U.S.-EU Cooperation

Economic Reform in Europe – Realising Europe’s Growth Potential: Minister for Finance, Mr Charlie McCreevy, T.D. :Enterprise Conference, London, January 24, 2004

Introduction

Let me begin by saying that I am delighted to be in a position to participate in this important conference in London - hosted by my colleague the Chancellor.

At present I am in Brussels honouring a long standing commitment to meet with the European Parliament.

However, I think it is particularly fitting - given the topics under discussion at today's conference - that it is by means of modern technology that I am able to be - quite literally - in two places at once.

A gratifying boost to my own productivity for today!

Irish Presidency Priorities…

As you know, Ireland currently holds the presidency of the European Council of Ministers.

I am very conscious that there are a number of formidable challenges which face us over the coming months which are central to the future success of the European Union.

We must work to deliver a seamless transition from 15 to 25 members of the EU on 1 May, 2004.

We have responsibility for the delicate task of steering the Intergovernmental Conference towards agreement on the new Constitution which will enable our enlarged Union do business effectively.

In tandem, we must redouble our commitment to structural reforms which will underpin the recovery and strengthen the vigour and resilience of our economies. In this way we can establish a virtuous cycle of investment, growth and employment creation.

Lisbon Strategy…

Sustainable growth and increased employment are the twin priorities of the Irish Presidency for the forthcoming Spring European Council.

Economic Reform in Europe will thus be a priority issue for us in the Council of Ministers over the coming months and it is on this aspect of our Presidency Programme that I will focus my attention today.

In the context of today's discussion, I want to touch on a number of themes. Two of these are employment and competition. Finally, I would like to say a few words about the EU/US relationship which I know is another theme being discussed at today's conference.

Getting Europe Working…

Unquestionably the biggest challenge we face is to boost employment and get Europe working.

Since 2001, unemployment has risen in the EU and, while some Member States are affected more than others, the EU unemployment rate is likely to have reached an average of just over 8% for the year 2003.

Putting that statistic into human terms - there are now some 14 million people unemployed in the EU-15 as a whole.

From a social as much as from an economic perspective, this situation is not desirable.

In pursuit of the goal of full employment, the European Council has set ambitious employment targets for the working age population under the Lisbon Strategy.

But speaking frankly, the cold hard reality is that, as things stand, it is quite likely that these targets will not be met.

The European Commission has recently stated that swift implementation of comprehensive labour market reforms is urgently needed and this is something with which I wholeheartedly agree.

In the lead up to the Spring European Council, the Irish Presidency intends prioritizing reform of Europe's labour markets. But the success or failure of European labour market reform in large part depends on the commitment of individual Member States and actions taken at national level.

It is a timely and welcome coincidence that the recent Employment Taskforce chaired by the former Dutch Prime Minister Wim Kok has recommended policy reforms across a range of areas for consideration by the EU. Today I will focus on just two groups - older workers and the low paid.

Raising the employment rate of older workers is crucial as part of the general effort to raise employment rates but also as part of the effort to deal with the challenges associated with the ageing population. Member States, who haven't already done so, need to put in place strategies providing incentives for workers to retire later, for employers to hire and keep older workers and promoting access to training.

Similarly, for a number of categories of workers, but in particular lower paid workers, net financial gains from employment can be too low to make employment a rational choice.
Where taxes and benefits interact to create unemployment traps, Member States must act to mitigate these effects through additional policy measures.

In Ireland, I have reduced the standard and top rate of tax by 6 percentage points each since 1997 and have put in place measures which have resulted in a situation where 35% of all income earners are now outside the tax net. These policies have significantly increased the incentive to work with over 300,000 extra people now employed compared to 1997.

While I appreciate that different member states will wish to pursue different fiscal policy strategies - and that is their right - the OECD have recently highlighted the structure of the tax system as being crucially important in terms of its potential impact on employment and economic growth.

I have also announced a range of pension reforms in my most recent Budget. The minimum pension age for all new entrants to the civil service, as well as new teachers and health sector workers will be increased to 65 years. Also the present compulsory retirement age of 65 for such staff will be removed enabling people to remain in work longer should they so wish.

Increasing Competition…

A regulatory environment that is conducive to investment is essential to make the EU economy more competitive and dynamic. Creating a well-functioning Internal Market with an effective competition policy is essential.

We fully support the Commission's Action Plan for Better Regulation. The Commission and Member States have already taken important measures in relation to the Action Plan over the past year. However, there are still a number of issues to be resolved if we are to ensure an efficient and full implementation of the Action Plan.

As a further measure to boost regulatory reform in Europe, the Irish, Dutch, British and Luxembourg Presidencies have agreed a joint initiative which is being launched today and which will be developed over the coming months to prioritise regulatory reform in a concerted effort to seek more flexible European product, capital and labour markets.

I think it is important to remember that since the launch of the Lisbon Strategy in 2000 a lot has been achieved. More than 25 legislative measures have been adopted to extend reforms across a range of policy areas, but a number of proposals (including directives on professional qualifications and intellectual property rights) remain pending.

Over the coming months, the Irish Presidency will seek to make progress in relation to a range of these important reforms.

The services sector, where progress is lagging, requires particular attention and we intend to work to significantly advance the proposal for a Directive on Services.

EU/US Relationship…

Before I conclude I would like to say a few words about EU/US relations.

The US and Europe are major sources of economic growth and income for each other. The transatlantic relationship provides employment to over 12 million people on both sides of the Atlantic.

As a regular traveller to the US, and coming from a country which is a prime location for US investment in Europe, I can testify to the value of the EU/US relationship.

Ireland, particularly over the last decade, has become a major conduit of US technological innovation into Europe.

These companies account for more than one third of Irish exports, almost half of total employment in foreign firms, and approximately 30% of total manufacturing employment.

Indeed Ireland and the US combined now account for 65% of world trade in software.

Over the course of the Irish Presidency, our aim will be to consult and co-operate with the United States on the broad range of issues, both political and economic, that face us all.

The European Union values its relations with the Americas as a whole. This is reflected in the fact that the EU will have summit meetings with the US, Canada and the Latin American and Caribbean countries during our Presidency. These meetings will provide key opportunities to strengthen our relationship.

Conclusion…

I hope my remarks demonstrate the determination on this side of the Atlantic to move ahead and forge a common agenda.

A larger European Union, and a more dynamic one, can only benefit all actors on the global economic stage - which in turn will benefit the daily lives of all of our citizens as well.