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Tánaiste delivers keynote address at IIEA - Ireland: Beyond the Troika Programme

Address by An Tánaiste, Eamon Gilmore TD,  to the Institute of International And European Affairs

Ladies and Gentlemen,

This Sunday, the 15th of December, and the day we exit the Troika programme, is an important moment for our country. It is a moment that many believed would not happen. And it is a moment that easily might not have happened. Bailout exit is important, not in and of itself, but because it is another major step forward towards the post-crisis Ireland that we seek to build.

I am pleased to have this opportunity, therefore, to take time to reflect on the lessons of the recent past, but more importantly to look to the future.

The full import of what it means for a country to lose control over its own affairs became apparent to me when we entered Government in March 2011.  There were times, particularly in those early months between March and June 2011, when I genuinely feared for the financial survival of the State. The banking system was broken, and the live register was climbing.  A dole queue of half a million was in prospect. And while our own prospects were deteriorating, the Eurozone crisis was deepening.  There was a real danger of a collapse in investor confidence in Ireland.

When the new Government was formed, there was only five months’ funding left to pay for public services, for wages, and for pensions.  We had money to keep the schools open until June, but not to re-open them come September.  The only other alternative, was to accept the Troika loans.

When you are in that position, when your country is in that position, things become very clear.  You have to decide very quickly what the bottom line is.  To me there was only one answer: we had to fix the problem. Ignoring it or prolonging it was not an option.  So in everything we had to do, only one thing mattered: what would make the problem better or worse? Would the decisions we made each day, improve the position of the country, or wouldn’t they?

When I look back at that time, I am more convinced than ever, that Labour’s participation in Government was essential to fixing the problem. The crisis was so great, that we needed a broadly-based Government to take it on. We needed a Government that would stick to the job, even if the problem got worse, before it got better, which is exactly what happened. 

One thing we were clear about, going into Government, was that the bailout programme, as it stood, was unworkable.  It was a plan based on debt, not growth.  The loans were too expensive, the conditions too onerous, and there was no plan to create jobs.  What we had to do was to rebuild the bailout programme from within.

Early on, we restructured the banking system, while limiting the cost of recapitalisation. We re-negotiated the interest rate and term of the programme loans.  We ended the bank guarantee, liquidated Anglo Irish bank, and tore up the promissory note for IBRC. We negotiated a reduction of €10 billion in our debt and €40 billion in our funding needs.  And we launched a major campaign to repair Ireland’s reputation abroad, focusing both on European capitals and on the US – the importance of which cannot be overstated.

Where, once, stories in the international press about Ireland were illustrated with pictures of high-tech workers, by 2011 it seemed that every story featured a lonely horse in an empty ghost estate.  The work of convincing investors, and political leaders in other countries, that Ireland was a sound place to invest and to do business, was approached strategically by every single member of Government, and, at my direction, every single member of our diplomatic corps.  We know, to our cost, that the price of economic instability is jobs.  And the reward of stability, is investment – in Ireland’s case, a steady increase in foreign direct investment since 2012, accounting for around 19,000 new jobs so far.

Our approach has been to bring forward what measures we could to stimulate activity in the short term, such as the 9% VAT rate for the hospitality sector; a stimulus plan launched by Brendan Howlin focusing on schools, health facilities and roads; and incentives such as the home renovation scheme; while also pursuing longer-term strategies in key sectors, such as ICT, and the development of a Strategic Investment Fund.  From the outset, this Government has been determined not to repeat the jobless growth of the nineties, which is why reform of our welfare and training system has, from the beginning, been a central plank of our economic strategy. 

It has not been easy.  And it is not over yet.  It won’t be over until people feel recovery in their own lives, and in their own pockets.  But the plan is working.  From an economy that was losing 7,000 jobs a month, we are now creating almost 5,000 net new jobs a month.  Unemployment is falling – down to 12.5 per cent, its lowest level in three and a half years.  Crucially, we are also seeing a modest decline in long-term unemployment, and youth unemployment.

I am sometimes asked whether I regret Labour’s decision to go into Government at a time of profound crisis.  Frankly, that question fundamentally misunderstands the history, the character and the values of my party. 

I am the leader of a party that believes in the dignity of work, and in our collective capacity, as Irish men and women, to create a better life for our people.  We cannot guarantee either, without a functioning State, and a functioning economy. 

I am a social democrat.  That means I believe in a fair economy, and good quality public services.  But if you believe in providing quality schools and hospitals and safe streets, then you have to know how you are going to pay for them.  And if you believe in an economy that can provide decent work, with fair conditions, then you cannot hand control of it over to the international financial markets.

That is why the Labour Party never shirked the decisions necessary to rescue our economy, and secure the future for our country.  And it is also why we will do nothing, now or in the future, to put that recovery at risk. 

Not everyone has agreed with the decisions this Government has made.  I understand that.  There is no easy way to make a budget adjustment of 30 billion euro. 

But even in the face of the harshest realities, my party has been, and continues to be, determined to maintain a threshold of decency in how we face down this crisis.  That is why we restored the minimum wage, reinstated the Joint Labour Committees, and maintained core welfare rates for the unemployed, for carers and people with a disability, and pensioners.  It is why we chose to raise taxes on wealth, such as pensions, financial assets and property, rather than take-home pay.  It is why we found resources, together with Atlantic Philanthropies, to begin a new initiative targeted at breaking the cycle of childhood poverty.  And it is why we are focused on taking some of the burden off young families in particular, by helping with bills for uniforms, school books and GP visits for the under-fives.

Social solidarity comes in many forms.  We should not forget the fact that a significant amount of the reduction in public spending in recent years has been achieved away from the frontline, and without disruption to public service users.  Compared to 2009, broadly the same public services are now being delivered with 10 per cent fewer staff, and with a pay bill that has been reduced by almost four billion euro.  Industrial peace is an economic asset, and it has been instrumental in getting us to where we are today.  As a country, it is widely remarked that, for all of our difficulties, we have sustained a strong sense of social solidarity, and social cohesion. And we should be proud of that.

There have been difficult decisions, but there were also many roads not taken.

It is thanks to the work and sacrifice of the Irish people that we have reached this moment.  And I believe that the Irish people are entitled to know that in Ireland today, and in the Ireland we build for tomorrow, their hard work is not going to be squandered, nor their children’s future put at risk, because of bad politics, bad government, and a blind eye to low standards in Irish boardrooms.

Exiting the bailout is an important moment, but it is only a step along the road.  We now need to look to the future, and we need to set ourselves new targets, that we pursue with the same vigour and determination that we applied to the restoration of stability and bailout exit.

We have shown that, as a people, if we set our minds to ambitious goals, then we can achieve them.  For me, therefore, the next target is full employment. 

The Universal Declaration of Human Rights, adopted by the United Nations in Philadelphia in 1948, declared in Article 23 that ‘everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment’.

Yet, looking at the economic history of Ireland since the Famine, the most striking characteristic has been the failure to provide work and opportunity in Ireland for all of our people.  At the height of the boom, we thought, briefly that we had finally achieved that goal, but it proved to be an economy built on sand.  Yet, the goal still remains – providing opportunity and employment in Ireland for all of our people, including those who have recently left.

My view is that full employment is achievable.  Not immediately, of course, but over a number of years.  To me, it is a basic requirement of our state, that our people have the opportunity to grow up here and form relationships here.  That people who want to work hard and provide for their families can do so, and that they can aspire to provide for a better life for their children.  Those are basic human needs, and worthy human aspirations. And yet, this is not something that can be said of Ireland, for any sustained period in our history.

But, if we learn the lessons of the past, and if we apply ourselves with determination and focus, it is something that we can achieve.  The great transition that Ireland has made during the period of its membership of the European Union, is from being a low-income,  largely agricultural economy, to being a high-tech advanced industrial society.  We have shown repeatedly that some of the most technologically advanced companies in the world can thrive here, and we have many examples of indigenous enterprises that have developed and prospered here.  There are many Irish success stories.  As the global trading system expands, there is no reason why a small open economy like Ireland cannot trade its way to a high and sustainable standard of living, and maintain an economy that provides work and opportunity for all our people.

The Medium-Term Economic Strategy that the Government will launch next week will have the goal of full employment at its heart.  It will show that, while it is challenging, and will require favourable economic conditions internationally, full employment can be achieved if we pursue it with the same determination that we applied to the goal of bailout exit.

For all of the problems we have experienced since joining the euro, the fact remains that membership of the single currency gives Ireland unrivalled access to a market of 500 million people.  We have to learn the core lesson of this crisis, which is that membership of a single currency requires careful and disciplined management of our affairs, including the public finances.  And yet, we should also be confident in our underlying advantages as a trading nation and as an attractive location for investment.  Building on our strengths, we can develop a strong model of export-led growth, which in turn sustains good jobs in the domestic economy. 

A core part of our strategy, of course, has to be investment in our people, and a new way of thinking about the role that social protection plays in our society.  We need to retain a strong social safety net, and we have shown in this crisis our commitment to doing so.  But yet, we also have to think about education and training, as part of that safety net, in that we need to ensure that people have the skills to move between jobs.  The reforms that my colleagues Joan Burton and Ruairi Quinn are driving through Pathways to Work, are aimed at reinventing the welfare system so that it doesn’t just catch people when they fall, but also helps them to get back on their feet.

The purpose of our economic strategy, is not just to maximise the total number of jobs.  It is also to ensure that we have good jobs, which allow people to adequately support themselves, and to provide for their families.  It is a goal of Government policy to see living standards increase, in a sustainable fashion.  We want people to have a better quality of life which comes with rising incomes.  We also want people to be able to plan and make decisions about moving job or buying a home in a context where they can have good and reasonable expectations about their future.  During the crisis, the welfare system has buttressed and supported household incomes, but as the economy grows, income from work will replace income from welfare, as people move back into employment.  As resources permit, I also believe that we should look at ways of lifting the burden of taxation that has fallen onto hard pressed families in recent years.  Again, that will be possible in the medium term with the right policies and determined implementation of reform.

As a country, we are not just an economy.  We are a society.  We have duties and obligations to each other, and we measure our progress and well being in many ways. That is true in Ireland and it is true in Europe.

Social solidarity is at the heart of fundamental values we share in the European Union.

The greatest challenge Europe faces today is to address the growing divergence in the economic, employment and social situations across Member States.

This is being actively tackled now as an urgent issue in the Union,  across the range of policy areas, not least in the reform of the EU’s economic governance architecture. Indeed, I believe that Economic and Monetary Union is incomplete without a social dimension. It must become embedded in our path forward within the EMU.  This is one of the reasons why it is so critical that we see more social democrat parties in Government across the EU, and I look forward to being joined by our SPD colleagues in Germany, following their ballot this weekend.

Across the developed economies, there is a growing trend towards more inequality. A wider gap between rich and poor.  We have to confront this issue, both at national and international level.  We need new ways of thinking and a new determination to build a fairer society.  In Ireland, our most pressing social need is to create jobs.  Not just more jobs, but more and better jobs, which will sustain good living standards.  And we need to do more to tackle the root causes of inequality, particularly through our education system which is so fundamental to achieving fair opportunities for all our citizens.

And as a society, we have values that we can, and should, articulate on the world stage.  Exiting the bailout is the final act in returning Ireland to the status of being a ‘normal’ member of the European Union.  And yet we seek to be far more than that.  As our Presidency of the Union has shown, we have a capacity as a country to influence the direction of the Union, that we can and must exercise to the full. 

Through our membership of multi-lateral organisations, and particularly through our engagement with the UN, we bring our values, our strong focus on development, human rights and climate justice, to the international arena.  I am proud to say that, despite the crisis, we have been able to sustain our high level of effort in development aid.  Thanks to the professionalism of our defence forces, despite tight resources, we have taken on new peacekeeping roles, most recently on the Golan heights.  We are strengthening and deepening our role in Africa, working with partners such as the US on nutrition initiatives, but also expanding our long historical relationship with Africa into a more modern trading relationship.    In the future, we can and we must expand as our trading relationships with emerging economies, and as we do so, we will also strengthen our diplomatic and cultural ties. 

The past six years are an experience that we should not wish ever to repeat.  But in the midst of adversity, we have also seen many causes for optimism.  We have sustained a strong sense of social solidarity.  We have maintained, and indeed deepened, our international relationships.  I want, on behalf of the Government, to express our thanks to our partners in Europe for their solidarity and assistance during this difficult time.  Our fellow member states who have worked with us, to stabilise the Euro and advance the banking union.  Our friends in the UK, Sweden and Denmark, who advanced bilateral loans.  Our many friends in the US who have supported our efforts to promote investment. 

I want to thank our colleagues in the Commission, and in particular Commissioner Ollie Rehn, for his lasting commitment and unstinting assistance to Ireland.  All our colleagues in the ECB and the IMF, for their skill and expertise.  And of course, the many dedicated, patriotic Irish public servants, who worked so hard to bring us to this day.

There are lessons to learn from the past, but also much to be proud of.  As we exit the bailout, and set out on the next stage of recovery and renewal, we can do so with confidence.