the Governments of Ukraine and the Russian Federation need to start right away and produce results within a limited timeframe. In the absence of such results, the EU will decide on a second set of additional measures, such as travel bans, asset freezes and the cancellation of the EU-Russia summit.

EU Ministers at the Foreign Affairs Council on Monday will consider the next steps, and of course the European Council meeting next week will discuss the situation in the Ukraine and the EU’s response.

The European Semester
Let me turn now to the economic agenda for next week, starting with the European Semester. As the House is aware, following our successful exit from the EU IMF programme in December, Ireland is a full participant in the 2014 process.
This is the fourth European Semester cycle, the third under the enhanced governance arrangements introduced by the six-pack, and the first under the further enhancements introduced by the two-pack.

The discussion at next week’s European Council takes place in the context of improving economic conditions across Europe. Last year saw GDP in both the EU and the euro area back in positive territory for the first time since late 2011. The most recent purchasing managers’ data for February suggests that economic activity is now at its highest level in 32 months, while through the ECB’s bank lending survey we have seen some first signs of the easing of credit constraints for Europe’s SMEs.

Most importantly, there are now signs that this improvement in economic conditions is feeding through to the labour market. Many Member States, including Ireland, have returned to net job creation. Our own employment growth rate of over 3% in 2013 is currently the strongest in the EU.

But unemployment remains unacceptably high: around 11% for the EU and 12% for the euro area. The rate in Ireland is also 12%. We must remain focussed on the need to effectively tackle this. Job creation remains the priority.

Against this broader background, the Spring European Council will finalise guidance to Member States on the preparation of National Reform Plans for 2014. This process began with the Annual Growth Survey, presented by the Commission in November last year, and will conclude with the June European Council endorsing Country Specific Recommendations for Member States. As part of this process, the Commission, last week, also published in depth reports on macro-economic imbalances in 17 Member States, including Ireland.

We are, of course, studying the report on Ireland. It acknowledges that we have made significant progress in addressing imbalances which arose over the last decade.
We have noted the remaining challenges highlighted by the Commission and we remain firmly committed to addressing these by building on the reform measures which we undertook during the EU/IMF programme.

Work on the European Semester is being led by my Department, working closely with the Departments of Finance; Public Expenditure and Reform; Jobs, Enterprise and Innovation, and other relevant Departments. The objective remains to submit our 2014 national reform plan to the European Commission in April.

Implementation of Europe 2020 Strategy
As part of European Semester discussion, the European Council will also examine Europe 2020 – the EU’s strategy to support smart, sustainable and inclusive growth. It is a ten-year plan, adopted in 2010, based around five headline targets in the areas of employment, innovation, climate and energy, education and social inclusion.
These are translated into specific goals for each Member State, with progress monitored within the framework of the European Semester.

The Commission’s stocktaking exercise shows quite clearly that overall performance against these objectives is mixed. This is not surprising as in many ways implementation of the strategy has been overshadowed by crisis resolution in the euro area. Now, however, is the moment to properly re-engage with Europe’s post-crisis growth strategy.

I expect that our exchanges at the Spring European Council will be followed by a full public consultation on the strategy which run until the autumn. The outcome of this public consultation will then be taken forward by the new European Commission.

When Commission Secretary General Catherine Day met the Oireachtas EU Affairs Committee on 23 January, she emphasised the importance of strong stakeholder engagement with this renewal of the Europe 2020 Strategy, including of course from national parliaments.

The Commission’s 2030 Climate and Energy Framework proposals, which I will return to shortly, are likely to form an important strand of this wider process.

Industrial Competitiveness
The Spring European Council will also focus on industrial competitiveness. Exchanges here will be informed by the recent Commission Communication ‘For A European Industrial Renaissance’and by discussions at the Competitiveness Council on 20 February.

Ireland has been proactive in the preparatory discussions in this area as I believe that a competitive and innovative industrial sector will be an important element of Europe’s recovery. Minister Donohoe will expand on this in his contribution.

Climate and Energy
The European Council will also hold a first policy debate on the Climate Change and Energy Framework for 2030. Discussions will be informed, again, by a Commission Communication issued in January, and the debate will be followed closely at a wider international level, in view of the importance of EU engagement and influence in the international climate process under the UN Framework Convention and the Kyoto Protocol.

I wanted to set out our initial thinking on the Communication as we approach the European Council meeting.

In the first place, the Communication is a basis for a timely policy debate on the next phase towards the EU’s objective of transition to a competitive, low-carbon European economy by 2050.

Ireland recognises the benefits of increasing the share of renewable energy in our fuel mix, both from the economic and the environmental perspectives.

The issue requires careful consideration, in terms of both the challenges and the opportunities of global transition to a low-carbon future. Both ambition and flexibility are important features of the package, but we must also reach an outcome that is sustainable, for the EU as well as for individual Member States, on environmental, economic and competitiveness grounds.

We can only build momentum towards a low-carbon society if our vision is founded on a policy framework that is affordable, fair and transparent and takes account of Member States’ specific circumstances and capacities.

The principles and objectives for the 2030 Framework must be translated into concrete achievements. To do this we must, at an early stage, reach a shared understanding of the assumptions underpinning the Commission’s Impact Assessment. Our own initial technical analysis of the Communication has raised some issues of concern from a national perspective about the projected overall costs.

We look forward to engaging constructively with the Member States and the Commission to deepen understanding of the national implications of the proposals.

We note the recognition in the Communication that renewable energy has an important contribution to make to the 2030 framework. Effective transition to a low-carbon future requires that the 2030 framework provides for cost-effective implementation without placing a disproportionate burden on EU energy consumers or taxpayers and without undermining EU competitiveness.

While the proposed 27% renewable energy target for 2030 for the EU can be welcomed, we hope that the EU as a whole can surpass 27% and that potential investors are convinced – beyond any doubt – of our collective commitment to an ambitious renewable energy future.

We are interested to hear the Commission’s views on how the EU-wide renewable energy target post-2020 will be achieved, and on how the export of renewable energy from areas of high resource to areas of high demand can play a role in achieving this target.

We must send a clear message to industry that delivering the innovation needed to open up new renewable resources will be rewarded.

Public acceptance of energy infrastructure and renewable energy development is crucial. We cannot underestimate the importance of placing the concerns of local communities at the heart of the transition to renewable energy. Citizens must perceive that such developments are being made primarily for their benefit, and on an equitable, and cost effective basis.

With regard to energy efficiency the absence of concrete proposals is noted as is the Commission’s intention to consider this element after the review of the Energy Efficiency Directive in summer 2014.

Improved energy efficiency remains the most cost effective way to reduce emissions, improve competitiveness and increase affordability, especially for low-income consumers. And it will have a direct impact on the European jobs and growth agenda.

Finally, Ireland welcomes the proposal in the Communication to examine and pursue the most appropriate climate policy approach to agriculture and land use. This is an important development from Ireland’s perspective. We believe that a coherent and cost-effective approach to the parallel priorities of sustainable food production and climate change is fundamental to a realistic way forward at national, EU and wider international level under the UN Convention.

In anticipation of a new international climate treaty in 2015, we look forward to early development of this particular strand of the 2030 framework.

Single Resolution Mechanism (SRM)
As mentioned earlier, the European Council will also review progress in completing Banking Union. Let me update you on where negotiations currently stand.

EU Finance Ministers meeting yesterday had a long discussion on the Single Resolution Mechanism. The outcome of those negotiations is that finance ministers have now provided the Presidency with a revised mandate which I am confident will allow for an overall agreement with the European Parliament, in advance of the parliamentary recess in April.

The Single Resolution Mechanism is the natural complement to the establishment of the Single Supervisory Mechanism. It will overcome the asymmetry between supervision at the European level under the Single Supervisory Mechanism and resolution at national level.

It will create a central body to apply the Bank Recovery and Resolution Directive toolkit to banks in the Euro-area and to banks of participating non-euro area Member States. This central body will be known as the Single Resolution Board and will have the power to restructure and wind-down failing banks.

The Single Resolution Board will have access to a Single Resolution Fund, the principle for which is established in the regulation. The fund will be paid for by contributions from the EU banking sector. The rules for the use of and contributions to the Fund are set out in the Single Resolution Mechanism regulation. The target level of the Single Resolution Fund is approximately €55-60 billion.

The Inter-governmental agreement will allow for the transfer of funds from national compartments during the transitional phase to the single fund.

Once a final agreement is reached between with the European Parliament, this will deliver the next essential step in creating the banking union for Europe and thus help meet the objective set by the Heads of State and Governments of the Euro area in June 2012 of breaking the link between the sovereign and the banking sector.

[Negotiations with the Parliament continue and while there are a number of differences between the co-legislators I am confident that the deadline set by the European Council will be respected.]

The March European Council is also expected to touch on taxation particularly the Savings Tax Directive, the Parent-Subsidiarity Directive and ongoing work in the area of digital taxation.
The Parent-Subsidiary Directive flows from Ireland’s Presidency last year, during which we prioritised work on aggressive international tax planning and achieved significant progress. We fully support measures to eliminate double non-taxation. We also support the proposed changes to the Savings Tax Directive, which will expand its scope, make it more effective, and create a stronger and more coordinated approach to tackling tax evasion. In my view it is time to adopt this proposal.

Ireland has, in addition, welcomed the establishment of the European Commission’s expert group on digital economy taxation last November. We hope that this group will be able to assist the EU in tackling this difficult issue. Of course, due to the global nature of this issue, we continue to believe that the OECD is the most effective forum for further work.
It has become very clear in recent months that the issue of international tax planning by companies is neither limited to any one country nor limited to any sector of the economy – it is a global issue involving a wide variety of jurisdictions and companies, and it requires a global coordinated response.
External Relations
Finally under the external relations agenda item, as previously mentioned, we will, of course, return to the situation in Ukraine.

The European Council will also discuss preparations for next month’s EU-Africa summit. The theme of the summit will be ‘Investing in People, Prosperity and Peace’. I will be attending the Summit and intend to meet a number of African leaders. I see these meetings as a valuable opportunity to reinforce the aims of the Africa Strategy, launched by the Tánaiste in 2011.

Minister of State Donohoe will say a little more on this in his contribution.

As I said at the outset, we have both a very substantial and substantive agenda for our meeting next week.

I look forward to constructive and productive discussions, and will return to the House on the outcome of next week’s European Council in due course.  

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