Welcome toDublinto those of you travelling from abroad though I suspect for many of you it is not your first visit to this city.
Irelandhas long since had a reputation for punching above its weight and I think in your own industry, the Dublin International Insurance & Management Association is a fine example of this. To organise this influential gathering in this city, for ten successive years, is no mean achievement and represents the kind of industrious endeavour required by this country as we grapple with unprecedented economic and social challenges.
Even for those of you who may have visitedDublinbefore I wonder has it been during an election or referendum campaign before? For us locals poster festooned lampposts are a regular occurrence but in terms of visibility Irish political campaigning is unique. Irish politics has always had a touch of the carnival about it. Political independence after the Act of Union with theUnited Kingdomwas hard won over a 120 year period. We were one of the first countries to see mass involvement in politics and as you can see from the lampposts across the city, elements of that tradition continue to exist to that day.
A colleague of mine recently returned fromFrancenoted that you would hardly be aware that an election was taking place. InIreland, there is no such doubt about the upcoming referendum.
I mention political independence because as you knowIrelandis one of the EU member states whose independence has been compromised through involvement in an EU/IMF support programme. I think it is fair to say that while the support of our European partners is both welcome and appreciated, we also want to stand on our own two feet again as soon as possible. On that basis, we will do what it takes to succeed.
Our performance under the programme has been impressive. Consolidation measures equating to 16% of GDP have been implemented since 2008.
Despite this retraction we are seeing a return to growth; last year, GDP grew by 0.7%, the first increase in economic growth since 2007. This growth has been largely driven by our export sector which was up 4.1% – a true measure of the flexibility of the Irish economy and workforce.
Ireland is committed to getting out of our current programme of assistance and returning to the markets. We are an example of a country that is implementing the programme and working with our EU and IMF partners to ensure our programme succeeds. All six of the end-quarter Exchequer primary balance targets set so far as part of the EU/IMF Programme have also been met. Over 100 measures under the programme have been successfully implemented to date and our underlying deficit for 2011 came in at 9.4% significantly below the initial target of 10.6%. We have achieved these targets despite weaker international economic conditions and wide spread uncertainty about eurozone economies.
I might make particular reference to progress on the banking side. As you are awareIreland’s debt crisis is first and foremost the outworking of a banking crisis and property bubble not a public finances crisis. Yet, here too, progress has been considerable. Following the PCAR exercise in March 2011, the banks have been recapitalized; the State’s investment was limited to €16.5 billion, due in large part to the sale of part of our stake in Bank of Ireland, as well as liability management exercises across the covered banks. This is a significantly smaller investment than the initial estimates of €35 billion when we entered the IMF-EU programme of support.
In addition, the banks have embarked on an ambitious deleveraging programme. They exceeded the target of €37 billion in 2011 with deleveraging of approximately €46 billion across the covered banks, despite the challenging economic environment. We are beginning to see some stability return to the banking sector as a result of these actions. Importantly, the deposit outflows seen in the period prior to the PCAR and subsequent recapitalisation have been reversed and there has been significant stabilisation and, indeed, growth in deposit numbers. As a result, the level of Central Bank funding for the covered banks has fallen from a high of €157 billion to €108 billion, and these banks’ share of total ECB funding has fallen from 18% to 7%.
But despite this progress it is evident that consolidation alone is not enough. Getting our finances in order is a key strand of our response but it isn’t a solution in itself. I welcome thatEurope’s focus has turned to growth and the need for jobs as part of our recovery; this is an area that I and my colleague Minister for Finance Michael Noonan have been engaging in at every opportunity with our European partners. Only yesterday, the National Asset Management Agency announced a €2bn investment plan in the domestic economy. Over the next few months we will see the Government bring forward further off balance sheet investment plans to stimulate the domestic economy.
This Government fully supports any measures that assist us in getting further growth into the economy, creating jobs and stabilising the euro. A stable euro will increase confidence across Europe and, as a consequence, lead to further growth inIreland.
Ireland is committed toEuropeand we want to engage constructively in finding solutions to the Eurozone’s current problems.
Early next year we will hold the EU Presidency where we will ensure growth and jobs remain at the top ofEurope’s priorities. My Department is already preparing for the Presidency and we want to take the opportunity to show that despite our locationIrelandis at the heart ofEuropeand that we can show leadership and drive forward with key policy objectives.
Importance of the Insurance Industry
As you are awareIrelandis one of the global centres of international insurance and reinsurance and for more than 20 years,Irelandhas been a location of choice for insurance and reinsurance companies wishing to operate across the European Union under Freedom of Services.
The introduction of Solvency II is likely to take place on 1 January 2014. The Irish international insurance and reinsurance industry has been fully engaged with and actively contributed to the development of the new Solvency II regulatory regime.
It is important that we work hard to maintain and develop this position as there are many opportunities going forward particularly in a Solvency II context. We cannot afford to be complacent however, as we are in competition with other EU countries for attracting such business on an ongoing basis, and it is unlikely to get any easier in the future.
Despite the challenging economic environmentIrelandremains an ideal location for insurance and reinsurance companies to establish a presence given our transparent and competitive tax rate, our highly educated English speaking workforce and the recognition of the importance of the international financial services sector.
The Irish insurance and reinsurance industry is a significant player in the EU marketplace and a significant proportion of investment from international insurers inIrelandis from leading US global insurers who determineIrelandas a key location to access European markets.
EU Stability Treaty
I mentioned already the referendum that is taking place here. Voting takes place this day week. I cannot underestimate its significance forIrelandand the importance of the Yes vote which I am confident the Irish people will deliver.
Firstly let’s start with the insurance or assurance question – you are after all in that business.
Regardless of one’s views about the merits of this treaty forEurope, there is no such debate about its merits for this country.
Guaranteed access to ESM funding is the cornerstone of our ambition to regain our sovereignty. Its availability is the backstop to our desired re-entry to the markets next year. It may be ironic that our chances of gaining market access require an alternative to market access but that is undeniably the case. Our state finance house, the National Treasury Management Agency, have made that absolutely clear. They consider that a “No” vote in the referendum on the Stability Treaty would mean in all likelihood that it would not be possible forIrelandto re-enter the bond markets at sustainable rates. Like all forms of insurance, we may not need to use it but neither can we afford to do without it.
Those opposed to the treaty in the referendum have failed, time after time, to answer this question. The naivety is remarkable. They seem to believe that somebody will step in to fundIrelandafterIrelandhas refused a guaranteed source of funding. They thinkIrelandcan afford the time to engage in semantics about the legalities of funding requirements with our European partners while asking them, at the same time, for assistance.
Ireland has real problems that need real solutions. We need more jobs; more economic growth and relief for families in trouble with mortgages. We need better living standards; opportunities for our young people and solutions to our debt problem. But, there are no fairytale solutions. We must work our way through our problems bit by bit.
But no country of our size can succeed without a positive international environment. Eurozone instability is a problem for us all. Recent downgrades in Irish growth forecasts cite external Eurozone factors as the primary cause. While, confidence is returning to our country and so is investment, we still need to continue with our progress but for that we need a stable euro.
The Stability Treaty is simply about protecting the euro in our pocket.
As I see it, the choice facing us next week in the referendum on the Stability Treaty is whether we build on what we have achieved – or go backwards.
It is a simple fact that what is good for stability in Europe, is good forIreland. ForIrelandto succeed,Europemust also succeed. For there to be stability inIreland, we also need stability in the euro area.
In essence, the Treaty lays the foundation stone for stability, recovery and growth. It is not a panacea for our problems. It will not resolve them alone. Europedoes require a more considered growth strategy. But that strategy is only possible if member states can have confidence that stability will not be undermined by profligate spending.
In our own context, the Chairman of the Fiscal Advisory Council has indicated that these rules will impose no further adjustment burden onIreland. Again the No campaigners have fixated upon what they claim is additional austerity measures the treaty will impose. I fear they will not be happy until 100% of our taxation revenue is being remitted in debt repayments.
We are emerging, slowly but surely, from probably the greatest economic crisis that this country has ever known. The choice before us is whether we continue to make progress, or whether we slip back.
The same is true of the EU and the eurozone. It is not a false choice, as some would characterise it, between austerity and growth. It is about choosing stability, and using it as a foundation for economic recovery.
There is now growing momentum in the EU and the eurozone to progress a plan for growth. For investment in innovation, in technology, in people. I welcome that.
We have made real achievements in tackling our problems inIrelandover the past 14 months. It has not been easy, but as a result,Irelandis well positioned to benefit from the growth agenda at European level.
Recent developments inGreeceare a stark illustration of what the alternative to our approach is. To say the least, that would not be an attractive prospect.
We now need to ensure that we hold a steady course. We are focusing on how we can create the right conditions to stimulate the economy, and create jobs for the Irish people.
This Government is committed to recovery. Sectors like the insurance industry have a key role to play in our recovery. Investors and business people like you have an important role to play. As a Government our job is to assist you in building and developing business here inIrelandand in providing the best possible conditions for business established here to thrive.
Enjoy your conference and for our visitors enjoy our city and country.