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The Minister for European Affairs Jennifer Carroll MacNeill has said Ireland is ruling nothing out as it prepares its response to the landmark Draghi Report which called for an additional €800 billion in investment each year.
Carroll MacNeill was speaking as she updated the Oireachtas Committee on European Union Affairs following her attendance at the General Affairs Council meeting in Brussels.
The Minister of State suggested that Ireland intends to take a balanced position on Draghi’s proposals, which if implemented could lead to large-scale common borrowing and a significant increase in the size of the EU Budget.
“We haven’t ruled anything out,” she said. “Of course we are net contributors now to Europe and we must guard taxpayers’ money very carefully, very importantly, but we have also had the experience of being net recipients.”
Mario Draghi’s report clearly states that the EU’s annual Budget – which amounted to almost €189 billion this year – is too small and fragmented to allow for the increase in investment needed to revitalise Europe’s economies.
Draghi has called for the EU to move towards “regular issuance of common safe assets to enable joint investment projects” – a step resembling the controversial issuing of common EU bonds to fund the post-Covid recovery package.
This is certain to be opposed by several of the EU’s more ‘frugal’ Member States. If implemented, it could lead to a significant increase in Ireland’s long-term financial contributions to Brussels.
Ireland’s contributions to the EU Budget more than doubled between 2013 and 2023, and the Department of Finance projects that the country will be contributing €4.5 billion per annum by 2027.
With Ireland’s annual EU receipts increasing much more slowly, the Irish government may be unwilling to back proposals to provide the EU with the means to make Draghi’s aspirations a reality.
During the Committee meeting, the Fine Gael TD for Dún Laoghaire acknowledged the role which EU initiatives such as cohesion funds and CAP had played in Ireland’s economic development, and she pointed to energy infrastructure as an example of where future EU funding could be directed.
She also updated the Committee about the government’s ongoing deliberations about how to respond to Draghi, particularly when it comes to sensitive issues such as proposals for common EU borrowing and the possible relaxation of State Aid requirements”
“We have a body of work to do within government to prepare our own submission, our own recommendations in October, and that work continues and there’s quite a lot of detailed work between different departments on that at the moment.
“But I think it’s absolutely fair to say that we share the view that Europe faces a competitiveness challenge, which I think necessitates some fresh thinking and new policies to stimulate growth, innovation and investment,” Minister Carroll MacNeill stated.
Authored by the former Italian Prime Minister and former President of the European Central Bank (ECB), ‘The future of European competitiveness’ report calls for actions aimed at closing the innovation gap with the US and China, boosting Europe’s efforts in the areas of decarbonisation and competitiveness and increasing the EU’s security by reducing its critical dependencies in key areas.
The report notes that the EU still accounts for 17% of global GDP, but warns that “growth in the EU has been slowing, driven by weakening productivity growth, calling into question Europe’s ability to meet its ambitions.”
It also criticises the lack of coordination of industrial policies between Member States, suggesting that this fragmentation is hampering scale, hindering innovation and preventing the creation of large capital pools.
While Mario Draghi has been quick to state that the report’s contents on State Aid should not be seen as a means of defending ‘national champions,’ there are concerns among smaller Member States that they would not be able to compete in an environment which allowed greater provision of State Aid to support businesses and entice investment.
One indication of the scale of government assistance which is already on offer was the German government’s decision to promise almost €10 billion in State Aid to Intel to help it establish two chip factories in eastern Germany – a development which has since been halted.
The inability of Ireland and other smaller EU members to match this level of support has meant that successive Irish governments have been resistant to proposals to relax the EU’s State Aid restrictions.
Finance Minister Jack Chambers recently told The Irish Times that a proposal to ease State Aid restrictions “essentially gives France and Germany a competitive advantage,” while conceding that if there is än inevitable shift within Europe, we need to make sure our enterprise and industrial policy evolves with that.”
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