Ceann Comhairle, Deputies,

I welcome the opportunity to report back to you on the December European Council, which took place shortly before Christmas.

This was a significant Council with a notably lengthy agenda. It covered:
- Common Security and Defence Policy (CSDP);
- Economic and Social policy;
- Economic and Monetary Union;
- Migration;
- Enlargement; and
- Energy.

We also addressed some of the main foreign policy issues at present including the situation in Syria and the Central African Republic as well as Eastern Partnership and the WTO.

Overall the conclusions of the European Council ran to fifty paragraphs and provide strategic orientations on current positions and thinking.

I think it's fair to say that our focus related to Banking Union, the completion of EMU and the common security and defence policy. Discussion on many of the other important issues was on this occasion relatively straightforward as there were no major decisions to be taken.

Economic and Monetary Union
Under the agenda item on economic and monetary union we considered banking union, partnerships for growth, jobs and competitiveness and the social dimension.

Banking Union
You will not be surprised that banking union remained a top priority for me.

Minister Noonan and his Ministerial colleagues in Europe had been working very intensively on the outstanding issues in recent weeks and as you will be aware succeeded in reaching an agreement on 18 December which was then endorsed by the European Council.

This included final agreement on the Deposit Guarantee Scheme Directive and the Bank Recovery and Resolution Directive, both of which significantly strengthen financial stability within the European banking system.

Agreement was also reached on a Council General Approach for the Single Resolution Mechanism, which will create a single body to apply the Bank Recovery and Resolution tool kit to Euro area banks and the banks of participating non-euro area Member States. On this basis the Greek Presidency has now been given a mandate to reach an overall agreement on the single resolution mechanism with the European Parliament. Negotiations have already commenced.

The Single Resolution Mechanism, once in place, will allow for the establishment of a pan-European resolution authority, the Single Resolution Board, with the power to restructure and wind-down failing banks.

The 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 and has a target level of approximately €55-€60 billion. The rules for the use of and contributions to the Fund are also set out in the regulation.
In order to allow for the gradual mutualisation of funds at national level into the Single Resolution Fund, Member States committed to negotiating an intergovernmental agreement by 1 March. Negotiations commenced at a meeting on 9 January. Finance Ministers on 18 December also adopted a statement on the design of a backstop to the single resolution fund. A sufficient common backstop both in the transition phase and the steady phase is essential for the Single Resolution Mechanism to be credible. This will be the subject of further negotiations.

Overall the general approach reached on the Single Resolution Mechanism was an important step in completing the Banking Union project. Although the deal is not perfect, an accommodation was reached and this is progress. The important thing for me is that the agreement reached will protect taxpayers in cases where banks need to be resolved. This is in welcome contrast to what happened in Ireland where taxpayers were required to shoulder the costs of failed banks. The fundamental objective remains to break the link between the sovereign and the banking sector as agreed by Heads of State and Governments of the Euro area in June 2012.

I also welcome the fact that the European Council fulfilled its objective of securing political agreement on the Single Resolution Mechanism by the end of the year. This was important for confidence, including from a markets perspective.
There's more work ahead, but the agreement shows that when we put our minds to it, European leaders can find compromises, deliver on promises, and on time! We will now work constructively with the European Parliament to ensure agreement is reached before Parliamentarians switch their focus to the European elections.

I would also point out at this stage that the agreement reached at the Eurogroup meeting of 20th June 2013 on the main features of the ESM's Direct Bank Recapitalisation instrument has not changed.

From an Irish perspective it was important that this agreement noted that "the potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement."

It is very clear that there is still a lot of negotiation to be done on this aspect of the facility but the agreement now in place keeps the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks open for us, should we wish to avail of it.

Partnerships for Growth, Jobs and Competitiveness
Proposals to introduce so called Partnerships for Growth, Jobs and Competitiveness were also discussed at the European Council. These were previously known as "contractual arrangements". It was my view that it would be premature to take any decisions on these proposals until they had been considered and teased out in much more detail. Most of my colleagues shared this view. As a result it was agreed that work should be taken forward and the proposals revisited next October. Competitiveness, of course, remains a very important issue and Ireland will support efforts to improve competitiveness in any way we can. I know that some Member States see the proposed partnerships in this light. We need to be sure, however, that we adopt the best approach.

Social dimension of the EMU
Building on the commitments made by the European Council in June, under the Irish Presidency, to strengthen the social dimension of the EMU, the European Council also re-affirmed the importance of employment and social developments within the European Semester.

In this context I welcome the new Scoreboard of employment and social indicators which will complement and build upon existing tools within the European Semester without entailing any automatic consequences or triggering binding sanctions. Ireland has consistently supported the development of such a scoreboard as an analytical tool to detect emerging divergences and negative developments that are relevant to EMU and that require urgent collective attention and action.

Common Security and Defence Policy (CSDP)
For the first time in five years the European Council also discussed the Common Security and Defence Policy known as CSDP. The first working session of our meeting was devoted to this topic. In reflecting on this, I think it is important to remember that during that period, the global context has changed significantly. The EU and its Member States are being called upon to assume greater responsibilities for the maintenance of international peace and security, especially in support of the United Nations which has the primary role in that regard. And this is against the background of tightening budgets.

Ireland believes that the Common Security and Defence Policy needs to be reinvigorated and improved to enhance the EU's capacity to act in support of the UN. While we look to protect the social and economic wellbeing of our own citizens, we cannot be immune to the threats faced by vulnerable men, women and children in fragile states, conflict zones and those suffering from natural and man-made disasters across the globe. The EU and its Member States can bring a Comprehensive Approach to the promotion of international peace and stability through a unique combination of civilian, diplomatic, economic, development, justice, security and defence instruments.

Currently, the EU is conducting seventeen missions across three continents. Thirteen of these are civilian missions and four are UN approved military missions. Ireland is contributing to three of the military operations and is proud that an Irish man holds the post of Mission Commander of one of them.

Discussions at the European Council addressed three areas: increasing the effectiveness of the CSDP; the development and provision of capabilities to support CSDP; and improving the ability of EU industry to provide those capabilities. The conclusions which we agreed represent a strong political commitment by Heads of State and Government to strengthen CSDP.

In order to achieve this objective, we endorsed a number of practical improvements to the CSDP aimed at speeding up the deployment of civilian CSDP Missions and our capacity for peace-keeping and crisis management in conflict situations, including in battle groups.

New security challenges also need to be addressed and, in that context, we agreed to focus on developing strategies in the area of cyber security and maritime security during 2014 - two key Irish priorities. We agreed that work should also continue on developing synergies between CSDP and Freedom, Security and Justice and in the area of border security and energy security.

For the EU to continue to play an effective and credible role as a security provider in its neighbourhood and in the wider world, it must ensure that it has the necessary capabilities to undertake these tasks. Troops on operations, including our own Defence Forces engaged on UN mandated operations, require effective force protection and defensive equipment. To that end, the European Council emphasised the central role of Member States and the European Defence Agency in developing capabilities in areas such as air-to-air refuelling, remotely piloted air systems, satellite communications and cyber defence.
The European Council also acknowledged the ongoing role of European industry in the provision of capabilities in support of CSDP and endorsed proposals to increase efficiencies in the delivery of capabilities by European industry. A roadmap aimed at implementing the commitments contained in the European Council conclusions will be produced this year.

The Council Conclusions also re-emphasise the Union's commitment to working in close collaboration with its global, transatlantic and regional partners such as the United Nations, NATO and the African Union. Cooperation with the UN is a point which I emphasised in the meeting and which I am glad to see reflected in the conclusions

Finally, on this point, let me emphasise that I believe that the work undertaken at the European Council is entirely consistent with Ireland's policy of military neutrality nor do they threaten the guarantees given under the Lisbon protocols. The Conclusions are set in the context of the development of the Common Security and Defence Policy, and indeed the Lisbon Treaty provisions are referenced in the conclusions.

Economic and Social Policy
Let me turn for a moment to the agenda item on economic and social policy.
Annual Growth Survey / Alert Mechanism Report
The December European Council concluded the preliminary phase of European Semester 2014 by welcoming the Annual Growth Survey and the Alert Mechanism Report presented by the Commission on 13 November. The main message here is that the biggest challenge now facing Europe's economy lies in sustaining a fragile recovery.

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. Ireland will be fully participating in the European Semester this year following the successful completion of our EU/IMF programme.

The December European Council set direction for further work. The Spring European Council will offer guidance to Member States on the preparation and submission in mid-April of their national reform plans. As I indicated previously to the House, I support strongly the continued emphasis on the five main priorities set by the Annual Growth Survey:
- Pursuing differentiated, growth-friendly fiscal consolidation;
- Restoring lending to the economy;
- Promoting growth and competitiveness for today and tomorrow;
- Tackling unemployment and the social consequences of the crisis; and
- Modernising public administration.

It is an emphasis that is reflected strongly in the clear direction we have set at national level, including through the interlocking Action Plan for Jobs and Pathways to Work strategies. And it is an emphasis we must ensure remains strong at European level, continuing to build from the successful Irish Presidency programme in the first half of last year.

Implementation of the Compact for Growth and Jobs
It is in this context that the December European Council also took stock of progress under the Compact for Growth and Jobs agreed in June 2012. This included reviewing preparations to have the Youth Employment Initiative (YEI) fully operational from the beginning of 2014.

Ireland, as one of the countries hardest hit by the crisis, will benefit from this new fund. The first phase of our own Youth Guarantee implementation plan, developed in conjunction with the OECD, was finalised by the Government in December. The broad outline has been submitted to the European Commission.

The European Council also took stock of progress in mobilising the enhanced lending capacity of the European Investment Bank on foot of the €10 billion increase in its capital base. This has already supported a 38% increase in its 2013 lending volumes, to €62 billion.

As I indicated to the House before the December meeting, there were almost €1.2 billion worth of EIB project signatures and loan approvals in Ireland in 2013 last year. This represents an increase of just over one-fifth on 2012 levels, which were in turn up more than four-fifths on the previous year.

However we continue to see room for stronger EIB support, including in the area of SME access finance, and this will remain a top priority for us over the period ahead.

Taxation
The European Council also had a short discussion on taxation, which is, of course, an important issue for Ireland. Leaders re-iterated their support for the OECD's project on Base Erosion and Profit Shifting, or BEPS as it has become known. Ireland supports the BEPS project as these issues cannot be tackled by countries acting on their own.

We also support the automatic exchange of information between tax authorities, and welcome the reference to early agreement on the Directive on Administrative Cooperation in the conclusions as important. Additionally the European Council noted the Lithuanian Presidency "end of term" report on tax issues and welcomed the Commission's initiative to establish an Expert Group on Taxation of the Digital Economy. We will be continuing to participate actively in the ongoing work in this area.

Other Issues
Deputies, as I noted at the outset, this European Council had a very heavy agenda. In addition to the discussions I have already outlined, we also looked at enlargement and some foreign policy issues. Minister of State Donohoe will touch on these later. Let me turn for a moment to the agenda items on migration and energy.

Migration Flows
Following on from previous discussions at the European Council and the Justice and Home Affairs Council in the wake of the major tragedy off the coast of Lampedusa - where more than 300 migrants lost their life after their vessel sank - the Council considered a Commission communication on the work of the Task Force for the Mediterranean.
The Task Force was established in October in response to the Lampedusa disaster and other tragedies that have arisen from the problem of irregular migration flows in the region.

The Council welcomed the Commission Communication outlining a series of operational actions aimed at addressing the problem. It is now a question of implementation, and in this regard there is general recognition of the need to prioritise EU co-operation with countries of origin and transit with the aim of averting hazardous sea voyages to the EU's Mediterranean borders.

Ireland participated in the Task Force, as did all Member States along with the External Action Service and the relevant EU agencies. We fully supported the Commission communication and the resulting Council Conclusions on this matter.

Energy
The European Council also took stock of progress made by the TTE (Energy) Council in relation to guidelines agreed at the May 2013 European Council on energy matters. These guidelines identified the importance of completing the Internal Energy Market by 2014 and of the external dimension of EU energy policy.

Tomorrow, 22 January, the Commission will adopt a package of measures including the Communication on 2030 Framework, a communication on energy prices, a legislative proposal on ETS structural measures, a communication on industrial policy, and the communication on unconventional oil and gas. We will be examining these measures closely in the run up to the March European Council which will focus, in particular, on the Climate and Energy 2030 Framework.

Conclusion
I hope that this has provided the House with a good sense of the discussions at the December European Council. The next Council will take place on 20-21 March. It will focus on energy and climate change as well as industrial policy and the European Semester. I will as usual brief the House in advance of the meeting.

ENDS

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