I was accompanied at the European Council in Madrid by the Tánaiste and Minister for Foreign Affairs, Deputy Spring; the Minister for Finance, Deputy Quinn, and the Minister of State with responsibility for European Affairs, Deputy Gay Mitchell.
This was a very successful European Council which took a number of decisions of fundamental importance to the future of the European Union. This success was due in no small part to the extremely efficient and effective conduct of business of the Council by the President, Felipe Gonzalez. This efficiency has been a hallmark of what has been a very successful Spanish Presidency. This European Council also set out in key areas the parameters of the agenda which will face the Irish Presidency from 1 July next.
The full details of the decisions taken by the Council are set out in Part A of the Council Conclusions copies of which I have arranged to be placed in the Library of the House. I would summarise the key decisions as follows; first, a number of key decisions in relation to economic and monetary union were made. The reference scenario for the changeover to a single currency was approved — 1 January 1999 was confirmed unequivocally as the starting date for stage three. The name of the new single currency, the Euro, was decided upon. Second, further impetus was given to the fight against unemployment which was identified by the Conclusions of the Council as the priority task of the Community and its member states. There will be a major review of progress in this area at the Dublin European Council in December next. Third, the formal decision to launch the Intergovernmental Conference on 29 March 1996 was taken. The Intergovernmental Conference will be a major priority for the Irish Presidency and its task will be to establish the political and institutional conditions for adopting the European Union to present and future needs, particularly with a view to the next enlargement. Fourth, the Council met the leaders and Heads of State and Government of the countries of Central and Eastern Europe, including the Baltics as well as Cyprus and Malta. The Council mandated the Commission to do further work on the implications of enlargement and it agreed in the light of this work and after the ICG to take the necessary decisions for launching accession negotiations at the earliest opportunity. In the case of Cyprus and Malta there is of course, a guarantee to commence negotiations six months after the end of the Intergovernmental Conference. Finally, the Council underlined the importance of action in the Justice and Home Affairs area in ensuring the creation of an area of freedom and security for Europe's citizens. In the area of drugs the Council endorsed the report of the expert group established by the Cannes Council and mandated the Italian and Irish Presidencies to progress implementation of the report, with progress on the drugs issue being reviewed at the Dublin European Council.
The Council also dealt with a wide number of foreign policy issues which will be addressed by the Tánaiste and Minister for Foreign Affairs in his statement.
The Madrid Council has sent an unequivocal message that economic and monetary union will commence on 1 January 1999. All the Heads of State and Government of the Union are committed to this, including those whose countries have an opt-out clause under the Maastricht Treaty. By creating economic and monetary union and the single currency we will enable Europe to fully realise its economic potential and place itself firmly centre stage in the global economy. Perhaps, more importantly, economic and monetary union will cement the integration of the peoples of Europe thereby helping to create a real European identity transcending national boundaries.
There will be hurdles to overcome before European Monetary Union becomes a reality. A significant outcome of the Council from an Irish viewpoint, is the attention being paid to the question of the relationships after 1999, between those within the single currency zone and those outside it. The Madrid Council recognised that these relationships will have to be defined before 1 January 1999. The Council, therefore, mandated the Ecofin Council, together with the European Commission and the European Monetary Institute in their respective fields of competence, to study all the issues arising from the fact that some member states may not initially participate in the single currency and to report as soon as possible. Deputies will be aware that the Minister for Finance recently announced the commissioning of a study of the implications of economic and monetary union for the Irish economy so that we will be better placed to plan our policies in preparation for economic and monetary union and with a view to successful participation in it. The terms of reference of this study include the economic implications of various membership scenarios for relevent member states other than Ireland.
While I do not wish to prejudice the outcome of the various studies under way it does seem at this stage that strong consideration will have to be given to some form of arrangement to promote exchange rate stability between countries inside economic and monetary union and those outside, in order, as far as possible, to eliminate the risk of competitive devaluations and distortion of the single market. Of course the more countries that are in economic and monetary union the less this will be a problem. In this regard I am very heartened by the political determination being shown in member states to ensure that they will meet the criteria for participation in economic and monetary union. I am also very pleased from an Irish perspective to note the recent comments by the UK Chancellor of the Exchequer that, in the event of the UK's non-participation in economic and monetary union, the road of competitive devaluation is not one the UK will follow.
This comment simply reflects the fact that the Maastricht fiscal criteria set out a sensible path for budgetary policy to which every member state should aspire. As I stated in this House very recently, stable public finances as demanded by economic and monetary union deliver low interest rates, low inflation, higher investment and, ultimately, more jobs. In other words, they make social and economic sense even if economic and monetary union did not exist. Finally, on the subject of economic and monetary union I wish to reassert the total determination of the Government to ensure that Ireland will be among the group of countries qualifying for participation in economic and monetary union with effect from 1 January 1999.
The Council had a very constructive exchange of views on employment policy. This was facilitated by the fact that for the first time the Council had before it a joint report on employment strategy from Ecofin, the Social Affairs Council and the Commission. The European Council approved this report and directed the two councils and the Commission to continuously monitor the application of the employment strategy and to report on progress to next year's Dublin European Council.
The Council also recommended specific areas for action on employment policy by member states who were recommended to pay particular attention to young unemployed persons, the long-term unemployed and unemployed women. This is a policy focus which the Irish Government shares. Also of particular Irish interest was the emphasis laid on local development initiatives and small and medium-sized enterprises (SMEs) as agents of employment creation and for tackling unemployment. We have long advocated the potential of local development for employment creation. This commitment is underlined by the fact that the local development programme in Ireland is the responsibility of the Taoiseach's Department. The European Union has committed over £300 million in support of local development in Ireland in the period up to 1999. It is widely acknowledged that the focus in Ireland on areabased strategies to tackle unemployment and support enterprise is yielding results of European significance. It is for that reason that I have announced that a European Conference on Local Development will be held here during our Presidency.
In regard to SMEs the Council had before it a very instructive report from the Commission. This report underlines the importance and job-creating potential of SMEs. It indicates that SMEs now comprise 66 per cent of total employment and 65 per cent of business turnover in the European Union. Moreover, net job creation in SMEs more than compensated for job losses in large enterprises during the period 1988 to 1995. During this period enterprises with fewer than 100 employees were responsible for almost all the new job creation at a rate of 259,000 net jobs per year. Significantly the report concludes that, during periods of recession, small enterprises shed jobs more slowly and absorb economic shocks better than large companies.
The report also points to sharp differences in administrative and VAT compliance costs between large and small businesses. It quotes a German study, which states that the relative cost of administrative burdens per employee is more than 20 times higher in smaller enterprises than in larger ones. A separate UK study estimates that the smallest enterprises pay 2 per cent of their turnover in VAT compliance costs whereas for larger enterprises the cost is negligible.
The report on SMEs sets out a list of priority actions to be taken at European and member state level to facilitate growth in the SME sector. In its Conclusions the Council laid particular stress on the need to do the following for SMEs; simplify administrative formalities; ensure better access to information, training and research; remove obstacles affecting SMEs within the internal market and promote their inter-nationalisation; and improve the financial environment for them by means of better access to capital markets and encourage development of the European Investment Fund function with regards to SMEs.
The European Council urged the Commission to put these aims into practice as swiftly as possible in the framework of the next integrated programme for SMEs. In addition, the Government will be carrying out its own review as to which measures in the Commission report might be suitable for application in Ireland.
The Madrid Council took the formal decision to launch the Intergovernmental Conference in Turin on 29 March 1996. The Intergovernmental Conference will review the Treaties which are, in effect, the constitution of Europe. The Council also welcomed the report of the Reflection Group on which the Minister of State, Deputy Gay Mitchell, was Ireland's representative. Deputy Mitchell is to be congratulated for his painstaking and effective work as a member of the group, which met in all 14 times for a total of 22 days over a six months period. The Intergovernmental Conference will lay the foundations of the Europe of the future and the report of the Reflection Group will, in the words of the Council Conclusions, constitute a sound basis for the work of the Intergovernmental Conference.
The key task for the Intergovernmental Conference is the revision of the Treaties to equip the Union to deal with today's realities and tomorrow's requirements. The Council reaffirmed the guidelines it adopted for the Intergovernmental Conference in Cannes. These are worth restating in full: to analyse the principles, objectives and instruments of the Union, in the context of the new challenges facing Europe; to strengthen the common foreign and security policy so that it can cope with new international challenges; to provide a better response to modern demands as regards internal security, and in the fields of justice and home affairs more generally; to make the institution more efficient, democratic and open so that they are able to adjust to the demands of an enlarged Union; to strengthen public support for the process of European integration by meeting the need for a form of democracy which is closer to the citizens of Europe, who are concerned with employment and environment questions and to put the principle of subsidiary into practice more effectively.
As I have already stated on a number of occasions Ireland will be a constructive participant in the Intergovernmental Conference. The Irish people would expect no less given the commitment which they have displayed to the European ideal in successive referenda. We will, of course, fight to protect Irish interests where necessary. Members here are generally aware of the key Irish concerns and I do not propose to repeat them at this juncture. It is, however, our objective that the end result of the Intergovernmental Conference will be an ever closer, more integrated Europe which will complement, and not conflict with, national identities and which above all will retain those elements which have made membership of the Union a magnet for so many of the states of Europe today.
Ireland will of course chair the Intergovernmental Conference during a crucial stage in its proceedings. No one can say at present when exactly the Intergovernmental Conference will end. The most likely end-date is spring of 1997, but if it can be concluded earlier the Irish Presidency will not be found wanting. On a more practical level the European Council made a number of important procedural decisions in relation to the operation of the Intergovernmental Conference.
The conference will meet once a month at the level of Foreign Affairs Ministers. Preparations for these meetings will be the responsibility of a working party of representatives of Foreign Ministers and the Commission. The Council also decided that the European Parliament, the Central and Eastern European countries, Cyprus and Malta, the members of the European Economic Area and Switzerland will be briefed regularly on the proceedings of the Intergovernmental Conference. Special arrangements are to be put in place whereby the European Parliament can give its point of view on developments in the Intergovernmental Conference. Countries seeking to accede to the Union will be entitled to put their points of view at meetings with the Presidency. It will also be very important that the public in Europe be kept informed of developments at the Intergovernmental Conference as it proceeds, so that they will understand the outcome. This is a responsibility that will fall on a number of bodies, including all the political parties in the House.
The enlargement of the Union to the east and south is perhaps the most daunting of the many challenges facing the European Union over the next decade. Ireland fully supports the statement in the Conclusions of the Council that enlargement is both a political necessity and an historic opportunity for Europe.
I am particularly pleased that the Council expressly recognised that enlargement will ensure the stability and security of the Continent — stability and security are prerequisites for all economic activity. It will offer new prospects for economic growth and serve to strengthen the building of Europe in observance of the acquis communautaire, including the existing common European policies. Any enlargement which led to a substantial dilution of the common policies would not work.
The Council also recognised that enlargement, to be successful, requires sound preparation. To this end it called on the Commission to deepen its evaluation of the effects of enlargement on the common policies of the EU and to forward its opinions on the applications received as soon as possible after the Intergovernmental Conference concludes. The Council also requested the Commission to submit a communication after the conclusion of the Intergovernmental Conference on the future financial framework of the Union from 31 December 1999 having regard to the prospect of enlargement. Overall this is a wholly sensible approach which should allow for a fully informed and timely assessment of all the implications of enlargement before actual negotiations commence.
The question of the cost of enlargement, and how it will be paid for, is of course a key issue for the Union as a whole and for Ireland. This Council has however ensured that the preparation for negotiations will be soundly based.
I wish to refer to the issue of drugs and crime. If the public is to be convinced that European Union is viable in the long-term it must be convinced that their own personal security can be safe-guarded within a European context. Thus a successful fight against drugs and organised crime is essential. The drugs problem is one that can only be tackled at all levels of the Union, local, national and European. The approval of the report of the Group of Experts on Drugs and the stress it laid on translating the guidelines it contains into precise co-ordinated operational activities, are very welcome developments. The incoming Italian Presidency in collaboration with the Irish Presidency will prepare a programme of activities on foot of this report, and the Dublin Council will examine its implementation.
The scope and mandate of the expert's report considered at Madrid did not extend to the issue of legal changes in the EU Treaties themselves. The work of the Reflection Group suggests that some Treaty changes can be made that would have a significant impact on the fight against drugs. In particular the group's suggestion that a specific legal basis for action against drugs be incorporated into the Treaty must be seriously considered.
Various aspects of the drugs problem are discussed in many fora at present, both within and outside the Union. One of the challenges will be to integrate the range of existing programmes and activities so as to take concerted action against the drugs problem. It is only through a comprehensive vision that this problem can be tackled. The expert group itself, whose mandate covered all aspects of the Community's work, is a good example of the approach to follow.
We must never lose sight of the fact that our aim in all the endeavours in this area is to create visible results. These results must be communicated to Europe's citizens in clear and simple terms.
This was a watershed European Council. It signalled the irreversible nature of progress towards a single currency. It addressed the employment issue in a focused manner. It laid down the procedural ground rules for the Intergovernmental Conference. It reiterated and strengthened the commitment to enlargement while protecting the existing gains of the European Union. It focused on integrated activity against the drugs problem.
Above all the Council reflected the willingness of member states to give the process of European integration a new dynamic. I look forward to building on this commitment during Ireland's Presidency of the Council in the second half of 1996.