 Good morning. I'm a little bit daunted by the introduction that's been given So it's only downhill from here So first I just want to thank the Institute for the opportunity to come along and dress the conference today About one year ago. I spoke at the Institute's Economic group on this topic and on that occasion I presented a long series of slides with lots of acronyms and jargon and I believe it went down. Well, but I want to make you very Comforted this morning. I'm not going to go through that again I'm going to leave that for others and instead I see my role here this morning more as kind of the the warm-up act to tee up some of the issues On the governance piece to give you a couple of observations comments from where I see things and and hopefully Issues that will be then echoed or picked up during the course of the morning and once I believe I've that done I can sit down and hand over to those that will do the real heavy lifting of going into the means of the complex issues Or at least that's how I'm going to see I'm going to take the next 15 or so minutes So in preparing for today Rather than having the slideshow I sort of felt that I'd structure my comments around there a couple of issues To begin with I thought I would just touch on the issue of the context the background I think to where we come from in terms of the European economic governance Then I'd like to sort of just give you a sense of you know Maybe how it's working or where we're at Then maybe to touch on some relevant challenges and I know there are loads I've only just highlighted a couple so it's not seen as a complete or anyway sort of a comprehensive list and then I'd like to say just a few words about the Your dimension of the economic governance from both the European and the Irish context So then in terms of background I Suppose what we can all say is that the the last six years have demonstrated To all of us that the economic governance framework within the EU and the Eurozone was not sufficiently robust And it certainly didn't give us adequate warning for the member countries or the institutions I think we can say that the rules of the stability and growth pact were not enough Or we weren't at least focusing on the right indicators with sufficient waiting In terms of the Lisbon process We certainly it wasn't sufficiently grounded to alert the union or the member states to take actions to address the very significant Loss and competitiveness that occurred in many member states I think the SGP was not designed to take account of macroeconomic imbalances That we all know were growing up throughout the union and top of these deficiencies I think the SGP was not always adhered to and we also know that it was diluted Certainly in the middle part of the last decade when certain countries ran into difficulties. I Also believe that at the beginning of the crisis Perhaps maybe too much time was spent seeing the problem as an issue for the periphery or certain countries rather than recognizing as a crisis facing us all and Furthermore, I believe that we failed to see the Interconnectiveness of events throughout the union the so-called negative feedback loops weren't always recognized Or if they were not sufficient energy in action was taken to address them We just didn't see The implications of the actions of one member state on the ripple effect It would have on other member states and this has clearly been magnified in the in the monetary union So the experience of recent years has reminded us Forthfully that we operate in the world of macroeconomic spillovers and Jeway was not given to this crucial fact while we were designing the original version of the monetary union So for the past number of years then in the European policy makers We've been trying to put out the fires of the crisis and at the same time rebuild a better governance regime Recognizing that we're not starting from a blank canvas So the EU institutions and the member states have been in the process of retrofitting the system And I think like all refurbs. It's not always ideal But I think we've done a lot, but we're not complete and I think you know sometimes within Europe in the Eurozone We don't get all credit from our critics for what we have done That said when you look at what we have done I'll be frank with you and say that I don't care for some of the labels that we use you don't make it easy The EU semester the two-pack surveillance for your area member states the macroeconomic imbalances the scoreboard the medium term budgetary Objectives the six-pack the CSRs along with the fiscal compact treaty They're just a name check a few and it's actually quite difficult to actually say them out loud without stumbling up or Mixing them up, but when you stand back from all of this detail, and I've only name checked Some of them. I believe that we have a more robust framework for the EU governance toolkit I'm not gonna say to you that it that's all perfect and job done. I think far from it I think it's still work in progress and no doubt the EU your area will at some point in the future Be tested again, and then we'll really know whether We've got it right But Taking that context into account. I suppose question then is is the governance regime working and will it be sufficient next time? So like any Irish person that's asked a question. I'm now not going to answer it Instead a point to the fact that it's probably a little bit like the French Revolution It's probably way too early to say But I guess a number of the speakers this morning in various aspects from looking down through the program and the various papers I think they're going to be posing questions and maybe saying yes or maybe saying those deficiencies I think that will be a good debate For my part I'd just like to remind you that we're developing the governance rules at a time when many countries both within the EU and Specifically your area member states are still in excessive deficit. I mean for instance in 2010 all but three member states Stonia Sweden and Luxembourg were in excessive deficit so Deficits greater than the 3% we now have 16 member countries in EDP and we're about to open proceedings in Croatia So we're a long way from the steady state or the calm waters So it seems to me that we're still testing the rules when most of us are either in bad times and some are in dire times So how the rules are working good times and how they'll help us keep us out of trouble in the future Will be a much more important test, but it's I think some way off However at this early stage what I can say is that I believe that we are seeing member states already beginning to change behavior Many are making a virtue of the difficult and hard tasks of repairing their deficits and debt positions I mean last week the French finance minister Pierre muscovici writing in the Financial Times said and I quote One can be French and take fiscal consolidation seriously There is no contradiction between being a social Democrat and being fully committed to restoring competitiveness I think we can take a lot of other countless examples of our policy makers Makers are bringing the change government regime governance regime into the wider agenda or at least They're certainly paying some service to whether it's lip service or not. I think the proof will be in the pudding In terms of challenges I Believe there's a significant number Ahead of us facing us in relation to when we discuss to you the governance regime I'm just going to name check a few and just talk about them I as I say don't see them as being a comprehensive list Because I fear we might be here for some time if I did The democratic accountability. I think is a challenge and by this I mean, you know, have we done enough to? Strong understanding within society of what these rules are and what are needed I think an event like this is certainly very helpful in terms of the Irish context in that But certainly sometimes sitting at meetings in Brussels I wonder have we socialized the rules amongst us all sitting at the table and we're the experts So I think they're the big challenge in terms of showing to our people that having rules and monitoring the key Indicators whether they'd be wage developments various macro imbalances high debt levels Etc that monitoring these is a good thing having policy makers take action to address imbalances for the good of the all of all I think is important and I suppose when I talk about democratic accountability buried in the back of my mind or various documents, which I'm sure Y'all have read and are familiar but ones like the Commission's blueprint towards a deeper and Genuine emu the European Parliament's report with a similar title the van Rompuy four presidents report all of these dating from 2012 which kind of set out interesting roadmaps and posed challenges And I think there's certainly anyone that wants to dig a bit deeper into this certainly worth their reread Another challenge. I think that we see is is the whole question of the austerity versus the growth debate And this view I think is one or the other is often put forward in terms of that It's if you're strict budgetary rules, then you won't have growth. I think addressing this issue is a really big challenge I believe for some member states There is some fiscal space to provide some support at the moment within the Union Perhaps further operation of the imbalanced procedures that we now have will prod action in these quarters However for certain for most member states. I think it isn't Credible to have a long-term growth policy that is based on high debt and deficits or just making them worse So absence of fiscal responsibility It's going to be hard to see where countries will really enhance their growth prospects over the medium to longer term I think this is the difficult message, but I think it's a sensible message Another challenge then is where will the growth come from? I think during the ongoing period of fiscal and financial repair in Europe Answering this question is a really fundamental challenge, but we better have some answers or else we risk undermining the whole new governance regime Here I think the answer must lie in structural reforms Targeting focus policy they aimed at tackling issues of low growth and the very high unemployment Particularly youth and long-term unemployment that we see in member countries So I think that the job will work there and I think issues like the CSR is in looking at country specific recommendations will be important Then another challenge that just signpost here this morning as I would see is what I'd call the variable geometry That's going on within the European Union By this I mean that during the crisis we've seen various pieces of evidence of a multi-speed job We've seen Europe operating as some number less than the 27 or now the 28 The fiscal compact is a clear example of this when we couldn't get 27 at the time and I think we ended up at 25 Then we have the euro area versus the EU the so-called ins outs 18 versus 28 Then there's often the talk of the north-south divide that we see in Europe and also in the context of this We talk about program countries versus non-program countries and of course then there's the issue of the Treaty institutions so-called community method as opposed to the intergovernmental method something. I know Catherine Day Secretary-General of the Commission spoke about at this Institute last week But whatever Europe is and by this I mean that the 28 it is varied and complex them while this key strength It also presents a major challenge that is highly relevant to the success of this governance project So parallel with these challenges. I believe there are many within the Commission And I think we got a little hint of this from Cats from last week that are becoming increasingly cognizant of the fact that different circumstances apply to different member states For example the MIP process the nature of the imbalances vary across member states For this process to be effective We will have to increase the focus at EU level on peer reviews so that member states can learn best practice from each other and take Actions as needs be This will take time. I think frankly to date most member states generally focus Only on their own issues and surprisingly don't often take the wider view when you see it at the table in Brussels Now I'm not naive I don't expect small member countries to take on larger ones But this I think is where we see the role of the institutions and common principles coming into being otherwise I think Again, the governance regime will fall short I think turning then to maybe the final part of what I wanted to just say to you this morning was I think if we look at The implications of the government's regime for the EU your area and in particular Ireland I Think it is clear Implications for the EU 28 is that there will be greater macroeconomic surveillance, and I think that's no bad thing The EU semester is now in its fourth year I know that you'll all be familiar with the various timelines involved and if not I'm confident that some of my fellow speakers will remind us of some of that detail during the course of the morning But I see the semester evolving over time and in this context I hope we will become more sophisticated in terms of focusing on material and important issues within the union and not too focused on a One-size-fits-all type of policy prescription. I think what I have in mind there is is that a country X of six countries specific recommendations every other country has as well It kind of becomes like a bit of a Christmas tree that we hang the baubles out of rather than focusing on a lot of the Important issues so I so I believe that we'll see a stronger commission focusing on the governance package that it has its disposal I think one immediate implication of that is is that I see that we will see over time maybe a Bit more of the teeth of the Commission and and this is something that we'll We'll just have to watch because we do know in the original SGP There was eventually when you got down through the articles fines So this time around I think things are set up more for sanctions and a bit more coercion Now apart from the envisaged stronger role that the Commission has I think there's a greater role Involvement for the European Parliament And where that will take us is I think is is it difficult to predict And I certainly think that the makeup of the new Parliament later this year will have an important development in this regard For the your area the crisis has provided evidence of the negative impact of billovers for the participating countries We are experiencing a greater level of oversight and we've now already moved to a common budgetary timeline as you know All within the your area to submit their draft budgets by 15th of October and then following an opportunity But the Commission to provide policy directions all countries are required to have their budgets enacted by the end of December in the your area We've also Additional requirements now for the role of independent fiscal councils and an independently verified economic forecasts So of immediate impact for Ireland was to move away from the December budget However, now that we've exited the bailout program without a pre-arranged backstop the so-called clean exit We are now in post-program surveillance post-program monitoring space And this will continue until we see 75% of the funds borrowed from all EU sources repaid So therefore there will be a level of oversight Involved from post-program surveillance for some time. I think Our expectations would be that for all concerned that this will work hand-in-hand With the other existing requirements and shouldn't be a duplication or over complexity of the process For Ireland we have to deliver a deficit target of below 3% by 2015 government is committed to do so in the context of Delivered a budget for 2014 that sought to overachieve on its existing specific EDP targets for 2014 So I think we're nearing the end of the hard years and returning our public finances to the safe harbour of coming out of excessive deficit However, once out of the correct of arm of the pact, we will then be moving into the preventative arm of the pact Here we will see rules governing our achievement towards them the meeting term budgetary objective or MTO and the Applications of the debt rule that 120th rule kick in but I think in relation to certainly they that issue Certainly, I think growths should assist us in terms of the ratio significantly. So it's it's not austerity forever So by way of some concluding comments, I think it's fair to say that our overall fiscal stance within the Union Will in future operate under stricter national and European rule rules than did in the past However, this should be seen as a good thing sensible approach and not as some would suggest austerity forever In say it is sensible in terms of ensuring that future growth will not be retarded by inappropriate fiscal policies And that the growth in our economic in our economy generates a level of resources Which should ensure that we build a more sustainable and sensible policy platform for the future Our recent performance in the international debt marks markets is already proof of the merits of hand having sensible fiscal rules applied over a longer term focus I Would also argue that the EU governance regime has some additional advantages for a small open economy in that it bringing more stability and sustainability to the economic and budgetary policies across to your area and Minimizing negative spillover effects So those it is important to look at these developments not just from an insular or national perspective About how this affects us within our country But also worthwhile looking at these developments from the perspective of how they help protect us from the potentially negative developments elsewhere and the opportunities they provide us by helping to put in place a more sustainable and stable Europe That should be to our advantage over the medium and longer term So in my attempt at answering that question I posed earlier I think well, it's too early to measure the success or otherwise of the new European government's regime Over the medium term. I think two major tests will be Has the introduction and operation of such a robust regime faster growth by focusing on the right policies and Secondly has the framework become socialized within all of the member states. I Think time will tell Thanks for your attention