Michael Noonan, Minister of Finance, Ireland
This was my third EU presidency as a minister. I first served in the role in 1984. Much has changed since then with our Union growing from 10 to now 28 member states–and dramatic changes in terms of how Europe today does its business.
What hasn't changed is that it is still a tremendous privilege to play one's part in steering the European agenda to the benefit of its citizens. For those who question the rotating six-month presidency of the EU, Ireland’s successful presidency shows that small countries can drive a positive agenda at the highest international level, not just in Brussels but at G20, OECD and IMF/World Bank meetings too. We did so by focusing on the high-level objectives that all countries could support and then delivered through the diligent and relentless work of Irish ministers and officials on the details of the agreements.
The Irish EU presidency came at a critical time in Europe recovery, and we saw our presidency as an opportunity to advance measures that supported stability, jobs and growth. We made this the central theme of our presidency, and I am pleased to report that we made real progress on supporting long-term economic growth and job creation–two objectives that impact on the everyday lives of EU citizens.
I presided over the Ecofin Council of Ministers, which is at the forefront of delivering on these objectives. Our aim is to move beyond the crisis that the EU, and in particular the euro area, has been battling in recent years.
Banking union and financial services
The priority issue that economy and finance ministers face has been the creation of a banking union. The need for such a union stretches back to before the crisis emerged. Since the introduction of the single market and the euro, there has been significant integration across Europe of financial markets, but with only partial integration of regulation and supervision.
The advancement of the banking union during our presidency was made easier by a broad agreement by the heads of state and government in 2012 that a functioning banking union requires four key pillars: banking supervision; prudential regulation of banks, covering bank capital, leverage, liquidity and risk management; bank resolution and recovery; and deposit protection.
Under these four pillars, the Irish presidency achieved agreement on the Single Supervisory Mechanism and the amendment to the European Banking Authority regulation. In addition, we achieved agreement on the Capital Requirements Directive (CRD IV), which is vital for ensuring the adoption of the Basel III requirements for strengthening the stability of financial institutions across the EU. As the final act of the Irish presidency we achieved political agreement on the Banking Resolution and Recovery Directive (BRRD) in June.
These essential agreements represent a significant body of the work required for a banking union. Clearly there is more to be done and we look forward to the discussions on the BRRD with the European Parliament before the end of 2013. I also look forward to the final element of banking union–deposit protection–coming to a satisfactory agreement in the near term.
The important lesson for policymakers inside and outside the EU is that progress on complex policy changes is possible when all parties agree on the objectives and can identify the economic benefits for citizens. The Irish presidency kept these at the heart of the discussions on the banking union.
Another important lesson is to introduce measures that will have real benefits in the short term. For example, it was clear from our discussions on the banking union that we must become more forward-thinking in the provision of finance to the different sectors of the economy. This is especially due to the limited public financial resources and the constraints on bank lending as a result of post-crisis deleveraging.
It is now essential that we explore how the financial system–markets, institutions and financial instruments–can be used to channel savings towards the financing of infrastructure projects and credit to enterprise. I was very pleased that the Irish Informal Ecofin led to the establishment of a high-level expert group on long-term finance and small and medium enterprises. The recent green paper on long-term financing of the European economy allows Europe to look at best practices for non-bank credit in other OECD economies.
Much has been done to bring stability to the euro in terms of economic coordination and reform. The EU has seen the introduction of fiscal rules with headline deficit and debt limits, a stronger focus on debt, a fiscal pact for 25 member states and greater flexibility in a crisis.
Our presidency achieved a successful outcome in terms of the economic governance of the EU and enabled the European semester process to be concluded at the European Council. This means greater monitoring of economic policies through discussions on member states’ budgetary and economic plans at specific times during the year. The presidency also achieved agreement on the “two pack” of economic governance measures. This allows for economic surveillance to be stepped up for euro member states with high deficits or debts, and those facing difficulties with regard to their financial stability.
In relation to both the annual EU budget and also the next seven-year framework– the Multiannual Financial Framework (MFF)–the Ecofin Council played an important role in ensuring progress. The EU budget is important for all member states, including Ireland, with supports for agriculture, science and technology as well as other centrally funded areas. The MFF sets the basis for EU budgets up to 2020 and is very important for economic development, growth and employment.
On taxation matters our presidency was active in promoting anti-fraud and anti-evasion measures in the Ecofin Council with conclusions adopted on tackling tax fraud and tax evasion. There was also political agreement on the VAT Quick Reaction Mechanism and VAT Reverse Charge Mechanism. These are important measures to prevent carousel fraud and other forms of indirect tax fraud, and to prevent the loss of necessary revenues for public services across Europe.
I would like to take this opportunity to welcome the publication of the OECD's Action Plan on Base Erosion and Profit Shifting and state that Ireland is actively participating in groups to bring forward its work. The OECD has done valuable work in identifying areas on which all members can agree to work together. EU member states and other countries know that more needs to be done. We have learned from the crisis that the reform process both in the EU and globally is a continual one, and that any state or institution cannot rest on past achievements. I am confident that the Lithuanian presidency will continue this necessary work of restoring the confidence of other countries and international markets in the EU.
In making these changes, all of us, as policymakers, must ensure that we do not lose the popular support of European citizens. The EU project is far from complete, but I believe that it will continue to strengthen and develop. Job creation, greater job security, increased standards of living, greater prosperity for all: this is what citizens across the EU expect and deserve. It is essential that policymakers effectively communicate to citizens how the many changes that are being introduced will bring about improvements in their lives, now and into the future.
© OECD Observer No 295 Q2 2013