Address by the Tánaiste to the Diplomatic Academy, ViennaDFAT - 21/6/11
Excellencies, Ladies and Gentlemen,
I am delighted to be with you this evening and I wish to thank our host, the Diplomatic Academy of Vienna and its Director, Ambassador Hans Winkler for facilitating our meeting. It gives me great pleasure to visit this institution, with its proud history and impressive reputation in the field of postgraduate training in international relations.
I understand that the Academy has its origins in the mid-18th century when Empress Maria Theresa established a school here to train recruits for the diplomatic service of the Habsburg monarchy. The ties of history and the interaction between Ireland and Austria go back even further in time –indeed by many centuries.
Reminders of our long-standing mutual exchanges and inspiration include the celebrated Schottenstift monastery, founded for Irish monks in the 12th century, not too far from here. More recent pages in our shared history were written by members of the old Irish families –our Wild Geese- who served with distinction and valour at the highest levels in the armies and diplomatic service of the Habsburgs.
Ties of history are important but tonight I want to focus on modern Ireland, its challenges and our progress in overcoming them – with your help.
The economic and financial crisis has severely impacted the Member States of the EU as well as far beyond our borders. Almost all of us have been affected to one degree or another, while some countries have thus far bounced back faster and more completely.
Clearly, the situation in Ireland, as witnessed by media scrutiny across our continent, is part of a wider financial and economic crisis which is in essence European. A solution can only be found in that wider framework to which both Austria and Ireland belong.
At the end of last March, European leaders agreed a comprehensive package of measures which, taken together, are intended to respond in a comprehensive manner to that economic and financial crisis, through the strengthening of European economic governance, safeguarding the stability of our common currency – the Euro, and improving Europe’s competitiveness.
Later this week, EU Heads of State and Government will once again meet in the European Council and will address the economic challenges facing us. A treaty establishing a European Stability Mechanism is to be signed, the first European Semester is to be concluded and we will review the challenges that collectively confront us and to which we collectively respond. There is no shortage of determination or of ambition to get this right.
And, as this audience will be aware, Ireland has certainly not been immune to these economic and financial challenges. I will not pretend otherwise.
The new Irish Government came into office in early March of this year – just over three months ago. During that relatively brief period, we have taken resolute and decisive action to confront and get on top of daunting challenges which face us, among which an unprecedented banking sector meltdown. In that context, one of our first actions was to disseminate as widely as possible the results of extremely rigorous stress tests of our banking industry. Armed with that new information, the Government announced the overhaul and restructuring of the domestic banking system in Ireland, with the creation of two new pillar banks, within a banking sector which will be smaller and more focused on the needs of the Irish economy and society.
We have, since then, achieved approval of our European and international partners for the inclusion of a number of elements to which we are committed to implement, including a revision to the minimum wage and launching of a jobs initiative, and the announcement of a comprehensive spending review which will examine, in a forensic way, spending right across Government. This will be completed by the end of September and will inform our budgetary process for 2012.
Ireland’s experience over the last number of years has undoubtedly been severe, even ‘extreme’. However, after three successive years of contraction, our economy is projected to return to growth, albeit modest growth, this year. That growth is forecast to accelerate next year and to become self-sustaining. The public finances are stabilising and we will record a balance of payments surplus for 2011. Our latest quarterly figures show a modest reduction in unemployment and we are hopeful this downward trend will gain momentum as our jobs strategy kicks in.
Strenuous, and it must be acknowledged painful, efforts are being made to close the gap between our national revenues and expenditure. Corrective measures totalling €14.6 billion were implemented over the last three years. This is a huge adjustment by any standards, amounting to over 9% of GDP, and it was followed by an additional €6 billion in cutbacks in the budget for this year with further adjustments of almost €4billion envisaged for next year.
These are staggering figures by any measure, but the Irish Government is firmly committed to reaching our 3% deficit target by 2015. We have no illusions that further pain and sacrifice lie ahead still for all segments of our society; likewise, we know it will not be in vain. Our government has a strong mandate from the people of Ireland to see this through, to take necessary if unpopular decisions and to stick by them.
Under the terms of the EU/IMF assistance programme for Ireland, an ECB/Commission/IMF team completed in April the first quarterly review of progress in implementing the programme. The EU/IMF has endorsed the decisive actions taken by the Irish Government to date to take control of our banking sector and to address our public finances.
The Government is pleased that the initial review of our progress under the assistance programme has now been approved by the Executive Board of the IMF and by the Council of the European Union. Ireland is taking strong medicine, as I said, following through on hard decisions, implementing tough measures and crucially meeting our commitments under that programme.
I want to put on record, tonight, how much we appreciate the on-going assistance and solidarity which has been demonstrated by our European partners, including, of course, Austria. Within the Euro area, where seventeen Member States share our common currency, it is simply self-evident that it is in all our interests that we ensure stability and sustainability across the entire zone.
And that is exactly what Eurozone leaders agreed to at their summit meeting last March. In the case both of Greece and of Portugal this agreement has been given effect through lower interest rates, taking account of debt sustainability.
No one has doubted that Ireland is implementing its EU/IMF programme effectively and demonstrably nor have they any reason to do so. I won’t dwell on it now but I am hopeful that we can find agreement among all partners on full implementation of the provisions of the Eurozone summit agreement and that we will receive due recognition for our efforts.
Ireland’s continued ability to meet the conditions encompassed in our EU/IMF programme is the best way to ensure that we exit successfully from this programme, and return safely to the financial markets for funding in as timely a manner as possible.
And we all know how much the EU, and particularly the Eurozone, needs a good news story. The markets need to be reassured that the measures being put in place to support and defend our common currency are working and are effective. That is the case with Ireland. We are meeting the demanding terms set in our EU/IMF programme. For that to be sustainable however, the necessary conditions and supports need to be in place.
We look to all our EU and Eurozone partners, including Austria, for understanding and appreciation on this issue. We will continue, consistently and patiently, to make this point to our partners and it is encouraging that our view is shared by the IMF, the European Commission, the OECD as well as the vast majority of our EU partners themselves.
A link has been drawn by some between a decision on the interest rate applying to our EFSF loans and the willingness of the Irish Government to change its Corporate Tax regime.
On this point, let me to be crystal clear:
- the rate of Corporate Tax charged in Ireland will not be changed.
This is the firm position of the Irish Government and of the Irish Parliament, and it is echoed strongly in our public opinion. To change our corporate tax rate would be wrong, for us and for the EU as a whole. Corporation Tax is inextricably linked to our prospects for growth: the very growth that will allow us to pull ourselves out of the extremely difficult position we are in.
The economic costs of abandoning our 12.5% rate would be far greater than the possible benefits of short term modest additional tax revenue. I believe this is understood here in Austria: debate at European level needs to be broader than an over-simplistic emphasis on headline rates of corporation tax. It should instead focus on effective tax rates.
Measuring effective tax rates accurately is extremely difficult, but the World Bank, in conjunction with PricewaterhouseCoopers (PWC) found that while in the EU overall, the average statutory rate is 22.5%; the average effective tax rate is 13.1%. The Report also found that thirteen EU countries have effective tax rates lower than Ireland, and that some Member States have very large differences between their nominal and effective rates.
As part of the Euro Plus Pact, Ireland, with partners, has agreed to pragmatic coordination of tax policies, and to commit to engage in structured discussions on tax policy issues, to ensure the exchange of best practice and the avoidance of harmful tax practices. We will live up to those commitments.
This is about Ireland and EU playing their respective parts in the Eurozone recovery. We know the EU will do its part and we will do ours.
As I mentioned earlier, growth in the Irish economy is beginning to return. This is being driven primarily by exports and by the international sector in Ireland. It is in Ireland’s and the EU’s interests that these prospects for growth are not “choked off” by any changes to, or uncertainty about, our corporation tax system. This is particularly important to a small open economy on the periphery of Europe.
The improvements in our competitiveness, associated with falling prices, rents and wages, coupled with global recovery, is having a positive impact on exports. Our exports rose 7.8% in 2010 and have continued to expand at a rapid pace at the start of 2011.The export performance is broad-based – pharmaceuticals, software, financial services, business services, and food sectors are all performing well.
There is an economic message from Ireland, one which is clear and direct, and which asserts our response to the economic crisis. Put simply:
- we are meeting our targets;
- we have drawn a line under our banking problems;
- the fundamentals of the Irish economy are strong;
- we will record a balance of payments surplus this year;
- we are returning to growth;
- Ireland recorded the second highest trade surplus in the European Union after Germany last year;
- Ireland is in the top 20 nations for quality of scientific research;
- our corporation tax rate of 12.5% will not change!
In sum, we are on the road to recovery and renewal.
Since I am in this elegant setting of the Diplomatic Academy, it would be remiss of me not to touch upon some of the wider aspects of Irish Foreign Policy in the context of our efforts to restore our international reputation.
Notwithstanding the unavoidable budgetary pressures, we are determined to ensure that Ireland maintains its high profile in multilateral forums, to help shape the world around us.
At the UN, for example, we will continue our proud tradition of contribution to UN Peacekeeping Missions, and will continue to harness soft power in order to promote more effective multilateralism, to press for progress on disarmament, to champion the rule of law, and to promote and protect human rights, to mention just a few priorities.
Ireland and Austria joined the United Nations on the same day: 14 December 1955. From the earliest days of our UN membership, we have both contributed actively on the world stage. Although Ireland had already participated in UN observer missions to the Middle East, it is our 1960 deployment to the Congo which is most widely remembered. This was, of course, also Austria’s first international peacekeeping deployment.
Like Austria, which served with such distinction on the Security Council in 2009-2010, Ireland feels that it is important that smaller States also have an opportunity to serve at frequent intervals on that world body and to bring their own particular perspectives to bear. Ireland intends to run for a Security Council seat in 2020.
As a small State, we are also acutely aware of the benefits and opportunities presented by a multilateral approach to tackling human rights issues around the world. With this in mind, we have decided to seek membership of the UN Human Rights Council for the first time for the term 2012-2015, to coincide with our next Presidency of the EU. We will be competing for one of three available seats at elections to the Council next year, and this promises to be a challenging contest.
However, we believe that this election is winnable, and will run a strong, focused campaign, emphasising our commitment to seeking common ground and securing consensus. If successful, we look forward to working closely with Austria, which was elected to the Human Rights Council for the first time last month, and will remain a member for the next three years. I would like to take this opportunity to congratulate Austria on its successful election to the Council, and I am sure it will make a valuable contribution to the Council’s work.
One cannot talk about Ireland’s place in the world, and the values which we promote, without referring to our traditional policy of military neutrality – a policy which I know resonates strongly here in Vienna. Citizens of Ireland and Austria have a powerful attachment to the concept of neutrality that goes far beyond its strict legal definition of impartiality towards belligerents during a state of war. But this has not caused either of our countries to shy away from international engagement. On the contrary, neutrality has enabled us both to engage more effectively in our efforts to promote peace and development through the UN, the European Union and our own bilateral actions.
Today, members of the Irish Defence Forces and the Austrian Armed Forces serve in many of the same theatres, including Kosovo, Afghanistan, Western Sahara and the Middle East. At the end of next week, we will both stand down from six months on EU Battlegroup standby.
Like Austria, Ireland does not believe that there can be purely military solutions to conflict. While the role of the military is fundamental to peacekeeping, it is nowadays seen as only one part of what must be a much more comprehensive peace-building package. The challenges facing a post-conflict society need to be addressed in a comprehensive and integrated way, drawing on all relevant instruments – from diplomacy and mediation through military and civilian crisis management to stabilisation, development and trade. Security and stability are essential for development and development is essential for security and stability. For this reason, we continue to lend strong support to the work of the UN Peace Building Commission.
Aligned with peace-building efforts, we seek to promote human security through our membership of the Human Security Network, an informal group of countries from all regions of the world, who cooperate on a broad spectrum of common global challenges including conflict and post-conflict issues, transitional justice and peace-building. Ireland, Austria and the other members of the Network recognise that human security is not limited to the absence of conflict but must also contribute to the creation of social, cultural economic and environmental conditions to prevent conflict, while ensuring the survival, well-being, livelihood and dignity of all human beings.
Small States can and do make a big difference, particularly when they work together in pursuit of common objectives and in defence of shared principles. Achieving the elimination of nuclear weapons is such a priority.
It is no exaggeration to say that Ireland has had no more likeminded partner in recent years in the area of disarmament and non-proliferation than Austria, and I am proud of what we have accomplished together. At the 2010 NPT Review Conference, Austria chaired the negotiations on nuclear disarmament and succeeded in brokering real progress after a decade of frustration and disappointment; Ireland was able to make a contribution on the thorny issue of a nuclear-weapon free zone in the Middle East. We work closely together in the IAEA and the Nuclear Suppliers Group to strengthen non-proliferation. The landmark Convention on Cluster Munitions, the most important instrument of international humanitarian law in over a decade, was adopted in 2008 through tireless efforts by a few small States, including Austria and Ireland.
I congratulate and commend the Austrian Government, particularly Minister Spindelegger, for its staunch commitment to disarmament and non-proliferation, manifested most recently in February 2011 by the establishment of the Vienna Centre for Disarmament and Non-Proliferation. There is no doubt that this platform for independent expertise in the field of nuclear security will make a major contribution to global efforts in this field.
Over the coming months, another Vienna-based institution – much longer established - will become a central focus of Irish diplomacy. Ireland will assume chairmanship of the Organisation for Security and Cooperation in Europe in January 2012. This is the first time that Ireland will chair the organisation, providing us with a welcome opportunity to assume a leadership role and to develop a higher profile, particularly in Eastern Europe and Central Asia, where the OSCE is most active.
The Chairmanship will also provide us with a significant opportunity to contribute to international conflict resolution, drawing in the process on our own values and historical experiences, particularly in Northern Ireland. Ireland will use its Chairmanship to oversee the organisation’s conflict resolution work, with particular reference to the so-called “protracted conflicts”, and will also promote a number of thematic priorities. I look forward to the opportunity I will have tomorrow morning, when I address the OSCE’s Permanent Council, to report on our preparations for the Chairmanship and to outline the key priorities we will be pursuing.
Before I finish, I should also briefly mention that Ireland will assume the Presidency of the Council of the European Union during the first half of 2013. This Presidency, Ireland’s seventh, will coincide with the fortieth anniversary of Ireland’s accession to the EU. Both the Union and the international environment in which it operates have changed considerably in the meantime.
The community of 9 Members in 1973 has tripled to 27 Member States today and I hope that we can shortly welcome our 28th member! I know Austria, as Ireland, has been a firm friend to Croatia and an ardent supporter of their candidacy.
The success of previous Irish Presidencies during the first decades of our EU membership contributed to defining Ireland’s positive image within the EU and beyond. Ireland was seen as a professional, impartial, and constructive Presidency-holder. In many respects we demonstrated what smaller Member States could achieve on the European and global stages as Presidency in spite of their size. Holding the EU Presidency and managing the Union’s agenda also delivered benefits to Ireland. It proved that an effectively managed and well-run Presidency can make a real difference to the perception of the country as a committed and effective EU member, at home and internationally.
The challenges and difficulties that Ireland has faced in recent years now mean that in many respects, Ireland must approach the Presidency in 2013 in a similar manner as our early Presidencies; to recreate our strengths, to rededicate our commitment to excellence and to demonstrate once more that smaller Member States can contribute constructively to the continually evolving progress of our European Union.
We say that “what doesn’t kill you makes you stronger”. Ireland has begun to emerge from an unparalleled trauma in our modern history as a State. Our resolve to create a brighter future for our nation is more powerful than ever before.