“Ireland could become a core Eurozone Member within 10 years”
Brian Hayes MEP remarks to The Irish Times PwC Tax Summit, Wednesday 20th September 2017
“One year after the Brexit bombshell, Europe has finally managed to get back in gear. It has been a long time coming. The sluggish Eurozone is now powering ahead and looking more positive and growing faster than either the US or UK. Five million new jobs have been created across the EU in the last three years. From the Eurozone debt crisis eight years ago to the need for new investment and banking union, the EU has finally turned the corner and is moving beyond Brexit.
“In July, the latest information about attitudes towards the EU from the Eurobarometer, provided for some interesting reading. Not since autumn 2004 has support for the euro been as high – 73%. And, of the 28 Member States, Irish views on the EU are now the most positive. It is clear that in an uncertain world, Ireland’s EU membership is recognised by ordinary people as an anchor and something positive.
“Brexit, instead of killing off the EU, has given it a new breath of life. Suddenly the EU is not looking as sick as it did.
“Politically we need to take the EU and its politics much more seriously. We are no longer net beneficiaries; we now contribute more than we receive. Just as we obtained over €57 billion in funds since joining the EU to develop economically, it is right that we contribute to other poorer Member States. We are one of the oldest EU Member States. We need to build new partnerships from the Baltics to the Benelux countries. We need to review our contribution to EU security while having a debate about our traditional policy on neutrality.
“At last we are beginning to see the emergence of a stronger more pro-European leadership. Angela Merkel is the standout leader amongst the big Member States right now. Alongside Macron the two leaders represent a strong team. While they may have views on the future direction of the EU, so do we and we must be clear in articulating those views especially on tax sovereignty and the position of smaller Member States.
“Being part of the Eurozone core is something we should strive for. That means getting our debt down well below 60% of GDP – I think we should aim for 40% within the next 10 years. Yes our debt levels are very high. Over the next three years the NTMA have correctly reminded us that we have to repay or restructure over €50 billion of debt. But a decade of sustained growth, averaging out at 3%, would make a great difference in reducing the actual debt and the cost of servicing debt.
“Making Ireland part of the Eurozone core would really help to position the country for future investment opportunities. EU countries within the Eurozone who are part of the core have no difficulty in attracting investment because they are regarded as safe economies. They are the countries that drive Eurozone policy making. Being perceived as a country with a sustainable level of debt and a strong public finance position makes Ireland even more attractive for inward investment. And also a country that can deal with shocks.
“In the future, being part of the Eurozone’s core means being open to a relentless benchmarking exercise; comparing ourselves against what other similar sized EU countries are doing. They can also learn from us. How have Estonia got their digital platforms so right when it comes to accessing public services? What can the German model of traineeships teach us about options for post leaving cert students? Can we learn from the reforms of pension policy that the Netherlands introduced ten years ago?
“Being part of the core within 10 years would bring enormous advantages of economic convergence to Ireland. While we do not determine interest rate policy anymore – that is set in Frankfurt by the ECB – we can internally devalue in other areas such as wages price inflation, output or educational attainment, as a means of becoming more competitive. That’s the essence of a currency union. Competitive advantage is gained by becoming better than others, especially those that are similar in size or similar in economic make up. Also the core of the Eurozone provides the best possible advantages for our exporting future. The winning of new markets being so crucial in the post-Brexit environment.
“But the key priority right now, as Paschal Donohoe has highlighted, must be about getting to a balanced budget next year. What many commentators do not fully appreciate is that under the Fiscal rules, we will have reached our Medium Term Objective and then all the talk about the restrictiveness on fiscal space will fade away. By getting to a balanced budget you then have the flexibility under the existing rules. Until we reach a balanced budget, the expenditure benchmark rule limits our spending levels.
“Our future lies in Europe – a future at the heart of the EU and future at the core of the Eurozone.”