We need your help now
Support from readers like you keeps The Journal open.
You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.
If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.
Sign in. It’s quick, free and it’s up to you.
An account is an optional way to support the work we do. Find out more.
By continuing, you are indicating that you accept our Terms of Service and Privacy Policy.
THE TAOISEACH WILL be in Brussels today for an informal meeting of EU leaders in an attempt to find a way to promote jobs and growth and to try to keep the debt crisis from spiralling out of control.
Enda Kenny and co are also due to discuss managing Greece amid continuing electoral turmoil in the country, which is threatening to pull apart the eurozone.
It’s expected that German chancellor Angela Merkel will face pressure from all sides on the issue of promoting growth, while France’s new president Francois Hollande has insisted that he will not sign the Fiscal Compact until it includes measures to promote growth.
Borrowing costs are up for the most indebted governments. There is an increasing number of reports of worried savers and investors pulling funds out of banks that are seen as weak. Meanwhile, unemployment is soaring as recession grips nearly half the eurozone countries.
What’s on the table?
After several years of talking about fiscal austerity and strict deficit targets, the predictions of many economists have come true and austerity has dragged down already fragile economies.
As a way out of this problem, economists and politicians have called for measures that would help a country’s economy grow.
Economists recommend pro-growth measures including reducing red tape for small businesses, making it easier for workers to find jobs across the eurozone and breaking down barriers that countries have created to protect their own industries.
Some economists go a step further and say governments should actually increase spending while economies are so weak — and make reining in deficits a longer-term goal
However the question of how to produce growth for Europe is a sticky one. Germany, which led the push for austerity, insists that growth will be the product of tough reforms, like ones it undertook to liberalize its economy over a decade ago.
Others say such reforms will take a while to bear fruit and more needs to be done right now — such as extending the deadline for deficit targets and waving through wage increases.
The EU leaders meeting today are expected to tread a fine line between talking about ways to promote growth and and sticking to commitments to balancing budgets.
Where will this growth come from?
One area could be the better use of the resources already at the European Union’s disposal. The EU has a pot of so-called “structural funds”, many of which are going unused even though several countries are in desperate need of cash.
Countries are also expected to discuss increasing the size of the European Investment Bank so that it can, in turn, lend more money to struggling small businesses.
Diplomats have already agreed to issue EU “project bonds” or Eurobonds— debt issued jointly by the union — which can be used to fund major infrastructure projects.
Hollande campaigned strongly on this idea, and even Germany, which was initially opposed to any jointly held debt, has softened its position. However, only a pilot phase of the project has been approved.
Today’s discussions on this issue will be crucial as they hold the potential to lead to the issuing of so called Eurobonds, which could take significant pressure off troubled EU countries almost immediately.
“Innovative, or even controversial ideas”
EU President Herman Van Rompuy has encouraged participants at today’s meeting to discuss “innovative, or even controversial, ideas.” He has suggested that nothing should be taboo and that long-term solutions should be looked at. That seems to point to a conversation about eurobonds.
Van Rompuy is likely to take the ideas put forward at today’s meeting and come back with an actual growth plan at next month’s gathering of leaders.
But Germany is still staunchly opposed to such as measure. Yesterday, a senior German official stressed that despite the pressure from some other European countries, Merkel’s government has not eased its opposition.
“You can wake me up in the middle of the night, at 3 am, and then I will tell you what our position is — also at 5 a.m., it doesn’t matter. We think that eurobonds are not the right path for many reasons and in our opinion they cannot be part of a growth strategy,” said the official, who briefed reporters on condition of anonymity in line with government policy.
What was needed instead, the official insisted, was work to eliminate the underlying problems by trimming the nations’ high debt burden and restoring their competitiveness through structural reforms.
Will any of the solutions work?
The problem with many of the solutions on the table is that even if they are all implemented, they would likely take years to yield growth. And Europe needs faster answers.
To that end, many economists are pushing for a larger role for the European Central Bank — the only institution powerful enough to have an immediate impact on the crisis. If Europe’s central monetary authority was given the power to buy up country’s bonds, that government’s borrowing rates would be pushed down to more manageable levels.
Why it matters
Taken together, the European Union is the world’s largest economy. If it isn’t growing, that weighs on everyone else. A lack of growth is also hurting the continent’s efforts to rein in deficits and cut debts. When growth slows, so does tax revenue.
That makes it harder for a government to balance their books — which can mean they have to make even deeper cuts. But the cuts themselves eat into growth: when government jobs and state investment projects are slashed, people have less money in their pockets to spend
Breaking that cycle will be key to getting European economies growing again.
- Additional reporting by AP
To embed this post, copy the code below on your site
Well we know France will put tax harmonisation (read corporate tax rate harmonisation) on the agenda as part of the changes to the austerity treaty.
We’d be nuts to vote for this thing before it is in its final form.
They may *want* that but Ireland has consistently rejected it and we’ll do the same again.
Having said that it’s extremely unlikely that the text of the treaty will change.
France is much more likely to push for *separate* measures.
Considering our man in Brussels can’t even debate his own position on a referendum treaty, I don’t hold up much hope david……head rubs aside.
Thats why the treaty should be delayed, w don’t know the final content.
Yes we do know the final text. If the text were to be changed afterwards we’d have to run another referendum to ratify the new text.
Odd that the French President, the French Prime minister and the French financial minster have said they will not ratify the fiscal compact as it now stands. Me I’d expect it to be changed seeing as the Germans have delayed voting on it, the Italians have called for changes, the Spanish are ignoring the treaty targets and now Wilders has gone to court in an attempt to prevent the treaty being ratified by the Dutch parliament until after their elections. Most sensible people would say hang on lets wait and see what the final document says before voting on it.
David, are you contending that a treaty cannot be changed after ratification without a referendum here in Ireland?
@David. The change to our constitution allows bodies competent under the Treaty to pass any law they like and these laws “have force of law in the State”. Surely they can say that in order for Ireland to meet its terms under the Treaty it is necessary for Ireland to increase corporation tax. If you believe they cannot force us to increase it after we vote Yes then please explain to me how it is protected.
Any increase in corporation tax has to go through the Cabinet, Dáil, Seanad and the president like any tax change.
The treaty does not change this.
Europe can demand all they like but in the end it’s up to our political leaders to decide. If there’s anything that this government has fought hard on in Europe it is keeping our low corporate tax rate.
Is that why they haven’t faught for anything else david, too busy protecting the corporate tax rate that you seem to be contending they don’t need to fight to protect because it cannot be touched anyways?
Making lots of sense as usual david.
The Treaty does not change this but the amendment allows it to happen
No, the government has fought successfully to take corporation tax off the table. Enda told Sarkosy off over the issue and the French haven’t tried to touch it since. In the meantime we’ve fought and won a €10bn reduction in the cost of the bailout and we’ve deferred the €3.1bn promissory note payment that was due at the end of March.
Not to mention renegotiating with the troika to raise the minimum wage and cut USC for the lowest paid.
David, Sarkozy is no longer in power in France. Hollande and his prime minister have raised corporation tax during and since the election. So corporation tax is still on the table along with CCCTB which Ireland officials are discussing with their counter parts in Europe.
The €10 billion reduction that the government claims credit for only came about because of the crises that Greece found itself in. It wasn’t through the negotiation skills of Kenny or Noonan.
As for the change in the minimum wage and drop in the USC for the low paid yes you could count that as a sort of success but as the Troika have repeatedly said it’s up to Ireland to decide where it cuts or does not cut and their only concern is Ireland meets its numbers I don’t think it took hours of negations for that to happen.
Corporation tax is not protected. Read the amendment, not the Treaty
Ireland taken over without a shot fired
On the table another pat on the head for Kenny?
I think the news that Nama is to invest 2bn in Ireland’s economy is a great idea now imagine how great it would be if the European investment bank invested billions in the regions infrastructure in roads in transport where it was needed to make the continent super competitive. Country’s like Ireland could claim that as an island nation we are at a disadvantage to certain types of trade being sea locked. They could have a 20 year plan and then front load the investment into heavy construction projects to create lots of jobs. Because its jobs we need.
We could really do with a tunnel from Ireland to the UK say from Dublin or Wexford. With high speed trains connecting our city’s with UK and continental city’s.
It would be good for all. Then we need to federalise the currency like the US dollar so all debt and wealth is shared.
No that would be a great plan.
@David, Lets be clear, Hollande has said he wants the treaty change to include growth “not” along side it! So there will be a second referendum then as we always knew… False democracy yet again.
They will come back with a fudge, allowing all sides (for now) to claim victory. The stand-off between Hollande and Merkel on the Treaty won’t be resolved today, but the absence of a stance on this matter will be used by the yes camp to claim renegotiation is off the table (until another French Minister contradicts them again).
have your say